China-India Relations in Modi’s Second Term

July 2, 2019        Reading Time: 5 minutes

Reading Time: 5 min read

Image credits: Narendra Modi/flikr

Dr. Li Li*

As Narendra Modi starts his second term as the Indian Prime Minister, many wonder about the direction in which China-India relations are headed. During his first term, the bilateral ties between the two Asian giants experienced ups and downs, starting with the pleasant ‘hometown diplomacy’1 between the two top leaders, followed by the thorny Donglang/Doklam standoff,2 and ending with the promising 2018 Wuhan informal summit.3 Due to the turbulent world order and their respective domestic priorities, in the next five years, stability is expected to prevail in China-India relations. There will also be more room for cooperation and more maturity in dealing with differences.

The China-India relationship has entered a new era and is increasingly characterised by the complexity of regional and global situations. Therefore, changing international politics play a bigger role in shaping China-India relations. If Prime Minister Modi used to lean towards the United States in his first term, he would find plenty of reasons to hedge between the US and China in his second term.

First, many countries including the US allies (such as Japan) are inclined to take strategic hedging in an emerging US-China strategic competition.4 This strategy will not only best serve their own national interests but also help prevent a new Cold War. India’s proposed ‘multi-alignment’ (or issue-based alignment) is a de facto strategic hedging.

Second, while the US Indo-Pacific strategy is conducive to India’s aspiration to be a global power, the protectionism and unilateralism maintained by the Trump administration frustrates India,5 who believes globalisation and multilateralism serve India’s economic rise.6 With a trade surplus of USD 24.2 billion in 2018 with the US,7 India is also worried about being the next target of Trump’s trade war.

Third, the US direct negotiations with the Afghan Taliban have caught India off guard.8 The US credibility is being undermined in India with Trump revoking his pledges, that is a major role for India in bringing peace in Afghanistan and no hasty withdrawal of US troops, which was announced in his new South Asia strategy in August 2017.9 India seems to be very concerned about the prospect of Taliban returning to Afghan’s political mainstream. It may require India to work more closely with countries in the region (including Russia and China) to ensure its related security interests.

On the Chinese side, the dramatic change of the nature of China-US relations is forcing China to shift its foreign policy from US-centric to ‘neighbourhood first.’ When the new US National Security Strategy was released in December 2017,10 many in the Chinese strategic community still doubted if there was a fundamental shift of the US’ policy towards China. However, with the intensifying US trade war against China and its expansion into the domain of technology and innovation, which is represented by the US ban on Huawei, more and more Chinese believe that a strategic competition between China and the US may be irreversible. China will continue to try its best to maintain a constructive relationship with the US and avoid a China-US strategic confrontation, but it must be prepared for the worst.

Against this backdrop, a friendly and favourable neighbourhood is more crucial for China than ever before. Therefore, China will invest more in relations with its neighbours, including India. The principle that China and India are “partners rather than rivals” will continue to guide China’s policy towards India.

If China and India share common ground in the direction of China-India relations, more substantial cooperation and coordination between them can be expected in Modi’s second term. Interactions and exchanges will increase on the economic front and multilateral platforms.

While the bilateral trade volume is approaching USD 100 billion,11 the two biggest markets in the world (in terms of population) have started to be further connected. The success of China’s smartphone companies (such as Xiaomi, Vivo, and Oppo), accounting for 66% of the Indian market,12 inspires other Chinese investors to explore economic opportunities in India. This process will not only help the Chinese companies make profits but also create new jobs for Indians. At the same time, Bollywood movies have performed well in the Chinese market, and have contributed to the improvement of Chinese knowledge and perceptions of India.13 It is believed that the intensified US-China trade conflict may provide additional opportunities for more Indian exports (such as agricultural and pharmaceutical products) to China and more Chinese investment in India.

Since the current world economic order is under threat—represented by the setbacks facing the World Trade Organization (WTO)—emerging economies like China and India could deepen their cooperation and coordination under the frameworks such as the BRICS and G-20. It is also possible that both China and India support a more active Shanghai Cooperation Organisation (SCO), even though their motivations might be divergent. For China, it may help counterbalance the US strategic pressure. It may help India find a strategic balance when it continues its security cooperation with the US under the Indo-Pacific (or even the Quad) framework. The SCO may also be a place for India to take care of its concerns regarding the future of Afghanistan.

