“Our relations, which China are following a positive course and a steady effort to overcome past differences and build a growing convergence of interests. The challenge that we face vis-à-vis China is to sustain the steady expansion and strengthening of the relationship in diverse fields even as we attempt to together resolve the border issue. India and China are amongst the fastest growing economies in the world, the two largest developing countries and two major Asian powers with recognized capacity to play major roles in shaping the future of the continent. The challenge is to balance legitimate interests of all the other players-Japan, the ASEAN bloc and the US-in a cooperative framework. Bilateral trade between India and China this year will equal four and half billion US dollars. With China, economic relations have taken over political relations. With booming trade and boundary issues taking backseat, relations are going to improve with time. But China’s continuous claim on large area in Arunachal as a pressure tactics is a challenge again.

Background ofRelationships

India extended official recognition to the Peoples Republic of China on December 30, 1949, making it the first among the non-socialist countries to do so. India and the Peoples Republic of China established diplomatic relations on April 1, 1950.The global political architecture is shifting from the west to the East in which India and China and their bilateral relations are going to play a major part in the “Asian Century”.

Cordial Relations 1949-1959

The period 1950-57 was marked by warm relations and exchanges in various fields. Premier Zhou Enlai visited India in June 1954 and April 1960 and Prime Minister Nehru visited China in October 1954.  The leaders of china and India initiated the five principles of peaceful coexistence and made common efforts to gain the due status for the newly independent countries in Asia and Africa on the world arena. Today the Five principle of Peaceful Coexistence have become the universally -acknowledged norms governing the state to state relations.

Worsening Relation -1959-1979

The controversial integration of Tibet to China , followed by the shelter to Dalai Lama with thousands of followers in India , Chinese  refusal to accept the simla agreement of 1914, between Tibet and India , as a real boundary agreement and the other difference between two countries  led to the 1962 conflict.

However, the relations turned sour further due to opening of the Khunjerab Pass in Pakistan-occupied Kashmir (PoK). This 4,620-metre-high Pass at the terminus of the Chinese-built Karakoram Highway was opened for regular travel and trade.

Improving Relations- 1979-1988

India and China restored ambassadorial level relations in 1976. The visit of the then EAM, Shri Atal Bihari Vajpayee, to China in February 1979, the first visit at the level of EAM, marked the resumption of high level exchanges. During that visit, the two sides agreed to maintain peace and tranquility along the India-China border.  The visit led to :

• Resumption of talks after a gap of 19 years.
• Opening up of Kailash and Mansarovar for the pilgrims.
• China promising not to assist Naga and Mizo insurgencies.
• Sino-China trade rising sharply since early 1980s
• The beginning of Sino-India border talks which have come to be most central high level regular contact since 1979.

Post 1988 Period

The visit of former Prime Minister, Shri Rajiv Gandhi to China in December 1988, marked the resumption of political dialogue at the highest level. During this visit, the two sides agreed to develop bilateral relations in diverse fields while continuing to address the outstanding differences. The Joint Working Group on the Boundary Question at Foreign Secretary-Vice Foreign Minister level was set up.

Subsequently, during the visit of Prime Minister PV Narsimha Rao in 1993, the two sides signed the Border Peace and Tranquility Agreement. An India-China Expert Group was set up to assist the work of the Joint Working Group on the boundary question. The relationship underwent a temporary setback after India conducted its nuclear tests in May 1998. China vehemently criticized the tests. Acrimony deepened further due to the remarks of Defence Minister George Femandes that China is our potential threat Number One. The matter has been resolved after the clarification by Prime minister of India. The momentum of high-level exchanges has been maintained. 

• In October 2009, relationship between these two countries reached a milestone when both signed a wide ranging agreement to stand together against the" developed countries during crucial climate change negotiations in Copenhagen. They agreed that developed countries must reduce emissions by 5 percent and provide money and technology to the developing world.
• The Indian side unilaterally suspended military exchanges with China in 2009 when the Chinese side began to issue stapled visas to inhabitants residing in the Indian-controlled zone in Kashmir.
• Chinese Premier Wen Jiabao paid a three day official visit to India in December, 2010.
• The year 2011 was observed as the 'Year of India China Exchange'. The year saw a number of exchanges between the two countries, especially at the provincial/state level.
• Change of leadership in China, new President Xi Jinping, Premier Li Keqiang take charge of the nation's quest for change from economic growth to development and environment protection.
• Mr. Xi has formulated a 5 point program: (1) maintain strategic communication, (2) harness each other’s comparative strengths with cooperation in infrastructure, (3) mutual investment, strengthen cultural ties, (4) expand coordination in multi-lateral foray to jointly safeguard the legitimate rights and interests of developing countries and (5) tackle global challenges and accommodate each other’s core concerns and properly handle problems and differences existing between the two countries.
• Chinese PM Li Keqiang visited India and inked eight agreements to enhance cooperation in a range of areas including trade, culture and water resources.
• April 2013: A Chinese army patrol entered Daulat Beg Oldi in the western sector in Ladakh and set up a camp there.
• During PM Manmohan Singh’s visit in October 2013, India and China inked a BDCA (Border Defence Co-operation Agreement) which stipulates among a set of confidence building measures that in any face-off on the Line of Actual Control (LAC)
• Both nations inked Trans-Border River Agreement (TBRA). The pact extends a previous MoU to provide hydrological date in the flood season to cover a longer time period.
• After gap of 5 years, in November 2013 India and China held their 3rd joint military exercise christened as “Hand in Hand” which focuses on anti-terrorism drills. The yearly exercises began in 2007
• India, China, Bangladesh and Myanmar held the first ever official-level discussions on the BCIM economic corridor. This corridor would open up the whole of the north-eastern region of India to Southeast Asia and China
• 2014 has been launched as the ‘India-China Year of Friendly Exchanges’. Initiatives taken: a dedicated Chinese Industrial Park in India, promote Chinese companies to establish production and supply chains, Introduce Chinese language in middle schools, highlight Indian culture in China through ‘Glimpses of India’.

