China is a one-party state with power lying mainly in the hands of the Chinese Communist Party. Moreover, it is one of the five permanent members of the UN’s Security Council and thus possesses tremendous power and reach.

History of China’s Economy

The trade reforms introduced in 1978 have changed the economic position of the country on a gigantic level. 

After the reforms were introduced, the country began to open and its economy has seen tremendous growth. GDP growth averaged over 10% per year, making it one of the world’s fastest-growing-economies.

Recently, however, due to several imbalances, comparatively low growth rate of institutional development and fast pacing economic development, there have been several reform gaps that have kept the GDP growth rate at 6% per year and it has been decreasing continuously. The country has made Innovation its top priority while working on the strategy for the 2020-25 growth model catering to the current scenario.

China’s Strategic Advantage

China is an upper-middle-income country and a major supplier of raw materials to the rest of the world. It observes major investment from MNCs globally. Most of the products that we use in our daily life are labeled as either made in China or assembled in China.

Apple iPhone, which is considered a revolutionary product, gets its product assembling done in China. Low labour costs were considered the main reason initially but there has been a shift in recent years. Since countries like India, Vietnam, etc. can provide even cheaper labour, hence the question arises, what makes China different?

The answer is the quality of labour and the type of skill provided. As said by Tim Cook “You find in China the intersection of craftsman kind of skill, and sophisticated robotics and the computer science world. That intersection, which is very rare to find anywhere, is very important to our business.”

Thus, comparatively low labour costs, highly skilled labour, the ability to produce big consignment daily due to the strong labour force and a large home market make China an ideal country for product assembly. 

Trade Relations with India

Economic relations between India and China date back to ancient times with the Silk Route being the major trade route then. China is a major exporter of raw materials like pharmaceutical ingredients, steel, electronic devices, fertilizers for India, thus making India as China’s biggest trading partner after the US. India too runs a huge trade deficit with China.

The major inability of Indian companies to produce products at low rates arises because of a lack of research and development facilities, poor infrastructure and incompetent labour policies.

In a survey of about 90 people, it was asked: “What is the main reason that encourages you to buy foreign goods?”

The following were the observations:

Due to this Chinese goods gain an edge and find a huge market in India. Moreover, the Indian population forms a large base for many Chinese apps. These do not mainly contribute to revenue but they help in boosting the reach of the product which is even more beneficial for the companies.

However, with the recent clashes and increasing deficits, the Indian government has banned several Chinese applications and has been constantly focusing on promoting the ‘Made in India’ campaign.

Impact of the Current Situation

With the advent of the current pandemic, almost all economies have come to a standstill. While some of the countries have been able to deal with the situation efficiently and have already observed the peaks, others like the US and India are the worst struck and their economies have faced a major shock. 

China has been accused of hiding information about the virus which eventually led to the pandemic. Markets crashed and the price of crude barrels fell to such an extent that they became negative for the first time in history. Many people have been laid off from their jobs, causing them to fall into debt traps.

However, the current border tensions with China have induced an even greater hatred among Indian citizens towards Chinese goods and services. Many Chinese contracts and tenders have been reworked and the suppliers have been changed. These have vastly affected China’s economy.

Nevertheless, the economic interdependence of the two nations is way too important to be ignored. An all-out boycotting of Chinese goods would force people to buy expensive goods in this period of recession. This would just worsen the situation and the governments would have to further moderate the policies to accommodate the situation.

Conclusion

 It can be rightly said that the expansionist and influential regime of the Chinese government is at an all-time high. China might be taking this course of action to drive the attention of the world away from COVID allegations by having disputes with other nations. However, with this course of action, it is losing a huge consumer base in India. Though low priced quality goods might still prevail in the markets as Indians don’t have good homemade alternatives.

India and China have been embroiled in border disputes since 1962 after the Indo-China talks failed. China has always been intruding in the territorial sovereignty of India, this has been very common but the international community never held China liable because of its veto in UN and structural hegemony in international markets but the advent of COVID-19 has led to an international bias against China. The factual matrix has created a situation in which China might be held liable for the very first time for violating the ceasefire agreement on LAC as it has lost support in the international arena and the CCP is facing extreme criticisms for its violations and misuse of authority.

The first step towards the long turn process of improving the efficiency of production in India should be taken immediately. Trade shouldn’t be stopped but the trade deficit needs to be brought to a balance to prevent other nations from exerting dominance in the future.

China needs to take into account the possible isolation by other countries in the long run which might bring down the already decreasing GDP growth and the scenario before 1978 might come into the picture again. China should acknowledge the need of the hour and help its subordinate countries with the current pandemic, help in building their economies to ensure healthy trade relations, the welfare of mankind and stability. History is evident, Wars cease to create any good, rather are a great way to destroy the global economy, loss of life and property and leave the world in a state of regret and despair. 

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Some major updates to cover in today’s Indian Foreign Policy Report are as follow:

India’s Mission Sagar in the Indian Ocean Region

With that spirit in mind, India has recently launched, ‘Mission Sagar’ on the 10th of May. The mission is India’s way of assisting nations in the Indian Ocean Region, in their fight against COVID-19. In this mission, assistance was provided by the INS Kesari, that sailed to the Maldives, Mauritius, Madagascar, Comoros, and Seychelles, to deliver material assistance and in particular, medical assistance to Mauritius and Comoros. The successful completion of the mission can be seen as a major milestone, in terms of India’s new foreign policy of increased engagement in the Indo-Pacific and the Western Sectors of the Indian Ocean. The mission is also in line with the Prime Minister’s policy of SAGAR (Security and Growth for all in the Region). Mission Sagar is one particular example of increased Indian activities in the spheres of maritime security, cooperation, and navigation security, as the country transitions from a passive maritime actor to an exceptionally active one, with an equally important say in the Indo-Pacific, one of the most coveted and disputed regions in the world.

