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Photo: Getty Images
Photo: Getty Images

India has no alternative but to deal with the People’s Republic

Our approach should be guided by rationality and enlightened self-interest and that means not letting commercial ties snap

What to do about China? That is the question animating leaders around the world, as the country’s strongman leader, Xi Jinping, aggressively asserts the Middle Kingdom’s putative resurgence. Whether on the border, in cyberspace, or in trade relations, Xi is cheerleader-in-chief of a China in an increasingly assertive mode. The feeling in Beijing, evidently, is that the days of “Pax Americana" are finally over; weakened by the folly of misguided wars, a financial crisis, and now a global pandemic—ironically emanating in China—the United States appears to have been brought to its knees.

The Economist of 13 August had a well-measured leader on Xi, arguing the case that the US, and, by extension, the Western world, would be foolish to believe that the politico-economic edifice that he has erected is a house of cards ready to be toppled by Western pressure. The message applies equally to India, which, in recent months, has pursued a more aggressive posture against China, in reaction, at least in part, to the recent border skirmish in Ladakh.

As The Economist argues, “The hope for confrontation followed by capitulation is misguided. America and its allies must prepare for a far longer contest between open societies and China’s state capitalism." The leader goes on to argue that a containment strategy, such as that pursued against the former Soviet Union, is unlikely to succeed, as China’s economy is already intimately intertwined with the world’s, unlike the Soviet economy, which ring-fenced itself and its satellites in Communist Eastern Europe from global trade and investment flows.

The London-based publication’s proposed solution: the West needs to make a diplomatic push to ensure that China plays by the rules, cooperate with it where possible, and allow “commerce to continue alongside stronger protections for human rights and national security". Just how to achieve this tricky balance is left unexplained.

Regular readers of this column will be familiar with a version of this argument. My long-time friend and co-author, the late James W. Dean, and I had argued the case for cooperation, rather than confrontation, with China (‘America First’ hastens the demise of US hegemony, 2 December 2018). As we wrote: “The wise course for the US is not to try to take on China as a foe, but rather to intertwine Western and Asian self-interest by harnessing free trade in goods, capital and ideas."

I still believe this would be wise for the US. For India, it is absolutely indispensable. The US, still the world’s richest and most powerful nation, can just about afford to flirt with economic warfare with China, as in the cycle of tit-for-tat tariff increases and decreases, or more recent US threats to ban prominent Chinese apps TikTok and WeChat.

For India, such an approach to China would be sheer folly. It might suit the government’s self-reliance agenda to try weaken economic relations with China—in particular, trade and investment ties—by raising tariffs and other trade barriers, going slow on approvals for new Chinese investments in India, and banning Chinese apps (here, India was ahead of the US). So far, however, the Chinese response has been a shrug. India is not so important to China that it need retaliate aggressively. Indeed, not reacting immediately signals China’s strength.

However, India cannot count on China’s forbearance to last forever. At some point, Xi and his advisors may just decide that the People’s Republic needs to show India its place—as the Chinese did in the 1962 border war—and engage in economic retaliation. This might include cutting off, or sharply reducing, the flow of Chinese investments in India, both direct, and indirect, such as those mediated through Chinese-controlled multilateral financial institutions, such as the Asian Infrastructure Investment Bank (AIIB). Indeed, AIIB has been investing billions in Indian infrastructure, and if these flows cease, India will be left scrambling for sorely needed investment dollars to revamp its tottering public infrastructure.

China hawks in the present US administration, and in the larger intellectual ecosystem around it, have been egging India on. They may well give India a pat on the back for taking on China and throw in a few crumbs, but, when push comes to shove, will they step in with billions of dollars of investment to fill the gap if the Chinese decide to pull the plug? I wouldn’t bet the bank on it.

India’s stance on China continues to be overshadowed by the 1962 debacle. Hypothetically, if that border war had been a stalemate, rather than a humiliating defeat for India, would India today be taking such an aggressive position vis-à-vis China? I think not.

India’s position must be guided by rationality and enlightened self-interest, and not by emotionalism and a desire to strike back for the sake of old wounds that have yet to heal. India needs to remain engaged with China on the economic front, and India has much more to lose than China if trade and investment ties fray badly. Beijing’s decision makers know this as much as New Delhi’s appear to be in denial of these basic facts.

Equally importantly, India must maintain a hawk-like vigilance at the border, creating such a show of strength at the Line of Actual Control (LAC) that China will have to think twice before another adventure on Indian-controlled territory. This will require the heavy lifting of seriously upgrading India’s military capability.

This is a difficult balancing act. For India’s sake, let us hope the government gets its right.

Vivek Dehejia is a Mint columnist

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