Contentious Issues

(a) Tibet & Dalai Lama.

• This led to the first ever war between these two nations. China is very sensitive about the territorial sovereignty and having Dalai Lama run a shadow government in India has historically been a major irritator for them.  
• India’s support for the Dharamasala regime is a huge issue for China, but not even headline-worthy for India.

(b)Two border disputes

• One in a region called Aksai Chin and another in a region called Arunachal Pradesh. Both nations claim both regions although China controls the former and India the latter.
• In both these places the geography favors the current arrangement. With both nations nuclear armed, it is inconceivable for any solution other than formalizing the status quo.  
• When Prime Minister Narendra Modi visited China in May 2015, one of his objectives was to persuade the Chinese leadership to restart discussions on the clarification of the Line of Actual Control (LAC) through the exchange of maps.  
• The rationale for India’s demand was that, pending a final settlement of the border question, LAC
• clarification would help ease border tensions. But the Chinese leadership was not enthusiastic about India’s proposal. Instead, China called for a comprehensive ‘code of conduct’ for the forces deployed along the border.
• Here, it is useful to remember that both LAC clarification and Confidence Building Measures (CBMs) are part of the agreed principles in the 2005 agreement.  This mismatch in desired outcomes was the main obstacle in the recent border talks, and it showed once again India and China’s contrasting approaches to border negotiations at large.  
• India’s reluctance to consider a ‘code of conduct’ suggests that it entertains reservations about agreeing to restrictions on its plans for infrastructure development in the border region.
•  Perhaps, this reluctance is because of two inferences. One, that the Chinese proposal is aimed at limiting India’s military and infrastructure modernisation, and thereby enabling China to preserve its military advantage in Tibet. And two, accepting the Chinese proposal could potentially curtail the ability to effectively patrol and intercept PLA movements in territory claimed by India.  
• The Indian position on the Sino-Pakistan understanding on Chinese activities in PoK has been consistent.
• There are often debates in India-mostly episodic and lacking vigour-about Sino-Pakistan relations.

(c)  Domination of Indian Ocean

• China has been accused of pursuing strategic maneuvers on a well-thought out route encircling India in the Indian Ocean.  Beijing has been reaching out to India’s neighbors on the premise of development and trade, allegedly recreating the Silk Route.
• From Nepal in the south east to Myanmar, Bangladesh to Sri Lanka in the south and Pakistan in the west, China plans to choke India diplomatically.  There are diplomatic visits, courtesy calls, exchange of gifts and promises between Mr. Modi and the heads of all of the surrounding countries, to not just counter the Chinese influence but also strengthen the Indian presence.

Water issue:

• The dispute between India and china is mainly regarding the Brahmaputra River flowing through the two countries the search for water resources in China and India has persistently been a source of tension between the two countries.
•  Chinese efforts to divert the water resources of the Brahmaputra River away from India will worsen a situation that has remained tense since the 1962 Indo-China war.
•  The melting glaciers in the Himalayas as a result of accelerating global climate change will have a dramatic effect on this river’s water supply. This will increase water scarcity as well as the likelihood of floods, impact agrarian livelihoods and strain the fragile equilibrium between the two Asian giants.

Pakistan factor:  

• The longtime friendship between China and Pakistan, rooted in a time when both countries were deeply mistrustful of India, has long made New Delhi nervous.  The relationship has mainly gone one way, with China providing economic assistance and political backing to Pakistan.
•  Islamabad is also anxious for an alliance it can use to balance the growing economic and political clout of India.  But Pakistan also offers China a gateway to South Asia, Iran and the Arabian Sea, one of the economic beltways that President Xi Jinping has sought to build through the region. Earlier this year, during a visit to Islamabad, Chinese Foreign Minister Wang Yi said China and Pakistan have an “all-weather friendship.”
• South China Sea issue and India:
• China opposes India’s oil exploration in the SCS (which has been undertaken at Vietnam’s request) by calling the area of exploration a ‘disputed’ area and asserting ‘Chinese sovereignty’ over the SCS in the ‘historical’ context.  
• It has been continuously expressing its reservation in this regard in the last few years, and sometimes quite belligerently at that. India has taken note of the Chinese reservation and has carefully gone ahead in signing a few agreements with Vietnam for oil exploration in the SCS.
• These exploration fields are very much within the maritime space under the actual control of Vietnam.  But at the same time, China casually shrugs off the issue of India’s ‘sovereignty’ over POK in the ‘historical’ context.
• China is currently engaged on a variety of investment projects and infrastructural building activities in Gilgit-Baltistan, and these will be expanded under the CPEC project.  
• China further explains that the Sino-Pak understanding to implement CPEC through POK is based on a range of bilateral agreements and understandings, including their 1963 Border Agreement.

