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The ease of doing business indicator, known as EDB, is a system that ranks the regulatory environment in countries around the world. New research looks at how the World Bank’s ease of doing business index has amassed considerable influence over business regulations worldwide. The financial institution has succeeded in doing so even though it doesn’t have an explicit mandate over regulatory policy.
Indian Prime Minister Narendra Modi with Chinese President Xi Jinping in Mamallapuram, Tamil Nadu on October 12, 2019. Photo/PIB
In 1996, Jiang Zemin became the first Chinese head of state to visit India, underscoring the journey the two Asian neighbours had made since their 1962 border war. His successor Hu Jintao came calling in 2006.
However, when you compare that to Xi Jinping’s three visits to India in the past five years – the last earlier this month to Mamallapuram — and his several meetings with the Indian Prime Minister Narendra Modi in China, India and other countries, you realise how much the ties between the two neighbours have seemingly improved.
From India’s point of view such interactions are extremely important. Staying engaged means the chances of slowly reducing the decades-old trust deficit between the two neighbours are higher.
There are also more opportunities for India to raise its concerns with Beijing about Pakistan, about the huge unfavourable bilateral trade deficit, and about everything else about the world that matters to New Delhi.
It also means that China continues to be interested in India beyond the long border dispute between the two. And that is a huge change from a time when Beijing cared little, if at all, about India. The shift has been slow, and mostly triggered by India’s economic growth that really started from the early part of this century.
However, we must not also forget that Xi hosted Pakistani Prime Minister Imran Khan just before leaving for India and then travelled to Nepal for an official visit — the first by a Chine president to the land-locked Himalayan kingdom — after his meeting with Modi.
A curious China has followed India for its technological brainpower, its growing market that can be tapped — a massive $65 billion trade surplus is a good indicator — and an economy that at one point touched double digit growth. At the same time, Beijing has also watched India become closer to the United States at a time when its own trade relations with Washington are at their highest.
However, it is hardly a relationship that can be called equal. If at all, China is still patronising — the big brother in the neighbourhood keeping a close eye on India’s growth and ambitions, but at the same time allowing It some space and me time so that the two can stay engaged in a world that is very different from 1962 when they fought a border war.
Xi made it clear during the visit that the informal summits between him and Prime Minister Narendra Modi were at the request of the latter. In short, what he meant was that he was happy to oblige India with meetings, photo-ops and seaside conversations about how best bilateral issues can be addressed. It works well for both leaders in the social media age when selfies are an important part of our lives.
Whether China is really keen to resolve the old border or the new bilateral trade deficit issue quickly is a question that is still on the table and likely to there for longer. And since it is an unequal relationship, India can only continue to wait patiently for the needle to move. Breathe slowly, and breathe long.
Let’s not forget Doklam, where Chinese troops pushed the Indian army around even as Xi shared a traditional Indian swing with Modi in Ahmedabad for a conversation and ruffled diplomatic feathers.
China always takes a long-term view of things — a glacial, civilisational approach that many in the world mistake as slow decision-making. But let’s remember to do nothing is as much a decision as doing something.
The civilisational trap
And so we get into the 100-year civilisations trap, which in reality means status quo. That serves China well, as India is not a political or an economic threat in any way and China currently has enough of its problems to worry about — from a slowing economy to a dying Hong Kong.
Despite all its own problems, China still weighs heavy on India and the world. Its economy is at least four times bigger than that of India. So while Indians can celebrate their economy growing at a pace faster than China’s at certain points in history, the reality is that it would still take India a few decades to reach where China currently is. That also has geopolitical ramifications.
India might be a rising star, but it still doesn’t have the geo-economic heft to make a real difference to the world. That ability to influence things beyond its borders would only come once India’s economy gets on the treadmill and somebody presses 10, or probably 12. That, unfortunately, isn’t happening very soon.
And while it may be a nuclear power; India is not a big military power. It still relies heavily on imports of arms and armaments to be able to flex its muscles. China, on the other hand, produces everything it needs from guns to planes and is a growing exporter of military hardware.
And we are not even talking about Pakistan, China’s all-weather friend. Beijing will continues to hold its hands for more reasons than those that concern India. The fact that Xi hosted both Khan and Pakistan military chief General Qamar Bajwa just before he dropped in to shake hands with Modi is a clear indication of its priorities.
In short, India doesn’t really have very strong bargaining powers with China and can only push for small shifts that Beijing is happy to allow, but never without taking something back. Negotiations, though seen in India’s favour in the short term, don’t always mean they will benefit New Delhi in the long run.
So while Indian exports to China will grow, the big question is what is it that Beijing is getting in return for opening its door slightly more? Will India allow Chinese companies to sell their 5G telecom technology despite objections from the United States and fears over data security? Time will tell.
It would be very interesting to know how Modi sold the political changes in Kashmir triggered by the revocation of the constitution’s Article 370 to Xi. Let’s remember, China was gunning for India post New Delhi’s decision to change the political set up of Jammu and Kashmir. Xi generally waved that off during that visit. So what happened?
The reality is that China might allow administrative tinkering in Ladhakh as long as it doesn’t feel the move could potentially disturb the other key political fault lines — the 4,00 km-long border as it exists. If it does view the changes as ones that will disturb the status quo we could expect another Doklam-like situation, or maybe more stronger arm-twisting and threats that would definitely disturb the calm seas seen at Mamallapuram.
More importantly, China will definitely wait for future opportunities to push India back diplomatically. It is not in its interest to see India rise. In its hierarchical worldview, India is much lower in the political, diplomatic, economic and cultural ladder than others. That is unlikely to change for a long time.
India, therefore, needs to be smart and prepared to finds ways to push China back, whether by aligning itself strategically deeper with powers as concerned about Beijing’s ambitions or by growing economically at a rate that makes Beijing to continue to appreciate and eventually reconcile to India’s ambitions and growth. China will only agree to play a mutually beneficial game with a strong India.
The trade war seems like the simplest explanation for China’s diminishing economic growth. The White House has slapped tariffs up to 25% on a $550 billion basket of U.S.-bound exports and Chinese exports to the U.S. dropped 22% in September. But while U.S. China hawks would no doubt like to take credit for dinging Beijing’s economy, Julian Evans-Pritchard, Senior China Economist at Capital Economics, notes that exports globally have decreased and argues that the trade war sanctions likely aren’t the cause of China’s slowdown.
Photo courtesy: White House Flickr
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