Modi to host Xi for talks as China, India seek to bolster ties

Bloomberg

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Indian Prime Minister Narendra Modi. Photo credit: Bloomberg Indian Prime Minister Narendra Modi. Photo credit: Bloomberg
Indian Prime Minister Narendra Modi will host Chinese President Xi Jinping for talks in New Delhi today after the two leaders witnessed the signing of more than $3.4 billion in agreements yesterday.
The world’s two most populous countries are looking to bolster economic ties and resolve a long-running border dispute during Xi’s trip, which began yesterday in Modi’s home state of Gujarat. It’s the first visit to India by a Chinese president since 2006.
“It’s a very significant visit as leaders of Asia’s two BRIC countries want to create more economic momentum in the bilateral relationship,” Rajiv Biswas, IHS Global Insight’s Asia-Pacific chief economist, said by phone from Singapore. “Modi is trying to improve India’s exports to China to reduce the trade deficit, and also to boost Chinese investment flows into the country in infrastructure and urban development.”
Modi is seeking Chinese support for his moves to revive Asia’s third-biggest economy while deterring it from asserting control over disputed land along the border. He met Japanese leader Shinzo Abe in Tokyo earlier this month and will visit President Barack Obama at the White House two weeks from now.
Modi told Chinese journalists on Sept. 16 that the two countries “can create a better tomorrow for all of mankind.” More than a third of the world’s people can have better lives if India and China boost economic cooperation, he said, according to an Indian government statement. The BRIC grouping, also comprising Russia and Brazil, will grow faster in 2014 than the global average, according to data compiled by Bloomberg.
Investment, trade
China is India’s largest commercial partner, and also accounts for its biggest trade deficit. While bilateral commerce exceeded $68.5 billion last year, India posted a trade shortfall of $34.4 billion on imports of Chinese-made heavy machinery, telecom equipment and home appliances, according to data compiled by Bloomberg.
India is seeking greater market access in China and will probably sign an agreement for China to set up industrial parks, Indian Trade Minister Nirmala Sitharaman told reporters in New Delhi on Sept. 10. Xi will also announce investments in India’s railways, the Press Trust of India reported.
Industrial & Commercial Bank of China Ltd. yesterday signed a deal to provide $2.6 billion in financing for IndiGo to buy and leaseback more than 30 Airbus A320 planes, Aditya Ghosh, the Indian carrier’s president, said in a statement.
“This visit signifies a milestone for India-China trade relations,” Suzlon Energy Ltd. Chairman Tulsi R. Tanti said in an e-mailed statement yesterday.
Territorial disputes
In the 14 years through June, China was India’s 28th largest source of foreign direct investment with inflows worth $411 million, or 0.18 percent of the total, government data show. Japan was fourth and the U.S. was fifth.
Tensions have simmered in the past few years over claims to disputed territory on their mountainous border. In campaign speeches earlier this year, Modi warned China to drop its “mindset of expansion.”
India accuses China of occupying 38,000 square kilometers (15,000 square miles) in Jammu and Kashmir, while Beijing lays claim to 90,000 square kilometers of land in the Indian state of Arunachal Pradesh.
Chinese incursions have occurred in the area this month, PTI reported, and the countries have seen sporadic border clashes over five decades. They fought a war in 1962 and China opposes the Dalai Lama, Tibet’s spiritual leader, who campaigns for Tibetan autonomy and human rights while in exile in India.
Vietnam
“Regarding the border issue, the Chinese stance has always been consistent and clear,” Chinese Foreign Ministry spokesman Hong Lei said in a briefing in Beijing on Sept. 16. “The Sino- Indian borders have been peaceful for a long while and the border issue hasn’t affected the development of the Sino-Indian relations. We hope both countries can keep it up to maintain this healthy momentum.”
China also warned that it would oppose any Indian agreements with Vietnam to explore for oil and gas in disputed areas of the South China Sea, the Times of India reported, citing Hong.
India will discuss “all substantive issues of interests” including the border dispute, India’s Foreign Ministry Spokesman Syed Akbaruddin, said in New Delhi on Sept. 15. Investment in smart city projects, railways and cooperation on nuclear energy will probably be included, he said.
Japan ties
Xi’s visit follows Modi’s trip to Japan, which has its own territorial dispute with China. Abe pledged a sweeping upgrade of economic and security ties with India, offering 50 billion yen ($480 million) in infrastructure loans and pledging 3.5 trillion yen of public and private investment and financing over five years.
“Happy Birthday, Modi-san!” Abe tweeted yesterday, which was Modi’s 64th birthday. “We had a great time together in Kyoto and Tokyo. See you next time!”
The meeting between Modi and Xi is “unlikely to result in meaningful progress towards any bilateral strategic partnership,” Arvind Ramakrishnan, head of India at U.K.-based risk adviser Maplecroft, said in an e-mail. “Modi is far more inclined to cultivate strategic ties with Japan and the U.S. in order to make India a counter-balance against Chinese influence in the Asian region.”
Still, the countries have links going beyond 145 B.C., with China exporting silk to India in exchange for pearls and coral. Modi is India’s first prime minister born after independence in 1947. Xi, 61, is China’s first leader born after the 1949 revolution.
India can benefit from China’s strength in creation of infrastructure and development of the manufacturing sector, while India’s strength in software can help Chinese companies become more efficient and competitive, Modi said Sept. 16.
“The combination of the ‘world’s factory’ and the ’world’s back office’ will produce the most competitive production base and the most attractive consumer market,” Xi wrote in the Hindu newspaper yesterday.

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