Webinar: Changing Sino-Indian Relations: From Celebrations to Clashes

James Crabtree

Good afternoon in London, good evening here, from where I’m speaking to you, in Singapore. My name is James Crabtree. I’m an Associate Fellow of the Asia-Pacific Programme at Chatham House and welcome to all of you for the latest in a series of members’ events here at Chatham House. Today we’re talking about changing Sino-Indian relations and the headline of the event is From Celebrations to Clashes. And we are joined by an all-star panel to give both sides of the changing relationship between Asia’s two most important powers.

I mean, it’s, obviously a very important time to have this debate. I think you could make the argument that the most consequential geopolitical change that has happened in the aftermath of the COVID-19 pandemic has been the changing dynamic between India and China. That is partly related to the clash in the Himalayas that happened in mid-June and then the faltering steps to repair relations prior to that. But it also encompasses India’s reprisals, particularly in the economic domain, from the banning of TikTok, to limits on investment, which have had global repercussions. And then, we have to try and understand how this changing balance between the two countries fits into the broader context, particularly between the United States and China and the changing dynamics of the Asia-Pacific. So, that’s no small topic.

To unpick this we have a very capable panel, beginning, and this is the order in which they will be speaking, with Nirupama Rao, who joins us from Bangalore, and Former Foreign Secretary, Former US Ambassador, and for the purposes of this discussion, also Former Ambassador of India to Beijing. So, Nirupama will kick off. Then we have Yu Jie, who is the Senior Research Fellow for the Home Team at Chatham House, the Asia-Pacific Programme. Joining us from, I’ve actually forgotten where, but she’s stranded somewhere, she’ll have to remind us, she’s not in London, she was just telling us where she was, but I’ve actually forgotten where it is, from India, speaking third, Suhasini Haidar, who is the Diplomatic Editor of the Hindu and with her enormous Twitter following, will be known to, I’m sure, many of you. And then, finally, Simon Cox, here in East Asia, the Emerging Markets Editor of The Economist.

So, each of our speakers is going to speak for five minutes, or a little over that, to set the scene on how they view China’s changing relationship with India, or India’s changing relationship with China, and then we’ll open up to questions. If you could ask your questions in the Q&A function, then, the idea is that, given – that we will try and unmute whoever wants to ask a question, if you do indeed want to ask a question. So, when you ask your question, please let us know who you are and what your name is and then we’ll unmute and you can ask it in person, or if you are feeling shy, then I will ask it for you, and we will wrap up crisply at – in an hour from now. So, that’s our order of play, and the other thing I should mention is this event is on the record, so it’s not being held under the Chatham House Rule, and some clips from the event may be used by our Events Team. So, if you’re going to ask a particularly fiery question, then do bear that in mind.

So, with no further ado, let me turn to each of our panellists, in turn, to get us kicked off. So, Nirupama, can I ask you first to give your view on changing Sino-Indian relations? And thank you very much to all four of you for being here.

Nirupama Menon Rao

Thank you, James, and thank you, Chatham House. I’m going to address the theme of our discussion today, which is changing Sino-Indian Relations from Celebrations to Clashes. The celebration that is referred to in the title, essentially, I would assume refers to the commemoration, I would use that word instead of celebration, of 70 years of diplomatic relations between India and China. Diplomatic relations were established between the two countries in April of 1950 and India was one of the first non-Socialist countries outside the Communist Bloc to recognise the New People’s Republic of China, so that’s the context.

And the second part of the title refers to clashes, which contextualises the relationship in the present and looks to the future. So, it is definitely a season of change in Sino-Indian relations and I believe there have been signs of a shift and more than a seasonal turbulence in the relationship for some time. The Doklam Crisis of 2017 in Bhutan was one such cloudburst, as also the adversarial approach of the Chinese on the issue of UN sanctions against the Pakistani terrorist, Masood Azhar, holding out on the entry of India into the Nuclear Suppliers Group and, of course, the ‘misadventure’, is at least the term in India, of the China-Pakistan Economic Corridor, which snakes through territory of Gilgit-Baltistan and Kashmir, occupied currently by Pakistan. And, of course, there has been prolonged unease in Delhi about the successful forays that the Chinese have made into India’s neighbourhood in South Asia, outside Pakistan, I’d say, in Nepal, Bangladesh, Sri Lanka and the Maldives. So, no real Panacea was provided by the two informal summits that Prime Minister Modi and President Xi Jinping held at Wuhan and Chennai in 2018 and 2019. I believe spectacle trumps substance, with core instabilities straining the relationship remaining where they were.

Now, talking of the boundary between the two countries, which really looms large in the relationship, it’s an unresolved boundary dispute along a Continental space, involving a land border of close to 4,000km. Even the length of that border is contested between the two countries. The Chinese say it’s considerably shorter, which deepens the fog, and this dispute is a constant and looming presence and memories of the conflict of 1962 haven’t faded in India. So, it’s a live volcano, which erupts from time-to-time, and for decades India, in fact, never acknowledged that there was a dispute with China on the issue, referring to it only as a question, the boundary question. In recent [audio cuts out – 09:16] it is injecting a welcome dose of realism into the India perspective, as it should, given the fact that India regards China as occupying around 38,000km2 of territory in the forbidding high altitude Aksai Chin area of Ladakh and Chinese maps, showing 90,000km2 of India’s state of Arunachal Pradesh, as part of South Tibet.

