I c chronicle (mar apr 2015) final

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March–April 2015 x ` 100

An India-China Economic and Cultural Council publication

China: Strategy Over Oil Swings

ECONOMY

INTERVIEW

FOREIGN POLICY

Oil-guzzling Dragon on Stockpiling Spree

“China’s New Working Relationship with Russia is Mainly Opportunistic”

Oil Dynamics and China’s Revised Foreign Policy

www.icec-council.org

Strategic Petroleum Reserves: A Weapon or a Defense Tool?

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Vol 5, Issue 2, Mar-Apr 2015 EDITOR-IN-CHIEF Mohammed Saqib EXECUTIVE EDITOR Urmila Rao EDITORIAL BOARD Mani Shankar Aiyar P.S. Deodhar Dilip Cherian Amir Ullah Khan Chen Si (China) EDITORIAL TEAM Irfan Alam Shawahiq Siddiqui Manish Vaid Monish Tourangbam Amrita Jash DESIGN Manoj Raikwar OWNED, PRINTED AND PUBLISHED BY Mohammed Saqib Registered with the Registrar of Newspapers of India under RNI No: DELENG/2011/43423 PUBLISHED FROM A-82, Zakir Bagh, New Delhi - 110025 ADDRESS FOR ALL CORRESPONDENCE India-China Chronicle B-59 (GF), South Extension - II, New Delhi - 110049 Telefax: 011-46550348 PRINTED AT Aleena Prints Mr. Naved Rasheed Block Z-II, 378, Shahadra, Delhi-110053 Mobile:+91-9582345886 E-mail : aleenaprints@gmail.com All Rights Reserved. Reproduction in whole or in part without written permission is prohibited.

All advertising enquiries, comments and feedback are welcome at info@icec-council.org The information contained in this magazine has been reviewed for accuracy and is deemed reliable but is not necessarily complete or guaranteed by the Editor. The views expressed in this digest are solely that of the writers and do not necessarily UHĂ HFW WKH YLHZV RI WKH PDJD]LQH

The crude oil prices that dropped by more than half between June 2014 and January 2015 to less than $50 a barrel, gave China an opportunity to add on its existing petroleum reserves. It provided India’s ISPRL or Indian Strategic Petroleum Reserves Ltd–the company in charge of the stockpiling–too, to build up petroleum reserves. Worried by the 2003 US-Iraq war, it was in January 2004 that India planned to build Strategic Petroleum Reserves (SPR). The government decided to create a strategic crude oil reserve of 15 Million Metric Tonnes (MMT). But only during the recent price plunge, since mid-June 2014, did the current government start pushing harder for this goal by taking advantage of low oil prices. While criticism abound regarding crude oil stockpiling, primarily due to huge cost of building and holding such reserves,the Indian government allocated Rs. 4,948 crores in the 12th Five Year Plan. This large sum was sanctioned in March 2015 by the Cabinet Committee of Economic Affairs to meet the entire FRVW IRU ¿OOLQJ FUXGH RLO LQ 9LVKDNKDSDWQDP FDYHUQ ZKLFK LV OLNHO\ WR EH UHDG\ E\ WKH ¿UVW KDOI RI 7KH RWKHU WZR 635V DUH SODQQHG LQ 0DQJDORUH DQG Padur, which have a combined holding capacity of 5.03 MMT (36.9 million barrels). This capacity would enable about 14 days’cover on consumption-basis and 19 days cover on import-basis in case of a supply disruption or extreme price volatility. On the other hand, China has had a robust strategy of stockpiling since its 10th Five Year Plan in 2001. Beijing allows private companies too, in strategic RLO UHVHUYHV EXLOGLQJ FDSDFLW\ &KLQD KDV D JRDO RI ¿OOLQJ GD\ VXSSO\ E\ LW KDV DOUHDG\ ¿OOHG LWV 635V WR GD\Vœ FRYHU ,W LV EHOLHYHG WKDW SHU FHQW RI &KLQDœV 635 FDSDFLW\ KDV EHHQ ¿OOHG ,WV LPSRUW VXUSDVVHG PLOOLRQ tonnes, or more than 7 million barrels per day (bpd) in December 2014 for WKH ¿UVW WLPH %HUQVWHLQ 5HVHDUFK 7R VHFXUH LWV RLO LQWHUHVWV &KLQD VXSSRUWV its oil companies in their efforts to expand overseas. It believes that securing oil abroad is a safer option as opposed to purchasing it from the international markets. Critics charge that the PRC is undermining national security by going RYHUVHDV DQG KDUPLQJ WKH FRXQWU\œV IRUHLJQ SROLF\ IRU SUR¿WV India has steered clear of such criticism primarily because thus far, its oil strategy has been guided by commercial storage concerns, and not by forSUR¿W SXUSRVHV +RZHYHU TXHVWLRQ WKDW WUDLOV 1HZ 'HOKL LV LV LW SUXGHQW IRU the country to incur huge expenses for massive storage facility build-up? Costs include opportunity cost of holding the reserve (you can’t predict long-term disruption), facility deprecation cost, deadweight losses related to escalation of UHYHQXHV IRU SXUFKDVH RI RLO DQG IDFLOLW\ PDLQWHQDQFH FRVW %HVLGHV ¿QDQFLQJ of SPR projects (capital investment for storage and purchase) means possible surcharge on domestic consumption of petroleum products. Anyone willing to pay the current price will have access to oil. So, how prudent is it to park large sums of national capital in SPR? Of course, SPR is desirable as it is the best salvation for a nation against supply shocks but is the capital investment on huge storage facilities worth it? Right now the purpose of SPR for India is to counter short-supply and not to make a statement of authoritative supremacy riding on barrel-power. Beijing uses it as a tool in its military and foreign policies. India must not get into that realm but should focus on immediate energy security concerns, for now.

Editor-in-Chief Mohammed Saqib

CONTENTS

COVER STORY

CONTENTS Dear Readers,

6

I am pleased to present the March-April issue of ‘IndiaChina Chronicle’, woven around the theme of China’s interest in securing oil energy. The importance of oil can’t be emphasized enough. The diplomatic relations among countries rests hugely on oil and energy dynamics, so do the geo-politics of a region. In this issue, our contributors have focused on various dimensions of energy security. The cover story by Manish Vaid ‘China: Strategy Over Oil Swings’ explains China’s contribution in fall of oil prices below $50 and the resultant impact on its economy. Dr. Rahul Mishra writes on China’s burgeoning oil diplomacy with Myanmar, critically exploring if the new China-Myanmar pipeline promises uninterrupted oil supplies to China lest any adverse situation surfaces in Malacca Straits. Asma Masood’s article dwells on how China’s foreign policy is being guided by its energy interests and Russia becoming the new friend on the block, primarily due to energy concerns. Sriparna Pathak and Priyanka Dey evaluate the reasons for Beijing’s stockpiling spree despite China’s slow economic growth. You would not like to miss out on the Middle Kingdom’s growing interest in Central Asia, where Amrita Jash points out the salience of Central Asia to Beijing. Sana Hashmi and Shagun Sharma focus on foreign policy and internal affairs respectively. The bouquet packs other stories too. Dr. Monish Tourangbam gives a worth-reading spin on India-China-Sri Lanka relationship whereas Samridhi Bimal and Devyani Pande analyse on India-China cooperation, as opposed to competition, to attain energy security. Before you conclude that the issue provides only analytical masterpieces, hold on. Tilak Jha’s experience of the Spring Festival in China is an interesting depiction of how China’s New Year celebration, though retaining WUDGLWLRQDO Ă€DYRXU LV DFTXLULQJ D GLJLWDO WRQH FRXUWHV\ *HQHUDWLRQ < The Spring festival 2015 was organized in New Delhi by the Chinese Embassy with India-China Economic and Cultural Council as partner. It drew people in droves as it does every year. Four pages of absolute delight i.e. of the festival celebrations, is packed in pictures. We also decided to give our readers a visual taste of Chinese contemporary artworks which was held in Delhi to commemorate the 65th anniversary of the establishment of diplomatic relations between China and India. Wrapped up between the serious and lighter side are two interviews, those of Dr. Alka Acharya and Dr. Carlyle A Thayer. While Dr. Acharya cautions on extreme opinion that Indians take on China, based merely on current events without having full comprehension of the historical perspectives, Dr. Thayer articulates on China’s new leadership position and President Xi’s push for ‘Asia for Asians’. I hope you would enjoy reading this special issue. I look forward to your comments and suggestions. Happy Reading,

Executive Editor Urmila Rao

|2| India-China Chronicle ƒ March-April 2015

Brief News

ENERGY 8 Satiating The Oil Hunger Together The oil appetite of emerging economies, India and China, is rising. Both the countries should take the route of cooperation rather than competition to slake their energy appetite. It is important to build-up energy security and provide a foundation for the Asian energy market to stem conflicts arising out of energy security concerns in Asia.

ECONOMY 12 Oil-guzzling Dragon on

Stockpiling Spree Economic growth is slowing in China, then why is Beijing stocking petroleum reserves? The explanation given is that in order to reduce reliance on coal, it is pertinent that other forms of energy must be reserved. Is that the real reason why China is obsessed with oil?

INTERVIEW 16 “China’s New Working

Relationship with Russia is Mainly Opportunistic� Dr Carlyle A. Thayer, Emeritus Professor at the University of New South Wales, Canberra, Australia is an expert on Southeast Asia region. His areas of specific interests are security cooperation in Southeast Asia and civil-military relations in Asia-Pacific. A keen China watcher and an avid commentator on Asia-Pacific defense strategies, Prof. Thayer shares his views on a host of matters with Urmila Rao.

the India-China Eminent Persons Group (2006-2008) and as member of the National Security Advisory Board (2006-2008 and 2011-2012). In her current capacity as Director and Senior Fellow at the Institute of Chinese Studies, New Delhi, Prof. Acharya shares with Urmila Rao her views on a realistic approach to the boundary dispute and China’s agenda-setting role, among others. Read on.

China: Strategy Over Oil Swings What has been China’s contribution to the recent drop in crude oil prices? How has China been impacted by the oil-price fall? Will China’s “New Normal� of slower economic growth affect India and other nations? Find out.

FOREIGN POLICY 24 Oil Dynamics and

China’s Revised Foreign Policy China’s foreign policy is being guided by its energy interests. Russia is the friend on the block even as amicable relations are being sustained in the Middle East. Latin America and Africa are being kept closer on the back of lowering oil prices. How are Beijing’s oil interests working out for its political economy?

GEO-POLITICS 28 China: Shifting Energies

to Central Asia In order to keep growth trajectory intact, its security and stability firm, China needs to feed its growing energy requirements. In a strategic geo-political shift, Beijing is now exploring energy resources in its backyard, moving away from traditional sources.

BI-LATERAL 32 Xi-Modi May 2015 Talks:

‘Opportunity of the Century’?

ENERGY 42 &KLQDÂśV %XUJHRQLQJ 2LO Diplomacy with Myanmar In late January 2015, Sino-Myanmar crude oil and gas pipeline project officially commenced its operations. Is this new pipeline an asset for China? Is the geopolitics of the region likely to change owing to the new oil route?

INTERNAL AFFAIRS 44 Ethno-religious Separatism in Xinjiang

19 Prime Minister Narendra Modi’s visit to China this May is viewed as an ‘Opportunity of the Century’ which has the potential to take the synergies between the two countries to newer heights, especially in resolving the border dispute which has troubled both the nations for years.

FOREIGN POLICY 36 A New Twist to India-China-Sri Lanka Relationship? Sri Lanka’s projection of Chinese investments as purely commercial in nature, with no geostrategic ambitions has not entirely been bought by India. The level and nature of Chinese investments in Sri Lanka allows Beijing enough elbow room in the island nation’s politics.

INTERVIEW 39 ,QIRUPDWLRQ 'HÂżFLW WKH %DQH of Sino-India Relations Professor Alka Acharya, author of the book ‘China & India: Politics of Incremental Engagement’, and former editor of the journal ‘China Report’, was nominated by the Indian government as a member of

The most critical challenge to China’s stability is the ethnic tension and conflict in Xinjiang. The Uyghur community and the Han Chinese authorities have had a number of violent clashes in the recent months.

FORUM 48 India-China Cooperation LQ %5,&6 Of all the multilateral groupings in which India and China are a part, BRICS is gaining prominence. BRICS is different from other grouping as its top agenda is not based on the idea of regionalism, but commercial cooperation.

FIRST PERSON 52 Ushering in Spring: Xin Nian Kuaile Tilak Jha, studying in University of Zhejiang, shares his experience of the Chinese Spring Festival in China.

56 Exhibitions & Trade Show In India and China

FESTIVAL 58 Chinese New Year! 62 Exhibition of Fine Arts of Contemporary China by Chinese Embassy

March-April 2015 ƒ India-China Chronicle |3|

F E E D B A C K

its leadership is not enough. The new-age generation also wants to know that in assuming leadership position, what is China doing with regard to its pollution. If an emerging OHDGHU LV XQDEOH WR ¿QG D VROXWLRQ how will it lead to other countries in the region, which are now getting increasingly polluted to carry on a normal life? China’s image is getting hurt for environmental reasons. New trade routes are alright, but China should talk about issues like better technology, green technology, and better education in Asia. It should XVH WKH IRUXPV IRU UDLVLQJ DQG ¿QGLQJ solution on these issues. Deepti Thukral, Mumbai

Interesting Perceptions! Asia for Asians or for China?

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quite liked the analysis of the cover story, ‘China 2015: Resetting the Asian Growth Story?’. It covers China’s “movesâ€? from almost all DVSHFWV ,W LV GLIÂżFXOW WR VD\ LI &KLQD is really driven by the urge to have ‘Asia for Asians’ or is more focused on raising its power and say on the global platform. Only time will unfold the real intention. But what is amply clear is that the US is now up for a real challenge. This rising dragon is certainly not meek in giving out its I-am-a-rising-power message to the US. It seems the US is taking China seriously. How the relationship between the two will pan out, again time will decide. However, the world now needs peace and no more new hostilities. Surya Kant Mishra, Delhi

Tilak Jha’s article, ‘India’s Perception Among Common Chinese’ was a very interesting article. I have just graduated to college and was planning to enroll for Mandarin classes. I would like to go to China at some point for further studies. Some of the observations made by Mr. Tilak Jha came as a surprise to me, mainly issues of TibetIndia complexities, immateriality of Sino-India border disputes in China and select coverage of information in Chinese media. In India, media always raises some or other controversial topic which goes on for days; even the government actions are up for critique by one and all. India and China should get into student–exchange more so that we both get to know each other better! Ankit Sinha, Gurgaon

What About Environmental and Education Leadership? The cover story ‘China 2015: Resetting the Asian Growth Story?’ should have also covered China’s role in environment and education leadership. Focusing on military might, forging new trade routes and asserting the same to Asian countries with a view that Asia is “safe� under

Power Lies in Sea and Space? It seems that seas and spaces are going to write the future of countries’ relationships. At least this is the impression I got after reading the article, ‘China’s Grand Strategy for High Seas’. The push for Maritime Silk Road makes it amply clear the extent to which China is placing importance on sea–diplomacy. India, unlike China, has not come out with any such strategies. In my opinion, it should, whether in defence or in protection, if not in offence. But India’s foreign policy with regard to land, sea or space has always remained weak. No wonder, China is making moves faster with clarity. Shireen Mustafa, Chennai

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Not Cheap Anymore! I just got hold of India-China Chronicle magazine. This issue was a pleasure to read. Thank you for giving a wide array of articles. Chinese perception of India was a pleasant read. I especially liked the article, ‘Made in China and Rising Wages’. China is now on its way out of providing cheap labour. Labour costs are undoubtedly soaring especially in coastal areas. Companies are now moving inland but will inland factories supplant its coastal ones, is a moot question. One of the reasons for soaring labour costs is that now the younger generation is seeking different terms of labour, which includes high wages. Samiksha Sharma, Delhi

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India-China Economic and Cultural Council B-59, South Extension-II,, New Delhi-110049. Email: info@icec-council.org. Ph: 011-41017185

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INFOCUS | INDIA-CHINA | NEWS

India Among 30 Founding Members of AIIB

I

ndia is among 30 countries to be appointed as prospective founding members of a China-proposed international lending institute. The Asian Infrastructure Investment Bank (AIIB) received applications from developed countries like Australia, Britain, Germany and France at the end of the application deadline of March 31. Surprisingly, it even received one from Chinese Taipei (Taiwan) which is not recognised as an independent country by China and several other nations. Chinese media indicated that a total of 45 countries had applied for membership after the initial Memorandum of Understanding was signed by 21 countries including China, India and Singapore at Beijing in October 2014. The USA and Japan have been averse to joining the bank, seeing it as a challenge to the World Bank and Asian Development bank. AIIB is expected to start at the end of this year with an initial subscribed capital of $50 billion and will fund infrastructure projects in Asia.

