INDIA - CHINA DIPLOMACY

BY - ISHITA MALHAN
APRAJITA MALHAN
BHARTI SINGH
GAURAV BHANDARI
BABITA
ANKITA SIKKA
History
Both countries entered the international stage at
about the same time: India in 1947 and the
Peoples Republic of China in 1949. Their relation
was off to a good start Nehru chose to establish
peaceful and cooperative neighbourly relations and
supported Beijings claim for a seat in the UN & 2
agreements were signed in 1954 one on trade, the
other on peaceful coexistence
However, behind the cover of the agreements Mao
promised its people from the very beginning that
he will do everything to regain the territories along
the Himalayan border, which once belonged to
China

in 1958/59, Nehru changed his perceptions about
China when troubles in Tibet broke out once again.
It was at the time when the Dalai Lama fled and
eventually got exile in India

Thus New Delhi started strengthening its defences
on the borders.

For the next three decades the relation between
the two nations became very difficult as incidents
during the 60s and early 70s show
1. 1962 Border War: China attacked India and seized
Indian territory
2. 1971 during the Indian-Pakistani War, China
supported Pakistan militarily and politically

From the mid 70s on, the relation improved slowly.
Diplomatic and Trade relations were resumed and
were stable

Throughout the 1980s the relationship were
difficult although not hostile. Numerous efforts to
solve the border dispute failed. In addition China
started its policy of encirclement India countered
with its Look East Policy

Rajiv Ghandis visit to China in 1988 marked a new
era in the Sino-Indian relations. It was the first visit
of an Indian Prime Minister to China after a gap of
more than 25 years

Two years later, the geopolitical situation changed with the
disintegration of the Soviet Union and a new unipolar
world order dominated by the US. Such profound changes
did also influence the foreign policies of China and India:
China
Sino-Russian relations improved remarkably. The Sino-US
relations however deteriorated.
China was strongly opposed to a unipolar world order.
India
The disintegration of the Soviet Union posed a serious
challenge to Indias foreign policy: India was deprived of a
crucial source of support although they were still allies ,
only weaker
Sino-Indian Relationship
The visit of Gandhi and the end of the Cold War paved the
way for a relatively harmonious decade in Sino-Indian
relations. During the course of a number of high-level
visits, important agreements in the economic, scientific
and military fields were signed

Indias decision to go nuclear (Pokhran ll) marked
another turning point in Sino-Indian relations.
Although India had already considered nuclear tests
before, China was taken by surprise
From a foreign policy point of view India saw its
interests threatened by:
1. a strategic Sino-Pakistani alliance (China supporting
Pakistan with nuclear equipment
2. and by continuing China policy of encirclement. As
India was not ready to acknowledge Chinas
hegemonic position in Asia, it eventually launched
the nuclear tests.
Beijing demanded an immediate roll back of the
nuclear weapons programmes of India and froze
diplomatic relations with New Delhi for a few
months.

One year after Pokhran ll, the Kargil crisis began. In
India there was uncertainty about Chinas position in
this Indo-Pakistani Conflict in Kashmir. Surprisingly,
Beijing acted very cautious by not taking Pakistans
side and commending both parties to return to the
negotiating table

2000 marked a gradual re-engagement of Indian and
Chinese diplomacy.

2003 ushered in a marked improvement in Sino-
Indian relations following Indian Prime Minister Atal
Bihari Vajpayee's landmark June 2003 visit to China.
China officially recognized Indian sovereignty over
Sikkim as the two nations moved toward resolving
their border disputes.

Military Ties
India and China have progressively stepped up
military contacts both at the headquarters and field
levels since resolving to improve bilateral ties in the
1990s.
The tempo and quality of the interactions picked up
after then Defence Minister Pranab Mukherjee
visited China in 2006 and signed a memorandum of
understanding on exchanges and cooperation in
defence.
The intention to increase military-to-military
interaction was firmed up with the first defence
dialogue in Beijing followed up with the first joint
exercises in Kunming in 2005.