Now, as India has tried to match China’s build-up of infrastructure in the border areas, along what both sides call the Line of Actual Control, or the LAC, the situation here has changed. And in the past, where there had been no lives lost or bloodshed for over four decades, since October 1975, to be exact, has been supplanted by a kinetic present. Transgressions across the LAC have increased over the last few years, particularly since 2013 and stand offs have occurred since 2013, to be exact, 2013 and 2014 in Ladakh and, of course, Doklam in Bhutan, where Indian troops came to Bhutan’s defence, as stipulated under bilateral treaty arrangements in 2017.

So, Galwan, and the place where we saw bloodshed in Eastern Ladakh in June of this year, was a crisis waiting to happen. A shared sense of acute nationalism, coupled with the need to defend sovereignty, as defined by each country, provided for tinder waiting to be set alight. The various agreements and mechanisms concluded bilaterally by the two sides since 1993 to maintain peace and build confidence, mutual confidence, so as to avoid mutual confron – sorry, military confrontation and violence along the LAC, didn’t prove sufficient guard against the tragic sequence of events on the night of the 15th June. And may I add that this sequence may never really be revealed and individual histories on each side, India’s and China’s, will make their own judgments about the rights and the wrongs.

Now, the operating system for Sino-Indian relations, built since 1988, when India’s then Prime Minister, Rajiv Gandhi, visited China, defying all odds that argued against extending an olive branch to our giant neighbour, was premised on the argument that both countries should not allow the continuing boundary dispute to block development of relations in other fields, including trade and business related interaction, as well as, importantly, people-to-people ties. China’s leader, Deng Xiaoping, told Rajiv Gandhi that, “India and China should work together to build an Asian century.” And in subsequent years, relations, particularly in trade and investment, grew substantially and significantly, even as the boundary dispute remained unresolved, despite high level efforts led by special representatives appointed by the leadership in both countries.

Therefore, post-June 2020, I believe that the operating system has become largely defunct, the operating system from 1988. It appears that it lacked the resilience and durability to withstand the shockwaves of Galwan. Efforts to disengage and de-escalate in the problem areas in Ladakh, where confrontation continues, are ongoing, both at the military and diplomatic levels. India would like a restoration of the status quo prevailing before May 2020 and the Chinese are mostly unyielding. The outlook doesn’t look promising and, meanwhile, the complete erosion of mutual trust is strewn all over the landscape of the relationship. Public opinion in India shows a level of agitation against China unseen in recent decades and while Indian Government spokespersons have been rather restrained in their statements on the stand-off with China and with – at the political level, even Prime Minister Modi has sought to reassure the people that India is dealing resolutely with ‘expansionism’, as he has termed it, without calling out China.

But on the trade and economic front, action has been seen with the banning of 59 Chinese apps, including the famous, or infamous, depends on how you look at it, TikTok, excluding China from government procurement, deciding that Huawei will not participate in India’s plans and projects to introduce 5G technology. But a drastic decoupling from doing business with China seems difficult to envisage. It will depend on the strategies that India builds to replace dependence on China in many fields, including active pharmaceutical ingredients for our crucial pharma industry, electronics components, equipment for power and telecom industries. For example, the timeframe could be anywhere between three to five years, building more supply chain resilience, on which some action is beginning, will be another requirement.

I’d like to say something briefly about India’s strategic partnership with the [audio cuts out – 14:38], which everybody talks about as a, kind of, India going, you know, on the rebound, to be much more closely aligned with China. It definitely – that partnership will stand us in good stead, in terms of diplomatic support, we already see that, and, also, in building defence and intelligence capabilities vis-à-vis China, and we’ll do – be doing more military exercises and things of that kind, I suppose. And in the Continental space, and this has already been demonstrated in the strategic airlift capability that our aircraft sourced from the US, enabled in Ladakh in recent weeks and months, but our fight with China will have to be our own, which is a sobering thought. And the repercussions of a conflict with China on our national, particularly our economic and developmental wellbeing, remain to be fully assessed. So, the stakes are very high, indeed.

I should stop here, because I’m probably over my time, but briefly, the maritime space of the Indo-Pacific also constitutes a new frontier of – between India and China. This is this place where many flags fly, but where the bipolarity of the contest and competition between the United States and China is more starkly expressed. But countries in the region, including India, and I believe it includes the ASEAN group of countries, would wish for a dilution of that bipolarity into a more multilateral, multipolar situation, where the room for manoeuvre is retained. So, strategic autonomy, as we call it, will be expressed by the factor of how we can build more independence from dependence on China economically, into the [audio cuts out – 16:18]. So, it’s the coalitions, then, of likeminded countries in the region, who have similar misgivings, as we do as we do, about China [audio cuts out – 16:37]. Thank you.

James Crabtree

Very good, okay, perfect. We lost, I think, the last 15 seconds of that, you were breaking up a little bit, Ambassador, but that was fantastic.

Nirupama Menon Rao

Do you want me to go over…

James Crabtree

I thought that was good, but…

Nirupama Menon Rao

…it again?

James Crabtree

No, no, no, no, no, it’s fine. I think we got the point, which is good, and that was a great overview, for those who haven’t been following this as closely as the panel have. So, Yu, do you want to take us on from there?

Dr Yu Jie

Sure, okay. Thank you so much, James, and also, let me thank my colleague Camilla and Maria to put this spectacular event together and allow me to join this historic panel. Now, I cannot compete the eloquence of Ambassador Rao in here regarding the understanding of Sino-India relations, but all can – I can offer is offered from the Chinese perspective, in terms of how China sees India, to some extent.