India-China Border Talks End on Positive Note

I

ndia and China concluded their latest round of boundary talks in New Delhi on a positive note. The two giant neighbours stressed on efforts for an early resolution of border disputes after the 18th round of talks. India was represented by National Security Advisor Ajit Doval and China by Special Representative Yang Jiechi.

|6| India-China Chronicle March–April 2015

Both sides agreed to work towards maintaining peace and tranquility in the border areas in an effort to grow bilateral relations, forgetting accusations of incursions from either side of the border over the years. The disputes are in Aksai Chin region which India claims as part of Jammu and Kashmir while China claims parts of the Indian state of Arunachal Pradesh as a part of southern Tibet.

Tibet-Nepal High Speed Rail Link Through Everest?

A

s part of building a 540-km high-speed rail link between Tibet and Nepal, it is believed that China may build a rail tunnel under Mt. Everest. As per ‘The Guardian’, “The Qinghai-Tibet railway already links the rest of China with the Tibetan capital, Lhasa, and beyond, and an extension running as far as the international border is already being planned at Nepal’s request”. The project is expected to be complete by 2020. This news has caused D ÀXWWHU LQ ,QGLD µ7KH *XDUGLDQ¶ VWDWHV WKDW H[WHQGLQJ WKH line would potentially forge a crucial link between China and the huge markets of India.

China Expresses Displeasure Over the US Taking Territorial Sides

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hina has urged the United States to stop taking sides on territorial issues. The statement came in the wake of the US Defense Secretary Ashton Carter expressing the view that Diaoyu Islands fall under the scope of the Japan-US security treaty. Reacting strongly to the Mr Carter’s view, China’s Deputy Director of Foreign Ministry Information Department, Hua Chunying said, “US-Japan alliance arrangement originated in the Cold War. We strongly oppose using this arrangement to undermine the interests of third parties.” China and Japan haveaterritorial row over a group of islands, which China calls Diaoyu Islands and Japan terms as Senkaku Islands. “The US should be prudent in words

and deeds, honouring its commitment to not taking sides on territorial issues,” she said, adding that the US should do more to contribute to regional peace and stability, rather than the opposite. 6KH UHLWHUDWHG WKDW 'LDR\X ,VODQG DQG LWV DI¿OLDWHG LVODQGV are part of China’s inherent territory,a fact that can never be changed and China’s determination to protect national sovereignty and territorial integrity cannot be shaken.

China Welcomes Visa-onArrival in India

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hina has welcomed the proposed move to facilitate visaon-arrival for its nationals in India. Deputy Director of Foreign Ministry Information Department Hua Chunying said China could reciprocate the move in a bid to facilitate personal exchanges between the two countries and to promote mutual understanding and trust that could lay the foundation for bilateral co-operation. More than 100 million Chinese tourists reportedly spent around $165 billion last year touring overseas destinations including Sri Lanka and Maldives but India is not prominent in their itinerary despite being South Asia’s biggest nation.

China’s ‘Belt and Silk Road’ Initiative Gets UN Endorsement

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nited Nations Deputy Secretary-General, Mr. Jan Eliasson during his visit to Beijing earlier this month VDLG WKDW &KLQD¶V´ %HOW DQG 5RDG´ LQLWLDWLYH ¿WV ZHOO LQ EXLOGLQJ XS LQIUDVWUXFWXUH DQG KHOSLQJ IXO¿OO 81 JRDOV Addressing a press conference in Beijing he said that China’ s efforts in boosting infrastructure investment are the concrete actions needed to meet UN development goals. “There is a need to increase investment in infrastructure, not least in developing countries,” he said. According to Xinhua News Agency, Mr. Eliasson reported that he expressed appreciation for China’s role in the UN peacekeeping operation, as well as its assistance in sending timely medical personnel to three African countries heavily affected by the Ebola virus and in helping with the Yemen evacuation. China is the largest personnel contributor to UN SHDFHNHHSLQJ PLVVLRQV DPRQJ WKH ¿YH SHUPDQHQW PHPEHUV of the UN Security Council Mr. Eliasson also attended the launching ceremony of the new United Nations website in Chinese.

Boost for “Made in China 2025” Strategy

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hina’s State Council plans to upgrade its manufacturing sector with the implementation of the “Made in China 2025” strategy. Premier Li Keqiang said in a statement that the strategy will be implemented along with an “Internet Plus” plan after which informatization and industrialization ZLOO EH XQL¿HG DQG SULRULW\ JLYHQ WR WKH GHYHORSPHQW RI WHQ ¿HOGV including information technology, new materials and agricultural machinery. Favourable policies will be planned to boost integrated growth and competition in the manufacturing sector.

61 , 3 3 ( 7 6 P

rices of oil are due for an upswing by the end of next year, according to US oil magnate T. Boon Pickens. The 86-year-old Pickens had predicted that the price of oil would touch those levels for 2015 but told a select audience in California recently that they “could very well be at $100 a barrel by the end of 2016.” ................................................................................................................. hinese Premier Li Keqiang has said that polluters will pay a price “too high to bear” for their illegal acts. He further said the Chinese government will focus on fully implementing the newly-revised Environmental Protection Law and that more support would be given to its enforcement, including capacity building. .................................................................................................................. hina has introduced a time-table-wise target to carry on specific judicial and social reform measures. The decision to introduce reforms was made at the fourth plenary session of the 18th CPC Central Committee that was held in October 2014. In early April 2015, the Communist Party of China (CPC) Central Committee's General Office, and the General Office of the State Council published the plan to implement the decisions. There are 84 reform measures and each of the 84 tasks is assigned to specific organizations with stipulated timetable and verifiable results for each reform item.

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March–April 2015 India-China Chronicle |7|

INFOCUS ENERGY INFOCUS|INDIA-CHINA|ENERGY

velopmental goals to be pursued in a mutually supportive manner. This article builds a case for India and China to end their oil and energy competition and move towards mutual cooperation in the energy sector. This would have a positive impact on building up energy security and can provide a foundation for the Asian energy market, which is essential for VWDELOL]LQJ FRQÀLFWV URRWHG LQ HQHUJ\ security concerns.

Satiating The Oil Hunger Together The oil appetite of emerging economies, India and China, is rising. Both the countries should take the route of cooperation rather than competition to slake their energy appetite. It is important to buildup energy security and provide a foundation for the Asian energy market WR VWHP FRQÀLFWV DULVLQJ out of energy security concerns in Asia.

Samridhi Bimal and Devyani Pande

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he global trade in mineral fuels and mineral oils has probably become the biggest international area of commerce. Energy is now a crucial link for intensifying trade relations among countries. Over the last few years, tightening of energy markets (in particular oil and gas) has led to volatile prices, and hence demand and supply changes among the major energy importing countries. Despite the dramatic weakening in global energy markets, the ongoing economic expansion in Asia – particularly in China and India – is expected to drive growth in the world’s demand for energy over the next 20 years. As per the BP outlook 2035, global demand for energy is expected to rise by 37 per cent from 2013 to 2035, or by an average of 1.4 per cent a year (BP Outlook 2035). China was the world’s second-largest consumer of oil after the United States and India was the 5th

|8| India-China Chronicle March-April 2015

largest consumer in the world in 2013. India and China also happen to be the fastest growing economies in Asia with India expected to expand 7.8 percent and China to grow at 7.2 percent in 2015-16 (Asian Development Bank forecast). For both these economies, energy access and development are crucial. With rapid modernization, they are at a stage where their energy demand has taken off and is not likely to decelerate in the future. In this race, to acquire as much energy as they can to meet the growing industrial demand, India and China need to re-think their energy policies. The energy sector is still evolving on the one hand and on the other, consists of resources that are depleting, pushing the need for alternative sources of energy. In such a scenario, the two Asian giants can take the lead in collaborating on energy projects to give rise to DQ HI¿FLHQW PDUNHW LQ WKH UHJLRQ $V the two large emerging economies in Asia, they can also interlink their de-

Energy Competition between the Asian Giants Evidence shows that competition rather than cooperation is increasingly driving the energy security policies of India and China. In a bid to slake their appetite for energy, both countries have started looking towards OPEC countries to grab oil and petroleum projects. To secure oil blocks and energy projects, there have been many cases of competition between India and China in the past decade. 7KH ¿UVW LQVWDQFH ZDV ZKHQ $QJROD offered seven oil blocks - three in shallow water and four in deep water - in its ¿UVW RIIVKRUH OLFHQVLQJ URXQG LQ One of Africa’s major oil producing countries, Angola was experiencing a post-civil war reconstruction boom at that point of time. In the $600 million offer, India had promised to include $200 million to support Angola’s ongoing railway construction project. This was outbid by China with a $2 billion offer. Another instance of China outbidding India to secure energy and cementing ties with Central Asia was the proposed acquisition of PetroKazakhstan Inc., a Canada-based company. India wanted to buy the stake of Petrokazakhastan and had offered $3.9 billion. China won the deal by offering $4.2 billion to Petrokazakhastan against India’s offer. Such instances of India and China competing to secure energy, with India being on the losing side have led to China’s dominance in the energy security landscape. India has lost at least $12.5 billion of deals to China in the past few years. The growing investment of India

and China in Nepal’s hydroelectric projects is another case of competition in the energy sector between the two countries. Nepal’s extensive water resources provide ideal conditions for hydro-power projects and potential for export of hydro-energy. India and Nepal have entered into hydropower agreements on several occasions, the recent being the signing of the Agreement on Electric Power Trade, CrossBorder Transmission Interconnection and Grid Connectivity” (Power Trade Agreement). Incidentally, as part of its economic diplomacy, China has doubled its investment in all sectors

A $30 BILLION OIL PIPELINE PROPOSAL FROM RUSSIA TO INDIA THROUGH CHINA IS AN IMPORTANT STEP TOWARDS COOPERATION. CHINA HAS SHOWN ITS WILLINGNESS TO OPEN ITS DOOR TO RUSSIAN OIL TO FLOW THROUGH ITS TERRITORY MAKING WAY FOR INDIA TO PURSUE ITS ‘CONNECT CENTRAL ASIA’ POLICY

including transport, infrastructure and hydroelectricity. There has been D VWHDG\ LQÀX[ RI &KLQHVH LQYHVWPHQW since the signing of the $1.6 billion agreement to develop the 760 MW West Seti hydropower project. These instances to outdo each other in the energy sectors necessitate the question if such competition can really help India and China realize their goals of seeking mineral fuels to meet their demand. This point was rightly put by the former Indian Petroleum Minister Mani Shankar Aiyar when he articulated,“Over-competition will result in unnecessary loss to both sides. Both countries have to realize that when we compete in an unhealthy PDQQHU WR DFTXLUH RLO ¿HOGV LQ WKLUG countries, we only end up driving costs for each other.” Possibilities for Energy Cooperation There is reason to believe that the competitive outlook may be changing. This was witnessed during the Chinese President - Mr. Xi Jinping visit to India last year (September 2014). The visit UHDI¿UPHG WKDW DV ODUJH GHYHORSLQJ countries committed to promoting the use of clean energy; India and China believe that expansion of civil nuclear energy program is an essential

March-April 2015 India-China Chronicle |9|

INFOCUS|INDIA-CHINA|ENERGY

component of their national energy plans to ensure energy security. In June 2012, India’s Oil and Natural Gas Corp. (ONGC) and the China National Petroleum Corp. (CNPC) signed an MoU, intended to strengthen existing Exploration and Production (E&P) operations in Burma, Sudan, and Syria, and broadened the scope for making joint bids on foreign oil DQG JDV ¿HOGV IRU ( 3 LQ WKH IXWXUH In 2006, the two companies signed an initial pact for bilateral oil cooperation and possible joint crude purchases, which has enabled the ongoing joint E&P development in Burma, Syria, and Sudan. Yet, these agreements have not resulted in joint bidding or policy cooperation. The recent MoU should enable ONGC and CNCP to expand FRRSHUDWLRQ WR MRLQWO\ ELG RQ ¿HOGV and jointly invest in infrastructure development. The ONGC and CNPC partnership will ease exploration and development costs by enabling both countries to jointly participate in developing new energy resources. Joint

efforts by the two countries in pooling their investments and technology would yield better resource outputs. The pipeline across Burma from the Bay of Bengal to Southwest China is WKH ¿UVW RI VXFK GRZQVWUHDP SURMHFWV and may demonstrate the growth and expansiveness of Indo-China energy relations. This agreement can set a precedent and provide a foundation for greater regional integration of the Asian energy market. There is scope for cooperation in using renewable sources (nuclear,

THERE HAVE BEEN MANY CASES OF COMPETITION BETWEEN INDIA AND CHINA TO SECURE OIL BLOCKS AND ENERGY PROJECTS IN THE PAST DECADE. INDIA HAS LOST AT LEAST $12.5 BILLION OF DEALS TO CHINA IN THE PAST FEW YEARS

|10| India-China Chronicle March-April 2015

wind and solar energy). In terms of power capacity, both India and China UDQN DPRQJ WKH WRS ¿YH QDWLRQV ZLWK wind power capacity. Most of the capacity in India is along the coastal areas where corrosion problems are severe. In contrast, in China much of the wind energy is tapped in the inland northern and northwestern parts of the country where cold temperatures present a different set of problems. 7KH WZR FRXQWULHV FDQ EHQH¿W IURP DQ exchange of experts in their respective areas of strength. The Joint Statement released during President Xi’s visit – was a step in this direction. The two sides are committed to making joint efforts to diversify the energy mix and enhance the share of clean and renewable energy, so as to meet the energy requirements of all countries. Cooperation on Pipeline Networking and HydroPower India and China would be able to bring in a pipeline network to tap the Russian, Central Asian and Middle

Eastern energy sources. In future this pipeline network can form a hub of HQHUJ\ VXSSO\ WR WKH RWKHU $VLD 3DFL¿F countries. With robust increasing energy demand and a shortfall in domestic energy production, particularly hydrocarbons, India is gazing toward energy-rich countries like the US and of late Russia, for energy imports. A $30 billion oil pipeline proposal from Russia to India through China is an important step forward in this regard. China has shown its willingness to open its GRRU WR 5XVVLDQ RLO WR ÀRZ WKURXJK its territory making way for India to pursue its “Connect Central Asia” policy. It seems China is as a catalyst that can give India access to hydrocarbon resources of Russia and even Central Asian countries. In a latest change, there is news of Turkmenistan-Afghanistan-PakistanIndia (TAPI) gas pipeline involving China as one of its partners. With India’s plan to join the Shanghai Cooperation Organization supported by Russia so as to help it gain a strategic presence in Central Asia, this would in return strengthen India’s strategic partnerships with Russia and China in South Asia, particularly after the US military withdrawal in Afghanistan after 2014. Thus China holds the key to India’s pipeline diplomacy through Eurasia, facilitating Russia and Central Asia to market its energy exports to South Asia as well. This again offers India and China a chance to renew and revive their energy cooperation in hydrocarbons (which so far has remained on paper only. Hydrocarbon transportation route (oil and gas pipelines) is another area of possible cooperation, where both countries can bring energy through the shortest possible routes with minimum investment cost. Given the proximity of both nations to Nepal and surrounding areas in the region, both countries can collaborate in these areas to meet their demand for hydropower. Considering how critical oil is to the functioning of global economy, the absence of information about the oil market is striking. The two

sides are convinced that it is in the common interest of the international community to establish an international energy order that is fair, equitable, secure and stable and WR WKH EHQH¿W RI WKH HQWLUH LQWHUQD tional community. Both producers and FRQVXPHUV FRXOG EHQH¿W LI &KLQD DQG India worked more closely with the global energy communities. Competition or Cooperation in Energy? (QHUJ\ VHFXULW\ FDQ EH GH¿QHG DV µD sound balance between energy supply and demand serving the purpose of facilitating sustainable economic and VRFLDO GHYHORSPHQW ¶ µ%DODQFH¶ GRHV QRW mean only the relationship between overall amount of supply and demand, EXW WKH ¿W EHWZHHQ D YDULHW\ RI HQHUJ\ sources and a complex set of needs. The intermix of globalization and geopolitics has made it impossible for any single country to secure its energy supply entirely on its own. This is inextricably linked to the foreign policy of emerging market economies that seek to meet their energy demands. Apart from being on agenda for several multilateral forums, energy security is now high on the foreign policy agendas

of both India and China. The urgent energy security issue has resulted in brisk energy diplomacy with aspirations for cooperation running high among both producing and consuming countries. The concept of energy security needs to be expanded, EHFDXVH WKH UHDO ULVNV DUH QRW µEHORZ JURXQG¶ D ODFN RI UHVRXUFHV EXW µDERYH ground’ (political instability). It is time for India and China to end their old oil rivalries and move towards a better cooperative environment. The EHQH¿WV WKDW ZRXOG DFFUXH DV D UHVXOW of cooperation on the energy front between the two Asian giants are much larger than that of competition. India DQG &KLQD FDQ WDNH WKH OHDG E\ ¿QGLQJ ways to cooperate on energy rather than taking adversarial positions. For cooperation in this sector between these two countries to materialize, there is need for a comprehensive plan consisting of joint investments in energy resources abroad and creating a well-structured regional energy network.