The India-China military pact assumes significance
on the heels of reports that China has been
providing military assistance to India's archrival
Pakistan.
The two principles at the core of the defense
doctrine that India presented to China are India's
determination to become a major power on the
Asian continent and the designation of the Indian
Ocean as a peace zone.
India has been working hard to raise its standing in
matters of Asian security & the Indian strategy to
achieve this goal is to engage with all but align with
none
There is no doubt that china is cautious about
indiaa military dependency on Russia & Israel &
more recently on USA
Economic Relation

China's economic relations with India have
shown significant improvement over the
passage of time. Both the economies have
emerged as economic superpowers owing to
their rapidly-expanding consumption goods
market, easy availability of raw materials,
cheap labor force, and favorable economic
infrastructure.

Introduction of Economic
Wing
Government has decided to set up an economic wing
in its diplomatic mission in Beijing, signifying the
growing financial clout of China which has become
India's largest trading partner

The economic wing will have eight posts, including
one counselor, who will be appointed by the
Department of Economic Affairs

The objective of such a wing is to attract investments
from China and coordinate with various ministries and
departments in Chinese government such as Finance
and Planning Commission .
The wing will also be in touch with the Chinese
government on the issues of G-20 to have a
coordinated approach.

India has such economic units in its missions in the
US, the UK and Japan among other countries and
the fact that the wing is now being created in its
embassy in Beijing indicates the importance it
attaches to Chinese investments in the country.

The mandate of economic wing is different from
that of commercial wing, which was already
functional in the mission. The commercial wing
primarily focuses on bilateral trade.

Bilateral Trade
The history of bilateral relations between China and
India dates back to mid 1980s. The process of
dialogue initiated by the governments of the two
countries at that point of time was quite helpful in
identifying the common trade interests. Efforts
were initiated to make the most of their economic
strengths so as to further the economic relations
between India and China.

The trade relationship between these two
countries has historically been tenuous at best.
They have not been trading as often and as much
as one would expect this two giants to trade. The
markets have opened up right now to each other.
"There was a big influx of Chinese manufactured
goods to the Indian markets usually consumer
items like electric fans, batteries and such other
items. India has also started making its presence in
information technology markets felt within
mainland China."
The Evolution of India-China
Trade
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1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Exports (from India to China) Imports (from China to India)
TRADE DEFECIT
Trade Deficit
Trade between India and China has jumped substantially from
$1 billion in 2001 to $52 billion in 2008 and the two sides are
targeting to reach $60 billion.

However, Indias current annual exports to China stands at
about $11 billion, while China exports goods worth $27 billion
to India.

This creates is large and growing trade deficit that India is
experiencing in its bilateral trade with China that needed to
be corrected.



China is Indias largest trade partner, while India is Chinas
tenth largest partner.
The government is closely monitoring the Chinese response to
its concerns over the widening trade gap, which could reach
$24-25 billion this year
Incase, China fails to take adequate steps in the next few
months to reduce the deficit and move towards a more
balanced trade ties, India is prepared to take retaliatory
measures
Even if tariffs are lowered on manufactured products, India
can't compete with China on manufactured products



Graph showing defecit
Reasons for deficit
India has sought to diversify its trade basket, but raw
materials and other low-end commodities such as iron ore still
make up about 60 percent of its exports to China.

In contrast, manufactured goods -- from trinkets to turbines --
form the bulk of Chinese exports.

In an illustration of India's dependence on Chinese
manufacturing, Shanghai Electric Group Co agreed in October
to sell power equipment and related services worth $8.3
billion to India's Reliance Power.

According to some economists, India's at a phase of capital
expenditure that is 15 years behind China

China also was importing a lot of capital goods in the initial
period of growth takeoff in the 1980s with periods of trade
deficit.

Also there are procedural bottlenecks, including time
consuming licensing procedures, being faced by Indian drugs
and pharmaceuticals, which needed to be removed.
Indian businesses cite Chinas tariff barriers of as high as 30-
to 35 percent for the manufactured equipment industry as a
hindrance to market entry with the same barriers in place for
the agriculture industry

Custom procedures, standards, certification, regulatory
practices and quantitative restrictions were also cited as
problem areas in exporting goods to China by the Federation
of Indian Chambers of Commerce and Industry
Proposed steps to handle defecit

In a joint economic group meeting with his Chinese
counterpart Chen Deming, commerce minister Anand Sharma
pressed for following issues

greater import of IT and ITeS by China from India,

removal of tariff and non-tariff barriers restricting import of
power plant equipment from India,


removal of restrictions on import of Basmati rice, fruits and
vegetables

landing rights for Indian TV channels in China, and import of
more Indian films by China

