Of Doklam And Dangal
One simple and actionable step, that would greatly facilitate both business and tourism, would be to open up more air routes between China (and Hong Kong) and India
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Gautam Bambawale is an unusual foreign service officer. Articulate and intelligent, he assumed his position as the Indian ambassador in Beijing last November. He knows his subject; he has worked on Indo-Chinese affairs for thirty years. This is his fourth tour in China and his Mandarin is fluent. Moreover, he has previously been posted as ambassador in both Pakistan and Bhutan. You won't meet another diplomat who has been to Doklam.
Bambawale recently made his first visit to Hong Kong as ambassador. After his call on the Chief Executive, Carrie Lam, and signing the new Dual Taxation Agreement between Hong Kong and India, he interacted with the business community. His message was that, despite a rocky 2017 caused by the Doklam stand-off, Indo-Chinese relations are full of potential. India, he said, sees China not as a rival but as "a partner in development and progress".
He cited two successes to support his optimistic outlook. First, Xiaomi has overtaken Samsung as the market leader in India for smartphones, showing that Chinese business can succeed in India. Second, Aamir Khan's film Dangal topped the charts in China for several weeks last year, demonstrating China's openness to Indian culture.
In answering questions, Bambawale was more constrained. He saw the border dispute as the key bilateral issue and outlined the protracted path to its resolution. However, he would not predict whether a delineation of the border would take a year more, or twenty. He explained that India's refusal to collaborate on President Xi's headline Belt and Road initiative was because the China-Pakistan Economic Corridor, in India's eyes, encroaches on sovereign Indian soil. He would not comment on whether China was supporting India's candidacy for Permanent Membership of the UN Security Council, saying this issue was part of a reform of the overall governance of the UN.
Partly as a result of such strategic issues, the business relationship between India and China is a fraction of what it should be. Bilateral trade reached just $84 billion in 2017, still short of the agreed $100 billion target, and is heavily skewed in China's favour. India has a $52 billion trade deficit with its neighbour. So far, efforts to improve Indian exports to China, both in volume and quality, have fallen short.
Flows of FDI are also modest, though growing. The ambassador claimed that India treats Chinese FDI with exactly the same welcome as that from other countries, but his business audience knew that, due to security concerns, this is not the case. Equally, sectors of the Chinese economy of interest to Indian investors remain at least partly closed.
The recent spurt of investment from China's burgeoning tech sector into India illustrates the real potential that exists. Alibaba, TenCent, Didi and now Meituan have all made significant investments into Indian growth companies. Chinese FDI into India has crossed $2 billion.
Despite lingering geo-strategic tensions, the potential for India-China bilateral business is truly enormous. One simple and actionable step, that would greatly facilitate both business and tourism, would be to open up more air routes between China (and Hong Kong) and India. There are currently only six direct air routes between the Mainland and India. Singapore has five times more flights a week to India as does Hong Kong. Improving connectivity between these two giant, neighbouring economies would be a welcome first step towards a deeper mutual engagement.
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