The authors are researchers at the Indian Council for Research on International Economic Relations (ICRIER), New Delhi. The views expressed are personal and not of the institution.

March-April 2015 India-China Chronicle |11|

INFOCUS|INDIA-CHINA|ECONOMY

Oil-guzzling Dragon on Stockpiling Spree

Economic growth is slowing in China, then why is Beijing stocking SHWUROHXP UHVHUYHV" 7KH explanation given is that in order to reduce reliance on coal, it is pertinent that other forms of energy must be reserved. Is that the real reason why China LV REVHVVHG ZLWK RLO" Sriparna Pathak and Priyanka Dey

D

ecember 2014 marked the highest crude oil imports in China. China, already the world’s largest energy consumer doubled the oil reserves in 2014, in comparison to 2013. According to estimates by Thomson Reuters Oil Research and Forecasts, China’s total crude imports exceeded 31 million tonnes, which is more than seven million barrels per day, for the ¿UVW WLPH LQ 'HFHPEHU 7KLV LV more than 10 per cent higher than the previously recorded monthly amount. Economic growth is clearly slowing in the country, which is why a stocking up of Strategic Petroleum Reserves (SPR) comes across as surprising. According to analysts, this level of imports will not continue in the long term. However, the question that arises here is why the sudden jump and the subsequent stockpiling of oil UHVHUYHV LQ WKH ¿UVW SODFH"

|12| India-China Chronicle ƒ March-April 2015

Fuelled by Economic Reforms China has been a net oil importer since 1993. In 2011, oil imports VWRRG DW ¿YH PLOOLRQ EDUUHOV SHU GD\ accounting for 54 per cent of its total demand. More than 50 per cent of the total crude oil imports are from West Asian countries. In order to prevent a potential shock to its economy in the event of an oil supply disruption, China has been progressively building an oil stock reserve system. According to reports, China has completed four stockpiling facilities with a capacity of DERXW PLOOLRQ EDUUHOV LQ WKH ¿UVW phase of its SPR plan, and has begun the second phase which comprises eight storage sites that will have a combined capacity of around 207 million barrels. Out of these, two sites were reportedly completed in the second half of 2011, and the site at Tianjin was completed in 2012. The third phase is supposed to boost the total SPR capacity to about 500 million barrels per day by 2020. The pertinent question that rises here is on why China is so obsessed ZLWK RLO" 7KH DQVZHUV WR &KLQDœV increasing dependence on oil imports and the subsequent building of oil capacities lie in the need for Chinese companies to develop technical expertise for their more challenging resources. Further, the government’s decision to move away from the over dependence on coal as a form of energy, the goals of environment conservation,

Graph 1: Production and Consumption of Oil in China Unit: 1000 barrels per day Source: US Energy Information Administration

and the attempts of Chinese companies to capture value upstream are the other reasons. After the emergence of the global economic downturn following the subprime mortgage crisis in the US in 2008, prices of oil have decreased substantially, and China is increasing its global acquisitions and using its vast foreign exchange reserves to help purchase equity in projects or acquire stakes in energy companies worldwide. Since 2008, Chinese companies have purchased assets in West Asia, North America, Latin America and Asia; EHVLGHV LQYHVWLQJ DQ HVWLPDWHG 86' 34 billion in overseas oil and gas assets

in 2012, as reported by the CNPC Economics Technology Research Institute. The following graph on consumption and production of oil domestically reveals the necessity for the country to import oil. As is clear in the graph, oil consumption in the country exceeds domestic oil production. In 2013 for example, China consumed 10.11 million barrels of oil per day, whereas domestic production of oil stood only at 4.164 million barrels per day. The situation was completely different when the country began its process of reform and opening up in the 1980s. In 1980, for example, production of oil was higher than the consumption of oil. Production stood at 2.11 million barrels of oil per day while consumption stood at 1.76 million barrels of oil per day. In the 1980s, China’s economy was relatively small, and the export-led growth economic model had not been spurred into DFWLRQ 7KH UHIRUPV RI 'HQJ ;LDRSLQJ set market forces into action, which in turn saw the setting up of more factories, enterprises and increase in production. The economy was more reliant on coal as a form of energy as compared to the current situation. China still relies on coal as the primary source of energy. However, this dependence has reduced in comparison

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INFOCUS|INDIA-CHINA|ECONOMY

to the decade of the 80s. China, nevertheless remains the world’s top coal producer, consumer and importer, and it accounted for about half of the world’s coal consumption in 2014. This has implications in the context of the world’s energy-related carbon dioxide emissions. Increasing the Imports As a result of high coal consumption, the country has emerged as the world’s leading energy related CO2 emitter, releasing 8715 million metric tonnes of carbon dioxide in 2011. According to the 12th Five Year Plan, carbon intensity will be reduced by 17 per cent between 2010 and 2015; while energy intensity by 16 per cent in the same time period. Additionally, China intends to reduce its overall CO2 emissions by at least 40 per cent between 2005 and 2020. In order to reduce reliance on coal, it becomes pertinent that China develops its reserves of other forms of energy, which is the explanation for China’s obsession with oil, and the surging imports in oil. China, as stated by the Oil and Gas Journal in 2014, holds 24.4 billion of proven oil reserves, up over 0.7 billion barrels from the 2013 level. 7KLV LV WKH KLJKHVW LQ WKH $VLD 3DFL¿F region. China’s total oil and liquids production is the fourth largest in the world, and has risen by about 54 per cent in the past two decades. However, the reserves serve only the domestic market and the production pace has not been able to keep pace with the growth in demand for oil either. As a result of this, the reliance on imports

THE ANSWERS TO CHINA’S INCREASING DEPENDENCE ON OIL IMPORTS AND THE SUBSEQUENT BUILDING OF OIL CAPACITIES LIE IN THE NEED FOR CHINESE COMPANIES TO DEVELOP TECHNICAL EXPERTISE FOR THEIR MORE CHALLENGING RESOURCES has increased. The following graph shows imports of oil versus exports of oil from China from 1986 to 2010. In 2010, China exported 61000 barrels of oil per day, while it imported 47, 54000 barrels of oil per day. The scenario was completely different in 1986 when China had initially started out on its path of reforms and opening up to the outside world. In 1986, China exported more and imported less. It exported 0.57 million barrels of oil per day, while it imported 7000 barrels of oil per day. As is clear from the two graphs, crude imports of oil now outweigh domestic supply, and they made up over half of total oil consumption in 2013. The 12th Five Year Plan targets oil imports not to exceed 61 per cent of its demand by the end of 2015. However, based on current trends, it can be predicted that China will import more than 66 per cent of its total oil by 2020 and as stated by the Economic Intelligence

Graph 2: Imports and Exports of Oil: 1986-2010 Unit: 1000 barrels per day Source: US Energy Information Administration

|14| India-China Chronicle ƒ March-April 2015

Unit, 72 per cent by 2014 as demand is expected to continue to grow much more rapidly than the supply by domestic oil production networks. According to the New Policy Scenario in the International Energy Agency’s World Energy Outlook (2012), China’s primary oil demand will rise to 12.2 million barrels per day in 2020 and to 15 million barrels per day or more by 2035. As China continues diversifying its sources of oil supplies, certain African countries such as Angola gain in sigQL¿FDQFH $IWHU 6DXGL $UDELD $QJROD has now become the second largest supplier of oil for China. The following graph shows China’s crude oil imports by source in 2013. In 2013, Angola emerged as the second largest supplier of crude oil to China, accounting for 14 per cent of total oil supplies to China. Iran, which has historically been one of the largest suppliers of oil supplied eight per cent of crude oil to China in 2013.

In 2012, China had reduced its imports from Iran by 20 per cent. Total crude oil import from Iran dropped from 555000 billion barrels per day in 2011 to 439,000 billion barrels per day in 2012. This was attributed to a contract dispute between Sinopec, China’s key oil importer and Iran’s state oil company. Sudan and South Sudan ZHUH DOVR VLJQL¿FDQW RLO H[SRUWHUV IRU China, until 2012, when production ZDV VKXW DIWHU SROLWLFDO FRQÀLFWV between the two African countries

CHINA IS INCREASING ITS GLOBAL ACQUISITIONS AND USING ITS VAST FOREIGN EXCHANGE RESERVES TO HELP PURCHASE EQUITY IN PROJECTS OR ACQUIRE STAKES IN ENERGY COMPANIES WORLDWIDE

Graph 3: China’s crude oil imports by source

over oil resources. Exports from Sudan and South Sudan dropped from 260,000 billion barrels per day in 2011 to zero by April 2012. Similarly, Libya’s status as an important source of crude oil exporter to China also was affected since the latter half of 2013, as it got embroiled in domestic political turmoil. China balanced and replaced its share of oil lost from Iran, Sudan, South Sudan and Libya with crude oil imports from other West Asian countries such as Oman, Kuwait etc., along with increasing supplies from Angola, Venezuela and 5XVVLD 'HVSLWH WKH IDFW WKDW &KLQD has stepped up imports of crude oil from Iraq, the future depends on the pace of infrastructure development and the political situation in Iraq. All the heightened activity from China in the form of building up its SPR, and importing oil from all over the globe may actually prop up global oil markets, wherein prices have dropped by more than half since 2008. Currently, international crude prices are near six year lows, and these levels are almost revisiting levels last VHHQ LQ WKH ZDNH RI WKH JOREDO ¿QDQFLDO crisis of 2008. This drop in prices has presented unlimited opportunities to China in order to increase its reserves of crude oil at extremely low costs, which is an additional reason behind the drastic surge in imports. In fact, taking advantage of the situation, in February 2015, Beijing loosened the tightly state controlled sector which ZLOO QRZ DOORZ VPDOOHU UH¿QHUV WR DSSO\ for crude oil import quotas. Currently, the need to build up its reserves seems extremely urgent to the country, and the time to build up the reserves also seems cost effective. As such, China’s oil obsession will draw to a close as Chinese consumption becomes more HI¿FLHQW DQG OHVV RLO LQWHQVLYH 7KH completion of the building of SPR will signal a decrease in oil demands, and along with it, the end of China’s obsession with oil. ‰

Unit: Percentage Source: FACTS Global Energy, Global Trade Information

Sriparna Pathak is an Associate Fellow at the Observer Research Foundation, Kolkata, West Bengal while Priyanka Dey is a Research Intern there

March-April 2015 ƒ India-China Chronicle |15|

INFOCUS|INDIA-CHINA|INTERVIEW

“China’s New Working Relationship with Russia is Mainly Opportunisticâ€? Dr Carlyle A. Thayer, Emeritus Professor at the University of New South Wales, Canberra, Australia is an expert on Southeast Asia region. His DUHDV RI VSHFLÂżF LQWHUHVWV DUH VHFXULW\ FRRSHUDWLRQ LQ 6RXWKHDVW $VLD DQG FLYLO PLOLWDU\ UHODWLRQV LQ $VLD 3DFLÂżF $ NHHQ &KLQD ZDWFKHU DQG DQ DYLG FRPPHQWDWRU RQ $VLD 3DFLÂżF GHIHQVH VWUDWHJLHV 3URI 7KD\HU VKDUHV KLV views on a host of matters with Urmila Rao. Q: Of late China, in its conduct with Asian nations, seems to be guided by a ‘we-ought-to-cooperate’ kind of pitch, a sort of moving away from a rather aggressive tone to a more positively assertive one. For instance, Beijing now seeks greater role for India in SCO, in BCIM and in Maritime Silk Route projects. However, just two decades back, the narrative was different; it was widely believed that Beijing was blocking India’s efforts to join APEC. There is also a change of stance in its conduct with Russia. How do you look at Beijing’s changing attitude? A: There are two explanations for China’s recent charm diplomacy: China is under the leadership of Xi Jinping and the U.S. is pursuing a policy of rebalancing towards WKH $VLD 3DFLÂżF &KLQD XQGHU ;L Jinping has been quite assertive in

its dealing with smaller powers over territorial disputes in the South China Sea. China is reacting to a change in US policy towards India initiated by the Bush administration and carried further by President Obama both before and after Prime Minster Modi DVVXPHG RIÂżFH ;L -LQSLQJ LV SXVKLQJ an ‘Asia for the Asians’ policy to undermine, if not exclude, the United States from regional institutions and has thus attempted to win India over. China’s new working relationship with Russia is mainly opportunistic. China would like to be the dominant state in a multi-polar balance of SRZHUV LQ WKH $VLD 3DFLÂżF WKDW marginalizes, if not excludes the US.

Q: In one of your articles you articulated that â€˜â€Śunder the policy of rebalancing, President Obama pledged maintaining military FDSDELOLWLHV LQ WKH $VLD 3DFLĂ€F

|16| India-China Chronicle ƒ March-April 2015

despite funding cuts ‌‌’ Recently, 3UHVLGHQW ;L LQ D Ă€UVW DGGUHVVHG D gathering of his military attaches and advisors. Clearly, military diplomacy is acquiring greater salience in China’s international relations too. Pitting both the countries in the security context, do you see the US formulating and re-formulating strategies for its $VLD 3DFLĂ€F SUHVHQFH LQ WKH ZDNH RI China’s military ‘noises’? A: China excels at adapting and borrowing from the policies and practices of foreign states to advance its interests. In 1997, for example, it promoted its New Security Concept in the ASEAN Regional Forum and among ASEAN members in an attempt to undermine what it characterized as outdated US Cold War alliances. In other words, China was “talking the ASEAN talkâ€? when it promoted cooperation in non-

traditional security. Likewise, China has studied US defence engagement with the region and adapted these practices to its military diplomacy. In Southeast Asia the key states have tried to avoid entrapment by asserting the region’s autonomy and ASEA’s centrality. ASEAN has manoeuvred to prevent major power military diplomacy from becoming a zero sum game. Thus China and WKH 86 FRPSHWH IRU LQÀXHQFH DQG at the same time as they cooperate multilaterally. A structural shift in China’s favour is unlikely because of the eight ASEAN dialogue partners who are members of the East Asia Summit and the ASEAN Defence Ministers’ Meeting Plus (ADMM Plus). China can only count on support from Russia. The US can count on the support of its allies Japan, South Korea and Australia as well as New Zealand, and generally India.

Q: In your view, to what extent does the issue of East and South China Sea prevent Beijing from obtaining allegiance of claimant countries, as well as other Southeast Asians nations, in its emphasis of ‘Asia for Asians’? A: China’s territorial disputes with Japan, the Philippines and Vietnam have created a strategic faultline running through East Asia. This has had the effect of shoring up, if not reinvigorating, US alliances with Japan and the Philippines. China’s actions have also rekindled the embers of China’s threat thesis propounded in the 1990s. All of the ASEAN claimant countries know they must get along with China but they bridle at giving allegiance to the Middle Kingdom. Even non-claimant states like Indonesia, Singapore and Myanmar resist supporting ‘Asia for the Asians’. In sum, Southeast Asian states do not want any power to dominate regional affairs, not even an Asian power like China.

Q: Underlining the need for enhanced Asian cooperation, China March-April 2015 ƒ India-China Chronicle |17|

INFOCUS|INDIA-CHINA|INTERVIEW

China: Strategy Over Oil Swings

has launched several initiatives for new Asian linkages. Analysts, however, argue that the cooperation plans of Beijing are marked by ambiguity and opaqueness and that the refrain for cooperation is for LQFUHDVLQJ LWV VSKHUH RI LQĂ XHQFH and bolstering security framework. What is your assessment? A: China has put many initiatives on the table and it is clear that China’s efforts to build up connectivity via roads, railways and shipping routes have resonated favourably in Southeast Asia. Southeast Asians support the Chinese-initiated Asian Infrastructure Investment Bank (AIIB) because of the shortage of funds from existing international lending institutions like the Asian Development Bank (ADB). During the colonial era it was argued that ÂłWKH Ă€DJ IROORZV WUDGH ´ 7KH VDPH holds true today, China’s efforts to promote economic development cannot be separated from its security interests. For example, if you trade by sea you have an interest in preventing an adversary from controlling the sea lanes.

Q: With economic leadership initiatives such as offering loans to companies in bi-lateral projects, developing Asian Infrastructure Investment Bank, new Silk Road Fund, and pledging billions of dollars for such initiatives, is China now looking to challenge the Westerndominated economic institutions? Would you say China is giving out a message (to the US) that it is ready for a leadership role in Asia? A: &KLQD LV GH¿QLWHO\ FKDOOHQJLQJ WKH existing Western dominated status quo created at the Bretton Woods conference in 1944. China does not think that its current voting power LQ LQWHUQDWLRQDO ¿QDQFLDO LQVWLWXWLRQV is commensurate with its economic power. For example, the 2010 plan to reform the International Monetary Fund has been stymied by the US Congress. Globally, China is seeking to rally the BRICS – Brazil, Russia, India, China and South

What has been China’s contribution to the recent drop in crude oil prices? How has China been impacted by the oil-price fall? Will China’s “New Normal� of slower economic growth affect India and other nations? Find out.