Now, beyond the immediate border tensions of the – highlight longstanding asymmetry between India and China. India says China is seeking pre-eminence in Asia, if not further afield, and India, obviously, in turn, looking for multipolarity, like what Ambassador just said, and wanted to be taken seriously by Beijing. And, obviously, the more India engage with other countries concerned about China’s rise, for example, Japan, or obviously United States, the more China appears to pay India respect, and that’s really in the mindset of India decision-makers. Now, on the other hand, and for the Chinese diplomatic community, it doesn’t really think that India, in terms of strategic terms, in terms of strategic competition, but they’d rather see India as mainly as a regional rivalry. And that sense of superior power over India among Chinese officials, experts, and even among the Chinese public, is quite longstanding and they are very convinced that China’s governance system have and will continue to outperform that of India’s. So, the Chinese diplomatic community have a very little doubt that China will maintain and enhance its military and nuclear advantages over India in years to come.

But, obviously, Beijing perceive a China-India relations in the relative co-operative terms that is really before the COVID-19 and most likely driven by the interest of, as both countries are the largest, two of the largest developing countries, and also rising players in global politics, because the so-called Global South. And they would prefer the international order would also share the voices of China’s and India’s and many other developing countries. Now – but at the regional level, on the other hand, when you have – you suddenly have a border dispute, and also, the countries have contradictory views, in terms of their relationship with Pakistan, and also divergent versions of the future of the securities structure in the Indo-Pacific. So, these are the differences between Beijing and Delhi.

Chinese Diplomats and Analysts are rather optimistic about India is interested in maintaining a favourable international environment for its own dev – economic development and, also, have very little incentive to entering a major conflict with China. Obviously, the Chinese would believe that the country’s extensive economic interdependence will deter the current, rather hostile ways of portraying China in India domestically and this, perhaps, will not fundamentally altering the bilateral relations. But, obviously, I think interdependence doesn’t really mean that India won’t see China as a strategic rival, but rather, it would prevent the use of nuclear weapons, bearing in mind those countries are nuclear powers, as well.

But I think, however, the effect of economic interdependence seems to be declining, because the so-called nationalistic sentiment, that rising both in Beijing and in Del – in Delhi, as well. And both leaders, like President Xi and the Prime Minister Modi, are embracing more assertive posture towards all rivals, including with each other, as well. And, also, attributing military tensions on the other side, hostility, and, also, demand soldiers to be firm to define the national borders and strongly push back against perceived aggression, as well.

Now, those developments inclu – increasing, obviously, likelihood of border clashes to escalate in future, and what happened in June was really a clear example for that. And, obviously, what I consider the worry in here, it is not just about that sense of the nationalistic sentiment, but, essentially, about the economic model both country will develop in the post-COVID-19 scenario. On the one hand, when China has introduced this whole – the idea of the so-called dual circulation, by driving domestic demand and domestic consumption and drastically reducing foreign investment across the world. And this, perhaps, would reduce India’s economic engagement with China and, therefore, to what extent that economic interdependence would really serve as a buffer zone for – in terms of the strategy competition between the two countries, and we’re not very sure.

Now, secondly, and I’d also like to bring the element of the complexity of the – in the power corridor of Beijing. Now, the complexity for China’s foreign policy decision-making also further contribute the complexity of these turbulent bilateral relations. And partially, what we have seen so far is the border dispute and happened in mid – during this year is purely and simply decided by the People’s Liberation Army, which is stationed at the border region. They have not received the order from Beijing to make such a move. Now, this has always been different voices, how to dealt with India, between the civilian diplomatic community and vis-à-vis the People’s Liberation Military diplomatic community inside China. And clearly this division will just continue, like China’s foreign affairs, in terms of dealing with any other countries, including United States, including with ASEAN countries, as well.

Now, the trouble is, for the Chinese foreign and diplomatic community, sometimes it is rather difficult to speak with one voice. Now, essentially, to have this relationship to go further either could be consider as a celebration or consider as a clash and what we have to assess in here is really according to the domestic situation of both countries. And speaking on China’s term, and if China finally has decided to scale back its foreign investment and, most notably, on the Belt and Road Initiative, perhaps its relationship with Pakistan will be less stronger and this, perhaps, will erase the doubt from India. But whereas, on the other hand, if China again decided to shrinking its foreign investment abroad and perhaps India will no longer be economically indepen – interdependent towards China, as well. So, the future is hanging there and it’s rather with a lot of uncertainty and we don’t really know what to happen.

Well, on the other hand, and whether Xi Jinping will be able to improve the sense of consistency and bring up different voices and within the diplomatic community to be able to speak with one voice, in terms of dealing with Chi – in terms of dealing with another country, in the bilateral relations of another country and that’ll be the challenge ahead. It’s not just a challenge for China, for Beijing dealt with Delhi, but is also for the challenge for Beijing dealing with Washington, as well.

So, I just end my short comments in here and look forward to the others’ questions and comments.

James Crabtree

Sorry, here we are, amateur error, I forgot to unmute myself. Thank you very much for that, that was terrific. An interesting debate to come about the extent to which the debate about how exactly the Galwan incident occurred and where it was directed, and there’s dispute about that. But also, as you said at the end, getting onto the issue of how this affects the US-China situation is also going to be interesting. So, Suhasini, do you want to take over from there and give us your sense of things?

Suhasini Haidar

Absolutely, and, you know, I do, you know, agree with the two speakers before me about the nature of the world changing. So, you know, the – oh, the clashes that we saw in Galwan or the tensions at the LAC, does have to take into – any analysis of that does have to take into the fact of how the world itself is changing right now, what kind of leaders, if I may say so, the alpha leadership syndrome we see around the world, how that is playing into what we are seeing at this situation?

