Mr. Shiv Shankar Menon, NSA  May 2014

Congratulations on the establishment of the Centre for China Analysis and Strategy. This is an important step in the direction of a better understanding in India of our largest neighbour, China. There is certainly a need for an improved understanding of China’s evolution as she becomes ever more important to our foreign and security policies. 


Jayadeva is an old friend and a professional colleague of long standing. Having worked together for several decades, I have no hesitation in saying that the Centre is in good, capable and knowledgeable hands.


China occupies much of our mind-space in India, judging by the amount of newsprint and air-time in our media for instant commentary on China. But it does not seem to receive the same proportion of our academic and professional effort. An accurate understanding of China is an essential precondition for discussion of India-China issues, for meaningful policy, and to assess the challenges and opportunities that arise. I therefore welcome your initiative in setting up the CCAS an important step in this direction.


What I would like to do today is to briefly consider the strategic significance of India-China relations, which has implications for China’s place in India’s grand strategy, or, in other words, how China affects our quest to transform India. 


India and China Today


In geopolitical terms, India and China today constitute a large, heavily populated, landmass of relative political stability and economic vitality and growth in the Asia-Pacific, surrounded by considerable uncertainty. The flanks of this island of relative stability, in West Asia, Central Asia and East Asia, are witnessing increasing turmoil. On these flanks we see sharpened territorial disputes, rising ethnic and religious conflict, and spreading extremism and terrorism. At the same time, the world economy’s prospects remain uncertain with signs of a recovery weak and patchy. With their relative stability and growing national capacities India and China are potentially a strong stabilising factor in a rapidly changing geopolitical landscape. It is in India and China’s common interest to continue to anchor stability in the midst of turmoil, if they wish to achieve the ambitious domestic tasks of development and transformation that they have set themselves. Success in these tasks will itself be a major contribution to international stability and progress.


Strategic Convergences


India and China can play such a role because despite our differences there are congruences between our views and assessments of the shifting balance of forces in the international situation. Both see a diffusion of power to several emerging economies and powers in Asia and other parts of the world. While the shorthand for this phenomenon is “multipolarity”, it is in reality a more complex and multi-layered phenomenon, to which powers are reacting by hedging and balancing, and by multi-pronged diplomacy.


For their part, India and China are far too large and independent to either contain one another or to be contained by any third power or group of countries. India’s policies have been driven by the pursuit of strategic autonomy on issues vital to India. As a corollary, India has not and will not be part of an alliance system. To that extent, Indian and Chinese world views are not in fundamental contradiction today.


In the peripheries that we share, in Central Asia, West Asia, in South East Asia, and in the maritime space from the Indian Ocean to the Western Pacific, there are both convergences and divergences between India and China. Among the convergences are:


• Both depend upon West Asia and the world for crucial energy imports. We have invested together in sources of energy around the world and are discussing energy security in the Strategic Economic Dialogue that began two years ago.

• Security of the sea lanes that bring that energy to us, and that carry our overseas trade, is important to both countries. Both have worked together in the international naval effort to combat piracy off the Horn of Africa. We have agreed to begin a maritime security dialogue.

• Fighting the rising tide of extremism in our shared periphery is in our common interest. The transition in Afghanistan, cross-border terrorism from Pakistan, and rising extremism in West Asia affect both our societies. We have shared assessments and consulted with China on these issues, so as to arrive at a correct understanding of the risks.


It is in the same periphery that both India and China are most sensitive as issues here affect core interests of territorial integrity and sovereignty. Here lies the real test of Indian and Chinese diplomacy and of our ability to work together, handle differences and compete and cooperate at the same time.


On issues of larger global governance and order, the regimes and norms that guide international behaviour, we have each worked within the post-War WWII Western order, the main features of which still dominate political organs like the UN Security Council, even though it does not meet our needs optimally. This is an area where clearly much more needs to be done to bring Indian and Chinese positions in alignment.


Economically, India and China have been among the greatest beneficiaries of the two post-Cold War decades of free flows of capital and an open international trading system. That now seems to have come to an end after the 2008 economic crisis.Through plurilateral agreements like the TPP and TTIP the West is attempting to set new standards for trade and investment flows among preferred partners. Neither India nor China have been invited to the TPP negotiations, though without India and China such arrangements wouldonly dangerously fragment  world trade and abet the rise of protectionism in developed countries.


The West works from the top down to adjust the existing economic order, using the strengths that she has. China has worked from the ground up, changing realitiesthroughout the Asia-Pacific and into Central Asia, Africa and other regions as well — building pipelines, road, rail and air connectivity, creating port and travel infrastructure, and through trade and investment links. India too has been working to improve land, sea and air connectivity with her neighbours in South and South-East Asia, and in the extended neighbourhood of the Indian Ocean region and West Asia as well, building economic corridors into Myanmar, for instance. This is the strategic context within which the BCIM Corridor, the Maritime Silk Route and other such proposals involving India and China should be positively considered. China is now the largest trading partner for most of her neighbours and further afield too. International settlements in the RMB and new financial structures like an Asian Infrastructure Bank are on the anvil. The BRICS Bank and Contingent Reserve Arrangement have been finalised.


