Hu Jintao’s Balancing Act in India and Pakistan
Weekly Pulse
November 24-30, 2006
During his visit to India and Pakistan, Chinese President Hu Jintao has indeed performed a fine balancing act in China’s relations with its two South Asian neighbours. Motivated primarily by economic and trade concerns, Beijing wishes to pursue strategic partnership with both countries—a task facilitated by the fact that Islamabad and New Delhi themselves are engaged in peace talks and promoting bilateral relationship.

Peace in South Asia is essential for economic growth in China. Recognizing India’s growing economic clout, China does not want old rivalries to hamper its expanding trade and economic ties with India. At the same time, Beijing does not want to create an impression that its growing ties with India will anyway impinge upon its historically entrenched strategic ties with Pakistan.

However, it is clear that China will continue to walk a tightrope in its ties with India and Pakistan, as each of them is simultaneously engaged in another strategic partnership with the United States. Indo-US ties involve a whole gamut of areas, including peaceful nuclear energy, software and economic collaboration; while Pak-US ties essentially revolve around the US-led war on terrorism.

Moreover, despite declaratory intentions of expanding strategic relations, Beijing and New Delhi are yet to achieve the level of trust that can help them overcome political differences over a range of issues, particularly the lingering boundary dispute between the two countries. Finally, Kashmir will remain an additional irritant in Sino-Indian relationship, as long as the Indo-Pak peace process fails to resolve it amicably.

Visit to India

In New Delhi, President Jintao and Indian Prime Minister Manmohan Singh declared that their “strategic relationship” had a global significance and was “irreversible.” The two leaders agreed to double bilateral trade to $40 billion by 2010. They concluded 10 agreements, which aim to expand cooperation in areas such as trade, energy, agriculture, investment and human resource development.

More importantly, the two leaders agreed to promote “civilian nuclear cooperation…through innovative and forward-looking approaches, while safeguarding the effectiveness of international non-proliferation principles.” They also affirmed their commitment to resolve outstanding differences, including on the boundary question through “peaceful means and in a fair, reasonable, mutually-acceptable and pro-active manner.” While this process goes on, their joint declaration stated, it would be ensured that “such differences are not allowed to affect the positive development of bilateral relations.”

Economic Difficulties

Trade is the most important factor driving Indian-Chinese relationship. It has grown from US$1 billion a decade ago to nearly US $20 billion this year, and both countries see massive potential in each other’s economies. Yet important differences exist between the two countries over trade and investment issues. China wants to conclude a Free Trade Agreement with India, but the latter is unwilling to conclude the deal for fear of Chinese domination of the huge Indian consumer market.

It is not hard to see why China is keen to clinch a Free Trade Agreement with India. China with its GDP growth predicted at over 10 per cent is currently experiencing what economists call over capacity due to increased private investment. China has 30 investment projects estimated to be worth US $6.9 billion in India—the largest number Beijing has in any country abroad. The 10 accords include a Bilateral Investment Promotion and Protection Agreement that aims at increasing bilateral investments.

China also feels aggrieved due to Indian restrictions on its investments. India has barred Chinese companies from investing in high-security areas, such as ports. For instance, India has refused to let a Chinese company based in Hong Kong with “ties to the People’s Republic” of China to submit a bid on a harbor reconstruction project because the same company was also engaged in a project in Pakistan. Recently, Chinese telecom giant ZTE was disqualified from bidding for a large contract from India’s state-run phone service provider BSNL Ltd.

Boundary Dispute

Aside from snags in bilateral trade and investment ties, China and India differ fundamentally on several other political and security matters, especially the boundary dispute. Since 2003, the two countries have been in talks to resolve this dispute, which involves large areas along their 4,000-kilometre border, a bitter legacy of the 1962 war between the countries. China claims 90,000 square kilometres of territory in India’s Arunachal Pradesh, including the Buddhist city of Tawang.

In fact, just a week before President Jintao’s visit to India, Chinese ambassador to New Delhi Sun Yuxi renewed the border controversy by reiterating China’s claim over Arunachal Pradesh. He said, “In our position, the whole of the state of Arunachal Pradesh is Chinese territory. And Tawang is only one of the places in it. We are claiming all of that. That is our position.” India quickly rejected the claim asserting that the province was an “integral part” of India.

However, during their talks in New Delhi, the Chinese President and Indian Prime Minister agreed to seek a mutually fruitful outcome of the negotiating process on the boundary dispute. The process began after India changed its stance on the Tibet issue. During his visit to Beijing in June 2003, Indian Prime Minister Atal Bihari Vajpaee declared, “Tibet Autonomous Region is part of the territory of the People’s Republic of China.” During the same visit, the Indian premier agreed with his Chinese counterpart to appoint Special Representatives to explore resolution of the boundary issue. Then, in April 2005, India and China signed the ‘Agreement on Political Guiding Principles’ for settlement of the boundary question. It is within the context of these principles that New Delhi and Beijing would attempt to solve the dispute.

Other Irritants

But the boundary dispute is not the only irritant in Sino-Indian relationship. Three other snags in the two countries’ relationship are worth mentioning: First, India disputes China’s rule over 43,000 square kilometres of barren land in the disputed region of Jammu and Kashmir. However, as stated before, since India and Pakistan are engaged in peace talks over Kashmir, China’s role in the matter has acquired a new significance.

Just as India no more plays the Tibet card against China, Beijing has also stopped playing the Kashmir card against India. Until a decade ago, China supported Pakistan’s traditional stand on Kashmir—that of realizing Kashmiri self-determination on the basis of UN Security Council Resolutions. China changed its stance during former President Jiang Zemin’s visit to India and Pakistan in 1996.