But I will say that over the past year, or certainly in 2020, there have been two major events from the Indian perspective that have defined India-China relations. The first has been the coronavirus pandemic, the fact that China did not warn the world as early as people feel it could have. That even once the pandemic was underway, there wasn’t enough information shared about just how that pandemic could be dealt with, which has been a – which has had an effect on public opinion, as well, in India, of China. And the second part has been the LAC tensions that began sometime in mid-April, but we know that there were clashes in May and then there were the deadly clashes in Galwan, in which at least Indian – at least 20 Indian soldiers were killed. We don’t yet know about the Chinese casualties there.

One of the biggest casualties if you asked me, of this time, has been a complete lack of real trust between the two, which has now manifested itself in a certain kind of divergence or narrative. You know, in the last week there have been two statements made, one by the Chinese Ambassador to India, one by the External Affairs Minister, S Jaishankar, and both of them, in fact, made these two statements around the same time, saying very different things. The Chinese Ambassador, basically, talked about the Galwan clash and said, “This is something that should – the relations should not be disturbed by one thing at a particular time,” is what he said. “We’re working to handle what happened,” referring to the Galwan clashes, “properly, but it is a brief moment from the perspective of history.” So, he was probably referring to the fact that 1962, which Ambassador Rao explained has had such an impact on India, is the single war between the two countries in their 2,000 year history, despite the amount of tensions we had over the boundary.

External Affairs Minister Jaishankar, instead said, “This is surely the most serious situation after 1962. In fact, after 45 years we have had military casualties at the border and the quantum of forces deployed on both sides of the Line of Actual Control is also unprecedented.” So, he’s making three statements over there about why this is not just one moment in time, this is going to have a lasting impact. Where do I see that lasting impact, very briefly? I would say I think there are five basic shifts that have occurred in the last couple of months. One of them has been strategic, where a line that hasn’t seen violence and deaths in so many years is now open. There could be violence at any part of that 3,500km boundary or the line of actual control between India and China now, or certainly the threat perception of that certainly exists from this point.

The second has been, and speakers before me have spoken about the business rethink on now whether so much Chinese investment should be encouraged. Visas for businessmen have been thought about. The third has been how people-to-people ties have been affected. Certainly, because of the COVID pandemic, in any case, we’re not seeing much cross-travel between the two countries, but it’s likely to be much less, even when the pandemic is over, simply because the Indian side is now cutting down on the kind of business visas they give and these have been drastically increased, in the last few years, as well as what they are doing, in terms of checking Chinese language, education in India, universities that have tie ups with Chinese universities. These are all seeing a lot more government scrutiny and I think that is going to play out on the people-to-people relationship over a period of time.

The fourth place is where Ambassador Rao discussed South Asia, China’s growing presence in South Asia and its willingness to actually challenge India in many of the places where if India is working with a certain country and its subcontinent on a certain issue, suddenly you also see China in there, and vice versa. You see India also getting involved in a much more competitive frame, as Yu Jie was saying, in South Asia.

And I think that the fifth, which has not been spoken about quite as much, is at the leadership level, the fact that despite having the kind of talks between the two leaders, I think one newspaper actually counted close to 20 meetings between Prime Minister Narendra Modi and Chinese President Xi Jinping since 2014. And I found that des – and we find that despite all those meetings, despite two particular informal meetings held over two years between the two leadership, we have not yet picked up the phone and spoken to each other. I’m a bit surprise that Yu Jie would say that there has been no communica – you know, this is not a Beijing driven conflict and Beij – it was just done by the PLA at the LAC. Given that, firstly, the points of conflict are at least five points, it’s not just one particular Commander or one aggressive battalion or platoon that led to these tensions, but over the course of the Line of Actual Control, all the way from Sikkim to Ladakh. And it is amazing to me that if Beijing is not involved in this kind of decision, that not one phone call has gone out between the leadership to try and work it out, even as we see the situation has not improved, and this is now four months into this conflict.

But having painted this picture, and I have to put a but over here, because I think the international commentariat, particularly in the West, is guilty right now of trying to conflate all the conflicts we are seeing. So, the US-China conflict that began because of trade and now has spilled into so many different areas, the larger questions about China’s behaviour in the South China Sea, and when it comes to the Belt and Road Initiative, various countries complaining about aggression when it comes to trade, 5G, you know, pushing 5G in telecom in all these countries, those larger questions are getting conflated with the India-China bilateral situation, and this would be a mistake at this point. I’m not saying we won’t get there. I would say at this point it would be a mistake to conflate all of them and assume India is going to react in a way that actually just brings the world together in some kind of China containment programme.

Some of the small indicators of that you can already see in government reactions. India has, despite everything, made no big military moves against China in these four months. Even after Galwan, we have not seen military action in trying to push back the PLA and, certainly, there is every indication that the PLA still holds a lot of territory that it has not in the past and is, essentially, Indian territory. There have been no shutdowns, despite the kind of rules we have seen. Those rules have been worked around to say we will deal with countries in the neighbourhood to whom India does not give any kind of development aid. But there has been no direct shutdown of Chinese companies, whether it’s Huawei, whether it’s Tencent, all the rest of them. We have not seen the announcement on the militarisation of the Quad. This is a major issue that was expected an announcement that US, India, Australia and Japan would have military exercises together. We understand a decision was taken, but no decision has been announced. In fact, the diplomatic outreach that we saw India take when the External Affairs Minister, as well as the Defence Minister, travelled to Moscow, the External Affairs Minister held a meeting, the diplomatic outreach has been to Russia. Not something that the US and Washington D.C. would be most comfortable with.

