India’s national security advisor met Chinese Minister of Foreign Affairs Wang Yi (王毅) for the first time since 2019 last month. This get-together was previously an annual affair, but it had not been held since Indian and Chinese soldiers clashed on the border in the summer of 2020.
Its resumption is another indication that Indian Prime Minister Narendra Modi and Chinese President Xi Jinping (習近平) seem to have agreed, when they spoke on the sidelines of a BRICS summit in Russia in October last year, to dial things down a notch.
However, not too much. The two armies remain entrenched on disputed mountaintops in the depths of a Himalayan winter. Nevertheless, by the standards of the past four years, this counts as a thaw. Such progress could not have been predicted even last year. The two countries had dug themselves into adversarial positions.
Illustration: Yusha
The Chinese resented India’s increasing closeness to the US, and the Indians were furious that Beijing seemed to be determined to change the “status quo” on the border to its advantage.
A lot has changed since then. Most importantly, both nations are more than a little concerned about how to revive their slowing growth.
China’s recovery from its property sector stumbles has not been as strong as its leaders hoped. Ripples from its 2021 crisis in real estate have now spread through its economy. Less demand for new construction has impacted sectors from steel to appliances; slowdowns in these sectors combined with stumbling house prices — which might decline by more than 8 percent last year — mean that many Chinese consumers are feeling poorer.
China has over-invested in its industrial infrastructure; and now, consumer demand seems unable to absorb all that excess output. Exporting the excess is becoming difficult, as well. Some countries in Southeast Asia have enacted anti-dumping provisions targeted at imports from China.
As the trade dispute gains momentum with US president-elect Donald Trump’s arrival in the White House, economic planners in Beijing would thus be casting their eyes around for new destinations for their manufactures. India’s attempts to cut economic ties with China would have been identified as a problem that needs solving.
India imports vast amounts of Chinese goods already; but attempts to wean itself off them intensified sharply after the border erupted in 2020. Regulatory action focused on imports from China, including those being repackaged in Southeast Asia, with which India has a free trade agreement. Chinese investment in India was banned as well. Visas for Chinese citizens to visit India dried up.
However, that strategy did not seem to be working as planned. Indian policymakers noticed that the trade deficit continued to rise. Oddly, India was importing more from China in precisely those sectors — such as electronics — where it also seemed to be improving its competitiveness, and exporting more to the West.
They should have expected that. It was a sign of success, not failure. The iPhones that Apple Inc now builds in India would naturally have an extended supply chain that includes companies in China. India’s government has struggled to create new, high-quality employment for its millions of young people, a problem worsened by economic growth that has been at its lowest for almost two years. If these new jobs in electronics exports need India to share supply chains with China, that might be a price worth paying.
Some in India’s government have now begun to realize that breaking free of China — by growing domestic competitiveness and finding India’s own export markets — would not happen unless the nation enters supply chains that China currently dominates.
In other words, an India that manages to compete with China would only do so with China’s help. Chinese businesses might have to invest in India’s manufacturing ecosystem if it is to emerge as an effective substitute for the factories those same businesses operate in China. Chinese goods would need to serve as inputs for this emerging ecosystem. Chinese businesspeople would have to be able to go back and forth.
None of that could happen while the border was ready to explode at any moment, and thus both countries began, tentatively, to repair their grievously damaged relationship. We are still some distance from, say, New Delhi rolling out the red carpet for a Chinese state visit, but their growth slowdown gives both sides a solid reason to strive for the return of some sort of normalcy.
Yet the fundamental problem remains: Both also want different things from this thaw. The Indians want Chinese investment and inputs, and for them to stop pushing on the border. The Chinese want another market, and hope they can get the Indians to be less enthusiastic participants in a future Trump administration’s attempts to isolate China politically and economically.
New Delhi knows about this mismatch, and so does Beijing, but both countries’ economies are in such a hole that they are willing to overlook it — for now.
Mihir Sharma is a Bloomberg Opinion columnist. A senior fellow at the Observer Research Foundation in New Delhi, he is author of Restart: The Last Chance for the Indian Economy. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Taiwan faces complex challenges like other Asia-Pacific nations, including demographic decline, income inequality and climate change. In fact, its challenges might be even more pressing. The nation struggles with rising income inequality, declining birthrates and soaring housing costs while simultaneously navigating intensifying global competition among major powers. To remain competitive in the global talent market, Taiwan has been working to create a more welcoming environment and legal framework for foreign professionals. One of the most significant steps in this direction was the enactment of the Act for the Recruitment and Employment of Foreign Professionals (外國專業人才延攬及僱用法) in 2018. Subsequent amendments in
After nine days of holidays for the Lunar New Year, government agencies and companies are to reopen for operations today, including the Legislative Yuan. Many civic groups are expected to submit their recall petitions this week, aimed at removing many Chinese Nationalist Party (KMT) lawmakers from their seats. Since December last year, the KMT and Taiwan People’s Party (TPP) passed three controversial bills to paralyze the Constitutional Court, alter budgetary allocations and make recalling elected officials more difficult by raising the threshold. The amendments aroused public concern and discontent, sparking calls to recall KMT legislators. After KMT and TPP legislators again
US President Donald Trump on Saturday signed orders to impose tariffs on Canada, Mexico and China effective from today. Trump decided to slap 25 percent tariffs on goods from Mexico and Canada as well as 10 percent on those coming from China, but would only impose a 10 percent tariff on Canadian energy products, including oil and electricity. Canada and Mexico on Sunday quickly responded with retaliatory tariffs against the US, while countermeasures from China are expected soon. Nevertheless, Trump announced yesterday to delay tariffs on Mexico and Canada for a month and said he would hold further talks with
Taiwan’s undersea cables connecting it to the world were allegedly severed several times by a Chinese ship registered under a flag of convenience. As the vessel sailed, it used several different automatic identification systems (AIS) to create fake routes. That type of “shadow fleet” and “gray zone” tactics could create a security crisis in Taiwan and warrants response measures. The concept of a shadow fleet originates from the research of Elisabeth Braw, senior fellow at the Washington-based Atlantic Council. The phenomenon was initiated by authoritarian countries such as Iran, North Korea and Russia, which have been hit by international economic
RSS