Trade deficit:

•  India faces trade imbalance heavily in favour of China. India has a trade deficit with China of nearly $50 billion, its largest with any country. Singapore, with a population about 240 times smaller than India, sells twice as many goods to China each year.

Reasons for the deficit:

• China imports raw material from India e.g. iron ore and exports the finished goods as it has got core competency in manufacturing sector and provides huge energy subsidies.
• Importing finished goods obviously cost more. India also imports power equipments, consumer electronics and telecommunications gear from china. China is dumping manufactured products in India.
• On the other hand India does not have a large access to Chinese market and with Indian rupee declining while renminbi gaining centre stage the trade deficit is becoming huge.

Maritime Silk Route project: Impact on India: 

• Beijing’s plan for a maritime infrastructure corridor in the broader Indo-Pacific region, first proposed by President Xi Jinping’s during his trip to Southeast Asia in October 2013, has attracted attention because of its potential to establish a Chinese foothold in the Indian Ocean. Needless to say, China’s outreach to India – inviting it to join the project – has generated much analytical curiosity.  
• The first thing of interest about the MSR is that it was initially mooted as an ASEAN-centered project.· The intention then was to enhance connectivity and cultural links in China’s strategic backyard-the South China Sea.  
• Beijing later expanded the scope of the project to include the Indian Ocean, but in reaching out to· Colombo and New Delhi, it found a willing partner only in the former. India has been ambivalent about the MSR and is yet to make up its mind on joining the project.  The problem with the MSR, essentially, is the ‘opaque’ nature of its proposal.
• Outwardly, the project is· about the development of massive maritime infrastructure and connectivity in the Indian Ocean and the Western Pacific. Beijing has been careful to project the MSR as an exclusively commercial venture, trying hard to dispel any impressions of it being a cover for maritime military bases.
• Surprisingly, however, China has released no details about the project, and this makes many countries doubt Beijing’s strategic intentions. The lack of specifics not only makes it hard to decipher the MSR’s real purpose, it gives credence to· suspicions of geopolitical game play by China. Indeed, for a project being touted as a critical enabler of regional sea-connectivity, Chinese planners would have spent much time and effort developing the fineprint.
• The lack of firm plans, proposals and timelines then does lead to a suspicion that there may be something about the MSR that Beijing is hesitant to reveal quickly.  The MSR’s essential· rationale is the leveraging of Chinese soft-power.
• The aim apparently is to shore-up China’s image as a benevolent state. Beijing’s would also conceivably use the project’s commercial investments to establish its legitimate interests in the Indian Ocean. And while China can be expected to do everything in its power to force region states to join the project – including offering economic aid to potential partners – the bottom-line for it will be to make an offer to India that is hard to refuse.
• For India, it is instructive that the sales pitch of shared economic gains does not conceal the MSR’s real purpose: ensuring the security of sea lines of communications (SLOCs) in the Indian and Pacific oceans. Since African resources are China’s focus right now, the project could well be a surrogate for a giant Chinese SLOC running all the way from the East African coast, to the Southern coast of China – created, maintained and controlled by Beijing.
• In its ultimate form, therefore, the MSR could end up setting up Chinese logistical hubs in the Indian Ocean, linking up already existing string of pearls.  India’s appreciation of the MSR must be based on an objective appraisal of these new realities. Even assuming the project delivers on its economic promise, it could well turn out to be detrimental to India’s geopolitical interests in the IOR.
• As Beijing becomes more involved in building infrastructure in the Indian Ocean, it will play a larger part· in the security and governance of the IOR, which could pose a challenge to India’s stature as a ‘security provider’ in the region and also adversely affecting New Delhi’s strategic purchase in its primary area of interest.

String of Pearls

What is “String of Pearls” - Ever since the term "String of Pearls" was coined by a team of experts at US based consultancy Booz Allen in 2004, journalists and academics have overplayed China's supposedly malevolent involvement with countries along its Sea Lines of Communication (SLOC), which stretch from the South China Sea to the Indian Ocean. China had a hidden strategy to build military bases along its SLOC with huge military budget support. According to the 2005 Washington Post article the "String of Pearls" refers to China's supposed aim to leverage diplomatic and commercial ties to build strategic bases stretching from the Middle East to southern China in order to protect its energy interests as well as "broader security objectives".

China was said to be building a container port facility at Chittagong, Bangladesh but at the same time was "seeking much more extensive naval and commercial access".

In Myanmar, China was supposedly building naval bases and had established electronic intelligence gathering facilities on the nearby Coco islands in the Bay of Bengal. At Hainan Island, the supposed first in the chain of strategic pearls off the coast of China, China was being allowed to "project air and sea power". Moreover, based on the Booz Allen map, China was said to be establishing a naval base and surveillance facilities in Pakistan.

Viewing a map of China's SLOC, there is certainly a correlation between China's relations with these countries and its energy security policy. Nearly 80% of China's fuel is imported, mostly from the Middle East and North Africa (MENA), and those shipments must travel through several strategic "choke points" along the way, including through the particularly narrow Strait of Malacca. But correlation does not always signify a causal effect.