And finally, apart from a few morale boosting speeches given by Prime Minister Modi, the Defence Minister, and others, we have not seen the Indian leadership, itself, make any particularly harsh statement against China. This has also been mirrored in Beijing. But, essentially, the narrative that continues to go out from Delhi and Beijing is we can work it out, that we are able to deal with this diplomatically and that’s something the External Affairs Minister said just yesterday, that eventually all our problems have been sorted out diplomatically. So, I would say the field is still open for where this could lead. It would be a mistake, however, to assume that things have been set in a way that cannot change, thank you.

James Crabtree

Again, hang on. Oh, there we go. Okay, thank you, perfect, that’s great. Much obliged, we have, from our audience, which has crept up in numbers to the best part of 100 now, so that’s great, we have at least two questions to go on. But if others, with now having seen most of our panel, have any questions, then we’ll turn to you in just a second. But before we do that, Simon, can we come to you to – we’ve heard the geopolitics, do you want to give us the economics, as it were, and tell us how you view the changing Sino-Indian relations from that side of things?

Simon Cox

Yes, thanks, James, and thanks to Chatham House and to the other speakers. This is a fascinating discussion. So, economically, the response from India, I think was probably quite canny, but also, it’s a great pity, it’s a great shame if this economic decoupling proceeds. Because India and China really are complementary economies. China tends to export the things India needs to import. They’re, in a way, a, sort of, natural fit. Now, we saw that ten years ago with things like power equipment. When I was based in Delhi, you know, Shanghai Electric did an enormous deal with Reliance Power and we’ve also seen it with state-owned enterprises building infrastructure in India. And – but what’s becoming much more interesting recently, of course, is the remarkable success of Chinese consumer tech in India, companies that are about as private as Chinese companies get succeeding with consumer-facing businesses and also making quite a big contribution to funding India’s own unicorns.

Now, I think that’s quite a remarkable economic achievement by China and I think it’s something that India actually did benefit from and could continue to benefit from. Now, people will always observe that there’s an asymmetry in the economic relationship, there’s a very big bilateral trade deficit, but of course, as an Economist, you’re taught to understand that countries benefit from the imports they bring in from elsewhere. And clearly, India has very big infrastructure needs that China is in quite a good position to help them with. According to one report I saw, you know, if India, indeed, does ban Huawei and ZTE from 5G, it could increase costs by about a third. That’s something that, obviously, will hinder India’s economic development. And more than that, I think when we saw the ban on TikTok, there were a number of quite poignant stories talking to users of TikTok in India, including in some quite rural parts of India. People who’ve said things like, you know, “Instagram is for the big people, but I’ve built up a following on TikTok.” And I think, you know, that sort of consumer benefit is something that we could easily lose track of. So, it would be a big shame if this economic decoupling didn’t – did indeed proceed.

But politically, I think it was quite smart. India wasn’t really in a position to respond in kind and, really, had no need to. I think that, you know, India views its market as a great prize and so, when you cut China off from its market, people in India accept that as something that will be damaging to their strategic rival and, interestingly, I think the Chinese also think that. I think they’ve become quite proud of their achievements in places like India, especially because they defied some of the myths we have about China. So, these were companies, as I say, that were quite entrepreneurial and these were companies that were succeeding outside of the walled garden, as we call, you know, China’s tech sphere domestically, and they were succeeding in building brands. You know, many people don’t even know that TikTok’s Chinese and it’s become one of the, you know, most valuable brands in the world. So, I think, you know, it caught China’s attention when India banned these apps.

But there is a paradox here, because if you look at the numbers, actually, India’s actually not that economically important to China. If you look just at exports, for example, it’s about 3% of Chinese exports and Chinese exports are only about 18% of its GDP these days. So, you’re talking, really, about 0.6% of Chinese GDP at stake here. And then if you look at the consumer tech, India’s an enormous share of TikTok users, but if you look at spending, it’s actually quite small, it’s smaller than the UK, and when this ban was introduced, you know, it was introduced with quite a lot of suddenness. You’ll remember Arnab Goswami’s famous bit on his TV show, where he talks about the, “suddenness of the move, the unexpected nature of the move.” Now, as an Economist, that means it’s a very good potential event study for the stock market. You can look at the stock price before India’s ban and after and get a clean read of what kind of impact it had on these Chinese companies. And when I did that, when I looked at the stock prices of these Chinese companies, obviously, you can’t look at ByteDance, ‘cause it’s privately held, but if you look at Xiaomi, there is barely a ripple, which makes me think that, quantitatively, it’s perhaps not that important, but qualitatively, it clearly is. Thank you.

James Crabtree

Super, great, that’s great. So, we have a couple of questions, but first, let me just ask a few, just to make sure we’ve got, kind of, everything on the same page here, let me ask each of you a quick follow-up question. So, Suhasini, if I could come to you, there was a sense from both you and Ambassador Rao that in the aftermath of events since mid-June that nothing very much has changed up there in the Himalayas, that, you know, there have been talks at the military level, but, sort of, basically, it’s, sort of, as it was, really, that there hasn’t been a significant scaling down of the tensions on the border? Is that correct, could you just catch us up to what’s happening up there right now, just so we have that on the table?

Suhasini Haidar

Well, of course, but with the disclaimer that most of this is media driven and I can tell you even though more – all of us have really good sources on it, the government itself is not putting anything out. The only really official statement the government sticks by is what Prime Minister Modi said, is that, “Neither has someone transgressed into our territory, nor is someone sitting inside our territory.” Now, our military officials, other officials off the record, beg to differ and there are specific areas where they do see Chinese troops now sitting quite – in quite an entrenched way, whether it is a – at the Pangong Lake, or whether it is lower down in what is called the Depsang Plains and other parts. However, when it comes to talks, we’ve had several talks. You know, there’s something called the WMCC, which is the working mechanism between the two countries that involves officials from every kind of ministry, including the military and external affairs and all the rest. And that WMCC routinely meets maybe twice a year and it has been in place since 2012. In the last two months, I think, since June, we’ve had five of those meetings.

