India must exercise trade, diplomatic options warily
By Nantoo Banerjee
Notwithstanding India’s current trade tariff spat with the United States, India should apply caution to further open up imports from China with which it already suffers from massive trade deficits – nearly $100 billion last year when China had severely cut down imports from India. The latter should also avoid the Chinese trade trap promoting the Yuan (Renminbi) as an alternative to the US dollar for trade, investment, and reserves, citing political shifts and market fluctuations. A China-India bilateral trade is most welcome in each other’s currencies as it is being done in the case of Russia-India trade now leading to a big boost to India’s oil import from Russia. Over 90 percent of Russia-India trade is now settled in Roubles and Rupees, reducing reliance on the US dollar, enhancing financial sovereignty for both nations.
At the same time, India should raise its own production of fertilisers, rare earths and drug intermediaries among others. India imports nearly 2,000 commodities from China. There are some 600 items where over two-thirds of imports come from China. In 416 categories alone, worth $25.2 billion, India’s dependence has severely increased compared to pre-pandemic levels. India also imports nearly 90 percent of its rare earth magnets from China. This is despite the fact that India has the world’s third largest reserve of rare earth elements after China (44 million tons) and Brazil (21 million tons). India’s reserve of rare earth elements is estimated at 6.9 million tons. Last April, China announced export controls on a broad range of rare earths and related magnets as a response to US President Donald Trump’s broader tariffs on goods.
India has too many uncomfortable issues with China, from border disputes to China’s strong military alliance with two of India’s difficult neighbours – Pakistan and Bangladesh. Last week, China agreed to enhance its strategic relations with both Pakistan and Bangladesh. In fact, China’s offer to stand by India on the issue of the punitive 50 percent import tariff on India imposed by the US could be intended to further ignite the Indi-US trade tension. China is trying to take full advantage of the latest trade bickering between the US and India by spicing it up with warning against the US action, portraying the US as a “bully” and standing with India to uphold the World Trade Organization (WTO) framework. China is out to capitalise on the present India-US diplomatic strains to counter US influence in Asia. It aims to weaken the US-India relationship, force New Delhi to get closer to Beijing, and enhance China’s own strategic position in the region, especially in the context of shared concerns about Washington’s unpredictable foreign policy.
India will make a big mistake if it trusts China’s cunning mind and its hand of friendship amid the country’s current rift with the US. Incidentally, the Chinese state-controlled media has openly celebrated the friction between the US and India, considering it as beneficial to China’s interests. The political strategists in China view the penal US tariffs on Indian goods as an opportunity to potentially raise a wedge between India and the US, a key element of America’s Indo-Pacific strategy aimed at counterbalancing China’s rise. China wants to benefit from a breakdown of political trust between the US and India. Lately, Chinese Foreign Minister Wang Yi’s rush to Islamabad soon after his visit to New Delhi conveyed a clear message that it attaches a much greater importance to the growing China-Pakistan relationship. During Wang Yi’s Delhi visit, China tried to play a trick on India on the Taiwan issue as its ‘One-China’ resolve and tried to drag India in its support. Last week, China expressed “surprise” over clarification by India over External Affairs Minister S Jaishankar’s reported comments related to the One-China policy during his talks with Chinese Foreign Minister Wang Yi. India said there is no change in its position on Taiwan, and New Delhi’s relationship with Taiwan focused on economic, technology and cultural ties. It clearly shows that India needs to be extremely cautious with the latest Chinese gestures. Wang Yi had soon left Delhi for Islamabad to attend the annual strategic dialogue to review all-weather ties with Pakistan and attend the sixth round of China-Pakistan Foreign Ministers’ Strategic Dialogue with Pakistani Deputy Prime Minister and Foreign Minister Ishaq Dar.
China is desperately trying to exploit the US-India trade rift by trying to make India see China as “partners” rather than “adversaries.” It was quick to ease export restrictions on goods critical to India such as fertilizers, rare earth magnets, and industrial equipment. For a change, China has welcomed Indian investment in its country while hoping for a “fair, just and non-discriminatory business environment” for Chinese enterprises operating in India. Chinese Ambassador Xu also stressed the need to view the border dispute between the two countries separately from the broader relationship, suggesting that cooperation can progress alongside addressing the border issue. India needs to navigate these dynamics cautiously, pursuing its strategic interests while managing relations with both the US and China as the long-term impact on the global trade landscape remains uncertain.
However, there is no denying the fact that of late China is seemingly trying to improve diplomatic relations with India while maintaining strong ties with Pakistan and Bangladesh. For example, Prime Minister Narendra Modi and President Xi Jinping met on the sidelines of the BRICS summit in Kazan, Russia, on 23 October 2024. There have also been visits by India’s Foreign Secretary Vikram Misri, Defence Minister Rajnath Singh and national security adviser Ajit Doval for key bilateral meetings to comprehensively resolve border issues and take steps to stabilise ties between the two countries.
Yet, China’s well calculated change in approach in dealing with India, especially after the US-India trade rift, makes the people of India somewhat sceptical of China’s intentions, particularly with regard to many of Beijing’s activities such as building a giant dam on the source of the Brahmaputra River in the Tibet Autonomous Region that will control the river’s flows through China before entering India. China has been protecting terrorist leaders like Masood Azhar in Pakistan to support the Islamist network there. Now there is a fear that Beijing can quietly promote fundamentalists in Bangladesh too. Such activities affect India’s economic lifeline and national security. India must exercise trade and diplomatic options warily. (IPA Service)