The "String of Pearls" theory is based partially on the fact that China possesses one of the world's largest commercial shipping fleets and relies heavily on international maritime commerce. Energy imports carried on tankers from the Persian Gulf and Africa traverse often treacherous regions, including the threat of long-range pirates operating from Somalia. In accordance with those threats, China has developed diplomatic, economic and military relations with respective Indian Ocean countries. However, it is a large hypothetical leap to assert these relations are driven by a longer-term desire to construct actual military bases along its SLOC.

Ever since the publication of the Washington Post's alarmist article, journalists and researchers have hyped China's intentions in the Indian Ocean. Retired Indian army Brig S K Chatterji painted a very threatening portrait of China's involvement with South Asian countries in his September 2010 article "Chinese String of Pearls could Choke India".

The “String of Pearls” as a China’s strategic tool can be summed up as  

To establish series of nodes of economic and military power in the region with the consent of various nations

This favour has to be secured by a combination of diplomacy and economic packages to influence the requirements of various needy countries

• To enhance access to airfields and ports and treat them as base for future operations at both economic and military levels.
• To go for all out investment in the strategically areas which could be beneficial for both China and concerned countries. 

China’s Reluctance to Support India’s membership of international bodies

• China has continuously blocked India’s entry in UNSC. Recently China has blocked India’s entry in NSG. Chinese diplomats say Beijing wants NSG entry to be norm-based — in other words, whatever rules govern Indian entry should apply to others too.
• Norm-based entry would, presumably, help Pakistan gain entry, something many in the NSG are certain to resist because of the country’s record as a proliferator of nuclear-weapons technology to Iran, Libya and North Korea.

Areas of Cooperation

• Despite their rivalries, the two countries have played up their cultural links-such as the importation of Buddhism into China by wandering Chinese monks more than 1,500 years ago-and have found ample room for economic cooperation.
• Both are members of the BRICS grouping of emerging economies, which is now establishing a formal lending arm, the New Development Bank, to be based in China’s financial hub of Shanghai and to be headed by a senior Indian banker.  
• India also was a founding member of the China-backed Asian Infrastructure Investment Bank, which plans to be formally established by year’s end and seeks to emulate institutions such as the World Bank and International Monetary Fund.  

Educational areas:

• India and China signed Education Exchange Programme (EEP) in 2006, which is an umbrella agreement for educational cooperation between the two countries. Under this agreement, government scholarships are awarded to 25 students, by both sides, in recognized institutions of higher learning in each other’s country. The 25 scholarships awarded by India are offered by Indian Council for Cultural Relations (ICCR).

Trade cooperation:

India China export & import data

• Two countries have shown tremendous economic growth. Change in the dynamics of the global economy has provided the opportunity to both countries to cooperate on wider scale.  China and India are the major trading partners in the region. During the last decade, bilateral trade has increased notably. In 2014, the trade between China and India exceeded over $65 billion mark.
• According to the Trade Map figures, in 2013, China accounted for 11.1 percent of India’s imports, while 4.1 percent of India exports were destined for China. Chinese exports to India are mainly comprised of electric and electronic equipment, organic chemical, fertilizers and furniture. On the other side, China’s imports from India chiefly consist of cotton, pearls, precious stones, copper ores, slag and ash.  
• Bilateral trade has expanded substantially in recent years. Nevertheless, the balance of trade still remains in China’s favor.
• Following table summarizes the latest trends in trade between China and India. Source: China India Trade and Investment Center  Though, compared to the past, the economic cooperation between the two countries has accelerated.
• However, there are still enormous opportunities that have not been exploited in such fields as manufacturing, construction, electricity, gas and water industries, infrastructure (such as, roads, buildings, transportation, storage and communication), hotels and tourism, financial institutions, agriculture, healthcare, education and the various training sectors.  China and India have synergies in many areas.
• China has wide experience and expertise in the field of construction industry. Due to its international recognition, Chinese firms have been successful in creating infrastructure base for many countries.
• India could utilize Chinese expertise in the development of its high speed railway network, metro lines and other infrastructure facilities.  While the sides are seeking to expand bilateral trade to $100 billion this year, China exports far more than it imports, something Indian Prime Minister Narendra Modi hopes to alter with increased market access for Indian goods and services.

Areas of Competition in Africa:

• The rapid economic growth experienced by China and India has resulted in an increase in competition for· global resources and investment opportunities. Unsurprisingly, the abundance of natural resources in Africa has made the continent a hotspot for Chinese and Indian economic activity.  
• This growing Sino-Indian involvement has been economically beneficial and has resulted in widespread· investment and development, with African leaders welcoming the competition.  Africa is now the latest front in an increasingly global competition between India and China for new markets,· agricultural land and access to natural resources.  
• While Western media and politicians have reacted with varying degrees of alarm over the surge of Chinese· trade and investment in Africa, Indian companies have been quietly building their presence on the continent.  
• As China drives deeper into what many Indians consider their sphere of influence in South Asia, Africa offers· an ideal opportunity for Indian firms to challenge China’s growing influence in the region.  For many Indians, particularly in certain political circles and on the blogosphere, competition with China is· presented in a classical real politik paradigm.
• The headlines misleadingly frame the issue in terms of win/loss or even as a “race” between the two· countries. Although it may be compelling, even somewhat entertaining, to draw on 19th century colonial cliches (e.g. the Scramble for Africa or the Great Game) it is entirely misleading as both the Indians and Chinese are employing radically different strategies in Africa than earlier European powers.
• Ironically, the enhanced competition among Chinese and Indian companies will most directly affect· European and American firms who are rapidly being shut out of Africa’s emerging markets.  While China’s aggressive economic approach has caused it to achieve more influence in Africa than any· other country, its dominance is slowly being impeded by India’s growing involvement in the region.
• India has focussed on emphasising its cultural and historical ties to enhance the development of its trade relations with resource-rich countries like Zimbabwe, Ethiopia and Sudan.  
• The success of India’s soft power strategy has been evident in countries like Sudan, where Indian· corporations have attained near complete control of the local oil and natural gas industry.  The same trend is occurring in Zimbabwe where China’s dominance in the energy and resource sectors is· being challenged by private and state-owned Indian enterprises.  
• The US$ 4 billion takeover of Zimbabwean steelmaker Zicosteel, by India’s Essar Group, was hailed by the· Zimbabwean Government as the largest foreign direct investment deal in Zimbabwe in recent decades.  Competition for the takeover was intense, as various Chinese corporations challenged the Essar Group’s bid.·  
• The incident has been viewed by some as a reflection of the intense rivalry developing between China and· India, and while China continues to dominate African markets, the success of India’s economic strategies has raised uncertainty towards China’s future economic dominance in the region.

Competition in foreign policy

• China and India are still strategic rivals despite their increased economic cooperation.·  
• Alongside the U.S., Japan, and Australia, India is also seen as one of the major actors that have an interest in offsetting China’s dominance over Asia.  That India and China came to be known as fellow members of the BRICS does not suffice by itself to reverse· the two giants’ inherent tendency towards taking sides with rival groupings which are once again beginning to overwhelm Asia’s strategic environment.  
• Moreover, New Delhi set its permanent membership on the United Nations Security Council (UNSC) as a primary national goal in the name of being recognized as a great power on a global scale. In contrast, China pioneers the opposition bloc which stands firmly against any attempts to reform the UNSC because such would mean including not only India but Japan and several other countries in the Council as well.  
• The two countries’ strategic interests in South Asia are also mutually exclusive. 
• China maintains intimate ties with Pakistan, with high-level defense cooperation at the core thereof, a reality that deeply disturbs India as might be expected.  On the other hand, Beijing feels extremely uncomfortable with India’s hosting of the Tibetan opposition.
• China even fears that India might still be supportive of Tibet’s independence. Likewise, there is a heated rivalry between Beijing and New Delhi for influence over Bangladesh, Myanmar,Sri Lanka, and Nepal.
• New Delhi shapes its foreign policy in tandem with the West, backing Myanmar’s opening to the rest of the world as well as its related democratization project.
• However, Beijing believes one of the essential motivations behind such a policy is to detach Myanmar from China’s larger zone of influence.

PM Modi’s visit to China in 2015  

• The visit was rich in symbolism and substance and it opened up a new chapter in India-China relations. For the first time, Chinese President Xi Jinping travelled outside Beijing to receive a foreign leader, in Xi’an in his home province of Shaanxi.
• President Xi also accompanied Prime Minister to the Big Wild Goose Pagoda and organized a grand welcome· ceremony at the Xi’an city wall.  
• There were 24 agreements signed on the government-to-government side, 26 MoUs on the business-tobusiness  side and two joint statements, including one on climate change.
• The fact that India and China could come up with over 50 outcome documents in just eight months reveals the huge potential that exists between our two countries, as well as the efforts that we have made to elevate our partnership.  
• They included such diverse fields as space cooperation, earthquake engineering, ocean sciences, mining,railways, skill development, education, culture, Yoga, tourism and many more.
•  Prime Minister interacted with 21 CEOs of leading Chinese companies and over 40 prominent Indian CEOs attended the Business Forum along with their counterparts from China.
• The 26 business understandings worth over US$ 22 billion signed at the Forum covered such varied sectors as industrial parks, renewable energy, thermal energy, telecommunication, steel, capital goods, IT and media.  
• There was, moreover, an action-oriented accord on road-basing the bilateral partnership, as could be seen from the range of agreements signed and in the establishment of new dialogue mechanisms, such as the one between the DRC and the NITI Aayog and the Think Tanks’ Forum, besides a bilateral consultative mechanism on WTO negotiations.  
• Three new institutions were launched in partnership, the Centre for Gandhian and Indian Studies in Shanghai, Yoga College in Kunming, and National Institute for Skill Development and Entrepreneurship in Ahmedabad. Both sides decided to establish new Consulates in each other’s country, in Chengdu and Chennai and to· expand our interactions at the sub-national level.
• Two agreements signed-one on cooperation between the Indian Ministry of External Affairs and the· International Department of the Central Committee of the CPC and another on the establishment of a State/Provincial Leaders’ Forum-reflect this understanding.  
• A number of sister-city and sister-state relations agreements between: Karnataka and Sichuan, Chennai and· Chongqing, Hyderabad and Qingdao, Aurangabad and Dunhuang were also signed.  Prime Minister also announced the extension of the e-visa facility to Chinese nationals wishing to travel to India.

Other Important issues

(a)ONE BELT, ONE ROAD (OBOR)

The One Belt, One Road (OBOR) initiative is part of China’s major policy framework to boost domestic development and foreign diplomacy. China also wants to ‘reconstruct’ the world order to fulfill its interests and become a dominant world power.