IN THE FUTURE, THE ECONOMIES OF CHINA AND INDIA WILL BE MORE INTERDEPENDENT. THE BALANCE OF POWER IN THE INDO-ASIA-PACIFIC REGION WILL BECOME MORE MULTIPOLAR Africa – to push for greater power in LQWHUQDWLRQDO ¿QDQFLDO LQVWLWXWLRQV Regionally, China is offering investment capital through its AIIB to address shortfalls in lending by the ADB. Through its actions China is demonstrating that it is already a major Asian power that is exerting leadership.

Q: As a ‘third party’, do you view that owing to historic reasons and ongoing border disputes, full potential of cooperation between between India and China has remained unrealized? In the realm of possibilities, what future do you

|18| India-China Chronicle ƒ March-April 2015

see between these neighbouring countries? A: China’s unresolved border dispute with India, coupled with China’s support for Pakistan and increased naval presence in the Indian Ocean will serve to constrain Sino-Indian ties from reaching their full potential. This was demonstrated in September last year when President Xi Jinping visited India. Not only was there a Chinese incursion across the Indian border but Xi’s offer of investment capital fell well short of India’s expectations. Although this is a major part of the story, it is not a complete explanation. India must remove the shackles on its economy and let market forces play a greater role. In the future, the economies of China and India will be more interdependent. The balance of power LQ WKH ,QGR $VLD 3DFL¿F UHJLRQ ZLOO become more multipolar. At the strategic level bilateral relations will remain a mix of rivalry and cooperation because of China’s support for Pakistan and China’s ambitions to play a greater role in Central Asia. ‰

Manish Vaid

T

he drop in global crude oil prices that started mid-June last year continues to impact the economies around the world with both negative and positive consequences. Since mid-June, West Texas Intermediate (WTI), fell from $107 to below $44, a drop of almost 60 per cent, while anRWKHU VLJQLÂżFDQW JOREDO EHQFKPDUN Brent oil declined from $114 to $52, a fall of more than 50 per cent. This noteworthy fall in the oil price has brought cheers to most of the oil-importing countries; however, almost all the oil-exporting countries are worried, barring Saudi Arabia. Factors Driving the Crude Oil Prices Downward The recent fall in oil prices has

resulted from excess supply of oil in WKH PDUNHW ERWK E\ WKH 2UJDQL]DWLRQ of the Petroleum Exporting Countries 23(& OHG E\ 6DXGL $UDELD DV ZHOO DV WKH 86 ZKLFK FRQWLQXH WR ÀRRG WKH RLO PDUNHW ZLWK LWV HYHU LQFUHDVLQJ supplies of shale oil. The decline of prices also got momentum due to UHGXFHG GHPDQG IURP RLO JX]]OHU China, and Europe (EU), which at the moment is under tremendous fear RI GHÀDWLRQ 7KRXJK WKHUH ZHUH D IHZ NH\ GULYHUV bringing oil prices to as low as 2009

level, it was an unexpected series of geopolitical events and misreading of WKH PDUNHW WKDW OHG WR IDOO LQ RLO SULFes. Saudi Arabia did not to cut the oil production despite the low oil prices. In the past, during periods of instability, Saudi Arabia has adjusted its production so as to restore balance LQ WKH PDUNHW ,Q RWKHU ZRUGV WKH DGMXVWPHQW IURP 23(& FRXQWULHV ZDV done by cutting down the oil production when oil prices fell and vice-versa, so as to maintain adequate supplies in WKH PDUNHW In the recent turn of geopolitical events, there was an increase in oil SURGXFWLRQ E\ FRXQWULHV OLNH /LE\D DQG

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INFOCUS|CHINA|COVER STORY

,UDT GHVSLWH FLYLO XQUHVW ,Q /LE\D for instance, production that had fallen due to intense civil war from 1.4 million barrels a day in the summer of 2013 to less than 200,000 barrels per day at the end of 2013, rallied to 900,000 barrels per day in June 2014. The central government and regional militia agreed to re-open WZR WHUPLQDOV WR ERRVW /LE\DœV FUXGH exports, which during the period from late July 2013 to April 2014 ZDV EORFNHG E\ 3HWUROHXP )DFLOLWLHV *XDUG OHG E\ ,EUDKLP -LGUDQ D /LE\DQ militia leader. Whereas, in Iraq, the militant group ISIS failed to capture the country’s main oil producing regions, and as a result, Iraq saw a spurt in oil production at a pace not seen in the last 40 years. Besides, Baghdad and the Kurds ZRUNHG RXW D GHDO LQ 'HFHPEHU to increase the production still further WKRXJK LW ODWHU KLW D URDGEORFN Therefore, Saudi Arabia, which KDV WUDGLWLRQDOO\ DFWHG DV 23(&œV swing producer (meaning that it has often used its spare capacity to either LQFUHDVH RU UHGXFH 23(&œV RLO VXSSO\ WR VWDELOLVH WKH JOREDO RLO PDUNHWV actually failed to act upon so as to cut its oil production. Moreover, Saudi Arabia had also underestimated the potential of the US shale oil and gas boom. Though, the Saudi oil costs less than $10 a barrel to produce, the EUHDNHYHQ SULFH for the US shale oil too ranges from $40 per shale play to $80 per shale SOD\ VLJQL¿FDQW HQRXJK WR VKRZ LWV resilience to the oil price fall to a large H[WHQW 7KH DYHUDJH EUHDNHYHQ RLO price needed for projects in various VKDOH SOD\V WKDW PDNHV LW SUR¿WDEOH DQG offers a good rate of return is shown in WKH ¿JXUH (See Figure 1) The third important driver pushing the crude oil price low has been the strong US currency supported by its good economic performance (Figure 2). 7KH :RUOG %DQN *OREDO (FRQRPLF 3URVSHFWV UHSRUW UHFNRQV WKDW a 10 per cent appreciation of the US dollar is associated with a decline of about 10 per cent in the oil price as per the high estimates, while 3 per cent or

Figure 1: Average breakeven oil price per shale play

Figure 2: Oil prices and US dollars

Source: January 2015 Global Economic Prospects. A World Bank Report

less as per the low estimates. While these have been the broad reasons for fall in global crude prices, China too has played its part. China has shaped the movements of global commodity prices, particularly the oil prices, as per its economic growth momentum. An Oil Odyssey and China International Energy Agency’s ,($ 'HFHPEHU 2LO 0DUNHW Report attributes a sharp slowdown in oil prices to China’s low oil demand, DV ZHOO DV ZHDN HFRQRPLF RXWORRN RI Europe and Japan. Nearly 60 per cent of China’s domestic oil supply is met

|20| India-China Chronicle ƒ March-April 2015

from its imports, consequently, the fall in oil prices, has so far translated into KXJH IRUHLJQ H[FKDQJH VDYLQJV %DQN RI $PHULFD 0HUULOO /\QFK HVWLPDWHG a gain of $72 billion on China’s oil import in 2015, if Brent remained at a price of $70 a barrel. ,W LV D ZHOO NQRZQ IDFW WKDW &KLQDœV RLO imports reached record highs in 2008, which helped countries economically, and provided raw materials to rising China to feed its huge population, primarily derived from its own huge energy intensive growth. This has been the cause of record price rises for global commodities ranging from oil and ores to wheat and soy, setting off a global commodity boom, wherein &KLQHVH ¿UPV ZHUH JREEOLQJ XS RLO gas, coal and metals from Canada to ,QGRQHVLD WR .D]DNKVWDQ But despite Beijing’s emphasis on the need to shift its economic priorities to consumption patterns (and reduce the share of investment and exports as a share of its economy), in its WZR FRQVHFXWLYH ¿YH \HDU SODQV )<3V i.e. 11th )<3 DQG th )<3 (2011-2015), China failed to trigger consumption-led growth. The imbalance between high investment and low FRQVXPSWLRQ LQWHQVL¿HG IXUWKHU DV WKH JRYHUQPHQW SHUPLWWHG EDQNV WR PDNH loans to fund infrastructure and prop-

erty development projects, resulting into credit binge. All this further lead the total debt (including government, household and corporate) to climb WR DERXW SHU FHQW RI *'3 ZKLFK was up by 100 percentage points from 2008. Though, undoubtedly, this debt allowed China to power its economy, it also saddled China with a heavy repayment burden that affected its real estate sector the most, as large amount RI FUHGLW ÀRZHG WR WKH SURSHUW\ GHYHOopers. This raised the inventory of unsold houses to new record levels. &KLQDœV RLO LPSRUW RYHUWRRN WKH 86 in November 2013. China became the largest oil importer in the world, after it imported 6.3 million barrels per day as against US’ 6.24 million barrels per day. In 2013, China’s oil consumption growth accounted for one-third of the world’s oil consumption. According WR :RRG 0DFNHQ]LH D JOREDO HQHUJ\ metals and mining research and consultancy group, China’s oil imports are projected to rise further to the tune of 9.2 million barrels per day by 2020, which will then address its 70 per cent of its total oil demand. For China, soaring crude oil imports, (from around 2013 till the start of recent RLO SULFHV GURS ZHUH DOUHDG\ PDNLQJ such imports untenable, as China has historically controlled the consumer SULFHV IRU UH¿QHG RLO SURGXFWV VXFK DV petroleum and diesel while insulating

CHINA’S SLOWING ECONOMY HAS PLAYED A SIGNIFICANT ROLE IN REDUCED GLOBAL CRUDE OIL PRICES DUE TO REDUCTION IN ITS OWN OIL DEMAND. THE SLOW ECONOMIC GROWTH AT THE RATE OF AROUND 7 PER CENT HAS BEEN DUBBED AS “NEW NORMALâ€? BY PRESIDENT XI JINPING them from higher and volatile prices, OHDYLQJ WKH 6WDWH RZQHG 1DWLRQDO 2LO &RPSDQLHV 12&V ÂżQDQFLDOO\ RYHU burdened. To address the concerns RI LWV 12&V &KLQD FDPH RXW ZLWK LWV oil price reform legislation in 2013 to UHĂ€HFW LQWHUQDWLRQDO RLO SULFHV LQ WKH country’s domestic demands. But due to China’s slowing economy, resulting from its growth patterns, economic policies and HQHUJ\ HIÂżFLHQF\ DV HODERUDWHG LQ the following section), its demand for energy imports and particularly oil, has slowed tremendously. According to recent IEA estimates, China’s oil demand will rise at an average annual pace of 2.6 per cent through 2020, which is only about half the rate during China’s explosive expansion of the previous decade.

Figure 3: China’s growth target for 2015

Other Factors China’s slowing economy, which KDV SOD\HG D VLJQLÂżFDQW UROH LQ UHduced global crude oil prices due to reduction in its own oil demand, has been dubbed as “New Normalâ€? by People Republic of China (PRC). This ‘New Normalâ€? was important to curb the energy intensity of China, where manufacturing sectors had led to huge demand of oil imports, resulting in exFHVV FDSDFLWLHV RI LQGXVWULHV OLNH FRDO and steel in the past, unsustainable developmental activities and deteriorating environment. This “New Normalâ€? of slower growth is now appreciated worldwide E\ YDULRXV DJHQFLHV DQG ÂżQDQFLDO LQVWLWXWLRQV OLNH $VLDQ 'HYHORSPHQW %DQN and International Monetary Fund, which has in fact projected China’s future growth trends even lower than India. Thus Chinese energy demand is facing two headwinds, wherein at WKH ÂżUVW LQVWDQFH LWV HFRQRP\ LV H[pected to grow at a slower pace and second, this growth would be less energy-intensive; which is not good news for some, such as miners of coal and LURQ LQ $XVWUDOLD ,QGRQHVLD DQG %UD]LO and oil producers in the Middle East, Russia, the Caspian Sea area and VenH]XHOD 7LOO UHFHQWO\ DOO WKHVH FRXQWULHV had economic gains, attributed largely to Chinese economic growth.

Figure 4: Global economic growth vis-a-vis oil demand and intensity

Source: IEA Medium-Term Oil Market Report; chart by Carbon Brief March-April 2015 ƒ India-China Chronicle |21|

INFOCUS|CHINA|COVER STORY

The gospel of the “New Normalâ€? thus emphasised by the Chinese President, Xi Jinping, since 2013, means laying less emphasis on growth, but more on structural reforms instead. Notably, China has already ditched its double digit growth, when on March 5, 2012, the then Chinese Premier Wen Jiabao, set the growth target of just 7.5 per cent. China has since then strived for moderate growth rate and, therefore, has lowered 2015 growth target to just 7 percent (See Figure 3). China will now focus more on economic reforms and some stringent governance regime wherein there would be least scope for any corruption. Therefore, Chinese economic slowdown is here to stay, irrespective of low global crude oil price. This low price may, however, provide a stimulus to its current as well DV IXWXUH JURZWK EULQJLQJ VLJQLÂżFDQW reduction in China’s crude import bills and boosting its exports in the years to come. Impact of Fall in Crude Oil Price on China Just before analysing the impact of fall in crude oil price on China, it would be prudent to appreciate the “New Normalâ€? of oil price trend too. The world has observed years of sustained record high oil prices, which SURPSWHG WKH RLO JX]]OLQJ HFRQRPLHV to act prudently and do away with their dependency on excessive oil usage. The

RLO FRQVXPLQJ HFRQRPLHV OLNH &KLQD and India, as a result of high crude oil SULFHV DUH QRZ PRUH LQFOLQHG WR PDNH policy adjustments to embrace new green energy technologies. The recent fall in oil price have rather given these countries an opportunity to capitalise and intensify their efforts to do away with ‘dirty’ fuels through deregulating their petroleum products and increasing excise duty/ consumption tax on the same so as to disincentive their excessive use, amidst consistent drops in global crude SULFHV 0RUHRYHU LPSURYLQJ ÂżVFDO DQG FXUUHQW DFFRXQW GHÂżFLW DUH JLYLQJ their governments further leverage to expand their clean energy initiatives. These developments, according to IEA, are nothing but a “Ratchet Effectâ€?. IEA, therefore states that, “The recent price decline is expected to have only a marginal impact on global demand growth....Projections of oildemand growth have been revised downwards, rather than upwards, since the price drop.â€? IEA further says, “Changing technologies and tightening environmental constraints are combining to create a ‘new age’ of lower oil demand growth and diminishing oil intensity, where less oil is required to produce a comparable amount of economic output‌â€? 7KLV LV DSWO\ GHSLFWHG LQ ÂżJXUH 4, which shows global economic JURZWK KDV RYHUWDNHQ DQG FRQWLQXHV WR RYHUWDNH WKH RLO GHPDQG JURZWK

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resulting in lower oil intensity, which is expected to fall by a third between 2008 and 2020. Therefore, with upcoming global FOLPDWH WDONV LQ 3DULV LQ 'HFHPEHU LW LV KLJKO\ XQOLNHO\ WKDW FRXQWULHV OLNH &KLQD ZRXOG UHYHUW WR KLJK HQHUJ\ intensive growth, particularly at a time when China’s recent embracing of clean energy initiatives has started to yield positive results, wherein China witnessed a drop in carbon emissions last year. Hence, though oil price fall has created enough pressure on energy LQWHQVLYH FRXQWU\ OLNH &KLQD LW KDV DOVR given these countries an opportunity to establish green habits. For instance, imposing carbon/consumption tax and/or eliminating subsidies on petroleum products, have helped China to increase its tax revenues, without affecting disposable income of its people. However, this may not be as easy for China because of couple of ‘debt factors’ – one is credit binge, as aforementioned, which has to be cleaned up as soon as possible and the other is high build up of debt by oil producing companies, which has cut down their FDVK Ă€RZV DQG UHYHQXHV WKDW FDQ RQO\ be recouped with increasing the marNHW VKDUH WKURXJK SXPSLQJ PRUH RLO LQWR WKH PDUNHW :KLOH GHDOLQJ ZLWK WKH ÂżUVW ZLOO WDNH VRPH WLPH WKURXJK sustained efforts and reform processHV ZKLFK &KLQD KDV DOUHDG\ WDNHQ LW

