Eye on China: SR Talks – Mi Credit – Tech War – CPEC Stumbles – SL Balances – Power of Serbia – Xinjiang – Record Defaults – GDP Target – Employment

Eye on China is a weekly bulletin offering news and analysis related to the Middle Kingdom from an Indian interests perspective. This week we cover Wang Yi’s upcoming India visit; Xiaomi launches new credit platform; China’s engagement in South Asia; the trade war; CPEC’s troubles; protests in Hong Kong and much more.

I. SR Talks, IOR, Xiaomi & BYD

China was the subject of some discussion in the Indian parliament this week. First, Defense Minister Rajnath Singh once again stated that “perceptional differences” with regard to the LAC were the cause of transgressions. One hopes that clearly stating claim lines will be on the agenda as Wang Yi visits India later this month for the 22nd round of SR talks on the boundary issue with NSA Ajit Doval. Rajnath also added that our forces, however, remain on alert, and that India is developing infrastructure like roads, tunnels, railway lines, and airfields on the China border. Well, so has China. This report in ThePrint argues that Beijing has made good progress in building roads, railways and bridges, besides new infrastructure at airports in Tibet since the Doklam standoff.

The defense minister’s remarks came as Congress leader Adhir Ranjan Chowdhury hit out at the government for being “soft towards China.” His concerns were the ties between China and Pakistan and reports of Chinese vessels being present in the Indian Ocean.

This comes amid reports that India forced back a Chinese research vessel, Shi Yan-1, which was suspected of undertaking surveillance activities. The vessel was reportedly detected by P-8I maritime patrol aircraft a few weeks ago. Indian navy chief Admiral Karambir Singh confirmed the incident this week, saying that “if you have to do anything in our EEZ, you have to notify us first.” During his press interaction, Admiral Singh also pointed to India’s shrinking naval budget and the desire for three aircraft carriers. One hopes lawmakers actually focus on these issues too, rather than sparring over being soft and hard. Another point mentioned by the navy chief was regarding the Milan maritime exercises scheduled for next year, which will involve 41 countries. “We are talking about our Indian Ocean Region. We have called the people that we think our like minded…With others we have much better interoperability,” Singh said, when asked about why China was invited for the drills.

But that does not mean that there are no drills together. The annual Hand-in-Hand drills are beginning on December 7 in Urmoi, with the participation of 130 soldiers from both sides. “The aim of the exercise is to practice joint planning and conduct of counter terrorist operation in semi-urban terrain,” the Indian army says. What will happen are lectures, firing of each other’s weapons, battle obstacles course, special heliborne operations and discussions of case studies of various counter-terror operations.

The final security bit that I’d like to highlight this week is this bit from former Chinese ambassador to India Luo Zhaohui during the Fourth India-China Think-Tanks Forum in Beijing in late November. He says: “The two sides should go beyond the mode of controlling differences, break the strange circle of ups and downs in bilateral relations, enhance mutual trust, properly handle differences, seek common development, and explore a way for big developing countries to live peacefully and develop together.”

Trade and investments are a good way to ease the volatility in the relationship. This week, there were a number of interesting stories on this account. For starters, Indo-China Border trade has culminated for the year, with exports at Rs. 39.73 crore and imports at Rs. 3.16 crores. This is basically what went over the established trade passes.

Meanwhile, Chinese smartphone maker Xiaomi launched its online lending service in India on Tuesday. Xiaomi’s Mi Credit connects smartphone users with lending firms, giving them access to quick loans of up to Rs. 100,000. Mint reports that the current lending partners for Mi Credit are primarily NBFCs or fintechs such as Aditya Birla Finance Ltd, Money View, EarlySalary, Zestmoney and CreditVidya. Mi Credit is the second financial product being made available by Xiaomi in India, after Mi Pay. Mi Pay is a UPI-based payment app, with over 20 million registered users.

Another notable investment is that by China’s Skyworth Group, which says that it is pumping in $100 million as part of the first phase of its “Make in Telangana” plan, which reportedly includes manufacturing LED TVs, set-top boxes, washing machines, air conditioners, refrigerators as well as lithium batteries for electric vehicles. TOI’s report adds that the group has acquired a 50-acre parcel of land and its investments over phases could exceed Rs. 2,000 crore. Another Chinese company that’s promising big investments is BYD. It recently signed an MOU with the Tamil Nadu government. BYD’s Indian arm, i.e., BYD India Pvt Ltd, plans to set up a unit for manufacturing phone components. Already this Indian subsidiary has two factories in the country covering more than 140,000 square metres, with a cumulative investment of over $150 million. Its business entail mobile components, solar panels, battery energy storage, electric buses and trucks, electric forklifts, chargers, and rail transit.

Finally, Union Commerce and Industry Minister Piyush Goyal told Parliament this week that China now is among India’s top 5 export destinations for medicinal herbs. For FY 2018-19, India exported $13.4 million worth of medicinal herbs to China. Another product that Goyal wants to export is tobacco.

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