About OBOR

• The “belt and road” have two components—the Silk Road Economic Belt (SREB) that would be established along the Eurasian land corridor from the Pacific coast to the Baltic Sea, and the 21st century Maritime Silk Road (MSR).
• The “belt and road” run through the continents of Asia, Europe and Africa, connecting the vibrant East Asia economic circle at one end and developed European economic circle at the other.
• The SREB focuses on bringing together China, Central Asia, Russia and Europe (the Baltic); linking China with the Persian Gulf and the Mediterranean Sea through Central Asia and West Asia; and connecting China with Southeast Asia, South Asia and the Indian Ocean.
• On land, the initiative will focus on jointly building a new Eurasian Land Bridge and developing China- Mongolia-Russia, China-Central Asia-West Asia and China-Indochina Peninsula economic corridors.
• The 21st-Century MSR, in turn is designed to go from China’s coast to Europe through the South China Sea and the Indian Ocean in one route, and from China’s coast through the South China Sea to the South Pacific in the other.
•  To implement the concept, the Chinese have stressed on joint consultation and joint building. China sees this as the most effective model that can be used to safeguard mutual benefits.

What China expects from OBOR?

• Address security threatsAchieve long-term economic benefitsReduce America’s threat to trade lifelines

Analysis

• Analysts point out that the ‘One Belt One Road’ initiative, backed by a solid financial institutional network, once implemented, is expected to accelerate the shift of geo-economic power away from the United States, towards Eurasia.
• More than 4.4 billion people, or 63 per cent of the global population countries, are expected to benefit from China’s game-changing plans.
• Analysts say that the “belt and road” initiative could shift the center of geo-economic power towards Eurasia, and undermine the “Asia Pivot” of the United States and its allies.
• Chinese President Xi Jinping is hopeful that the mega-trade volumes among the Silk Road economies would touch $ 2.5 trillion over the next 10 years.

Pros of India joining OBOR  

• The technical know-how the project will bring back could be used to develop or iron out issues facing· technical bottlenecks.  
• The OBOR initiative could be icing on the cake for India’s flagship programs like Digital India.
• The “Information Silk Route” has the telecom connectivity between the countries through fiber, trunk line and under-sea cables.  
• This will expand the bandwidth capabilities for India significantly, without which offering e-Governance and· delivering public services in an efficient manner will remain a pipe dream and a good marketing campaign.  India will have excellent connectivity of various transport modes, and a great facilitator to Make In India· initiative if India joins such global infrastructure project.

India’s strategy to counter OBOR

• India is not part of OBOR. India reaffirmed its opposition of One-Belt-One-Road initiative of China, with Foreign Secretary stating that New Delhi will join multilateral connectivity initiatives in Asia, only if they were pursued through a consultative process.
• India has indicated that it sees China’s OBOR as a “national Chinese initiative”.
• The defence establishment is concerned that the project might not be altogether benevolent and that these corridors in future could be used for military mobilisation.
• There are concerns in India about being part of a “hegemonic project” that would ensure China led development in the Indian Ocean region.
• The main point of contention for India is the China-Pakistan Economic Corridor or CPEC, which is also part of OBOR.
• For New Delhi, OBOR may be a potential economic opportunity but it also threatens India’s interests.

India’s strategy to counter OBOR

• India recently proposed the ‘Cotton Route’ (seen by many as its answer to the Silk Route) to strengthen economic ties between countries in the Indian Ocean rim.
• It has also launched Project Mausam and Spice Route apparently in response to China’s Belt and Road initiative.
• The ‘Mausam’ project envisages the re-establishment of India’s ancient maritime routes with its traditional trade partners along the Indian Ocean.
• The ‘Spice Route of India’, visualises the India-centered linkup of historic sea routes in Asia, Europe and Africa.
• Many people in India perceive the Mausam Project and the Spice Route as rivals to the Maritime SilkRoad.

(b)SOUTH CHINA SEA (SCS) DISPUTE

• The three million square kilometers South China Sea is the maritime heart of Southeast Asia but also a disputable property. Maritime boundaries in the South China Sea are particularly problematic because they involve six separate claimants in a mostly enclosed body of water with a large number of disputed land features.
• The South China Sea is ringed by Brunei, China, Indonesia, Malaysia, the Philippines, Taiwan, and Vietnam, and dotted with hundreds of small islands, shoals and reefs, many of them occupied by the disputants.
• The fundamental issue in the South China Sea is one of territorial sovereignty, that is, which state has sovereignty over the islands and their adjacent waters.
• UNCLOS has no provisions on how to determine sovereignty over offshore islands. As there is no treaty that governs the issue of sovereignty, states have to look for guidance to the rules of customary international law on the acquisition and loss of territory.