Strategic Petroleum Pet Reserves (SPRs) further, with an objective of having those reserves reserv with a 90-day supply by 2020. China Ch has already paused 635 VWRFNV WR GD\Vœ ZRUWK VHUY635 VWRFNV WR ing the country count at the time of high oil prices, and the th world with more stable oil prices. negative impacts from falling The negat crude oil price, have in fact, cru began to affect all Stateb R RZQHG 12&V VXFK DV S Sinopec, PetroChina, ChiQ QHVH 1DWLRQDO 2IIVKRUH 2LO Co Corporation and Chinese National Petroleum CorporaNati t tion) that have registered a fall WKH K LU UHYHQXHV U LQ WKHLU DQG QHW SUR¿WV during the previous p years. PetroChiwill ensure a moderate rate of growth in the years to come. The other factor LV WKH ZHDNHQLQJ RI WKH EDODQFH VKHHWV of oil producing countries and tightening of their credit conditions. This has potentially worsened the price drop DV D UHVXOW RI VDOHV RI RLO DVVHWV /RZHU price of oil has also reduced compaQLHVœ FDVK ÀRZV WKHUHE\ LQFUHDVLQJ WKH ULVN RI OLTXLGLW\ VKRUWIDOOV ZKHUHLQ ¿UPV DUH XQDEOH WR PHHW WKHLU LQWHUHVW payments. Therefore, debt service requirements may rather induce consistent production of oil so as to hold the PDUNHW VKDUH GHOD\LQJ WKH UHGXFWLRQ RI VXSSO\ LQ WKH PDUNHW DQG WKHUHE\ contributing to an increase in global crude oil prices. Hence, based on the aforementioned developments and slowing Chinese economy, China’s focus largely would be to drift from energy-intensive growth to structural reform process. There would be mixed impact on China as a result of low crude oil price, which ZRXOG EH IHOW E\ VHYHUDO VWDNHKROGHUV The positive impacts of reduced oil price include reduction in the high cost of living, attributed to low transSRUW FRVW DQG ORZ LQÀDWLRQ UDWH 7KH reduction in crude oil import bills is OLNHO\ WR ERRVW WKH HFRQRPLF DFWLYLW\ by 0.1-0.2 per cent, as pointed out by the Global Economic Prospects, 2015 report. Countries would be speeding XS WKHLU FUXGH LPSRUW IRU ¿OOLQJ XS

IT IS HIGHLY UNLIKELY THAT CHINA WOULD REVERT BACK TO HIGH ENERGY INTENSIVE GROWTH AS A RESULT OF UNPRECEDENTED FALL IN GLOBAL CRUDE OIL PRICES, PARTICULARLY AT THE TIME WHEN CHINA’S RECENT EMBRACING OF CLEAN ENERGY INITIATIVES HAVE STARTED TO YIELD SOME POSITIVE RESULTS, IN TERMS OF FALLING CARBON EMISSIONS na, for instance, posted a decline in net SUR¿W E\ SHUFHQW LQ RQ D \HDU on-year basis. All these companies therefore, have decided to slash their capital expenditure for the year 2015 VLJQL¿FDQWO\ ZKLOH &13& KDV JRQH ahead with speeding up its natural gas exploration. $QRWKHU OLNHO\ LPSDFW RI IDOO LQ crude oil price on China is its challenge on cleaner energy goals. The Chinese, being cost-conscious capitalists, could fail to resist their temptation for energy bargain as has been manifested in WKH IRUP RI VWRFNSLOLQJ RLO %XW FRQcerned with its deteriorating environ-

ment and increased global pressure, it LV YHU\ OLNHO\ WKDW &KLQD ZRXOG SUHIHU WR adopt expensive greener technologies rather than yielding to the temptation of lower oil prices. A case in point is the US-China climate deal in which China SODQV WR VWHS XS LWV HQHUJ\ HIÂżFLHQF\ DV a means to curb energy-intensity. %DFNHG E\ D VWURQJ HFRQRP\ &KLQD had gone ahead unbridled, to quench its thirst for oil, however, in the process, it got saddled by credit EXUGHQ 2LO FRPSDQLHV WKDW WRRN ORDQV IRU LQYHVWPHQW KDYH SXW EDQNV LQ D VWDWH RI ÂżQDQFLDO VWUHVV $QG WKH FRXQtry, which is now reeling in debt, could suffer a ‘hard landing’ in coming years, if economic reforms are not put in the right perspective. The fear of slowing economy and the burden of servicing debt has slowed down Beijing’s demand for natural resources, including oil. This has put a downward pressure RQ RLO SULFHV +RZHYHU NHHSLQJ LWV chin up, China has spun the slowing economy situation into an acceptable “New Normalâ€? slogan. Hence, growth around 7 per cent is the “New Normal.â€? But this “New Normalâ€? may not be as bad for China, rather it can prove to be a blessing in disguise if it manages to push ahead economic recovery measures by embracing renewable energy resources and adopting energy HIÂżFLHQF\ PHDVXUHV But in all these endeavours, it remains to be seen, whether China would actually succeed in prompting LWV SROLF\PDNHUV WR VWULYH IRU HFRQRPLF transition and rebalancing from export and investment-driven economy to that of a consumption-based economy, WR PDNH DQ\ IXQGDPHQWDO FKDQJH in economic growth, which is more sustainable over indiscriminate quest for barrels. ‰

Manish Vaid is a Junior Fellow with Observer Research Foundation with research interest in energy policies and geopolitics

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states. Economic equilibrium in these countries is in China’s best interest. Thus China’s energy forays are contributing to global stability to a vital degree. Beijing’s relations with Russia, the Middle East, Latin America, South East Asia and Africa deserve special focus.

Oil Dynamics and China’s Revised Foreign Policy China’s foreign policy is being guided by its energy interests. Russia is the friend on the block even as amicable relations are being sustained in the Middle East. Latin America and Africa are being kept closer on the back of lowering oil prices. How are Beijing’s oil interests working out for its political economy? Asma Masood

R

eports in March stated Russia has changed its policy of disbarring sale of majority stakes LQ LWV RLO DQG JDV ÂżHOGV WR IRUHLJQ LQvestors. This paves the way for allowing Chinese stockholders to hold more than 50 per cent of strategic properties. China has long held keen interest

in expanding its energy sources. The breakthrough with Russia will herald a new era for Beijing’s energy policy. One reason for Russia taking a different stance is the drop in crude oil prices, which have dented precious oil income for the Asian Bear. With the Ukraine crisis in tow as well, Russia now needs Chinese investments and markets for ensuring its economic stability. These

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GHYHORSPHQWV UHÀHFW D JOREDO VKLIW WKDW is taking place in several oil exporting countries towards greater reliance on China. China is responding by increasingly shaping its foreign policy based on oil dynamics across the atlas. The fall in oil prices is a decisive stimulus. If oil prices continue to SOXPPHW WKHUH LV D ULVN RI ÀX[ LQ WKH economic regimes of the oil dependant

Beijing and Moscow: Energy Tango The year 2014 witnessed a historic energy deal between Russia and China. Russia’s Gazprom and China National Petroleum Corp (CNPC) met at Shanghai to sign a 30-year gas deal estimated to be worth USD 400 billion. The agreement is projected to deliver 38 billion cubic metres of natural gas a year eastward to China, starting around 2018. The timing of the deal’s GXUDWLRQ LV VLJQL¿FDQW DV LW FRLQFLGHV with China’s rise to being the world’s largest economy in 2050. China’s burgeoning economy is riding on the projected oil import boom from Russia. The scenario is a sea change from earlier circumstances, when Russia was reluctant to allow China to purchase stakes in its oil and JDV ¿HOGV IHDULQJ %HLMLQJœV HFRQRPLF expansion. Despite the huge volume of energy trade, there were no pipelines between the two countries. Russian intellectuals were also perturbed by the LQÀX[ RI &KLQHVH LPPLJUDQWV LQ WKH )DU East. The new deal will bring a U-turn in Russia’s attitude towards China, and strengthen its partnership on both hard power and soft power platforms. CNPC is heading the hard power front, by providing a prepayment of USD 25 billion to fund Gazprom’s expenditure of USD 55 billion which will support the infrastructure and transportation costs of the deal. 2QH VLJQL¿FDQW RXWFRPH RI WKH GHDO is that China will provide loans to Russia’s debt-ridden oil and gas companies. These loans will enable the cash strapped corporate such as Rosneft to build pipelines and modernize their production at low risk. China’s prepayment of $60 billion to $70 billion played a decisive role in helping Rosneft manage its large corporate debt.

The resultant spike in oil revenues will go a long way in rebuilding the 5XVVLDQ ¿QDQFLDO V\VWHP :KLOH QRW openly acknowledged, the Asia-Pacific is dependent on a stable Russian economy. It is a less known fact that the collapse of the Soviet Union was partially due to the fall in oil prices at the time. China needs a strong modern Russia to carry its success in the Asian Century. It is evident from the recent declaration highlighting Russia as a strategic partner in China’s Maritime Silk Road venture. The process of providing loans and purchasing energy is thus a lifeline not only for Russia, but

also for a rising China. China’s policy of non-interference complements its energy trade with Russia. While the West condemns Russian actions in Eastern Ukraine and imposes crippling sanctions, China adopts a low-key stance and calls for restraint. Beijing believes that Russia will not initiate a major war as it will only result in negative consequences. Russia owes China for being a diplomatic ally during this time of turmoil. The opportunity of earning higher energy trade may have been a vital factor in shaping China’s response to the Ukraine crisis.

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7KH EHQHÂżWV DUH QRW RQO\ LQ WUDQV border Russia-China energy trade alone. As Russia has drifted away from the West, it will have to forge partnerships with China for oil exploration in the Arctic. China will thus gain a valuable arena to expand its energy resources. The escalation in energy ties will make China face the added expectations from Russia to continue negotiations to normalize the situation in the Korean peninsula. This is indispensable as Russia is set to transit energy to South Korea and Japan via North Korea. 5XVVLD PD\ EH ÂżJKWLQJ D EDWWOH RQ LWV :HVWHUQ Ă€DQN EXW LW LV VHHLQJ WKH evolution of stronger ties with its Sinosphere neighbour. China is hence shaping its foreign policy in such a manner to accommodate not only its own interests but also to allay the concerns of its strategic ally in Moscow. It will garner Beijing several advantages beyond the energy realm-Russia is now likely to strongly support China’s claims in the South China Sea. Russia and China will also work closer together to counter the USA’s Asia pivot. In addition, China will devote more attention to the Shanghai Cooperation Organization (SCO) in order to protect its strategic interests in the region. Its energy ties with Russia will form an important crux of SCO dimensions in future. India cannot be ignored in the China-Russia equation. Delhi is likely to forge closer ties in the RussiaChina-India triangle, perhaps via the SCO. Besides, the Russian Deputy Prime Minister had stated in 2014 that an extension of the USD 400 billion pipeline to India could be “one of the largest infrastructure projects that could be conceivedâ€?. The energy deal between China and Russia is sure to pave the way for higher trade ties in other sectors and ensure a gradual erosion of the residual mistrust between Beijing and Moscow. While China increases its energy reliance on the Bear, it is thus seen to grasp a golden handshake on diplomatic, strategic and commercial fronts. The world may soon see an evolved Beijing-Moscow partnership,

one that transcends traditional barriers and embraces opportunities to rise WRJHWKHU LQ WKH $VLD 3DFL¿F FHQWXU\ The Convergence of Sino-Middle Eastern Interests Saudi Arabia and Iran deserve special scrutiny while studying China’s energy-cum-foreign policy in the Middle East. The Persian state presents several interesting aspects. As China’s third largest supplier of energy (for 12 per cent of China’s annual needs), ,UDQ SOD\V VHFRQG ¿GGOH RQO\ WR 6DXGL Arabia in Beijing’s Middle East policy. Beijing imported 630,000 barrels per GD\ ESG RI ,UDQLDQ RLO LQ WKH ¿UVW KDOI of 2014 alone, up 48 per cent from the SUHYLRXV \HDU 7KH ¿JXUHV IRU ELODWHUDO trade between Iran and China are noteworthy as well, having reached USD 36 billion in 2012. This makes China the

AS RUSSIA HAS DRIFTED AWAY FROM THE WEST, IT WILL HAVE TO FORGE PARTNERSHIPS WITH CHINA FOR OIL EXPLORATION IN THE ARCTIC. CHINA WILL THUS GAIN A VALUABLE ARENA TO EXPAND ITS ENERGY RESOURCES largest trading partner of Iran. The zenith of ties between the states, which once boasted of powerful ancient civilizations, forms a crucial lever for ChiQDœV 0LGGOH (DVW SROLF\ )RU VWDUWHUV the Iran nuclear talks issue has transformed China’s image, displaying the Sinosphere as an important player on the new century’s negotiating table. Thus Iran’s energy exports have not only fed China’s economy, but transformed Beijing into a leading voice in international affairs. These dynamics have made the USA appreciate China’s mediatory efforts, and earned sanction waivers for China while trading with Iran. Thanks to China’s efforts, frosty relations between Washington

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and Tehran have recovered. This has formed a circle of positive ties between Beijing and Tehran. Good relations are indispensable, as Iran will be a vital part of China’s ambitious land Silk Road plan. The Persian country will serve as a valuable gateway for China’s commercial connections with Europe. The scope of ties observed between the two countries has made the People’s Liberation Army expand its ambit to the Gulf, with joint defense exercises being undertaken with Iran’s military forces. This ensures security of China’s strategic interests in the volatile Middle East region. These factors are now added to the recent plunge in oil prices. The phenomenon will make Iran strengthen its dependence on China as a valuable market for its oil and gas exports. While low prices worry Iran, Saudi Arabia does not seem perturbed. The Kingdom refused to cut energy production, preventing a hike in oil prices. A sag in oil revenue is not an obstacle for the wealthy country, unlike Iran’s case. However, lower prices are a boon for China, for whom the KSA is the largest energy supplier. The bulk of KSA’s USD 36 billion exports to China is crude oil. The scope of energy ties have made China the Kingdom’s largest trading partner, surpassing the USA. Iran cannot be ignored while studying China-KSA relations. China is observed to play a neutral stance, while maintaining good relations with both countries, deriving goodwill and resources in return. China is hence maintaining amiable ties with two of its top Middle East partners, ensuring a platform for linking Asia’s future great powers with the continent’s largest energy suppliers. India can partner with China while fostering relations with the KSA and Iran. Together the South Asian neighbours can work to successfully build a multipolar environment in the Middle East. Banking on China for Stability Lower oil prices have brought China closer to Latin America and Africa. While China has lent a sum of USD 119 billion to Latin America in the last

decade, the Asian power has emerged as the region’s largest lender, surpassing even the World Bank. These loans are offered in return for higher oil supplies. The spike in oil exports comes as a relief, especially to Brazil, Venezuela, Ecuador and Argentina, at a time when low oil prices have led to a slowdown in the region’s economic growth. China has thus propelled the region to enhance development in infrastructural and other sectors, while following a policy of non-interference towards the region’s volatile internal affairs. This foreign policy approach has been shaped not only by China’s demand for energy but its goodwill approach towards all partners in the international arena. Africa is another region where Chinese energy interests are being consolidated. In fact, China has emerged as Africa’s largest trading partner, and is a major oil importer from countries like Angola and Sudan. China is adopting the position of a lender in VHYHUDO $IULFDQ VWDWHV RIIHULQJ ¿QDQFH to build their economy in the form of integrated aid packages. These include a wide range of infrastructural ventures ranging from roads/railways WR VFKRROV IURP ¿EHU RSWLF FDEOHV WR hospitals. China is hence shaping its foreign policy to emerge as a facilitator of development and growth in this struggling region. Energy interests have made China show its diplomatic prowess, while acting as a mediator in WKH 6XGDQ FRQÀLFW :KLOH &KLQD KDG

CHINA WILL PROVIDE LOANS TO RUSSIA’S DEBT-RIDDEN OIL AND GAS COMPANIES. THESE LOANS WILL ENABLE THE CASH STRAPPED CORPORATE SUCH AS ROSNEFT TO BUILD PIPELINES AND MODERNIZE THEIR PRODUCTION AT LOW RISK provided Khartoum with arms to engage with the rebels, it now mediates with South Sudan to help resolve the FRQÀLFW +RZHYHU WKHUH UHPDLQV DQ issue of the quality of infrastructure funded and built by China. India can play a valuable role at this juncture by working with China to ensure that the Dark Continent and Latin America emerge amidst world-class facilities. India and China can act as partners and not competitors while reaping PXWXDO EHQH¿WV While China expands its energy LQWHUHVWV LQ IDU ÀXQJ SODFHV LW LV not ignoring its Southeast Asian neighbours. The slump in oil prices may bring countries like Indonesia and Malaysia closer to China despite their differences in the South China Sea. This may occur through a higher SUROLIHUDWLRQ RI WUDGH DQG ¿QDQFH YLD the China Southeast Asia Free Trade Area and the new Asian Infrastructure Investment Bank. Ironically, lower oil prices indicate China will increase

its defense modernization budget to upgrade its naval presence in the disputed South China Sea. Nevertheless, China is likely to follow a deterrent approach while maintaining good relations with Southeast Asia. India can partner with ASEAN to maintain balance in the region. China’s foreign policy with the studied regions is observed to be largely shaped by its energy interests. It is VLJQL¿FDQW WKDW &KLQD KDV HVWDEOLVKHG itself a major lender in return for increased energy supply. The newly formed BRICS New Development Bank offers scope for the same. Low oil prices have forged stronger relations between China and the oil-dependent economies. China has also emerged as a mediator as seen with Iran and South Sudan. Oil has hence fueled the rising 'UDJRQœV ¿UH ZKLOH EULQJLQJ RXW LWV DOter ego – the mediating Panda. If New Delhi collaborates with Beijing, the neighbours can expand their strategic interests together. India can share its technological expertise and investments while foraying into the upstream(energy exploration) and downstream (oil and gas trade) avenues. As the century progresses, there may be a shift in oil dynamics, but both China and India will continue to shape their foreign policy based on one resource, that is, Black Gold. ‰

