Eye on China: Trade Truce – Week of Xiplomacy – Osaka RIC – India’s 5G Decision – Li’s Reform Pitch

Eye on China is a weekly newsletter offering news and analysis related to the Middle Kingdom. This week we cover US-China trade war talks; India’s deliberations on Huawei and 5G; Xi’s meetings with world leaders; Li Keqiang’s pledge for reform and opening up and much more.

I. India-China Relations

RIC in Osaka: Prime Minister Narendra Modi was in Osaka this week for the G20 meeting. At the sidelines of the summit, he held talks with a bunch of world leaders, including Russia’s Vladimir Putin and China’s Xi. Foreign Secretary Vijay Gokhale briefed the press after the RIC meeting. Discussions over the “international situation” dominated the meeting. Gokhale said all parties agreed to “strengthen the international system led by the United Nations…uphold international order based on accepted international norms and international law…and that we promote a multi-polar world, a world in which there are many centers of influence and stability and we also spoke about democracy for international relations.” WTO reform was also discussed, with all parties critiquing “the growth of unilateral action, protectionist tendencies.” Finally, India apparently wants a global international conference on terrorism, with Modi being sure that China and Russia would support this. The overarching theme about the international system, rules-based order and the role of the WTO were also discussed in the BRICS statement in Osaka.

The Xinhua readout of the RIC meeting echoes much of the above, but didn’t discuss talk of a terror-related conference. Interestingly, it also tells us that Xi wants the “three countries to build an open world economy that facilitates a better development of emerging-market countries and developing countries, expand cooperation in 5G network, high technology, connectivity, energy and other areas…” The 5G bit is rather fascinating, since it was also part of Modi’s talks with Trump.

The Huawei Committee: So what’s really happening with Huawei in India? We’ll ET Telecom reports that ahead of Mike Pompeo’s visit to India in June, the US Commerce Department had written to India’s Commerce Ministry “to look into security-related issues” with regard to allowing Huawei in the country’s 5G networks. TOI reports that Indian government’s Principal Scientific Adviser K Vijay Raghavan, who heads a 5G committee, wants 5G trials in the country to begin while excluding Chinese vendors. The committee that he heads comprises officials from the Intelligence Bureau, MEA, MHA, telecom and IT ministries and the department of science & technology. TOI’s report provides details of discussions during a June 13 meeting, during which each ministry shared rather differing views. 

Meanwhile Telecom Minister RS Prasad’s statement in Parliament this week indicates that the committee is yet to give its report. He added: “So far six proposals have been received (on 5G trials) which include proposals from China’s ZTE and Huawei. Any field trial in respect of 5G is to be carried out only through licensed Telecom Service Providers in a restrictive, limited geographical area and for specific use case.” Prasad also said that the US decision to place Huawei on the Entity list will impact Indian firms supplying US-origin technology components to the Chinese firm. Huawei’s role in a future Indian 5G network was also the subject of discussion during a Chinese trade delegation’s visit to India this week. CPPCC’s Yang Yanyi, who led the delegation, wants India to adopt an “open and inclusive approach” and is confident that New Delhi will “make an independent decision for the best interest of India and also for the common interest of us all.”

Trade & Investment: Let’s now scan through the Sino-Indian economic relationship through the prism of the new Indian Economic Survey. Business Today reports that the document mentions China 136 times. China continues to be the largest source of imports into India accounting for 13.7 percent of the total imported value in 2018-19. However, India’s imports from China fell to $70.3 billion from $76.4 billion a year ago. The survey also discusses China’s growth and employment strategy, with investment being the key catalyst. One other point discussed is the potential for Indian firms to expand their roles in global supply chains amid Sino-US trade frictions. One way to do that is to attract global firms to Make in India. ET reports that India has opened conversations with over 250 American companies that are exploring a shift in manufacturing operations from China. The report says that there is an attempt to establish an inter-ministerial panel to look at ways to harness India’s potential to become a low-cost manufacturing hub for high-end IT products. There’s increasing interest from Taiwanese officials and firms to expand investment in India, shifting from the PRC. Bengaluru could be a major beneficiary of this, with a Taiwanese IT and electronics cluster in the works.

India’s Development Cooperation: Well this isn’t strictly a China-related report, but given the constant talk in India about BRI’s influence in South Asia, it is important to highlight. Also, that was the question, i.e., India’s counter to BRI, that the government was answering when it gave out this information. V Muraleedharan, MoS External Affairs, told Parliament this week that India’s development cooperation partnership based on concessional lines of credit is operational in 63 countries. Currently, there are currently 279 LOCs, worth $28 billion. Of this, 254 projects aggregating nearly $4.70 billion have been completed and 194 projects worth nearly $19 billion are under implementation. 94 of these projects are being carried out in 5 countries in India’s immediate neighbourhood. The LOC in this regard is worth nearly $6.6 billion.

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