As China-US Battle It Out, Here’s What It Means for India

"“America agreed to give Beijing open access to our economy… (instead China) has used an arsenal of policies inconsistent with free and fair trade, including tariffs, quotas, currency manipulation, forced technology transfer, intellectual property theft, and industrial subsidies … China has chosen economic aggression, which has in turn emboldened its growing military…China now spends as much on its military as the rest of Asia combined, and Beijing has prioritised capabilities to erode America’s military advantages”. "

One can be forgiven for believing this to be a Cold War-era indictment of China, except that it comprised the core of Vice President Mike Pence’s statement, at the Hudson Institute in Washington on 4 October.

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How had things come to such a pass? After all, as recently as in April 2017, President Trump had ‘developed a friendship’ with Xi Jinping while hosting the Chinese President at his Mar-a-Lago estate. China, craving peerhood with the US, believed it had the measure of the feisty White House occupant and that their investment in Trump’s son-in-law Kushner had paid off.

“Jared became Mr China,” as per The New Yorker.

Trump’s Multi-Pronged Attack

From day one, Trump, though whimsical, has been steadfast in accusing China of bad faith and brazenly engaging in predatory business practices.

He is miffed at the $375 billion trade deficit that the US has with China (66% of its global total in 2017), militarisation of South China Sea by Beijing despite protestations to the contrary, as well as its determination to wrest leadership in innovation and infotech from the United States. With its ‘Made in China’ 2025 vision, the Middle-Kingdom has set its sights on controlling 90% of the world’s most advanced industries, including robotics, biotechnology and artificial intelligence (AI).

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While recent US administrations merely wagged their fingers, Trump has opted for a multi-pronged assault.

He has declared a trade and tariff war on China, blocked Chinese efforts to acquire American technology jewels (a $117 billion deal for purchase of Qualcomm Inc was scuttled on grounds of threat to national security, in March 2018), upgraded ties with Taipei in the same month by adopting the ‘Taiwan Travel Act’ and decided to impose a visa ban in December 2018 on Chinese official who deny American citizens access to Tibet, to cite a few examples.

UK, Japan, New Zealand and Australia, among others, joined the US in banning the use of Huawei equipment in their 5G mobile networks.

China has begun to feel the pinch of these measures, coupled with a natural slowdown of its economy. Its stock market lost 25% in value in 2018, becoming the worst performer in the world. Chinese public debt, estimated at over 250% of its GDP, is mounting.

Domestic consumption remains sluggish at under 40% of GDP. Given its massive manufacturing overcapacity and to maintain its economic growth, Beijing is critically dependent on robust exports, portents of which appear bleak, also due to the worldwide anti-globalisation sentiment.

India’s Gain

A push-back against its ambitious ‘Belt and Road Initiative’ (BRI), conceived partly to deploy surplus capital and industrial capacity, has begun with countries like Malaysia, Sierra Leone, Nepal, Myanmar and even Pakistan seeking cancellation of or better terms for the projects. Notwithstanding its habitual bluster, Beijing is therefore eager to defuse tensions with Washington.

What does this turn of events mean for India? Obviously, strained relations between the two powers gives more leverage to India and increases her bargaining space. Both nations are likely to hedge bets and jockey for influence. In the short term, the Chinese tone towards India should mellow. She may show some flexibility in trade by procuring limited quantities of pharmaceuticals in addition to sugar and non-Basmati rice. Even she realises that a trade surplus of $65 billion (in 2018) with India is politically unsustainable.

However, there would be no give on key issues of concern to India like boundary, membership of NSG and UNSC, or terrorism or vis-à-vis Pakistan. In reality, Beijing will do everything to keep India off-balance, short of engaging in open hostilities.

On the other hand, there is a virtual consensus across the political spectrum in the US for closer ties with India.

India’s image is that of a friendly yet prickly, benign and non-threatening power.

India’s rise is in American strategic interest, as she can be a valuable partner, if not an ally. Our relations have witnessed an unprecedented transformation since we hit the reset button in March 2000, consequent to President Clinton’s 5-day visit. However, India needs to guard against Washington’s transactional disposition and propensity to try and use her against Beijing.

Fortunately, India has developed a greater appreciation of realpolitik and harbours fewer illusions. New Delhi knows that Washington and Beijing are capable of patching up suddenly – due toTrump’s unpredictability or an unforeseen geopolitical development. However, China will no longer get an easy pass from the US. In the least, a period of hard bargaining and mutual testiness has begun.

At the same time, the US will remain the foremost economic, technological, military and political power, for the next couple of decades, at the minimum. Given our convergences, it serves India’s interest to deepen bilateral engagement. On balance, China is and will remain India’s greatest challenge and the US, its biggest opportunity.

(The writer is a former High Commissioner to Canada, Ambassador to South Korea and Official Spokesperson of the Ministry of External Affairs. He can be reached at@AmbVPrakash. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)

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