China–India Relations IAS Target

China-India Relations UPSC

21 Jul 2020

Category : International Relations

Topic: China-India Relations UPSC

India-china relations belong to the bilateral relationship b/w the Republic of India and the People’s Republic of China (PRC). There are border clashes and economic competition between the two countries which have at times led to nervy relations between two great Asian powers. The new relationship started in 1950 when India was among the first countries to finish formal relations with Taiwan and identified the People’s Republic of China as the legitimate govt of Mainland China. India and China, the both, are the most populous countries and even the fastest-growing major countries. They are the engines of the global economic system.

Past relationship

  • Facilitation of the propagate of Buddhism from India to East Asia and south-east Asia.
  • During World War II, British India & China both fought against Imperial and expansionist Japan.
  • Cultural and economic relations b/w China and India date back to ancient times and the Silk Road was major trade route between India and China.
  • Current border disputes due to overlapping claims which led past military disputes the Sino-Indian War of 1962, the Chola incident in 1967, and the 1987 Sino-Indian skirmish. Recent Doklam military fall out b/w great Asian powers

Doklam Issue

The offensive stand of China on Doko La (Doklam) and India’s strong warning in return, is the latest addition to the worries that ruin Indo-China relations. It started when India (Indian Army) objected to road construction by the People’s Liberation Army (PLA)of China in the Doklam plateau which China claims to be a part of its Donglang region. However, India and Bhutan recognize it as Doklam, a Bhutan territory. Later, China blamed Indian troops for entering its territory and India claimed the Chinese for destroying its bunkers (People’s Liberation Army bulldozed an old bunker of the Indian army stationed in Doklam). Thereafter China stopped the passage of pilgrims heading toward Kailash-Mansarovar through the Nathu La pass, Sikkim. The route is an alternative to the Lepu Lekh route via Uttarakhand and had been opened for pilgrims in 2015.
After this, both India and China increased the presence of their troops and since then there has been a war of words especially from the Chinese state media. Though, a military standoff was averted, diplomatic negotiations have not yielded many results to cool-off the passions across the border.

Importance of Bhutan

Doklam (Zhoglam or Droklam or Donglang) is a narrow plateau sit in the tri-junction of India, Bhutan, and China. China supposes Doklam to be disputed territory between China and Bhutan. It, therefore, challenges the presence of the Indian army in the region as a transgression. The disputed region is near India’s Siliguri Corridor which connects the seven northeastern states to the Indian mainland.

Why India did support Bhutan?

  • Bhutan has a very strategic position considering India’s geography.
  • Bhutan and India have an extremely cordial relationship, as Bhutan and China don’t have formal relations.
  • To encourage the relationship, India and Bhutan signed a ‘Friendship Treaty’ in 2007 that commits India to defend Bhutan’s interests and the close coordination between the two militaries.
  • India is concerned that if the road is completed, it will give China greater access to India’s strategically vulnerable “chicken’s neck” (Siliguri Corridor) that connects the seven northeastern states to the Indian mainland.

In early 2017, the two countries clashed at the Doklam plateau along the disputed Sino-Bhutanese border. Since the late 1980s, both countries have successfully rebuilt diplomatic and economic relations. In 2008, China became India's largest trading partner and the two countries have also extended their military and strategic relations. Apart from trade and commerce, there are some other areas of mutual interest on which China and India has been cooperating and the two countries are cooperating on a range of international like trade, climate change, and reform of the global financial order, among others, to promote common interest".
Despite growing economic and strategic ties, there are several barriers for India and the PRC to overcome. India faces a trade imbalance heavily in some favour of China. The two countries failed to resolve their border clashes and Indian media outlets have frequently reported Chinese military incursions into Indian Territory. Both countries have gradually established military infrastructure along with border areas.

Bilateral Trade Year
90 billion $ 2017-18
20 billion $ 2006-07
Bilateral trade b/w India and China with the trade deficit widening to US$62.9 billion in China's favour

India-China trade deficit

Bilateral trade b/w China and India touched US$89.6 billion in 2017-18, with the trade deficit widening to US$62.9 billion in China's favour. Much of the rise in imports is driven by India’s import of high-tech goods like mobile phones, telecommunication products, and other electronic products. The problem of a huge trade deficit is India’s export of raw materials as opposed to importing finished products with high technology from China and a large number of Chinese products being discarded in markets like India and this further boosts trade deficit. Market access is a big problem for Indian companies. Strict government regulations in China hamper Indian companies from entering the Chinese market.
For example, India is very strong in three key sectors:
  • IT services
  • Agriculture
  • Pharmaceuticals
But Chinese regulations impose restrictions that throttle the provision of Indian goods and services. At the same time, India doesn’t have in-depth knowledge of the Chinese market, while china understands the Indian market and its dynamics with changing seasonal festivals India has a democratic system and implementation of policies takes more time compared to China. A problematic business environment and bottlenecks in infrastructure, labour laws, and poor environmental standards have, furthermore, discouraged foreign investment and thus affected the growth of the manufacturing sector in India. Various Indian governments haven’t been able to make the best use of India’s comparative advantages with China in order to tap into the under-exploited Chinese market. The number of Chinese tourists visiting India is low, but this may also be due to the visa regime being rather strict due to perceived security reasons.

Step to diminish trade deficit

Understanding China’s market Strong efforts must be made to recognize china and information about Chinese market for the benefit of Indian Industry and consequently for the government as well. Without such knowledge, no opportunities can be seized.
Diversifying trade basket Efforts are being made to boost overall exports by diversifying the trade basket with emphasis on manufactured goods, services, resolution of market access issues and other non-trade barriers.
Trade meetings and trade fairs This is done through bilateral meetings and institutional dialogues. Indian exporters are encouraged to participate in major trade fairs in China to show-case Indian products.
Food processing and dairy sectors India is a potential market for agricultural inputs like fertilizers and processed chemicals. In turn, Indian firms can pay attention to the Chinese markets in processed and frozen foods and dairy products.
Pharmaceutical sector The pharmaceutical sector has huge business potential for both countries. India is a large importer of active pharmaceutical ingredients from China. Indian firms specialize in formula development and finished dosages.
Tourism promotion and e-visa Recently, Government steps of introduction of the concept of e-visas for facilitating travel by Chinese tourists, but much more needs to be done to magnetize Chinese visitors specially to allay concern on safety, security and sanitation matter.