Bi-annual Exchange of Prisoner List Between India and Pakistan

As India has constantly tried to increase its presence on the international stage, it has found itself at an impasse with its neighbours on a multitude of issues. However, amidst this highly taut and tense environment, India and Pakistan recently exchanged a list of prisoners on the 1st of July. The exchange of lists is in accordance with the 2008 agreement, where the nations exchange a list of prisoners bi-annually, which is on the 1st of January and the 1st of July. The Indian lists contain 265 Pakistani civilians and 97 fishermen. On the other hand, the list issued by Pakistan contains 54 Indian civilians and 270 fishermen. Furthermore, to expedite the process, the Indian government has provided the nationality verification details of 7 civilians and 106 fishermen. Lastly, to show India’s commitment to the bilateral process, the central government has asked the Pakistan authorities to confirm the nationality status of 88 Pakistani prisoners in Indian custody.

India-China Dialogue Between Special Representatives

As mentioned earlier, India finds itself in an extremely precarious position when it comes to both its neighbours. However, the statement is especially true regarding its relationship with China over the Actual Line of Control. The escalation in violence in the Galwan Valley and the loss of life of Indian and Chinese soldiers was the first since 1975. This extremely volatile situation has both the governments scratching their heads as to what needs to be done next to diffuse the simmering atmosphere. China has chosen to strike a blow against India when it is busy dealing with the surge in casualties as a result of the COVID pandemic. However, in the last few months, India has chosen to follow a hardline stance against the Chinese. This has visibly resulted in increased violence on the border regions and has led to a campaign within the Indian polity advocating the ban of all Chinese products and applications.

However, recently there was a dialogue between the special representatives of the two countries. During the conversation, Ajit Doval, India’s National Security Advisor and H.E Wang Yi, State Councillor and Minister of Foreign Affairs for China, had an in-depth exchange of views on the border issue. During the discussion, several important points were highlighted, the first among them being that peace and tranquillity were essential for the further development of bilateral relations. Hence, it was agreed upon to disengage and pull back all troops from the Line of Actual Control and complete de-escalation on the India-China border. Secondly, both sides agreed to respect the Line of Actual Control and vowed to not take any unilateral action in the region.

India-Russia Bilateral Relations

In a further effort to strengthen bilateral relations, the Indian Prime Minister had a telephonic conversation with the President of the Russian Federation, wherein they discussed several strategic topics of interest to both nations. Mr Modi also used this opportunity to congratulate the President on the successful completion of the parade, marking the 75th anniversary of the end of the Second World War. More importantly, Mr Modi felicitated President Putin on the recent constitutional vote, through which President Putin has consolidated his power till 2036. The Prime minster further recalled the participation of an Indian contingent in the parade in Moscow, as a sign of friendship. Lastly, the Indian Government expressed their enthusiasm for hosting President Putin, later in the year during the bilateral summit.

India’s Participation at the ‘Strengthening Consensus for Peace’ in Afghanistan

Afghanistan over the last many decades has been turned into a complete war zone, with the presence of uninvited international actors. However, in the last two years, there have been constructive steps taken by both the Afghan government and the United States of America to bring the Taliban to the negotiation table in an effort to end the violence and bring lasting peace to the region. Lately, the Islamic Republic hosted a regional meeting, by the name of, ‘ Strengthening Consensus for Peace’. The meeting was chaired by the Afghan President, H.E Dr Mohammad Ashraf Ghani. The conference recorded participation by 20 countries and international organizations. During the conference, India expressed support for establishing a constitutional order in Afghanistan and unequivocally stated the importance of putting an end to terrorist sanctuaries and safe havens for destructive forces in Afghanistan.

Indian Nomination to the United Nations Security Council

Lastly, India recently secured its position as a non-permanent member of the United Nations Security Council, with a vote of 184 out of 192. However, to fill in the seat of the Ambassador/Permanent Representative to the United Nations and other international organizations in Geneva, Shri Mani Pandey, who currently serves as the Additional Secretary in the Ministry of External Affairs has been appointed.

Conclusion

Looking at India’s foreign policy from a macro perspective, we come to see that India has consistently tried to create an environment of inclusiveness then whether it be in the Indo-Pacific or the Western sectors of the Indian Ocean Region. India’s willingness to corporate and emerge as a regional power is a visible thought of its efforts in Afghanistan and its strategic partnerships with countries like the Russian Federation and France. In the last two decades, China has developed by leaps and bounds and has emerged not as a regional power but as a global hegemon. This has overshadowed nations like India, owing to China’s aggressive policies. Hence, while India tries to extend its reach globally, it has locked horns with China recently in the Galwan Valley region. The Indian and the Chinese sides seem to be ideologically clashing with each other over the Indo-Pacific, one of the most disputed regions of the world. It is India’s capabilities to fight off both the COVID 19 and the Chinese aggression, that will define the India that emerges in the near future.

Also Read: INDIA’S FOREIGN POLICY REPORT – EDITION #2

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