The Hindu Editorial Analysis- 9th December 2024 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

A Good Beginning but China Negotiations Must Continue 

Why in News?

The statement made by Union External Affairs Minister, S. Jaishankar on December 3, 2024 was his first substantive statement in Parliament on developments in India-China relations since the Chinese intrusions in Eastern Ladakh in the summer of 2020. His remarks offer clarity on some issues, but many questions remain unanswered.

What is the Significance of China for India?

• Industrial Raw Material Dependency: 
  • China has become India's largest trading partner in the fiscal year 2023-24, with a total trade of USD 118.4 billion (according to the Global Trade Research Initiative), despite ongoing border issues. 
  • India is significantly reliant on imports from China for essential industrial raw materials and intermediate goods. 
  • More than 70% of India's Active Pharmaceutical Ingredients (APIs) come from China, highlighting the pharmaceutical sector's strong dependency.
  • In the fiscal year 2023-24, India imported electronic parts worth over USD 12 billion from China.
  • Currently, India relies on imports for nearly 80% of its solar equipment, with China providing over 60% of these imports (according to Policy Circle Bureau).
  • Recent initiatives to boost domestic manufacturing will take several years to reduce this dependency significantly.
• Technology and Digital Infrastructure: 
  • Despite concerns about security and bans on certain apps, Chinese technology still plays a major role in India's digital world. 
  • Chinese smartphone brands continue to lead the Indian market, holding over 75% of the total market share (as per Counterpoint Research). 
  • Even with restrictions, critical telecommunications gear often includes Chinese parts or technology. 
  • Emerging sectors in India, like electric vehicles, heavily rely on Chinese battery technology and components. 
• Investment and Expertise: 
  • Chinese technical know-how is important for India's industrial growth. 
  • Chinese companies have considerable experience in building infrastructure and high-speed rail systems, which India is looking to develop. 
  • Numerous Indian unicorn startups have attracted significant investments from Chinese sources, which are vital for their growth stages. 
  • As of 2020, 18 unicorn companies in India received more than USD 3,500 million in Chinese investments.
• Trade Route Dependency: 
  • India's trade routes and regional connectivity projects frequently overlap with China's influence. 
  • Many of India's trading partners in Southeast Asia have close economic relationships with China. 
  • Although India chose not to join the Regional Comprehensive Economic Partnership (RCEP), it highlights China's significant role in regional trade.
  • Over 55% of India's trade passes through the South China Sea and the Malacca Straits (as reported by the Ministry of External Affairs).
  • Important maritime trade routes for India's economy run through areas where China has a strong presence.

What are the Major Areas of Contention Between India and China?  

• Border Disputes and Territorial Claims: 
  • The 3,488-km Line of Actual Control (LAC) is a highly tense area, with many standoffs and incidents occurring. 
  • The Indian and Chinese armies have been in a standoff since May 2020 after a serious clash in the Galwan Valley. 
  • China currently controls about 38,000 sq km in Aksai Chin and claims an additional 90,000 sq km in Arunachal Pradesh, which it refers to as South Tibet. 
  • Recent satellite images reveal that China is building villages along the LAC that can serve dual purposes, along with making significant upgrades to its military facilities. 
• Economic Imbalances and Trade Deficit: 
  • India is facing a large trade deficit with China, which reached $85 billion in 2024, according to a report by The Hindu. 
  • In the past five years, Chinese exports to India have grown at an annual rate of 9.61%, as noted by The Observatory of Economic Complexity. 
  • India has put anti-dumping measures on Chinese goods, but China continues to enter the Indian market through ASEAN intra-trade and bilateral FTAs.
• Water Resource Disputes: 
  • China controls the upper regions of major rivers that flow into India, including the Brahmaputra (known as Yarlung Tsangpo). 
  • China has built several dams, including the large Zangmu Dam near the Bhutan-India border and is planning the world's largest hydroelectric project at Medog. 
  • There is no water-sharing agreement between the two nations, and after the Doklam standoff in 2017, China stopped sharing hydrological data on the Brahmaputra.
• Cyber Threats: 
  • China has gained attention for its cyber attacks in India. In 2022, hackers linked to China targeted seven Indian power hubs. 
  • More than 300 Chinese apps have been banned since 2020. Concerns regarding 5G technology led to the exclusion of Huawei and ZTE from India's telecom infrastructure. 
  • A recent report by SentinelOne claims that a ransomware attack on AIIMS Delhi in 2022 was carried out by a Chinese hacker group named ChamelGang.
• Regional Influence Competition: 
  • China's investments in the Belt and Road Initiative exceed USD 62 billion in Pakistan (CPEC), which challenges India's influence in the region. 
  • China has set up bases or port facilities in Pakistan, Sri Lanka, Myanmar, and Maldives. Its economic influence is also growing in Nepal, Bhutan, and Bangladesh, forming a "String of Pearls" around India. 
  • India's counter-strategies, such as the Necklace of Diamonds strategy, are still developing.
• Strategic Alliances and Regional Partnerships: 
  • China's strong military ties with Pakistan, including sharing nuclear technology and defense equipment, raise concerns for India. 
  • India is increasingly aligning with the US and participating in the QUAD (including joint military exercises like Malabar), which has upset China. 
  • India's oil exploration projects in Vietnam's EEZ face opposition from China.
  • About $200 billion of India's trade passes through the South China Sea each year, as reported by the Observer Research Foundation.
  • China's growing naval presence in the Indian Ocean, including submarine deployments and research vessels in Hambantota Port, is a concern for India.
• Diplomatic and International Forums: 
  • China's ongoing protection of terrorists based in Pakistan at UN forums frustrates India. 
  • There is competition for influence in international organizations like SCO and BRICS, which creates tensions. China opposes India's aspirations for global governance reforms. 
  • China continues to oppose India's membership in the NSG and its bid for a permanent seat on the UNSC.