Asma Masood LV 5HVHDUFK 2IÂżFHU DW &KHQQDL &HQWUH IRU &KLQD 6WXGLHV &KHQQDL

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INFOCUS|INDIA-CHINA|GEO-POLITICS

China: Shifting Energies to Central Asia

,Q RUGHU WR NHHS JURZWK WUDMHFWRU\ LQWDFW LWV VHFXULW\ DQG VWDELOLW\ ÂżUP &KLQD QHHGV WR IHHG LWV JURZLQJ HQHUJ\ UHTXLUHPHQWV ,Q D VWUDWHJLF JHR SROLWLFDO VKLIW %HLMLQJ LV QRZ H[SORULQJ HQHUJ\ UHVRXUFHV LQ LWV EDFN\DUG PRYLQJ DZD\ IURP WUDGLWLRQDO VRXUFHV Amrita Jash

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QHUJ\ SUHGRPLQDQWO\ V\PERO L]HV WKH JHRSROLWLFV RI WZHQW\ ÂżUVW FHQWXU\ DV HYLGHQW LQ WKH growing global appetite for possessing QDWXUDO UHVRXUFHV 7KLV SKHQRPHQDO LQFUHDVH LQ HQHUJ\ GHPDQG RLO DQG gas) is a result of an existing parallel EHWZHHQ WKH HVFDODWLQJ FRQVXPSWLRQ and the scarcity of energy supplies WR PHHW WKH GHPDQGV 7KLV GHPDQG supply chain of energy acquisition has

characteristically changed the nature of global politics, whereby ideological VXSUHPDF\ RI WKH &ROG :DU ELSRODULW\ KDYH EHHQ VXSHUVHGHG E\ WKH DVSLUD WLRQ RI HFRQRPLF SULPDF\ ZKLFK LV SUHGRPLQDQWO\ GULYHQ E\ XQLQKLELWHG DFFHVV WR QDWXUDO UHVRXUFHV ,Q RWKHU ZRUGV HQHUJ\ KDV EHFRPH D FUXFLDO GHWHUPLQDQW RI ZRUOG SROLWLFV UHJXODW LQJ WKH HEE DQG ÀRZ RI HFRQRPLF GH YHORSPHQW ,Q WKLV FRQWH[W &KLQDœV EHKDYLRXU in international politics is not an ex

|28| India-China Chronicle ƒ March-April 2015

FHSWLRQ ,WV UDSLG PRGHUQLVDWLRQ DQG unparalleled rise as a global power in WKH LQWHUQDWLRQDO DUHQD LV FRQFRPLWDQW ZLWK D KLJK LQGH[ RI HQHUJ\ FRQVXPS WLRQ ZKHUHLQ DYDLODELOLW\ DQG XQ precedented need of energy resources KDYH EHFRPH D NH\ GULYHU RI LWV IRUHLJQ SROLF\ 7KLV LV D UHVXOW RI &KLQDÂśV KLJK JURZWK UDWHV ZLWQHVVHG LQ WHUPV RI LWV ERRPLQJ GRPHVWLF HFRQRP\ UDSLG XUEDQLVDWLRQ LQFUHDVHG H[SRUW OHG WUDGH WXUQLQJ IURP D ELF\FOH FDSLWDO WR WKDW RI LQFUHDVLQJ GHPDQG IRU FDUV

in irrational energy use and control the country’s energy consumption by fully implementing energy-saving policies‌� as stated by President Xi -LQSLQJ LQ D PHHWLQJ RI &KLQDœV WRS HFRQRPLF SROLF\ JURXS WKH 2I¿FH RI WKH &HQWUDO /HDGLQJ *URXS RQ )LQDQ FLDO DQG (FRQRPLF $IIDLUV 7KHUHIRUH ZKDW PDNHV HQHUJ\ D YLWDO QHHG LV WKDW an unchallenged access to energy re VRXUFHV LV VLJQL¿FDQW IRU WKH VWDELOLW\ RI WKH &KLQHVH VWDWH IRU WKH SROLWLFDO VWUXFWXUH DV ZHOO DV WKH UXOLQJ &RP PXQLVW UHJLPH

ULVLQJ LQGXVWULDO VHFWRU FRPPDQG RYHU VFLHQFH DQG WHFKQRORJ\ DQG VR FLDO WUDQVIRUPDWLRQ ,Q WKLV FKDQJLQJ G\QDPLFV ZLWK RQO\ RQH SHU FHQW RI WKH ZRUOGÂśV RLO UHVHUYHV IRU WKH VHFRQG ODUJHVW FRQVXPSWLRQ Âą LW KDV EHFRPH LPSHUDWLYH IRU &KLQD WR VHFXUH D VXV WDLQDEOH HQHUJ\ VXSSO\ $V LW H[SHULHQFHV HQHUJ\ YXOQHUDELO ity, securing access to energy resourc es is an essential national interest of &KLQD WR HQVXUH LWV HFRQRPLF SURVSHU LW\ DQG JURZWK +HUH WKH PDMRU FKDO OHQJH IRU D ULVLQJ &KLQD LV WR VXVWDLQ LWV JLJDQWLF HFRQRP\ ZKLFK LV UDSLGO\ LQFUHDVLQJ LQ VL]H DV ZHOO DV LPSDFW 7KDW LV &KLQDÂśV QDWLRQDO LQWHUHVW LV â€œâ€Ś[t]o ensure national energy security, China needs to take steps to rein

China’s Existing Parallels: Energy Needs Versus Economic Growth 7RGD\ &KLQD LV WKH ZRUOGœV ODUJHVW HQHUJ\ FRQVXPHU &KLQDœV ERRPLQJ HFRQRP\ JURZLQJ DW DQ DYHUDJH UDWH RI SHU FHQW RYHU WKH ODVW GHFDGH has been a key factor in triggering &KLQDœV DSSHWLWH IRU JUHDWHU HQHUJ\ FRQVXPSWLRQ ERWK GRPHVWLFDOO\ DV ZHOO DV LQWHUQDWLRQDOO\ :LWK WKH ODUJ HVW SRSXODWLRQ LQ WKH ZRUOG &KLQD LV DOVR WKH ZRUOGœV ODUJHVW FRQVXPHU DQG SURGXFHU RI HQHUJ\ &KLQDœV HQHUJ\ PL[ LV GRPLQDWHG E\ FRDO RLO K\GURHOHFWULFLW\ QDWXUDO JDV QXFOHDU DQG RWKHU UH QHZDEOHV PDNLQJ XS WKH UHVW 7KH UDSLGO\ LQFUHDVLQJ HQHUJ\ GH PDQG HVSHFLDOO\ LQ OLTXLG IXHOV KDV PDGH &KLQD H[WUHPHO\ LQÀXHQWLDO LQ ZRUOG HQHUJ\ PDUNHWV PDNLQJ RLO WKH VHFRQG ODUJHVW VRXUFH RI WRWDO HQHUJ\ FRQVXPSWLRQ 7KLV KLJK GHPDQG IRU RLO DQG LWV OLPLWHG VXSSO\ KDV WUDQVLWHG

&KLQD IURP EHLQJ (DVW $VLDÂśV ODUJHVW oil exporter to that of the second larg HVW RLO LPSRUWHU ,Q RYHU WZR GHFDGHV &KLQDÂśV RLO FRQVXPSWLRQ KDV PRUH WKDQ GRXEOHG PDNLQJ LW WKH ZRUOGÂśV VHFRQG ODUJHVW RLO FRQVXPHU EHKLQG the United States and the largest glob DO HQHUJ\ FRQVXPHU LQ $V D UH VXOW RI WKH LQFUHDVLQJ GHPDQG &KLQD WKH ZRUOGÂśV VL[WK ODUJHVW RLO SURGXFHU KDV EHFRPH D QHW LPSRUWHU RI FUXGH RLO IURP EHLQJ D QHW H[SRUWHU LQ %DVHG RQ WKH VWDWLVWLFV 86 (QHUJ\ ,QIRUPDWLRQ $GPLQLVWUDWLRQ (,$ SRLQWV RXW WKDW &KLQD UDQNV DV WKH ZRUOGÂśV VHFRQG ODUJHVW FRQVXPHU RI RLO after the United States and the second ODUJHVW QHW LPSRUWHU RI RLO ,Q (,$ÂśV DV VHVVPHQW &KLQD ZLOO VXUSDVV WKH 86 DV WKH ODUJHVW QHW RLO LPSRUWHU GXH WR LWV ULVLQJ RLO FRQVXPSWLRQ ZKLFK DF FRXQWHG IRU RQH WKLUG RI WKH ZRUOGÂśV RLO FRQVXPSWLRQ JURZWK LQ $SDUW IURP RLO &KLQDÂśV XVH RI QDWXUDO JDV KDV also increased, resulting in 4 per cent RI WKH WRWDO HQHUJ\ FRQVXPSWLRQ DQG WKDW &KLQD KDV VRXJKW WR LQFUHDVH WKH JDV LPSRUWV YLD SLSHOLQH DQG OLTXHÂżHG QDWXUDO JDV /1* $V D Âľ:RUOG )DFWRU\Âś &KLQD LV KHDY ily dependent on electrical and in GXVWULDO UHVRXUFHV WKHUHE\ PDNLQJ HQHUJ\ QHHGV YLWDO IRU LWV HFRQRPLF GHYHORSPHQW :LWK DQ LQFUHDVLQJ HQ HUJ\ GHPDQG &KLQD IDFHV D JUDYH RLO VXSSO\ FULVLV $FFRUGLQJ WR WKH 2LO DQG *DV -RXUQDO 2*- DV RI -DQXDU\ &KLQD KROGV ELOOLRQ EDUUHOV RI SURYHQ RLO UHVHUYHV XS RYHU ELO OLRQ EDUUHOV IURP WKH OHYHO DQG

Source: US Energy Information Administration, Today in Energy, March 24, 2014.

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INFOCUS|INDIA-CHINA|GEO-POLITICS

WKH KLJKHVW LQ WKH $VLD 3DFL¿F UHJLRQ %XW LWV SURYHQ UHVHUYHV FRQVWLWXWH MXVW SHU FHQW RI WKH ZRUOG WRWDO IRU D FRXQWU\ ZLWK SHU FHQW RI WKH ZRUOG¶V SRSXODWLRQ &KLQD¶V WRWDO RLO DQG OLT uids production, the fourth largest in the world, has risen by about 54 per FHQW RYHU WKH SDVW WZR GHFDGHV DQG VHUYHV RQO\ LWV GRPHVWLF PDUNHW ,Q WKLV VNHZHG PDWUL[ RI GHPDQG DQG VXSSO\ &KLQD¶V SURGXFWLRQ JURZWK IDLOV WR PDWFK LWV GHPDQG JURZWK 7KHUHIRUH ZLWK DQ RLO LPSRUW RI SHU FHQW &KLQD SHUFHLYHV KHDY\ HQHUJ\ VKRUWDJHV IURP D FRQVWULFWHG JOREDO PDUNHW DV RQH RI LWV JUDYHVW WKUHDWV ,W KDV EHFRPH D QHFHVVLW\ IRU &KLQD to secure its energy access in order to VXVWDLQ LWV UDSLG HFRQRPLF JURZWK

IN ORDER TO AVERT SECURITY IMPEDIMENTS AND REDUCE ITS DEPENDENCY ON THE GULF FOR OIL, CHINA IS NOW DIVERTING ITS ENERGY ATTENTION TOWARDS ITS WESTWARD NEIGHBOUR, CENTRAL ASIA Meeting the Needs from Central Asia &KLQD¶V RLO QHHGV DUH PDLQO\ PHW by external sources; the current sup SO\ RI RLO WR &KLQD PDLQO\ FRPHV IURP WKH 0LGGOH (DVW $IULFD $VLD 3DFL¿F DQG (XUDVLD 6LQFH WKH PLG V SHU FHQW RI WKH RLO VXSSO\ FDPH IURP ERWK $IULFD DQG WKH 0LGGOH (DVW VSHFL¿FDOO\ 6DXGL $UDELD $QJROD DQG ,UDQ PDNLQJ XS DOPRVW SHU FHQW RI WKH WRWDO RLO VXSSO\ IURP WKH UHJLRQ ,Q WKLV VXSSO\ FKDLQ &KLQD IDFHV GLI¿FXOWLHV LQ WHUPV RI GLVWDQW UHJLRQV WKDW SRVH VHFXULW\ WKUHDWV LQ WHUPV RI PDLQWDLQLQJ UHJLRQDO VWDELOLW\ DV ZHOO DV HQVXULQJ DGHTXDF\ WR PHHW WKH HQHUJ\ GHPDQGV ,W LV LQ WKH UDWLRQDO LQWHUHVW RI &KLQD WR GLYHUVLI\ LWV VXS SOLHV DZD\ IURP WKH UHJLRQ LQ SDUWLFX ODU WKH 3HUVLDQ *XOI ZKLFK DFFRXQWV IRU RYHU KDOI RI LWV RLO LPSRUWV 7KLV LV |30| India-China Chronicle March-April 2015

EHFDXVH WKH UHJLRQ LV QRW MXVW PDUUHG E\ FRQÀLFW EXW DOVR E\ WKH IDFW WKDW &KLQD¶V KHDY\ UHOLDQFH RQ *XOI RLO PHDQV WKDW SHU FHQW RI LWV FUXGH LPSRUWV DUULYH E\ WDQNHUV WKDW PXVW QDYLJDWH ULVN\ VHD ODQHV +HQFH LQ RUGHU WR DYHUW WKHVH VHFXULW\ LPSHGLPHQWV DQG UHGXFH LWV GHSHQGHQF\ RQ WKH *XOI IRU RLO &KLQD LV QRZ GLYHUWLQJ LWV HQHUJ\ DWWHQWLRQ WRZDUGV LWV ZHVWZDUG QHLJKERXU ± &HQWUDO $VLD ZKLFK SURYLGHV D YDOXDEOH RSSRUWXQLW\ WR &KLQD ERWK LQ WHUPV RI JHRJUDSKLF SUR[LPLW\ DV ZHOO DV D SRWHQWLDO HQHUJ\ VHFXULW\ LQ WHUPV RI VXSSO\ DQG GHPDQG &RRSHUDWLRQ ZLWK D QHLJKERXULQJ UHJLRQ OLNH &HQWUDO $VLD HQVXUHV D VHFXUH VXSSO\ RI RLO DQG JDV IRU &KLQD 7KHUHIRUH &KLQD¶V JHRSROLWLFDO VKLIW WRZDUGV &HQWUDO $VLD LV GULYHQ E\ WKH VKHHU SUR[LPLW\ RI &HQWUDO $VLD D YLDEOH SDUWQHU LQ HQHUJ\ WUDGH DQG LQYHVWPHQW WKDW DOORZV LW WR FXW WUDQVSRUW FRVWV KDYH D PRUH GLUHFW LQÀXHQFH RQ WKH VWDELOLW\ of a region so near, and also aids LQ WKH SURFHVV RI GLYHUVL¿FDWLRQ RI HQHUJ\ LPSRUWV &KLQD¶V IRRWSULQW LQ &HQWUDO $VLD took a strategic shift with its rapid HFRQRPLF JURZWK ZKLFK SURPSWHG VXEVWDQWLDO RLO GHPDQG JURZWK HTXDW ed with geopolitical uncertainties, re VXOWLQJ LQ WKH QHHG IRU &KLQD WR LPSRUW JUHDWHU YROXPHV RI RLO IURP ZLGH UDQJH RI VRXUFHV 7KDW LV WKH JHRSROLWLFDO XQFHUWDLQWLHV FDXVHG E\ LQVWDELOLW\ RI

WKH 0LGGOH (DVW ZKLFK LV WKH ODUJHVW VRXUFH RI &KLQD¶V FUXGH RLO LPSRUWV DQG WKH $PHULFDQ SUHVHQFH WKH SDV VDJH RI SHU FHQW RI &KLQD¶V RLO LP ports through Malacca Strait, with its VHFXULW\ SUREOHPV WKH QHHG WR GLYHUVL fy its energy suppliers, and the neces VLW\ WR GHYHORS WKH QRUWK ZHVW &KLQD KDYH GHWHUPLQHG WKH UHRULHQWDWLRQ RI &KLQD¶V IRUHLJQ HQHUJ\ SROLF\ WRZDUGV &HQWUDO $VLD 7KHVH YXOQHUDELOLWLHV KDYH IRUFHG &KLQD WR PRYH ZHVWZDUG IRU RXWVLGH UHVRXUFHV $ VLJQL¿FDQW DVSHFW RI &KLQD¶V HQ HUJ\ SROLWLFV LQ &HQWUDO $VLD LV FKDU DFWHULVHG E\ RLO SLSHOLQHV 7KH ¿UVW WUDQVQDWLRQDO RLO SLSHOLQH FDPH LQWR IRUFH LQ 0D\ ZKLFK UHFHLYHV .D]DNK DQG 5XVVLDQ RLO IURP WKH SLSH OLQH RULJLQDWLQJ LQ .D]DNKVWDQ 7KLV

Source: Phil Ebersole’s Blog, The geography of Pipelineistan, March 28, 2013.

