Eye on China: Disengagement Stalled – J&K & CPEC – Maldives Loan – US Outreach – Digital Currency – New IC Policy – Trade Recovers – Stimulus Data

Eye on China is a weekly bulletin offering news and analysis related to the Middle Kingdom from an Indian interests perspective.

I. India-China Ties

Another week and the standoff at the LAC continues. But some of the comments and leaked reports this week suggest to me at least that the military and diplomatic conversations that are underway are not just about disengagement and deescalation. Instead, there’s a broader discussion about border management that’s underway, which could possibly mean a compromise on the issue of restoring status quo ante. Anyway, why don’t you read through the stories below and let me know what you think.

So on Saturday, local commanders from both sides below the Corps Commander level reportedly discussed the situation at the DBO sector and Depsang plains. This comes after senior commanders had met on August 2. TOI reports that the PLA has also deployed over 12,000 troops, with tanks and artillery guns, from its 4th Motorised Infantry Division along the LAC across the Depsang-DBO sector. Earlier in the week, reports said that the fifth round of talks between Lt General Harinder Singh and his Chinese counterpart Major General Liu Lin ended in a stalemate. Krishn Kaushik reports for the Indian Express that since the last round of discussions, lasting 15 hours on July 14, there has not been much of a breakthrough on the ground as disengagement has not been completed at two of the four friction points. Meanwhile, Shishir Gupta reports that diplomats from both India and China are considering the option of putting patrolling protocols in place to avoid a repeat of the June 15 Galwan Valley flare-up. This comes as the chances of face-offs are increasing, because the PLA is building roads, laying fibre optic cables and setting up posts powered by solar panels up to the friction points along the LAC in Ladakh and the Indian army matching the effort.

While the PLA isn’t stepping back, the Indian Defense Ministry did, when it had to withdraw a statement from its website, which acknowledged that the PLA had transgressed into multiple areas in Ladakh. The updated statement didn’t carry that bit. No surprises for guessing why. This might be a weak segue, but in China also someone’s been hauled up for politically incorrect remarks about the LAC. Chinese media report that a netizen surnamed Zhou was arrested by the police in accordance with the law, because he spread the rumors online by saying that “the poor quality of military vehicles supplied by the Dongfeng Off-road Vehicle Co., Ltd. (hereafter referred to as Dongfeng) has caused the death of Chinese soldiers during the China-India border clash.” The report adds that Zhou “confessed to his crime of rumor-mongering, showed remorse, and wrote a sincere apology letter.”

On the diplomatic front, speaking at a public event this week, Indian Foreign Minister S Jaishankar said that “We are seeing the parallel but differential rise of the two countries… To my mind, what it does is it puts a huge premium on reaching some kind of equilibrium or understanding between the two [in the interests of both countries]. How to do that is one of the big challenges that we face.” He added that India’s approach today was based more on issues as the country is now dealing with a “much more loose architecture” with more poles and less rules, where overlapping interests are a key factor in working with other nations. Nevertheless, after speaking to Mike Pompeo on Friday, Jaishankar tweeted: “Exchanged views on responding to the Coronavirus challenge. Discussed meeting in the Quad format in the near future.” He added that they shared “assessments on regional and global issues including South Asia, Afghanistan, Indo-Pacific & beyond.” Also reports inform that Moscow is planning to organise a Russia-India-China summit on the sidelines of the G20 meeting, scheduled to be held in Riyadh in November.

Meanwhile, India Today reports that PRC exports to India since January 2020 have fallen by 24.7 percent year-on-year to $32.28 billion, customs data from the Chinese government has shown. The report adds that China’s imports from India have gone up 6.7 percent since January to $11.09 billion. Total trade registered an 18.6 percent drop since the beginning of 2020 to stand at $43.47 billion. The report also says that Chinese smartphones’ share in Indian market fell to 72 percent during the June quarter 2020 from 81 percent in March quarter 2020. But what’s potentially even more interesting are suggestions that the Indian government could hike duties on imported pharma APIs by 10% to 15%. This is all part of the decoupling that the government is attempting. Another component of this is evident in reports of reviewing the work of Confucius Institutes in India. The MEA weighed in on the issue this week, saying that the government would check to see whether MEA approval was sought as per guidelines prior to any pact between a Confucius Institute and an Indian educational institution. The Indian Express reports that the Education Ministry on Wednesday held a meeting with the University Grants Commission and representatives of higher education institutions to review the work of Confucius Institutes and Classrooms. Seven institutions running Confucius Institutes attended the meeting. There’s no decision or announcement since. But Beijing’s unhappy. The Chinese embassy in New Delhi issued a statement saying: “Indian relevant parties can treat Confucius Institutes and China-India higher education cooperation in an objective and fair manner, avoid politicising normal cooperation and maintain healthy and stable development of China-India people-to-people and cultural exchanges.” What’s noteworthy is that unlike in say the US or Canada, there have been no reported instances of indoctrination, influence or espionage with regard to the activities of CIs in India. In fact, their presence is very limited.

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