In other words new realities and norms are coming into being in international trading and financial systems, particularly around us. These are changing the environment in which we seek India’s development and transformation. 


In new domains such as cyber, outer space and climate change, on the other hand, there is a tabula rasa in terms of the norms and rules that should govern international behaviour and international governance is absent or ineffectual. This is a vacuum that could and should be filled. Here again India and China should engage to establish the extent to which our interests coincide. India seeks to ensure that the global commons be available to all countries for their legitimate peaceful uses.




In other words, the evolution of the international system has opened up convergences that did not exist earlier. Equally, India and China have differences and divergences as well.


Our divergences are well known to most of you, and are mostly in bilateral issues and in the periphery which is common to us.


The greatest impediment to the India-China relationship achieving its full potential remains the boundary issue. It would therefore be logical to move as rapidly as possible to a boundary settlement. When PM MMS and President Xi Jinping met in Durban in March 2013, they agreed that the boundary should be settled as soon as possible.


We have made some progress in the last decade on the boundary issue. We agreed the Guiding Principles and Political Parameters for settling the boundary issue in 2005. We are now in the second stage of the Special Representatives discussions evolving a common framework for a settlement, which can form the basis of an actual boundary settlement in the third and last phase of the SRs' work.


Despite all that you might hear in uninformed commentary, the India-China border is  generally peaceful. The status quo has been respected by both sides, as they are committed to do under the 1993 Border Peace and Tranquillity Agreement. When there was a unilateral change, as in Depsang last May, agreed mechanisms worked and restored the status quo within a few weeks. 


Why then is there disquiet in the Indian public mind about the boundary? Partly it is because this is indeed the largest such dispute in the world in terms of area. We have not settled the boundary for over half a century and we have an unfortunate history to come to terms with. 


Both sides have improved their border management, posture, and infrastructure on their side of the LAC over several decades. To maintain peace and tranquility even as new equilibriums emerge has therefore been a continuous process. Hence the series of confidence building measures and agreed operating procedures since the 1993 BPTA. These include standard protocols for behaviour in areas where we have different perceptions of where the LAC lies. We are now discussing a Code of Conduct for troops on the border and have stepped up direct contacts between the two militaries.


You are aware of the other bilateral issues such as trans-border rivers, Chinese presence in POK and so on which we are discussing with China.


We also have issues like the trade imbalance. Here again the picture is mixed. Over the last two decades, our trading relationship with China has developed rapidly as a source of cheap goods for the Indian market that has fed the Indian consumer revolution. China is now our largest trading partner in goods. She could also be a major source of investment, capital goods and infrastructure in India. The Strategic Economic Dialogue between our two countries that began two years ago is examining how to realise this potential. Clearly, if we are to do so we must also address the adverse trade balance against India which has reached unsustainable levels. We should move to diversify trade, find means of balancing the current account, and open Chinese markets to Indian services, pharmaceuticals and agricultural products.


In the periphery that is common to both India and China we have begun a process of dialogue and engagement. We are discussing the evolving situation in Afghanistan, counter-terrorism, and the situation in the region. As you know India believes that the time has come to build an open, rule based, inclusive regional security order in the Asia-Pacific. Such an order would take the edge off territorial disputes and hotspots in the region, which, in our view, should be settled peacefully, through negotiation, and in accordance with international law.


On all these issues, in the last decade both countries have shown an ability and willingness to address and manage differences, keeping their larger strategic interests in mind.




In sum, given both convergences and divergences, this is a relationship with considerable unrealised potential, where both cooperation and healthy competition occur.


The list of areas where India and China can and do work together has grown in the last two decades, based on the understanding that was forged during PM Rajiv Gandhi’s visit to China in 1988 with Deng Xiaoping, and strengthened by subsequent visits including Prime Minister Vajpayee’s 2003 visit to Beijing and PM Manmohan Singh’s 2008 visit. In essence, the understanding provides for developing the bilateral relationship where we can while discussing and settling differences like the boundary question. We do not allow differences to prevent the development of our relations where they are in mutual interest. This process is premised on an understanding that we do not interfere in the other’s internal affairs, and that we show sensitivity to each other’s core concerns.


I think it is also clear from what I have said that India-China relations have considerable significance for our attempt to transform India. The two countries have an agenda for the relationship which is wide-ranging and substantive. Resolving bilateral issues, putting our bilateral relations in a global and strategic perspective, and working to realise the strategic significance of these relations, contribute to our development, help to stabilise the Asia-Pacific region, and influence the architecture of global governance.


With these words allow me to once again wish the Centre for China Analysis and Strategy success in achieving the ambitious mission that it has set itself.

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