NonAlignment 2.0: A Foreign and Strategic Policy for India in the 21st Century Read Online Free PDF Page A

amenable to manipulation by China. The Dalai Lama’s popular legitimacy among his own people is a fact that the Chinese government must acknowledge.
    On the global canvas, China looks upon India not as a threat in itself, but as a ‘swing state’ whose association with potential adversaries could constrain China. The challenge for Indian diplomacy will be to develop a diversified network of relations with several major powers to compel China to exercise restraint in its dealings with India, while simultaneously avoiding relationships that go beyond conveying a certain threat threshold in Chinese perceptions. This will require a particularly nuanced handling and coordination of our foreign policy, both through diplomatic and military channels. If China perceives India as irrevocably committed to an anti-China containment ring, it may end up adopting overtly hostileand negative policies towards India, rather than making an effort to keep India on a more independent path.
    India–China economic relations also present a complex and somewhat ambiguous picture. Bilateral trade is rising rapidly but asymmetrically, with a growing trade surplus in favour of China. We could respond by trying to limit Chinese penetration of our market, particularly our infrastructure market. Or, we could allow access but with various conditions that safeguard and promote Indian interests in other areas. Given that India’s infrastructure market is likely to be in the region of a trillion dollars in the next few years, China would obviously have a keen interest in expanding access to it. We should see this Chinese economic interest as a point of leverage for tradeoffs favourable to us in other sectors, including political concessions in areas of interest to India.
    One of the big concerns in our economic relations is the involvement of China’s state-owned and -supported enterprises. Chinese banks are often able to offer preferential financing to Chinese companies because of their scale and because they are not driven solely by market forces. Many of China’s premier manufacturing firms are also state-run, and thus have access to such financing. This means that when Chinese companies participate in competitive bidding for open tenders, they may actuallyhave a big advantage over other bidders, which allows them to place stronger (lower) bids. However, such preferential financing could also be a useful asset in terms of the volume of infrastructure financing, so we need to develop systematic and differentiated approaches to the various issues at stake, which can balance immediate requirements with the longer-term implications of certain choices. There is the additional problem of the potential for espionage and intelligence gathering through software means, which was evidenced by the banning of import of Chinese telecom equipment.
    Given the asymmetry in the economic and trade relationship, we should not overestimate our bargaining power. It may be more realistic to link large orders to economic and trade concessions, including fixed investments in India-based facilities. It is also reasonable to expect that growing economic interdependence might help make the political relationship more manageable and less subject to oscillations (though we should also bear in mind Japan’s less than positive experience with China in this respect).
    The growing trade surplus between India and China has been a cause for concern owing both to its degree and composition. Not only is the degree of dependence of Indian industries on Chinese imports on the rise, butIndia’s main exports to China are in the form of natural resources, whereas its imports are largely higher-end manufactured goods. Given India’s large services sector, it should be pushing for greater market access and presence in China to correct this imbalance.
    One area where India may be able to bargain effectively with China is the domain of technology transfer. The ability to leverage access to our