Heading into China's corner will dilute India's democratic dividend

For many years now, Indian engagement with China has been a frozen conflict. After border violence at Doklam and Galwan, the Indian approach was that economic engagement is conditional on decency at the border. In September 2021, the book Rising to the China Challenge: Winning through Strategic Patience and Economic Growth, by Gautam Bambawale, Vijay Kelkar, R A Mashelkar, Ganesh Natarajan, Ajit Ranade, and Ajay Shah, was published by Rupa Publications. In essence that book argued: (a) In the short term, India was too weak to confront China alone, what was needed was a coalition with the great democracies of the world; and (b) the best foreign policy is to succeed on getting to economic growth, to build an India over a 25-year horizon where the asymmetry vis-a-vis China is less pronounced. 

With American President Donald Trump’s tantrums, some in India are ready to rethink the China relationship. Some fantasise of Richard Nixon/Henry Kissinger’s pivot to China, as a way of constricting Soviet Russia, and think that India can do similarly with China in order to constrict the United States (US). A greater sense of history, looking back, and a greater strategic sense, looking forward, is required. 

A good place to start is to examine the Chinese V-Day military parade. Special guests from Russia, North Korea, Iran, and Myanmar underline that strategic alignment. Beijing has two policemen in every corner, Tiananmen Square has a military presence, and schools have declared remote operations. This is just not the character of healthy liberal democracies, which do not perform showy military parades. 

In our hearts in India, we are a liberal democracy. Being a liberal democracy matters to people who matter. India should not dilute this strategic position on the globe by cosying up to China, which is not a natural partner. 

Mr Trump is indeed a historic low in the US; nobody expected the US to collapse into right-wing populism. We generally think that the advanced economies of the world have great institutions, but here we are, the US is now like an emerging market. At the same time, we should not see Mr Trump as a permanent feature of the US. For decades, both parties in the US have supported India’s rise, and looking beyond Mr Trump, we can expect a better US. They will reapply for the label of an advanced democracy, and they will improve relations with India. 

Most Chinese firms are monolithically controlled by the Chinese government. India is not like that, and the US is not like that. In the weeks after Mr Trump breathed fire, American firms like Apple and Kyndryl announced expansions of their activities in India. The US courts are pushing back against the President, in a way that could never happen in China. This gives stability to the India-US relationship, derisking it from politics, in a way that could never happen with China. 

Our conflict with the US is about the 50 per cent tariff. Our conflict with China is about much more than this. It was not so long ago that we saw practical Chinese military support for Pakistan. China’s actions on Tibet, Nepal, Bhutan, Bangladesh, Sri Lanka, Burma, and Mauritius are all inimical to Indian interests. China preaches multipolarity in the world but unipolarity in Asia: These aspirations impose unpleasantness upon us. 

With American markets shrinking, we in India are required to do better on finding new export markets. The natural place to do this is the advanced democracies, ranging from Europe to Canada to Taiwan. The Chinese market is significantly unavailable to Indian exporters, because China is a prime exponent of cheating on the principles of free trade with an array of non-tariff barriers. While 5 per cent of the credit for the slow death of the open global trading system goes to Indian unfairness, 95 per cent of this credit goes to China. There is no ready path for Indian firms to grow exports to China  without profound changes in the Chinese system, which is littered with minefields of economic nationalism and the lack of rule of law. The Chinese macroeconomy is suffering from a unique problem of overproduction: In many industries where India has a presence, openness to imports from China represents Chinese export of unemployment. 

Chinese economic coercion against India is alive and well. The Chinese state is trying to interfere with India’s rise as China+1. They have imposed restrictions on certain exports to India where the global supply chain relies on China. As Mr Bambawale has emphasised, even if these taps are opened today in a showy deal, we have to be fully conscious that the export bans can come back tomorrow. So there is no choice for Indian firms but to build non-China supply mechanisms. Hence, any quick deal right now does not really solve the problem. 

Chinese President Xi Jinping is not negotiating from a position of strength. He is in decline at age 72: In an authoritarian system, there are no clear mechanisms to a peaceful succession. His priority is to hold on to power, and not to think strategically for the prosperity of the Chinese people. This intrudes on the extent to which a sensible peace with India can be achieved. 

The decline in the US market is a modest-sized problem, which Indian firms will solve, ideally with immediate policy support in the form of removing trade barriers, indirect tax reform, and currency depreciation. The US is better than Mr Trump; they will improve in coming years. India’s interests lie with the advanced democracies of the world. It is with the West that we have non-resident Indians, our children studying, incoming foreign capital, the flow of the full knowledge that will make India great, foreign technology from central-processing units to Unix to LLMs, global companies operating in India, and our export markets. We should stay this course. There is plenty to do, expanding Indian engagement with the advanced economies that are not the US, which contain an aggregate market that is twice the size of the US. 

The author is a researcher at XKDR Forum