EEO G SLSHOLQH VSDQV PLOHV FRQQHFWLQJ $W\UDX LQ ZHVWHUQ .D]DNKVWDQ ZLWK $ODVKDQNRX RQ WKH &KLQHVH ERUGHU LQ ;LQMLDQJ 7KH RWKHU VLJQL¿FDQW VRXUFH LV WKH &HQWUDO $VLD &KLQD *DV 3LSHOLQH &$*3 ZKLFK EHJDQ WR IXQFWLRQ LQ 7KLV SLSH OLQH UXQV NLORPHWUHV IURP 7XUN PHQLVWDQ¶V RQVKRUH ¿HOGV WKURXJK 8] EHNLVWDQ DQG .D]DNKVWDQ WR ;LQMLDQJ +HQFH &HQWUDO $VLD LV QRZ &KLQD¶V RQH RI WKH JHRSROLWLFDO KRWVSRWV WR IXO¿OO LWV energy needs and thereby, sustain its HFRQRP\ $ GLUHFWO\ SURSRUWLRQDO UHOD WLRQVKLS H[LVWV EHWZHHQ &KLQD¶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¿OH $QG LQ WKLV SHUVSHFWLYH &HQWUDO $VLD offers a geopolitical opportunity for &KLQD WR IXO¿OO LWV HQHUJ\ GHPDQGV WKDW UHJXODWHV WKH HFRQRPLF REMHFWLYHV LQ WKH LQWHUQDWLRQDO DUHQD

Amrita Jash is a doctoral candidate at the Centre for East Asian Studies (Chinese Studies), School of International Studies, Jawaharlal Nehru University, New Delhi.

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INFOCUS|INDIA-CHINA|BI-LATERAL

Xi-Modi May 2015 Talks:

‘Opportunity of the Century’? Prime Minister Narendra Modi’s di’s t China this May is viewed ed visit to ‘ ury’ as an ‘Opportunity of the Century’ whic has the potential to take ke which the synergies s o between the two cou countries to newer heights, especi der especially in resolving the border dispu th dispute which has troubled both the nations for years. Richa Sekhani Rich

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nlike any other associations, India-China relationship is unique in its characteristics and has undergone dramatic transformation over past decades. Based on mat the principles of cooperation and competition, the linkages between the two peti countries–socio-economic, political cou and cultural has received much importance tanc since Prime Minister Narendra Modi Mod assumed power. Since then visits made mad by leaders from India and China have hav resulted in fruitful discussion and notable contributions to take the ties forward in a favourable direction. In this th context the forthcoming visit of Narendra Modi to China this May is Nar viewed view as an “Opportunity of the Century� tury to take the synergies between the two countries to newer heights, especially ciall in resolving the border dispute, which whi has troubled both the nations for years. y

|32| India-China Chronicle ƒ March-April 2015

The Boundary Question 7KH 0F0DKRQ /LQH ERXQGDU\ dispute is at the heart of relations between China and India since 1962 on two major claims made by China. One is on the Aksai Chin and the other is on Arunanchal Pradesh which is included in the British- designated North-East Frontier. The differences LQ WKH SHUFHSWLRQ RQ WKH /LQH RI $FWXDO &RQWURO /$& LQ WKH ERUGHU DUHDV LV the reason why the dispute remains unresolved even after the 17th round of talks at special representatives’ level. New Delhi has claimed that WKH 3HRSOHœV /LEHUDWLRQ $UP\ 3/$ FURVVHG WKH /$& PRUH WKDQ 600 times in the past three years in which, the \HDU VDZ D 3/$ VROGLHU FURVVLQJ PLOHV EH\RQG WKH /$& DQG VWD\LQJ there for three weeks. August 2014 saw another incursion by the Chinese troops into the Indian Territory– %XUWVH DUHD LQ /DGDNK¹ZLWK 3/$ FDUU\LQJ ÀDJV UHDGLQJ ³this is Chinese territory go back�. Such incidents have always interfered in making mutual relationships stronger. In this regard, Narendra Modi’s visit will be very important, especially in the backdrop of External Affairs Minister Ms. Sushma Swaraj’s recent visit to China and her talks with President Xi Jingping, followed by the talks between Chinese State Councillor Yang Jiechi and Indian National Security Advisor Ajit Doval. This has already set some grounds to resolve the border issue. Akasi Chin which China administers and India claims and Arunanchal Pradesh which India administers as a state but China claims have concerned both the nation and resulted in boundary disputes. From the point of view of China, the border dispute in Arunachal Pradesh is restricted to 2000 kms, whereas India DI¿UPV WKDW WKH GLVSXWH LV VWUHWFKHG WR about 4000 Kms. The incursions by the Chinese have always piqued India and for China, visit by senior governPHQW RI¿FLDOV WR $UXQDQFKDO 3UDGHVK and Modi government’s plans to build a 1,800 km highway along the McMaKRQ /LQH WR EH PRQLWRUHG E\ 8QLRQ Home Ministry, has raised constant

IT IS HOPED THAT BREAKTHROUGH ON THE BOUNDARY ISSUE WILL TAKE PLACE WHEN MR. MODI VISITS CHINA IN MAY. VISIT BY EXTERNAL AFFAIRS MINISTER MS SUSHMA SWARAJ EARLY THIS YEAR AFFIRMED THAT LEADERS OF BOTH THE COUNTRIES ARE READY TO DISCUSS ‘OUT OF THE BOX’ IDEAS FOR THE CONTENTIOUS BORDER ISSUE ZRUULHV LQ %HLMLQJ $FFRUGLQJ WR RIÂżcials, the eastern part of China-India border is disputed and therefore, beIRUH WKH ÂżQDO VHWWOHPHQW RI WKH LVVXH Beijing doesn’t want India to take any action that may further complicate the situation. The initiative taken by India is to match similar efforts in Southern Tibet where China plans to build extensive roads, railways and air networks. India sees it as a threat as it will further give rise to movements of

Chinese troops and equipment in the Himalayan region. Yang Jiechi and Ajit Doval have assured that both sides will extend their efforts to maintain peace and tranquillity in the border region through appropriate management and control. This shows that both the governments are inclined to make a fresh beginning to explore their relationship potential. While there have been legitimate efforts on both the sides to seek clari¿FDWLRQ RQ WKH /$& DQG UHVROYH WKH issues, the upcoming visit will be a potential litmus test in terms of reaching an understanding for coopHUDWLRQ WR ¿QG D VROXWLRQ IRU WKLV LVsue. While former Prime Minister, Mr. Manmohan Singh reached an agreement on Border Cooperation Agreement (BDCA) to de-escalate tensions on border incidents, Mr. Modi and Mr. Xi are likely to pitch in for arduous negotiation so that the border LVVXH LV ¿QDOL]HG EHWZHHQ WKH $VLDœV raising powers. Mr. Modi raised serious concerns about the border isVXHV GXULQJ )RUWDOH]D %5,&6 6XPPLW in July last year and during Mr. Xi’s visit to India in September last year, calling for a negotiated solution. However, the incursion by thousands of &KLQHVH WURRSV LQWR WKH /DGDNK UHJLRQ

March-April 2015 ƒ India-China Chronicle |33|

INFOCUS|INDIA-CHINA|BI-LATERAL

overshadowed his visit to India. The YLVLW E\ 0V 6ZDUDM DIÂżUPHG WKDW OHDGers of both the countries are ready to discuss “out of the box´ LGHDV WR ÂżQG a solution for the contentious border issue. The recent visit of Yang Jiechi to India marking the 18th round of negotiations has enabled the governPHQW WR ÂżJXUH RXW WKH SRVVLELOLWLHV DQG territorial compromises necessary to resolve the dispute. It is hoped that an early breakthrough on the boundary issue will take place, which will be further discussed during Mr. Modi’s visit to China. Market Accessibility in China Another issue which has concerned India is the non-trade barriers imposed by China, which makes market accessiELOLW\ GLIÂżFXOW IRU ,QGLDQ SURGXFWV DQG services. India-China bilateral trade in 2014 topped $65 billion, which led to WKH LQFUHDVH RI WUDGH GHÂżFLW WR ELOlion. Although India is largely dependent on Chinese market for imports of electrical machinery and equipment, mechanical machinery and appliance, project goods and organic chemicals, the exports in which India has advantage such as pharmaceuticals, agriculture, bovine meat and IT services, is drastically hampered by the Chinese barriers. ,QGLD KDV VLJQHG VHYHUDO 0R8V with China to export buffalo meat. However, this requires sanitary and phytosanitary clearance and has to XQGHUJR FHUWLÂżFDWLRQ SURFHGXUHV $V D UHVXOW WKH PHDW ÂżQGV LWV ZD\ WKURXJK Vietnam to China. On the other hand, WKH ,7 VHUYLFHV VXIIHUV IURP DUWLÂżFLDO barrier where Chinese administrator KDV VHW D OLPLW RI 86 PLOOLRQ IRU bidding, which restricts the entry of India’s service companies in China. Pharmaceutical exports are hindered by the non-trade barriers in China, although India is capable of providing cheaper products to the Chinese market. In contrast, India imports 70 per cent of its Active Pharmaceutical Ingredients (API) from China. Considering the presence of such barriers which makes the trade almost impossible and restricts the Indian market accessibil-

ity in China, Mr. Modi is likely to raise this issue when he meets his counterpart this May. India’s current account GHÂżFLW ZLWK &KLQD LV DOPRVW ELOOLRQ and its bilateral trade balance has consistently worsened over the years. As per a news article by an Indian daily, ‘The Economic Times’, India and China are likely to enter into a landmark agreement which will create a platform for cooperation between Indian states and Chinese provinces designed to promote trade and investments. On the other hand, Chinese face visa problem as they get single-entry visas for duration of 90 days. Another problem which China faces is the security review and the low business environment to support foreign investments. Issues of administrative transSDUHQF\ DQG HIÂżFLHQF\ DQG VLPSOLÂżcation of land acquisition procedures to promote its trade and investments has been an issue. There are chances

THE CHINESE AMBASSADOR TO INDIA, LE YUCHENG HAS PUT FORTH AN INTRIGUING IDEA; THAT OF EXTENDING THE CHINA-PAKISTAN ECONOMIC CORRIDOR TO INDIA TO CONNECT THE TWO PUNJABS AND NORMALISE TRADE RELATIONS

|34| India-China Chronicle ƒ March-April 2015

that Mr. Xi will enter into agreement DQG 0R8V WR HQKDQFH FRRSHUDWLRQ and economic ties between both the countries. Considering that growth has slowed down in Europe, China will be very much interested in focusing on Indian markets. Therefore, both WKH OHDGHUV VKRXOG UHDOL]H WKH SRWHQtial and strengths by addressing the challenges and obstacles so that they can exercise their development-based agenda of expansion. Infrastructure Development and Cooperation One of the major hindrances to trade is India’s undeveloped infrastructure facility. Modi’s “Make in Indiaâ€? and “Smart Cityâ€? development requires great efforts, especially in PRGHUQL]LQJ DQG XSJUDGLQJ LQIUDstructure and for that India requires cooperation and expertise from major countries like China, Japan, and 5XVVLD 0U ;LÂśV YLVLW LQ ,QGLD LQ saw tremendous efforts being taken to enhance cooperation towards develRSPHQW DQG PRGHUQL]DWLRQ RI ,QGLDQ infrastructure. The activities includHG VLJQLQJ RI 0R8 LQ UDLOZD\ VHFWRU 0R8 RQ VHWWLQJ XS RI ,QGXVWULDO SDUNV in Maharashtra and Gujarat and an RXWOLQH RI D ÂżYH \HDU WUDGH DQG HFRnomic development plan. The visit seeks to improve the trade imbalance, strengthening of investment cooperation, promoting business-friendly environment and enhancing cooperation between chambers of commerce and ÂżQDQFLDO VHFWRUV The Chinese President also made an announcement to invest $7 billion for building two industrial parks in Pune and Gandhinagar to collaboUDWH IRU VHWWLQJ XS ,QGLDÂśV ÂżUVW 5DLOZD\ 8QLYHUVLW\ +RZHYHU ,QGLD UHTXLUHV $20 billion investments from China to build its industrial parks and railways. There is a possibility that when Mr. Modi visits China, there will be renewed discussion on this front with major focus on the Bullet Train, for which the Chinese have shown their interest. India should focus and cooperate with China on building China’s Silk

5RDG LQLWLDWLYHV RI %&,0 FRUULGRU which will connect China and Northeastern India for enhanced trade and investment. More recently, WKH &KLQHVH DPEDVVDGRU WR ,QGLD /H Yucheng, put out an intriguing idea, that of extending the China-Pakistan economic corridor to India which will connect the two Punjabs through the Attari Wagah Border between $PULWVDU DQG /DKRUH 7KLV ZLOO EH D major achievement for India as it will normalise trade relation with Pakistan. India should think judiciously to reap WKH EHQHÂżW IURP WKH RSSRUWXQLW\ provided by Beijing to promote regional cooperation, especially in the context of Pakistan and Afghanistan and its future. Mr. Modi should be mindful of this while discussing the topic during his visit to China.

Tourism Promotion To enhance the trans-frontier engagements, people-to-people connecWLRQ LV RI YLWDO VLJQLÂżFDQFH ,Q WKLV VHJment, the role of tourism is very important. In his past visit Mr. Xi touched on the topic of establishing sister city relationships. Agreements were signed to promote relationships between Mumbai and Shanghai, Ahmadabad DQG *XDQJ]KRX DQG *XMDUDW DQG *XDdong for exchanges between people. In her maiden visit to China, Ms. Swaraj called for an additional route, that of Kailash Mansarovar Pilgrimage. Mr. Modi is likely to inaugurate the second route of the Kailsah-Mansarovar SLOJULPDJH WKURXJK 1DWKX /D 3DVV LQ Sikkim which will facilitate the pilgrims to travel Kailash Mansarover directly by buses, reducing the jour-

ney time from 22 days to 12 days, later this year. One of the central themes of Modi’s regional policy is the promotion of spiritual pilgrimage. This approach has unlimited possibilities with China. Delhi and Beijing must now launch a joint initiative to develop religious and cultural tourism across the IndoGangetic plains and border regions in Tibet, Yunnan and Xinjiang. When the two leaders meet, there is a possibility that they will further explore the opportunities in this area. Chinese have begun to show sensitivity to India’s concerns regarding China’s initiative of “One Belt, One 5RDG´ that tend to promote militarisation of Indian Ocean. However, China LV PLQGIXO RI ,QGLDÂśV ULVLQJ LQĂ€XHQFH in South Asia and Mr. Modi’s neighbourhood policy to step up ties with 6UL /DQND %DQJODGHVK DQG 0DOGLYHV The visit also provides an opportunity to clear the suspicion that the efforts initiated by China are for mutual benHÂżW $OVR WKH DGYDQFHV PDGH LQ WKH bilateral relationship between India DQG 8QLWHG 6WDWHV Âą ZKHQ 3UHVLGHQW Obama visited India in January and UHOHDVHG D 86Âą,QGLD MRLQW VWDWHPHQW have raised concerns in China that ,QGLD ZLOO DOLJQ LWVHOI ZLWK 86 LQ $VLD It won’t be a surprise if in the meeting Beijing mentions the increasing India86 FRVLQHVV There are many crucial issues on the plate to be discussed in May. What remains to be seen is how India strategically pursues its foreign policy. It will be interesting to note if the decisions WDNHQ GXULQJ WKH PHHWLQJ EHQHÂżWV ,QGLD RU PDNHV WKH &KLQHVH LQĂ€XHQFH LQ ,QGLD VWURQJHU ,I WKH FRXQWULHV ÂżJXUH out a permanent solution to the longdrawn border dispute, the visit will be hailed as historic. In fact, it will be a landmark achievement for Mr. Modi in WKH YHU\ ÂżUVW \HDU RI KLV WHQXUH ZKLFK he completes on May 26, 2015. For now, it’s a wait and watch game. Will the visit be an ‘Opportunity of the Century’ with breakthrough decisions or will it be merely rhetoric in nature? ‰ Richa Sekhani is Research Assistant at Observer Research Foundation, New Delhi

March-April 2015 ƒ India-China Chronicle |35|

INFOCUS|INDIA-CHINA|FOREIGN POLICY

A New Twist to India-China-Sri Lanka

Relationship?

