Boycott China? Relooking India-China Bilateral Relationship

Globe with India and China

India was the first non-communist country in Asia to establish diplomatic ties with the People’s Republic of China on April 1, 1950. 70th anniversary celebrations of this diplomatic relationship were cancelled due to the coronavirus outbreak that shut India down from the 25th of March. The decision to cancel the 70th anniversary event, however, did not stop presidents and the premiers of the two nations to exchange congratulatory messages and even make foreseeable euphoric statements about the two Asian giants working together. This situation has led many to start questioning the bilateral relationship between these two countries and how it would change as the result of the pandemic and China’s involvement in the virus outbreak itself.

The spotlight of animosity for the SARS-CoV-2 (i.e. the Covid-19) pandemic, which started to hit the world in early March and led to the ultimate lockdown of countries all over the world, is currently upon China. The virus made its first sign of life when the Wuhan Municipal Health Commission in China, reported a cluster of cases of pneumonia in Wuhan, Hubei Province on 31st December 2019. A novel coronavirus was eventually identified. 

The public, politicians and even the media have blamed China severely for the alleged ‘creation’ of the virus in laboratory conditions. However, despite these claims and accusations, the truth is far from this fictional notion as it is clear that the virus emerged naturally and became stronger through natural selection. 

“There is convincing evidence that the new virus was not the result of intentional genetic engineering and that it almost certainly originated from nature, given its high similarity to other known bat-associated coronaviruses,” said James Le Duc, the head of the Galveston National Laboratory in the US. 

Researchers and scientists have been able to conclude that the virus outbreak could have been avoided entirely as some of the features of the pandemic share several similarity traits with previous coronavirus outbreaks like that of the Middle East Respiratory Syndrome (MERS). 

The anger of many nations, despite the virus being proven to not be a product of Chinese biowarfare tactics, continues to be pointed at China. This blame is not for the origination of the virus, but for the ‘Iron-Curtain’ communist state’s inability to contain the spread of the virus, blocking crucial data from reaching the world and various internal factors that have led to the resulting pandemic. This has resulted in a major economic challenge for China, as MNC’s have started moving their production out of China. Japan has reserved $2.2 billion to help shift factories from its neighbor, while members of the European Union currently work towards cutting dependency on Chinese suppliers.

Investment ties with China

From a trade, commerce and Foreign Direct Investment (FDI) viewpoint, we can expect a change in this outlook of Sino-Indo relations, as India looks to lure in the production facilities of more than 1,000 American companies out of China, including medical devices giant Abbott Laboratories. This decision was part of Donald Trump’s ‘Make China Accountable” for handling the virus. The move is expected to severely worsen global trade ties as companies are looking to diversify their supply chain and production. 

April 19th saw India revising its foreign investment policy by tightening investment rules for companies located in countries sharing a land border with India. The new directive put into effect the requirement of prior clearance for investments from countries with which India shares its land border. This development was the after-effect of the Chinese central bank increasing its stake in housing finance lender HDFC at a point when share prices were plummeting around the world. Simultaneously, media reports from early May show India developing a ‘land pool twice the size of Luxembourg’ to host companies leaving China. Series of these decisions could be the first step of a possible breakdown of current bilateral ties.

The  situation can also be seen as a favorable time for India as it can exercise persuasion to SAARC (South Asian Association for Regional Cooperation) countries and countries participating in the Belt and Road Initiative (BRI) of China. The brain-child of President Xi Jinping in his attempt to revive the ‘Silk Route’, the BRI poses a serious territorial threat to India. The CPEC  (China- Pakistan Economic Corridor), an important sub-project of the BRI, consists of billion-dollar investments for overhauling and creating several land and rail-based physical infrastructure projects in Pakistan which pass through Gilgit-Baltistan in PoK, which New Delhi considers its own territory.

Currently, the support to China by the SAARC would not be as favorable as before, offering India a chance to curb any progress made by China that would affect our territorial sovereignty. 

Erupting Border Issues

India and China can also be seen facing a new battlefront as border tensions rise to unprecedented levels. People’s Liberation Army of China troops have crossed over onto the Indian side in the union territory of Ladakh (regions such as the Galwan valley) and have sparked violent conflict situations along the Sikkim frontier. According to economic and military experts, this was a retaliatory move by China as the country faces a mass exodus of production and enterprise that tilts the balance-of-power equation towards India, the economic beneficiary. China is using its military might to ‘bully’ India, possibly to spark another possible ‘Doklam standoff’ that would make our Western friends think twice about their investment; it all basically adds up to the modus operandi of economic greed.

It’s global and public knowledge that China and India have been facing several threats to their bilateral relations that you could call a ‘ticking time bomb’. Could this be the time this sets off?

Stephen S. Roach, former chairman of Morgan Stanley Asia wrote an article “The end of the US-China relationship” in which he claims the relationship to be the worst in the past 70 years. The US Republican Party’s political strategy’s premise Covid-19 politics is ‘Do not defend Trump, but attack China’. While this does not affect the independent bilateral relationship of India and China, it could send it into a spiral that could see border standoffs, economic sanctions and trade disputes.

India is not China’s primary threat and South Asia is not China’s primary theater.

Conflict between these two countries would not address any key security conflicts for China. Moreover, this would only yield minimal returns and probably expose China to a two-front war with the US and India.

Siddharth Raghavan
Student of Defence and Strategic Studies & CIMA India rank holder