So, clearly, there is an acceleration of the amount of engagement over the tensions at the LAC and routinely we hear from the government, saying that there is a certain disengagement being discussed. But really, until the actual disengagement happens, it will be hard to see how, you know, how any of this will move forward, particularly because there is this idea in India that apart – you know, without going back to what is called status quo ante to the situation pre-May and to maybe April, it is – it will not be possible for India to really go forward in other talks with China. So, it can’t be business as usual is what one individual comments.

James Crabtree

Very good, and Nirupama, could I just ask another, sort of, question? I think I got out of your remarks that, in a sense, you see this as a quite fundamental change. I just wanted to make sure that we’d understood this correctly. So, for instance, after the previous border clash, you had the Wuhan Summit and, you know, there’s a, sort of, back and forth swing. So, is it the case that this is really a, kind of, almost a permanent worsening in relations, or is there now the possibility that, you know, in six months’ time the leaders will get together and all of this will be repaired and forgotten? You have to unmute yourself, sorry. I, myself, fell foul of this nasty trick, so…

Nirupama Menon Rao

James, I really have no way of looking into a crystal ball and saying how things will be in six months from now. But I’ve referred to the Galwan incident as, definitely, as a turning point in the relationship, not a breaking point, because the two sides are obviously in touch with each other. And as I see from India’s position here, sitting here, in Peninsula India, in Bangalore, I really feel that India has really little option but to manage its tensions with China. There is an asymmetry of power, as Yu Jie pointed out, there’s no denying that, and we have to, you know, live with that for some time, at least, until, you know, we play catch up with China. And therefore, even if it’s not fundamental breaking point in the relationship, it is a turning point, the border question, the border problem is going to loom large in the relationship. And unless and until we learn both sides to manage these tensions and avoid the kind of hardship, we saw at Galwan, then that’s where Galwan differs. Because you referred to previous examples of confrontation between the two sides, but we didn’t have this kind of loss of life, we didn’t have this kind of bloody outcome. And it’s that that has introduced the element of change and it’s that that has exercised public opinion and that is what I think the political establishment is really very concerned about.

James Crabtree

Very good. Okay, let me start to bring in some of our questioners. So, Brishni Mukhopadhyay, I don’t know if you can be unmuted, you want to ask – well, I was particularly – you had a question for Yu Jie about the nature of China’s decision-making. While you unmute yourself, I mean, I suppose the – I’d be interested in hearing a little bit more from – on this question of how China makes these decisions and what your view is of the sense that China is, kind of, pushing forward on all fronts at the moment? But Brishni, can you ask your question, would – I think you’re unmuted now?

Brishni Mukhopadhyay

Certainly, and thank you, James, and thank you to Chatham House for hosting this discussion. I think it’s long overdue, so it’s very good to have everyone over here discuss this. My question to Dr Yu Jie was, given your statement that’s based on unilateral decisions taken by the PLA, aren’t you effectively suggesting that there’s, essentially, a dual power centre and whom does the world really trust, then, when it comes to negotiating with China, is it the PLA or is it the party in power?

James Crabtree

Thank you. Cherry, do you want to have a good at that?

Dr Yu Jie

Right, okay, sure. Certainly, a million-dollar question in here. I’m not sure you can – if I can offer a million-dollar answer in here. Now, essentially, what I’m saying is, like any other countries when they come to bureaucratic system, when they come to decision-making procedures, China, Beijing, it seems the rest of the world will have the impression that China is a monolithic entity that the Presidency can dictate everything from the top. Actually, really, from reality, that he will have to get an opinion from various factions within the party and also various players within the party. Now, the final, whatever the decisions, when they come to the foreign affairs, is perhaps the result of lowest common denominator.

And having said that, I mean, James, you would know this, this would equally apply for the Belt and Road Initiative, but if you just – apart from China-India military dispute, if we just look at South China Sea dispute, I mean, South China Sea dispute is really a classic example that why are you having too many cook in one soup? And, therefore, at the end of the day, the decision is not in anybody’s favour. And then, obviously, in that instance that the People’s Liberation Army took the upper hand and they make such a decision. Now, again, what I’m suggesting in here is not a dual power centre between the civilian decision-making process vis-à-vis the management decision-making process, is literally that the PLA has quite a substantial autonomy to be able to act and behave and sometimes the consequences is not always in Beijing’s favour.

So, I’m not doing any justifications for the actions, but simply, what I’m saying here, China is not the monolithic entity. Sometimes when we read China, we really have to feel the pulse of the domestic mood and also who are the players in charge on certain things?

James Crabtree

Could I just push you a little bit on that?

Dr Yu Jie

Yeah.

James Crabtree

So, Suhasini in her remarks talked about the, potentially, I think, from a Western point of view, the danger of conflating a whole lot of things going on in the world. You often hear this, you know, China being aggressive in Taiwan, South China Sea, India, dah-dah, dah-dah, dah-dah. I mean, what’s your sense of that analysis about the, kind of, post-COVID Chinese diplomatic posture? And is there some truth in that, as there was after the financial crisis, that, sort of, China was sensing a moment to push forward on various fronts, or is that a misreading of what’s going on in Beijing?

Dr Yu Jie

James, so, I think there’s some truth to that and, obviously, this, the term, the so-called “Warphoria Diplomacy” and – had happened after, you know, after China wouldn’t come to the first initial stage of the pandemic and then China tried to introduce these whole ideas that only China be able to handle this crisis quite effectively. And, obviously, that narrative is deeply troublesome, and it caused so much dipl0matic negative consequences, rather than doing China any favour.

