Eye on China: LAC, FDI, RCEP – Bhutan Village – Nepal’s Politics – Big Defaults – Xi’s Summits – New US Approach – Warning Australia – EU’s Dependence

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

Over the last two weeks, there have been reports of India and China agreeing to some sort of partial disengagement and de-escalation formula in Eastern Ladakh. It’s all rather sketchy and neither government appears to have formally confirmed anything. It’s all very similar source-based media reportage. But then, that’s sadly been the norm ever since all of this started.

Here’s what was reported in ThePrint a week or so ago: “Government sources said India is hopeful of a ‘complete disengagement’ before the middle of next month and that talks will continue at ‘all levels’…According to the proposal, modalities of which are yet to be worked out in detail, the Chinese will move back from the Finger 4 area of the northern banks of Pangong Tso to beyond Finger 8, sources in the defence and security establishment said, adding that the Chinese will also remove all tents and observation posts set up in an 8-km area. Similarly, Indian troops will also move back to its administrative Dhan Singh Thapa post, which is ahead of Finger 2, but just short of Finger 3, the sources said. The area from Finger 3 to Finger 8 is likely to remain out of bounds for patrolling by both sides as of now, which is akin to creation of a buffer zone.” Another report in Times of India had said: “Concurrently, the two armies are also slated to withdraw their tanks and other heavy weaponry to ‘depth areas’ from their current forward locations on the south bank of Pangong Tso-Kailash range of mountains…The final phase will entail the rival troops vacating the previously unoccupied Chushul heights.” The issue of Depsang plains would be left for later.

Anyway, what we do know officially from the MEA is that there will be another round, the 9th, of talks between Indian and Chinese commanders. The MEA spokesperson said that “the objective of these discussions is to ensure complete disengagement and full restoration of peace and tranquillity along the LAC in the western sector.” Ajay Banerjee reports for The Tribune that the talks are currently deadlocked. The two sides are discussing dates for a fresh round over the hotline. While of of this continues, Shehesh Alex Philip reports that “China is carrying out massive construction activities, including building new bridges and roads besides housing, to boost its military capability in eastern Ladakh not just in the new friction points of southern banks but also in areas like Galwan Valley and Hot Springs where both countries had carried out significant disengagement.” The long winter in India-China ties, I guess has just begun. On the ground, the Indian Army tweeted out images of new smart camps and shelters that will house the troops amid the freezing winters. While on the boundary issue, one more report to note is from Shishir Gupta. He writes: “China has surreptitiously undertaken a large military infrastructure upgrade in the central, Sikkim and eastern sectors with simultaneous strengthening of surface-to-air missile sites, an increase in unmanned aerial vehicle numbers, and an expansion of airbases in Tibet while the world’s attention has been focused on Beijing’s hostile moves on the line of actual control (LAC) in Eastern Ladakh.”

Oh one more thing, i.e., this report about the PLA using microwave weapons. It all began with a report by The Times, UK, which quoted Jin Canrong, a professor of international relations at Beijing-based Renmin University as saying that the PLA had turned two strategic hilltops in Eastern Ladakh which had been occupied by Indian soldiers ‘into a microwave oven’, forcing them to retreat and allowing the positions to be retaken without an exchange of conventional fire. Of course, this got picked up by other outlets around the world. The Indian Army dismissed this as “fake” and “baseless.” There’s been some reportage on this in Chinese media. For instance, here’s one piece that talks about The Times’ report and the Indian army’s response to it. It also mentions the exaggerated nature of the coverage that the report got in other outlets. It also talks about how military observers believe that major military powers do not have mature ‘microwave directed energy weapons’ and therefore, such reports are likely to be “sensational.”

Moving on, let’s look at some other stories, given that there were several summit meetings over the past 10 days. First, Indian Foreign Minister S Jaishankar spoke at the East Asia Summit recently. He talked about the need to respect international law and expressed “concern about actions and incidents that erode trust in the region.” Jaishankar also referred to the South China Sea Code of Conduct talks arguing that these should not be prejudicial to legitimate interests of third parties and should be fully consistent with UNCLOS. Second, there’s a report, scant on details for now, about the Indian government considering a plan to allow up to 26% FDI in some sectors from countries with which it shares a land border without government scrutiny. The Global Times got excited by this report. It’s piece says: “This once again confirms the basic logic that one should ‘not swim against the tide.’ It shows that New Delhi, once overwhelmed by nationalism, has begun to turn back from the road of ‘harming others but not benefiting itself’.” I honestly think this is good. We need more capital inflow. Also good, if it is indeed happening, is what this Economic Times report tells us about licensing rules for telecom companies. It says that the government is considering amending licence conditions to at least bar telcos from sourcing “critical equipment” for their networks from Chinese companies. This will effectively block Huawei and ZTE from participating in 5G trials.

Third, a measure of how much the pandemic and Beijing’s actions in Ladakh have led to a loss of goodwill in India, a new survey shows that 71 percent Indians consciously did not buy Chinese products this festive season. The survey covered 14,000 people across 204 districts between 10-15 November. According to the survey, only 29% of the respondents said they bought “Made in China” products this year; the figure for last year was 48%. But I guess one positive for Chinese companies in this is that: “About 66 per cent said they did so because they felt the products offered higher value for money, 13 per cent said it was the ‘uniqueness’ of the products and 25 per cent said they were unsure.” Fourth, India’s seafood exports to China are likely to face much more scrutiny, with authorities there saying that they detected COVID-19 on frozen pomfret packets exported from India. Imports from other countries are being targeted too. For instance, Brazil, Bolivia and New Zealand. This comes as the WHO says that the risk of catching COVID-19 from frozen food is low. Beijing’s. however, not really paying heed. In fact, there’s been some commentary about the possibility of imported frozen food being the original cause of the outbreak in Wuhan. Fifth, at the BRICS summit, Xi Jinping offered to work with India on the COVID-19 vaccine. He also said that “China has joined the COVAX facility and will actively consider providing vaccines to the BRICS countries where there is a need.” All we have for now is an announcement. Let’s see where this goes. In the meantime, at the WTO, India is seeking exemption for Covid-19 drugs and vaccines from patent protections. This move has been supported by China and Pakistan, but opposed by the United States and European Union. Finally, RCEP was signed this week. India, of course, has chosen to stay out. But there remains a window open for it to join if it so pleases. I recommend reading this explainer by Suhasini Haidar on India’s objections and the deal. As I do, this interview with Ambassador Shyam Saran. I am sharing an excerpt below from Haidar’s piece on whether the agreement addresses India’s concerns about Chinese goods, rules of origin, etc.

“India’s concerns over Chinese goods flooding the Indian market through other markets under the RCEP, without clear guidelines on rules of origin, find clear mention and an entire chapter devoted to it in the final RCEP text of 20 chapters, despite the fact that India is no longer in the grouping. There is also a chapter on allowing trade in services (Chapter 8), particularly financial, telecommunications and professional services, which was another key demand by India during the seven years that it continued to negotiate the RCEP. In addition, there is a summary of objections by various RCEP members to different parts of the agreement, which are expected to be resolved in the next few years as the treaty goes through ratification processes across the region. Even so, the Indian government says there is no rethinking the decision to stay out of the RCEP. India has skipped every meeting of the grouping in the past year.”

Click here to read the full newsletter.