Removal of procedural bottlenecks including time-consuming
licensing procedures being faced by Indian drugs and
pharmaceuticals

Effect on the relation
Already, India and China have clashed repeatedly over a raft
of issues including their long-disputed border, China's
increasingly close relationship with Pakistan, and fears of
Chinese spying.
No other country has initiated more anti-dumping
investigations against China at the World Trade Organisation
than has India.
In May, India barred its mobile phone operators from placing
orders with China's Huawei Technologies and ZTE Corp
because of national security concerns.

On the other hand both sides have something to gain from
the relationship.

The 2010 December visit of Chinese Premier Wen Jiabao
comes at a time when the Chinese are really keen that the
Indians do not become a fully fledged member of the U.S.
camp

India needs Chinese backing for a permanent seat on the U.N.
Security Council and both countries have stood together to
resist Western demands in world trade and climate change
talks.

DUMPING
Dumping
They are using the big Indian market merely to dump their
products and by doing so they are killing the Indian units.
For example last year during Diwali, China made crackers were
sold in the Indian market. These crackers reportedly contained
Sulphur. Sulphur is more harmful than Nitrate, which is used
in India to make crackers. Since the Chinese crackers were
cheaper than the Indian crackers, so they managed to attract
innocent and largely illiterate Indian lot. As a result the Indian
cracker industry saw a decline in the revenue.

Because of cheaper prices products made in China are
becoming more popular among the Indian masses. This has
had a very negative effect on our own manufacturing units
and as a result many of them have had to shut shop.

For instance, data reveals that 60 per cent of the industrial
units in the industrial belts of Thane and Bhivandi near
Mumbai have been closed down. ( Indian cottage industries
i.e handicraft)
Due to its cheap labour, China offers lowpriced imports such
as textiles and clothing, electronic devices, machinery, etc .
According to official data, Chinese imports stood at $3I9
million (Rs 1,435 crore) during April-June this year as
compared to $223 million (Rs 1000) crore during the
corresponding period of the previous year. ( data source
www.indiamart.com/new )
It has also affected Indian Export market,as china has replaced
indian goods in the foreign market as being cheaply produced.


Strategy to Gain Global Market
Share
They are killing the economy of not only India but also the
economy of the whole world very slowly. They are selling their
cheap products on very cheap rates and we people are getting
addicted of these cheap rated things and after few years there
will come a time when you will see only the chinese goods in
the markets because all the other manufacturers will become
bankrupt and after that China will start to rise the rates of
their products i.e. there will be complete monopoly of china
on the goods market. Thats the policy on which china is
working now a days.
Future Prospects
During the 10 visit of Chinese premier Wen Jiabao to India,
following outcomes & prospects have been highlighted

China and India have vowed to raise bilateral trade to $100
billion by 2015, from $60 billion in 2010

The aim is that both the countries be able to raise the bar of
friendship and cooperation to a high level in near future

to be able to raise friendship and cooperation to a high level
in the new century
two nations will formalize regular visits between heads of
state and government, open a telephone hotline between the
two premiers and their foreign ministers will meet once a
year.

The two sides agreed to initiate a strategic economic dialogue
to enhance macro-economic policy coordination.

Two-way trade is expected to reach $60 billion in 2010
compared with a target of $40 billion, which represents a 30-
fold increase since 2000.

agreed to take measures to promote greater Indian exports to
China with a view to reducing India's trade deficit

agreed to push forward with efforts to peacefully resolve their
nations' lingering border disputes.

China understands and supports India's wish for a bigger role
in the United Nations including the UN Security Council,

Beijing would like to strengthen consultation with India on
political and military affairs to beef up mutual trust.

On cross-border rivers that India has long claimed China is
damming, Wen has stated that any exploitation in the upper
stream will go through scientific planning and studies and
interests of the lower-reach nations will be taken fully into
account. The two nations' ministries of water resources have
thus signed a memorandum for China to provide data to India.

Also, it is encouraging to hear China is willing to allow the
Indian service sector, pharmaceutical and agricultural
products to enter the Chinese market to bring down India's
trade deficit
THANK YOU