So, what we have seen so far, if you’re actually judging by the statement made by Foreign Minister and also judging by the statement made by any other Chinese leaders so far on its relations towards United States, on its relations towards many part of the world, it strike a far more cautious note. So, I noticed that substantial change compared in March/April, see, for example, you know, the heightened period of the so-called Warphoria Diplomacy and then, vis-à-vis now, a much more cautious tone, and surely in Beijing also realised a mistake has been made. And the trouble, really, for Chinese foreign policy and also for China to go further, to be a global power, it is not about what China has said and do. It is always about how the other countries perceive what China has done and how the other countries, based on those perceptions, determine their policies towards China. So, China has to be very careful in here.

James Crabtree

Very good, and Will Obeney had an interesting question, ‘cause I think we have to talk about the relationship with the US in a second. So, Will, if you might be prepared to unmute yourself. But just while you’re waiting, Simon, could I ask you, in a sense, to – I don’t want to tempt you, also, into crystal ball gazing, but it strikes me that your analysis has a, sort of, slightly alarming undercurrent, which is that, in a sense, they’re diplomatic problems and these economic measures can be taken at very little political cost. And so, does that open up the risk of a, kind of, further downward spiral in which there are more, you know, import restrictions, more – in a sense, do – does one talk oneself into greater decoupling, because that’s the easiest possible option?

Simon Cox

Yeah, I think that’s a real danger. I mean, I always think it’s a danger when economic diplomacy is handled by Diplomats and not Economists, because they do tend to think of it as the least painful option and, of course, they don’t count all the ways in which these restrictions can hurt ordinary people. And industries are already complaining that, you know, essential inputs are being held up at the ports, things that India needs for its pharmaceutical industry, things that its automakers need are being held up at the ports. And, you know, as the classic economic analysis will tell you, these costs are quite diffuse, they’re, sort of, spread thinly across large groups of people and, therefore, you don’t get quite the same level of political salience you get with a higher profile military or geopolitical gesture. So, I think they are almost too easy.

And, of course, there is, still, in India, you know, a view that the country should be more self-reliant. Something that Modi has started talking about, again, a view that they should have their own local tech champions and that, therefore, these – this economic retaliation driven by Galwan Valley incident is, sort of, in accord with pre-existing views amongst some people. So, again, I think you’re right that there is a tendency that this, sort of, goes with the grain of domestic politics and against the natural grain of the economy.

James Crabtree

Yeah, very – and the, sort of, return of the language of self-reliance in India over the last few months has been rather intriguing. So, Will, we’ve got a couple of Wills in the line here, but Will Obeney, do you want to unmute yourself and ask your question about the US?

Will Obeney

Yes, thank you and thanks to the panel, as well. I fear it’s the obvious question, but, yeah, a lot of the media discussion nowadays on subjects like this is that a country can either lean towards the US or lean towards China and can get stuck, maybe, between those two global poles of power. So, I’d just be interested to hear from the panel whether they think, with India trying to make that slightly more distant relationship with China, whether that automatically means, or per – or will mean getting closer with the US? And I guess, by extension, would – what would the Chinese response to that be?

James Crabtree

Okay, now, I know everyone’s going to want to come in on this, but I’m conscious of – a little bit on time. But Nuripama, you’ve both been in Washington and Beijing, so you must speak on this, so tell us what you think?

Nirupama Menon Rao

Yes, Will, I did refer to this in my opening remarks, when I talked about the diplomatic support from the United States after Galwan. And, of course, the military and security relationship and increasingly, intelligence sharing connections, also, that we have developed in recent years with the US. But I’d also like to condition those observations by saying that India has been quite careful about navigating our growing – the course of our growing ties with the US, with, I believe, a full awareness of where we stand in the region and the sensitivity of ties with China. Unfortunately, I am constrained to say that China did not show the same sensitivity in its ties with India, especially when it came to Pakistan and on issues like before multilateralism with a greater role for India.

But the relationship with the United States and with Japan, also, I’d like to add, particularly, is strong, and not because I believe it’s just, you know, viscerally anti-China, but it does bring benefit for India, in terms of all that we need for our development story. And, also, in terms of technology, which is so vital, and innovation and in counter-terrorism and multilateral co-operation, public health and, of course, the strong people-to-people ties, because these are, essentially, ties between democracies. The defence and security partnership, I believe, will grow stronger, regardless of who is elected in November, to be President of the United States, whether it will be a rejig of the Trump years, or whether it’s going to be Vice President Biden. But from India’s side, I believe there will be a very strong inclination to build a stronger relationship with the United States, because it helps our position in the region. But as I also cautioned, in my opening remarks, when it comes to confronting China on our shared border, it’s going to be we’re in a lonely place.

James Crabtree

So, Yu Jie, do you want to come in on that on the Chinese side? I mean, does Beijing – is Bei – in a sense, Simon said from an economic point of view, you know, the economic relationship doesn’t actually matter to China that much. You also said Beijing sees India more as a, sort of, regional rather than a peer rival. But does Beijing bother that much, is it bothered if India draws a little closer to Washington as a consequence of this?

Dr Yu Jie

Well, I think anything to do with United States nowadays, Beijing will be deeply bothered, for whatever, for the quite obvious reason, because I don’t think it’s in Beijing’s interest that really to rock the boat on its relationship with Washington, considering things has gone significantly worse in this day, in particularly. So, any further action, provoked either by India, or by any other countries, and then Beijing will become extremely cautious. This does not only apply for India. This would apply for Russia and apply for Unite – for Japan and also, for many other countries and who share the border with China. So, I think it’s in Beijing’s interest that for this very moment to be careful on its all front diplomatically. It is not wise to open up new frontiers in – when the country, firstly, economically is not in a very good situation, and secondly, internationally feel rather isolated.