One must understand the complexity of China-India relations. Differences and mistrust will remain, and the chances for a final resolution of the border dispute in the near future appear slim. However, they are capable of managing their differences well. As each side focuses on its own domestic development, neither can afford a military conflict, no matter how limited it is.14 The unfortunate Donglang/Doklam standoff has clearly demonstrated how dangerous it is if the two Asian giants allow their border dispute to deteriorate. Now that each side continues to enjoy a strong leadership, the Wuhan spirit/consensus will be likely well observed. In the next five years, the China-India relations will be generally stable and constructive, with an increase of cooperation and good management of differences.

Notes

1China Daily. (2015). ‘Hometown diplomacy’ between Chinese and foreign leaders. [Online] Available at:
http://www.chinadaily.com.cn/world/2015-10/30/content_22313748.htm [Accessed 19 June 2019]
2India Quarterly. (2019). How Status-seeking States Can Cooperate: Explaining India–China Rapprochement After the Doklam Standoff. [Online] Available at: https://journals.sagepub.com/doi/full/10.1177/0974928419841771. [Accessed 19 June 2019].
3Ministry of External Affairs Government of India. (2018). India-China Informal Summit at Wuhan. [Online] Available at: https://mea.gov.in/press-releases.htm?dtl/29853/IndiaChina_Informal_Summit_at_Wuhan [Accessed 19 June 2019]
4The Wall Street Journal. (2019). Narendra Modi’s Massive Mandate. [Online] Available at:
https://www.wsj.com/articles/narendra-modis-massive-mandate-11558653338 [Accessed 19 June 2019]
5The Economic Times. (2019). PM Modi slams protectionist, unilateral trade moves. [Online] Available at:
https://economictimes.indiatimes.com/news/economy/foreign-trade/pm-modi-slams-protectionist-unilateral-trade-moves/articleshow/69796874.cms [Accessed 19 June 2019]
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7Office of the United States Trade Representative. (2019). U.S.-India Bilateral Trade and Investment. [Online] Available at:
https://ustr.gov/countries-regions/south-central-asia/india [Accessed 19 June 2019]
8Al-Jazeera. (2019). US-Taliban talks end in Doha with ‘some progress’: Taliban. [Online] Available at:
https://www.aljazeera.com/news/2019/05/taliban-talks-doha-progress-taliban-190509150545009.html [Accessed 19 June 2019]
9US Department of Defense. (2017). President Unveils New Afghanistan, South Asia Strategy. [Online] Available at:
https://dod.defense.gov/News/Article/Article/1284964/president-unveils-new-afghanistan-south-asia-strategy/ [Accessed 19 June 2019]
10White House. (2017) A New National Security Strategy for a New Era. [Online] Available at:
https://www.whitehouse.gov/articles/new-national-security-strategy-new-era/ [Accessed 20 June 2019]
11The Economic Times. (2019). India’s boycott of BRI not to affect trade ties with China: Indian envoy [Online] Available at: https://economictimes.indiatimes.com/news/economy/foreign-trade/indias-boycott-of-bri-not-to-affect-trade-ties-with-china-indian-envoy/articleshow/69162769.cms?from=mdr [Accessed 20 June 2019].
12Tech in Asia. (2019). In brief: Chinese smartphone makers dominate Indian market, says report. [Online] Available at: https://www.techinasia.com/chinese-smartphone-makers-dominate-indian-market [Accessed 20 June 2019]
13South China Morning Post. (2018). Why Indian films like Dangal and Toilet are so popular in China: similar problems. [Online] Available at: https://www.scmp.com/culture/film-tv/article/2177193/why-indian-films-dangal-and-toilet-are-so-popular-china-similar [Accessed 20 June 2019]
14Ministry of External Affairs Government of India. (2018). India-China Informal Summit at Wuhan. [Online] Available at: https://mea.gov.in/press-releases.htm?dtl/29853/IndiaChina_Informal_Summit_at_Wuhan[Accessed 19 June 2019]

*Dr. Li Li is a Senior Research Professor at the Institute of International Relations, Tsinghua University, and Director of Center for South Asian Studies. She can be reached at lili_thiir@tsinghua.edu.cn. The opinions expressed in this article are the author’s own and not the institutional views of LKI, and do not necessarily reflect the position of any other institution or individual with which the author is affiliated.

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