India and South China Dispute

• India has a strong interest in keeping sea lanes open in the South China Sea. The South China Sea is not only a strategic maritime link between the Pacific and the Indian Oceans, but also a vital gateway for shipping in East Asia.
• Almost, 55% of India’s trade with the Asia Pacific transits through the South China Sea. Apart from helping secure energy supplies for countries like Japan and Korea, India has the unique distinction of shipping oil from Sakhalin to Mangalore through sea routes of the region. Therefore, it is vital for India to have access to the region.
• If China continues to assert dominance over these waters, it will be difficult for India to continue with its activities through this channel.
• But China’s hard line on the South China Sea has affected India too. New Delhi was a bit taken aback after Beijing denounced plans by an Indian Company to develop oil fields in the region.
• The Chinese objection was to ONGC Videsh’s (OVL) venture for off-shore oil exploration in water’s belonging to Vietnam (not recognized by China), Beijing urged India to refrain from entering into deals with Vietnamese firms exploring oil and gas in the disputed South China Sea over which China enjoys ‘indisputable’ sovereignty.
• India however, in recent years, has been seen as a credible counterweight to China. Southeast Asian countries, wary of continued Chinese aggression in the South China Sea, have encouraged joint maritime exercises with India.
• In February 2010, the Indian Navy concluded its Milan series of maritime exercises in the Andaman and Nicobar Islands and almost all ASEAN countries participated in Milan exercise.
• India, which has helped Malaysia in building up its Coast Guard in the past, must consider assisting other ASEAN countries. India has a strong Navy with technological credibility that can be leveraged by ASEAN. Collaboration on missile technology, radar systems, defence component systems and supporting hardware are again areas where ASEAN countries can work in partnership with India. China, naturally, does not welcome the ASEAN move to interact militarily with India.
• India has also shown keenness to sell Brahmos missiles to friendly countries including the neighboring Southeast Asian countries. Most of the ASEAN countries have been engaged in a defense modernization programme and would like to obtain assistance in weapons up-gradation and systems integration.
• Like India, most of the Southeast Asian countries also rely on Russia for their defence procurements. India with its long experience in using Russian products and developed the technological capabilities for low cost servicing could be a potential ally for ASEAN in this field. Assisting ASEAN will also improve India’s relations with the Southeast Asian countries bilaterally and multilaterally and it will also boost India’s morale in balancing China in the IOR.

Recent Developments

Greater Pragmatism

• The President of China Xi Jinping held that the resolution of the boundary dispute b/w India and China “won’t be easy” and pending its final settlement “peace and tranquility” should be maintained on the border without affecting the overall relationships.

Xi proposed 5-point formula to improve ties with India:

• China and India should maintain strategic communication and keep the bilateral relations on the “right track”.
• Both nations should tap each other’s comparative strengths and expand win-win cooperation in infrastructure, mutualinvestment and other areas.
• Both countries should strengthen cultural ties and constantly increase the mutually expanding friendship between the two countries.
• The two countries should expand coordination and collaboration in multi-lateral foray to jointly safeguard the legitimate rights and interests of developing countries and tackle global challenges.
• Both should accommodate each other’s core concerns and properly handle problems and differences existing between the two countries.

Recent Positive developments

• The peaceful resolution of the Doklam standoff had facilitated the possibility for a rapprochement between the India and China.
• Significantly, India hadn‘t opposed the construction of bunkers and helipads by the Chinese army at the border near the site of the Doklam standoff.
• While China has also stationed a permanent force to man the point, India has maintained that as long as it is within Chinese boundary, it doesn‘t worry it.
• India had also visibly toned down planned celebrations marking the anniversary of the Dalai Lama‘s arrival from Tibet.
• A flurry of high-level visits is also on the cards and a summit meeting between the topmost political brass is also being planned.
• The easing of tensions has given out the possibility for progress in resolving the tricky border issues, narrowing trade deficit and other polarising aspects.

India and China inked eight agreements to enhance cooperation in a range of areas including trade, culture and water resources in 2012. Main highlights are:

• Improvements to the existing facilities for Kailash Mansarovar pilgrims
• Three working groups will be set up under the Joint Economic Group to enhance trade. The three groups are- Services Trade Promotion Working Group, Economic And Trade Planning Cooperation Group, and Trade Statistical Analysis Group.
• Sharing of Hydrological data.
• MoU for cooperation in the field of ensuring water efficient irrigation
• Identify sister cities and sister states/provinces in India and China with a view to establishing relationships b/w them in areas of mutual interest for enhancing greater people to people contacts

Border Defence Co-operation Agreement

India and China inked BDCA (Border Defence Co-operation Agreement)which stipulates among a set of confidence building measures that in any face-off on the Line of Actual Control (LAC) they will not use force or threaten to use force against each other and prevent exchange of fire or an armed conflict. The pact was signed by ex-Prime Minister Manmohan Singh and Chinese Premier Li Keqiang.

BCIM economic corridor

India, China, Bangladesh and Myanmar held the first ever official-level discussions on the ambitious BCIM economic corridor to link India and China with Bangladesh and Myanmar.

The economic advantages of the BCIM trade corridor are:-

Approach to numerous markets in Southeast Asia,
Improvement of transportation infrastructure and
Creation of industrial zones 

Currently, the four nations raised an ambitious proposal that included developing multi-modal transport, such as road, rail, waterways and airways, joint power projects,telecommunicationnetworks, etc.

The Vice President of India Mr. Mohammad Hamid Ansari launched the ‘India-China Year of Friendly Exchanges’ in New Delhi in February 2014. 

Initiatives Taken By India to Form Closer and Stronger Relationship withChina:

To promote Chinese companies to establish production and supply chains which will link our economies. This will also ensure a more balanced trade between our two sides. One of the ideas, which is being looked at carefully is of a dedicated Chinese Industrial Park in India.