What Measures can India Adopt to Balance its Relations with China?  

• Economic Diversification and Self-Reliance:
  • India should keep expanding its PLI scheme to lessen reliance on critical sectors.
  • Focus on building local manufacturing skills in important areas such as APIs, electronics, and solar equipment with initiatives like the Semiconductor Mission, which involves a USD 10 billion investment.
  • Build partnerships with countries like Japan, South Korea, and nations in the EU for technology sharing and investments in key sectors.
  • Strengthen the MSME sector to create local supply chains and decrease dependence on imports.
  • Use smart protectionist measures while ensuring compliance with WTO rules.
  • Develop quality standards and certification processes for managing imports.
  • Create incentives to encourage domestic value addition in manufacturing.
• Strategic Military Modernization:
  • Speed up the development of military infrastructure along the LAC, including 73 strategic roads and advanced landing grounds.
  • Enhance surveillance capabilities using satellite and drone technology, following the procurement of 31 Predator drones in October 2024.
  • Strengthen mountain warfare skills with specialized training and new equipment.
  • Develop quick response forces and improve logistics in border areas.
• Regional Leadership Enhancement:
  • Build stronger partnerships with neighbouring countries through increased development aid and infrastructure projects.
  • Expand initiatives like BIMSTEC and the Indian Ocean Rim Association to counter the influence of the BRI.
  • Create alternative supply chain networks with initiatives like the Supply Chain Resilience Initiative alongside Japan and Australia.
  • Increase cultural and educational exchanges with countries in Southeast Asia.
• Diplomatic Engagement Strategy:
  • Keep open dialogues through various channels while firmly maintaining core interests.
  • Engage in multilateral forums like SCO and BRICS while strengthening QUAD partnerships.
  • Create coalitions with like-minded countries to address specific issues.
  • Balance relationships with the US, China, and Russia to maintain strategic independence.
  • Recent examples include effectively managing border tensions through diplomatic means while preserving trade relations.
• Economic Leverage Development:
  • Identify and use the strengths of the Indian market in negotiations with China.
  • Create alternative markets for Indian exports through FTAs with the UK and EU.
  • Establish policy frameworks to screen investments while keeping beneficial economic relationships.
  • Strengthen India's role in global supply chains through initiatives like PM Gati Shakti.
  • Recent successes include attracting some global supply chains to India as part of the China 1 strategy and through decoupling efforts.
• Maritime Strategy Enhancement:
  • Bolster naval capabilities and presence in the Indian Ocean Region.
  • Speed up the development of port infrastructure and connectivity through the Sagarmala Project.
  • Enhance maritime cooperation with QUAD and ASEAN nations.
  • Improve monitoring and surveillance capabilities in key waterways like the Arabian Sea.

Conclusion:

• The recent agreement between India and China to restore their mutual patrolling rights in the Depsang Plains and Demchok is a positive development aimed at stabilizing the delicate border situation.
• It is crucial for India to continue implementing a diverse strategy that includes:
  • Economic diversification to reduce dependence on any single market.
  • Military modernization to enhance defense capabilities.
  • Regional leadership to strengthen its position in the area.
  • Diplomatic engagement to maintain open channels of communication with China.
• This approach will help India to effectively balance its relations with China.