The Chinese leader suggested in a speech to the Senate in Pakistan that New Delhi and Islamabad put aside their dispute and embark on mutually beneficial cooperation. During the Kargil War between India and Pakistan in the summer of 1999 and the military confrontation during 2001-02, China maintained a measure of political neutrality.

Since Pakistan has also changed its course on Kashmir, it does not have any problem with the new Chinese stand. However, as long as the Kashmir dispute remains unresolved—and given the fact the part of the disputed territory is in China’s hands—Kashmir’s potential to cause deterioration in Sino-Indian ties will remain valid.

Second, as always, India remains concerned about China’s cozy relationship with its historical rival Pakistan. India has particularly bristled over China’s plans to extend a civilian nuclear cooperation deal with Pakistan and its deep military ties with Islamabad. It is also perturbed over President Jintao’s plans to announce new economic projects in Northern Areas and Pakistan-administered Kashmir, especially the modernization of the Sino-Pak transport corridor. Finally, China is concerned over the growing US-India partnership, which, it believes, is directed at countervailing Chinese influence in Asia.

Beijing has expressed its reservations on the India-US nuclear agreement, which allows India access to nuclear technology. That is one main reason why China is interested in offering nuclear energy plants to Pakistan. While in an era of globalization, notions such as the United States building India as a counterpoise to China may not deserve great importance, but they will be relevant as long as state entities remain the principal actors, and great power competition continue to be the primary factor, in world politics.

Ties with Pakistan

Even before the Chinese President’s arrival in Islamabad, it was clear that the two historical allies would conclude several agreements between their public and private sectors, including the much-awaited Free Trade Agreement.

Despite Pakistan’s Foreign Ministry’s attempt to underplay the possibility of the conclusion of nuclear power plant deal between China and Pakistan, it was also clear that the two countries would reach highest-level political understanding on the matter.

The several agreements essentially cover Chinese help in setting up modern road and rail links, as well as optic fibre and Gas-Petroleum lines in Pakistan. They were aimed to strengthen bilateral economic, social and cultural relations, enhance trade and pave the way for more Chinese investment in Pakistan.

China’s assistance to Pakistan in the sphere of peace nuclear energy has a long history. Islamabad has asked China to build up to six reactors of 600 or more megawatts capacity each, at least twice the size of the 300 megawatts reactor China built at Chashma. If that happens, in the coming decades, Pakistan will be able to generate with Chinese help around 6,000 megawatts of electricity from over 8 nuclear power plants. Pakistan’s growing economy needs more and diversified sources of energy.

Given domestic problems regarding the construction of additional dams, particularly Kalabagh, and the Indo-US nuclear cooperation deal, which is also approved by the US Congress, Pakistan looks towards China to provide additional nuclear power plants. Besides Chashma I, China is building another nuclear power plant at the same site, called Chashma II. The new power station with the whole equipment imported from China had the first concrete poured on the site in December 2005.

In August, the Beijing-based China Business Times had reported that China was likely to sell Pakistan six 300-megawatt plants. Later, Pakistani and foreign media reports revealed that Pakistan was interested in setting up a number of power plants with Chinese help to generate some 8,000 megawatts of electricity.

As China performs its balancing act in its ties vis-à-vis India and Pakistan, it should be expected to compensate Pakistan for what it has failed to gain, against what India has acquired, from the United States. When President Musharraf visited Beijing in February, the two countries had announced they would “continue strengthening cooperation in the peaceful use of nuclear energy.”

In retrospect, even if a formal nuclear power plant deal was not concluded during Chinese President’s visit to Pakistan, the political intent towards realizing it in the near future will become obvious. The broad political understanding or agreement on the matter may leave the scale and specifics of cooperation for future talks.

Strategic Partnership

In February, President Musharraf and President Jintao had also concluded some 13 agreements, covering a wide spectrum of bilateral cooperation, especially in the fields of defense, trade and investment. Beijing agreed to provide Pakistan with $300 million in loans to buy Chinese goods, and help upgrade the Karakoram Highway.

Other agreements covered expanding economic ties, cooperation in health, joint work on family planning, a plan to boost two-way trade, meteorological research, fisheries, pesticide management, and an agreement for China to help Pakistan provide vocational training.

From nuclear and missile cooperation to joint defense production ventures such as those covering the production of aircraft and tanks, China and Pakistan have been engaged in a multi-faceted strategic cooperation for several decades. It is, however, their joint engagement in the building of Gwadar port that the two countries’ strategic interests have significantly converged.

The strategically significant port of Gwadar located on the shores of Balochistan as well as the main highway linking it to Karachi are being built with over 100 million dollars assistance from China. The deepening of the Gwadar port was completed in June 2006. There are over 1,000 Chinese engineers working in various infrastructure-building projects across the country, primarily in Gwadar.

Point to Ponder

As clear from the above discussion regarding past and potential snags in Sino-Indian ties, it will be years, if not decades, before New Delhi and Beijing are able to overcome their mutual suspicions, and solve actual political and security-related problems in relationship. That is not the case with Pakistan. Unlike India, Pakistan’s ties with China are time-tested, rooted in the history of modern China itself.

It is in this broader context that we in Pakistan should perceive our long-standing ties with China. We must also try to understand that China’s move to foster economic and trade ties with India will not be at Pakistan’s expense. In China’s increasingly realistic and pragmatic worldview, each country has its own potential—and realizing that requires a consistent “balancing act,” the precedent for which has been set by President Jintao.