To introduce Chinese language in the middle schools in India. Recently, 22 Chinese teachers have come to teach at selected C.B.S.E. schools across the length and breadth of our country.

Plan to highlight Indian culture in China through a programme entitled ‘Glimpses of India’.

This year China will commemorate the 60^th year of Panchsheel (5- Principles), along with Myanmar.

2014 Meeting Of PM Modi

Inviting the Prime Minister for the APEC meeting, Xi said: "India should deepen its engagement with the Shanghai Cooperation Organisation (SCO)."

The Prime Minister said India currently has observer status in the SCO, and was ready to accept additional responsibility, if asked to.

Modi also called for enhanced Chinese investment in the infrastructure sector in India, and hoped that the trade imbalance between the two countries is resolved.

Xi agreed that balance in trade is necessary for a sustainable economic relationship; the statement said and added that "enhanced services exports from India to China could be one way to address the issue".

 

Wuhan meeting 2018

• Since the Doklam Standoff, there have been no high level meetings between India and China.
• An informal summit was thus called to improve bilateral ties and to prevent another standoff at the border.
• The summit had no fixed agenda so that a wide range of issues could be covered.

Note:

• In December 2017, the two Foreign Ministers met in New Delhi followed by a meeting between China’s then state councilor Yang Jiechi and Mr. Modi’s National Security Adviser, Ajit Doval.
• Foreign Secretary Vijay Gokhale visited China in February 2018
• Foreign Minister Sushma Swaraj and Defence Minister Nirmala Sitharaman went to China for Shanghai Cooperation Organisation (SCO) meetings.

Significance of the summit:

• The very decision by the Chinese President Xi Jinping to spend two days in the city for talks with Prime Minister Narendra Modi sends out a message to Chinese business and political classes that ties with India have the highest approval.
• The summit has shown that despite bilateral and geopolitical differences, India and China can resolve differences peacefully and through prolonged dialogue.
• The summit’s outcomes may have been limited but are very valuable to stabilise the relationship.
• It has underlined the necessity of an entente cordiale between the two countries, which have become increasingly distrustful of each other.

Major Takeaways:

• Both the countries have decided to “issue strategic guidance to their militaries to strengthen communication”  in order to build trust and mutual understanding and enhance predictability and effectiveness in the management of border affairs, essentially to avoid another Doklam-like confrontation
• They have addressed measures to balance the ballooning trade deficit of about $52 billion (of about $84 billion bilateral trade), mostly by encouraging agricultural and pharmaceutical exports to China
• Both the countries discussed a joint project in Afghanistan.This proposed joint economic project in Afghanistan could be instrumental in mitigating the trust deficit between the two sides.
• They attempted to reduce the heat over unresolved issues and so-called “irritants” in the relationship, such as China’s block on India’s NSG membership bid or the UN’s terror designation for Pakistan-based groups, and India’s opposition to the Belt and Road Initiative or its use of the Tibet issue by strengthening the existing mechanisms of dialogue.

Positive changes after the summit:

• A statement was made by the Chinese vice foreign minister that China will not push India to join its Belt and Road Initiative (BRI) to connect countries Asia, Europe and Africa amid India’s persistent reservations on Xi’s mega project on the grounds of China–Pakistan Economic Corridor (CPEC) and financing patterns.
• Chinese business and industrial houses could now choose India as destination for greenfield projects and not just mergers and acquisitions.

Way Forward:

• The Wuhan summit has recommitted India and China to managing bilateral relations in a manner that creates the conditions for the “Asian Century
• If China and India can cooperate in Afghanistan, they can certainly do so in other parts of the neighbourhood.
• Mr. Modi and Mr. Xi, both with strong domestic political standing, would be able to reach an agreement, and use it to further consolidate their domestic appeal,
• The “informal summit” is being perceived as a big positive for Chinese companies investing in India as the two governments attempt to reset bilateral ties. This would give a major boost to the Make in India Campaign.

Conclusion

• Despite gloomy predictions about the inevitability of competition between China and India, cooperation between Asia‘s two emerging powers is possible. It, will however, require a much more concerted effort to bridge the gap in socio-cultural understanding that existed between them, there remains a fundamental lack of appreciation on the part of each country of the underlying cultural and societal norms that define the other norms that influence each country‘s perception of its own national interest.
• It is argued that greater appreciation of these elements is critical if China and India are to successfully address issues such as the ongoing border dispute and the mounting trade imbalance.
• In present and future scenarios, strategic and diplomatic relations between China and India are fraught with complication, tensions and misgivings on both sides upon the historical legacies of relations between the two countries. Much of the mistrust and misgivings emanate from the legacy of the 1962 war between the two countries.
• The following five decades have seen generation of Indians growing up with an inherent wariness of China and anything Chinese. The public popular imagination in India was fuelled by the often repeated stories of the great betrayal by the supposed ally nation.
• In recent decades after India gained its independence from Britain in 1947, there was a lot of popular hope for a strong and mutually beneficial partnership between the two nations. This was reflected in the popular phrase that was chanted by Indian children in the 1950s: Hindi-Chini bhai-bhai, the general atmosphere of bonhomie and Friendship was such that most Indians could not imagine the advent of Chinese military aggression on their relative unguarded northeast.