James Crabtree

Let’s take a few more questions. So, we had a Purabi Roy, I don’t know if you can unmute yourself, but you had a rather interesting question about – which goes back to – which I might direct at Suhasini, about the extent to which, in a sense, India has brought some of this on itself. Purabi, do you want to ask that question?

Purabi Roy

Yes, absolutely. Thank you very much, James, and thank you to all the panellists for a really fascinating and extremely relevant discussion. You know, Ambassador Rao talked about a – touched upon India’s neighbourhood, how China has been more and more involved, but while there is obvious economic and military asymmetry, there is also the question of India’s leverage within the neighbourhood, especially in Bangladesh and Nepal. And we’ve actually seen that worsening over the last year or so, at least in my opinion, from where I can see from here. Is there something that India could have possibly done better or differently to counter the Chinese leverage there, or the position, sort of, superior position that China finds itself in now? That would be my question.

James Crabtree

I see. Okay, so, your question is a, sort of, more regional, as opposed to the actual, sort of, reality on the border and the infrastructure building. So, Suhasini, do you want to have a crack at that, sort of, balance of power in South Asia?

Suhasini Haidar

Alright, well, I mean, I’d put it this way, that eventually, geography is reality and India has been the preeminent, you know, country in pole position in South Asia all this time. However, in the last four to five years, I would say, in particular, the idea of South Asia is no longer as attractive, either to the government of the day or to the commentariat, in a specific way, as the idea of South Asia. While the government has paid lip service to the South Asian Association for Regional Co-operation, SAARC, essentially, it is not really taking it forward. In fact, it’s taking subsets of SAARC forward. It is, however, making a huge effort towards what it calls its ‘neighbourhood first’ policy and the neighbourhood essentially means all countries, except for Pakistan. So, I would say the first place where China has been able to make inroads is in, not just in Pakistan, but in the idea that South Asia, as a concept, is no longer as cohesive as it used to be. This is my personal opinion. I should add that it’s not one that is shared by a lot of people. Most people think India’s position is at a much higher – larger table at the world and is not just to get mired in South Asian politics.

I think the second place where China has tried to, you know, outmanoeuvre India, is essentially in terms of the Belt and Road Initiative, in terms of the money it is able to pay for development projects. And we see that every country, except for Bhutan, in this region today and India, are actually members of the Belt and Road Initiative, have projects in their countries. There’s a downside to it, because many of those countries are now seeing the extent of debt that these projects are dragging them into and the inability to really get away from them. Sri Lanka lost sovereignty over a port, because it entered into one such project. The Maldives is trying to balance it out, but it is heavily indebted to China already. So, there’s been a kind of, you know, back and forth on that particular place.

And I think the third place where India does need to, perhaps, look very closely, is the political sphere, which is something China was never a part of in the past. And yet, we see the Chinese Ambassador in Kathmandu, for example, taking an interest in local politics, meeting with local Politicians when the party was on the brink of a split. That kind of internal interest that China is now taking, in various South Asian countries, is a place where India needs to watch very closely and is a place where India will not – should not give up any of its position or leverage, because it has always been a presence in the region, minus Pakistan, I will concede, and that’s where it really does need to be concerned, if you ask me.

I think apart from that, there was a Diplomat who once said to me, said, “So, how do you beat China? We – you know, India can’t just be, sort of, relaying all the roads that China is also laying and put money into things. Especially when India needs its own resources for its own growth.” And her answer for me was, “Be the un-China. Position yourself as the power in the region that is not China, that is a democracy, that is a pluralistic inclusive democracy, is a democracy that attracts people from around the world because of this particular plurality.” I would say that in the last year that image of India has taken a bit of a beating and that is one place where we could easily do much better.

James Crabtree

So, I’m afraid we’ve run right up against time, so there are a couple of questions we didn’t get to. Let me give a last word, for 30 seconds or a minute, to Simon. In a sense, underpinning a lot of the questions here is the idea that, you know, India has a – you know, is, sort of, on the backfoot, its economy is smaller, its military is less strong. In the context of COVID, what is the outlook for India’s economy? I mean, how bad are things and, therefore, in a sense, well, how does that side of things play into this equation, as you see it?

Simon Cox

Well, they’re pretty bad, right? I mean, the numbers keep getting revised. I mean, I’ve seen forecasts have been all over the map. I was actually quite surprised when Standard & Poor’s didn’t downgrade India’s credit rating outlook. But, you know, South Asia, well, India in particular, and also Latin America, have been terribly hard hit by the pandemic and their economies have – look set to suffer quite catastrophically as a result. So, I put India, sort of, up there with Brazil, I’m afraid.

Interestingly, looking at the Chinese press, and quite a lot of them are speculating that part of the reason that India has taken this, sort of, more robust stance on the border is to distract domestic population from economic worlds, and it’s very interesting how the interpretations, sort of, mirror each other.

James Crabtree

Very good. Okay, well, that’s a, sort of, suitably realist on which to end. I think we’ve covered a lot of ground in that, so, I’m very grateful to both my questioners, to the members of Chatham House, so we’re very grateful for your support at the House, and also to my four panellists. I think this is a debate that we’ll have to come back to, so we might invite all four of you back in another three months to see how things have changed. But many thanks to all of you for joining us this lunchtime, as it is in London, or this evening, as it is in South Asia and East Asia, we’re very grateful for your time and thanks, once again, to our panellists and good afternoon.