Sri Lanka’s projection of Chinese investments as purely commercial in nature, with no geostrategic ambitions has not entirely been bought by India. The level and nature of Chinese investments in Sri Lanka allows Beijing enough elbow room in the island nation’s politics. Dr. Monish Tourangbam

H

andling each relationship according to its merits and demerits is easier said than done given the interdependent nature of international relations. The same is true for the emerging dynamics between India, China and Sri Lanka. While concerns regarding Chinese investments in Sri Lanka pervade debates in New Delhi, Sri Lanka, more so, with the new government in Colombo, is seen emitting messages that it will de-link its relations with China and India. Even as the new political dispensation in Sri Lanka with the election of Mathripala Sirisena as the new president, promises to undo the perceived tilt towards China seen during predecessor Mahinda Rajapaksa’s tenure, the strategic manoeuvres of balancing relations with China and India, and its repercussions will impinge on the bilateral relationships. Even as news of Sri Lanka’s temporary suspension of a $1.5 billion Chinese real estate project in Colombo and the signing of an India-Sri Lanka civilian nuclear cooperation agreement are being seen as signs of a shift in Sri Lanka’s foreign policy approach, too much should not

be read into these proceedings as yet. As the trends and patterns of high level visits between these three countries clearly signify, the countries in pursuit of their interests in an important trade corridor of the Indian Ocean region will be seen practising adroit diplomacy to manage the relations. Adroit Diplomacy at Work Reports and analyses point to a security-insecurity paradox given India’s interests in Sri Lanka and in the UHJLRQ DQG WKH LQFUHDVLQJ LQĂ€XHQFH RI China in South Asia. However, Beijing, steering clear of a perception of ChinaIndia rivalry, has proposed a triangular partnership with India and Sri Lanka, during Sri Lankan Foreign Minister Mangala Samaraweera’s recent visit to Beijing. Commenting on the visit of Sri Lankan President Maithripala Sirisena to India, Chinese Foreign Ministry spokesperson Hua Chunying said, “We believe the sound relations among the three countries are conducive to the three countries and to the whole region. Therefore we are happy to see development of relations between Sri Lanka and India.â€? India’s efforts to reach out to the South Asian countries, in its effort to create a more conducive environment for regional integration,

|36| India-China Chronicle ƒ March-April 2015

has been much debated with the coming of the Modi government in India. And, India’s relations with Sri Lanka, with the recent elections leading to new SRZHU FRQ¿JXUDWLRQV LQ WKH FRXQWU\ have spawned many discussions on the future trajectory of India-Sri Lanka relations. China’s strategic priorities in the Indian Ocean region has been a matter of debate across the world, and its ambitious advocacy of the 21st century Maritime Silk Road (MSR) commensurate with Chinese investments in port developments in South Asia has been a cause of concern for India. Stressed signals went up in New Delhi when a Chinese submarine docked at Colombo during former President Rajapaksa’s tenure. Hence, both Prime Minister Modi as well as President Sirisena, has in recent times, made visible efforts to give new dynamism DQG FRQ¿GHQFH WR WKH UHODWLRQVKLS ,Q WHUPV RI &KLQHVH LQÀXHQFH WKDW came through investments during the Rajapaksa regime, India has quite a lot to catch up with. The last stages of the Sri Lankan civil war that came to an end in 2009 with the decimation of the Tamil Tigers and the killing of their leader Prabhakaran saw severe criticism regarding alleged human

rights violations by the Sri Lankan forces. In this scenario, where even India has been seen walking a tightrope because of vigorous Tamil politics back at home, the Chinese policy of nonintervention in other’s internal affairs gels well with the Sri Lankan intention to deal with its internal reform process at its own pace and ways. The relative non-involvement of Western countries in Sri Lanka because of differences over human rights issues coupled with China’s policy of aiding other countries, with an eye on augmenting China’s strategic interests in South Asia has clearly led to the rise of &KLQHVH LQĂ€XHQFH LQ 6UL /DQND Heavy Chinese Footprints Chinese footprints are hard to ignore even if Sri Lankan leaders desire D PRUH RSHQ DQG FRPSHWLWLYH ÂżHOG IRU RWKHU SOD\HUV PRVW VSHFLÂżFDOO\ ,QGLD Sri Lanka’s own interest in developing itself as a pivotal node in the trading routes crisscrossing the Indian Ocean also makes the pro-activity of the Chinese investments in Sri Lanka more enticing. Even as the new Sri Lanka, compared to Rajapaksa’s government seem well disposed towards India’s concerns regarding the increasing Chinese involvement in Sri Lanka’s development, the Sirisena administration has made its balancing act quite clear. The Sri Lankan Foreign Minister Mangala Samaraweera made it clear during his Beijing visit that the new government was â€œâ€Ś trying to ensure that there is a level playing ÂżHOG IRU DOO LQYHVWRUV DQG D FRQGXFLYH environment for investment based on the restoration of the rule of law, democracy, good governance and transparency.â€? Although debates emerge as to the possibility of a more even-handed, if not a pro-India tilt from the new Sri Lankan government, the all-encompassing engagement between China and Sri Lanka, emerging specially since the signing of the “Strategic Cooperative Partnership (SCP)â€? during former President Rajapaksa’s visit to China in May 2013 will continue. The SCP covers a whole range of issues including bilateral

BEIJING, STEERING CLEAR OF A PERCEPTION OF SINO-INDIAN RIVALRY, HAS PROPOSED A TRIANGULAR PARTNERSHIP WITH INDIA AND SRI LANKA, EMPHASIZING THAT SOUND RELATIONS AMONG THE THREE ARE CONDUCIVE TO THEM AND TO THE WHOLE REGION WUDGH LQYHVWPHQW ÂżQDQFLDO DVVLVWDQFH DQG RWKHUV VHHQ DV EHQHÂżWLQJ ERWK WKH countries. In recent times concerns have been expressed regarding the nature of assistance that China provides to Sri Lanka. Sri Lanka has reportedly picked up major loans for projects from countries such as Japan, Kuwait and China. While Japan and Kuwait, on average, offered loans at rates of 0.20.3 percent, in contrast,the interest rate on the Chinese loans exceeded 3 percent. Besides, only 2 percent

of the $4.8 billion as assistance that China provided to Sri Lanka between 2005 and 2012 came in the form of outright grants; the remaining 98 percent were in the form of soft loans. On the other hand, a third of India’s 1.6 billion dollars in assistance to Sri Lanka has come in the form of outright grants. Chinese long-term loans are geared towards supporting priority sectors like roads, expressways, ports, airports, power, irrigation, water supply and railways. While many propagate the inevitability of the no strings attached large-scale Chinese assistance for Sri Lanka’s economic development, critics contend that the Sri Lankan government might be unable to pay the Chinese loans, thus giving the latter an opportunity to turn part of the loan into equity, making them part owners of vital projects and installations. The level and nature of Chinese investments in Sri Lanka thus allow China enough elbow room in the politics of Sri Lanka, so much so that, one could argue that the change of guard in Colombo can hardly shake off WKH &KLQHVH LQÀXHQFH LQ WKH FRXQWU\ Notwithstanding the concerns of

March-April 2015 ƒ India-China Chronicle |37|

INFOCUS|INDIA-CHINA|FOREIGN POLICY

imbalanced trade between Sri Lanka and China, the bigger picture of HFRQRPLF EHQHÂżWV IRU D GHYHORSLQJ FRXQWU\ OLNH 6UL /DQND RYHUZKHOPV RWKHU QDUUDWLYHV +HQFH FRQFOXVLRQV VKRXOG QRW EH GUDZQ WKDW WKH IHZ RYHUWXUHV WKDW WKH QHZ JRYHUQPHQW LQ 6UL /DQND KDV PDGH WRZDUGV ,QGLD VXFK DV WKH FLYLOLDQ QXFOHDU DJUHHPHQW RU SURPLVHV RI HQKDQFHG GHIHQFH DQG VHFXULW\ WLHV PHDQ DQ\ NLQG RI GLVWDQFLQJ DZD\ IURP DQ LPSRUWDQW SDUWQHU OLNH &KLQD

WE BELIEVE THE SOUND “ RELATIONS AMONG THE THREE

Sri Lanka’s Balancing Act 6HHQ DV DQ LPSRUWDQW OLQN LQ LWV 0DULWLPH 6LON 5RDG VWUDWHJ\ &KLQDœV VWUDWHJLF LQYROYHPHQW LQ 6UL /DQND JRHV GHHSHU WKDQ ZKDWPHHWV WKH H\H )RU LQVWDQFH WKH VXSSO\ RSHUDWH WUDQVIHU DJUHHPHQW SHUWDLQLQJ WR WKH +DPEDQWRWD SURMHFW LQFOXGHV D \HDU OHDVH RI IRXU RXW RI VHYHQ FRQWDLQHU EHUWKV WR D &KLQHVH FRPSDQ\ 7KH &RORPER 3RUW &LW\ 3URMHFW FXUUHQWO\ XQGHU WHPSRUDU\ VXVSHQVLRQ ZKLFK HQYLVDJHG UHFODLPLQJ KHFWDUHV RI ODQG IURP WKH VHD DORQJ D SURPLQHQW SURPHQDGH LQ &RORPER LQFOXGHV D \HDU OHDVH RI KHFWDUHV WR WKH &KLQHVH ZLWK DQRWKHU KHFWDUHV

– HUA CHUNYING, CHINESE FOREIGN MINISTRY SPOKESPERSON

,QIRUPDWLRQ 'HĂ€FLW the Bane of Sino-India Relations

COUNTRIES ARE CONDUCIVE TO THE THREE COUNTRIES AND TO THE WHOLE REGION. THEREFORE WE ARE HAPPY TO SEE DEVELOPMENT OF RELATIONS BETWEEN SRI LANKA AND INDIA

�

IRU &KLQD RQ D IUHHKROG EDVLV PDNLQJ WKH &KLQHVH FRPSDQ\ D SDUW RZQHU RI WKH SURMHFW 0RUHRYHU WKH 6RXWK &RQWDLQHU 7HUPLQDO DW &RORPER 3RUW ZKHUH D &KLQHVH VXEPDULQH UHFHQWO\ GRFNHG LV RSHUDWHG E\ D &KLQD OHG FRQVRUWLXP ZKLFK KDV D \HDU ULJKW RI RZQHUVKLS XQGHU D EXLOG RSHUDWH WUDQVIHU DJUHHPHQW 6UL /DQNDÂśV SURMHFWLRQ RI &KLQHVH LQYHVWPHQWV DV SXUHO\ FRPPHUFLDO LQ QDWXUH ZLWK QR JHRVWUDWHJLF DPELWLRQV KDV QRW HQWLUHO\ EHHQ ERXJKW E\ ,QGLD

)RU LQVWDQFH SURSRVLWLRQ UHJDUGLQJ D &KLQD 6UL /DQND -RLQW &RPPLWWHH RQ &RDVWDO DQG 0DULQH &RRSHUDWLRQ LQWHQGLQJ WR H[SORUH MRLQW YHQWXUHV LQ RFHDQ REVHUYDWLRQ PDULQH DQG FRDVWDO ]RQH PDQDJHPHQW PDULWLPH VHFXULW\ VHDUFK DQG UHVFXH DQG QDYLJDWLRQ VHFXULW\ KDV EHHQ SHUFHLYHG LQ ,QGLD DV VRPHWKLQJ WKDW ZRXOG JLYH WKH &KLQHVH D IUHH UXQ WR FDUU\ RXW VXUUHSWLWLRXV PDULWLPH VXUYH\V DQG VQRRS RQ VRXWKHUQ ,QGLD $QG QRWZLWKVWDQGLQJ 6UL /DQNDQ DUPHG IRUFHVœ RI¿FHUV EHLQJ WUDLQHG UHJXODUO\ LQ ,QGLDQ PLOLWDU\ HVWDEOLVKPHQWV LQFUHDVLQJ FRQWHQW RI &KLQHVH HTXLSPHQW LQ 6UL /DQNDœV DUPHG IRUFHVœ ZHDSRQU\ KDV FRQFHUQHG ,QGLD QRQHWKHOHVV %HVLGHV WKH FHQWUDOLW\ WKDW 6UL /DQND RFFXSLHV LQ WKH VWUDWHJLF DVVHVVPHQWV RI ERWK ,QGLD DQG &KLQD DQG DQDO\VHV RI Colombo tilting one way or the other, GHSHQGLQJ RQ SROLWLFDO GLVSHQVDWLRQ WKHUH DQ LQWHUHVW EDVHG DVVHVVPHQW WHVWL¿HV WR QRW RQO\ D FRPSHWLWLRQ FRRSHUDWLRQ GLOHPPD EHWZHHQ ,QGLD DQG &KLQD EXW DOVR WR 6UL /DQNDœV VWUDWHJ\ RI JHWWLQJ WKH EHVW RI ERWK OHYHUDJLQJ LWV JHRVWUDWHJLF ORFDWLRQ LQ RQH RI WKH EXVLHVW PDULWLPH ODQHV LQ WKH ZRUOG ‰

The author is Assistant Professor at the Department of Geopolitics and International Relations, Manipal University

|38| India-China Chronicle ƒ March-April 2015

Professor Alka Acharya, author of the book ‘China & India: Politics of Incremental Engagement’, and former editor of the journal ‘China Report’, was nominated by the Indian government as a member of the India-China Eminent Persons Group (2006-2008) and as member of the National Security Advisory Board (2006-2008 and 2011-2012). In her current capacity as Director and Senior Fellow at the Institute of Chinese Studies, New Delhi, Prof. Acharya shares with Urmila Rao her views on a realistic approach to the boundary dispute and China’s agenda-setting role, among others. Read on. Q: You have often asked why “a serious, rational and realistic discourse on China in India, and vice versa, still eludes our respective grasps?� Could you please elaborate? A: There are only a few scholars and researchers in India who are studying China and the India-China relationship based on detailed investigation of sources and within the historical perspective. Universities and institutes doing such research are also few and far in between. The bulk of the writings that emerge are more in the nature of general reportage, news analysis or commentary on current events; this section appears to dominate the Indian discourse on China. Even within that, the lion’s share is taken up by the writings on the boundary dispute. The responses and commentary are in the wake of the intermittent “incursions� and are highly emotional in nature. This takes up too much of our imagination and shapes our opinions and perspective in black and white. It does not permit us to see the complexities of situations. And to that extent, therefore, I say we do not have a serious or a rational or a realistic discourse. What we have are knee-jerk reactions and very emotionally-charged, strongly nationalist positions.

Q: You also articulated that “full potential of cooperation is held hostage to boundary disputes...â€? A: It is quite evident that India and China are now increasingly dealing and engaging with each other. +RZHYHU WKH ÂłWUXVW GHÂżFLW´ KDV UHVXOWHG LQ SXWWLQJ March-April 2015 ƒ India-China Chronicle |39|

INFOCUS|INDIA|INTERVIEW

brakes on the expansion of this engagement. I think the important thing is to understand that we have a disputed boundary – which means that the claims of one side are contested by the other. So, even as we maintain our position and claim lines, we have to address the matter of territorial “incursionsâ€? differently. Reporting can, and must, be done without this emotional hype, DQG LQĂ€DPPDWLRQ 2XU UHVSRQVHV VKRXOG UHĂ€HFW WKH understanding of the complexity of the dispute and should DOVR UHĂ€HFW D FRQÂżGHQFH LQ WKH RQJRLQJ GLDORJXHV DQG mechanisms/processes which are exploring the possible ways to resolve it. Clearly this problem cannot be solved by military means but through dialogue and mutual give and take; we have to continue to talk about it and come to a compromise, based on respective interests. China is a rapidly rising power though it has its own problems and the gap between India and China is a huge one. We have to understand the strategic implications, the short, long and medium term implications of an unsettled boundary between us. This is a neighbour which is fast leaving XV EHKLQG 2XU XQGHUVWDQGLQJ RIDQG knowledge of China is pitiful and we have to also address this information GHÂżFLW DV RQH RI WKH IRUHPRVW SULRULW\ tasks. This would enable us to have a more informed process of engagement.

How does one interpret such contradictory stands? A: At this point we have a relationship with China that is

Q: Which are the areas for cooperation, in the short-term? A: Cooperation is already taking place,

particularly the 24x7 electronic variety, is largely responsible for spreading a rather alarmist version of the problem/ dispute. But these highly alarmist perspectives are neither enlightening nor helpful in showing us the way out. It also exerts huge pressure on the political and the diplomatic processes that are underway. 2I JUHDWHU LPSRUWDQFH LV KRZ DUH \RX HGXFDWLQJ WKH ordinary public/people about the dispute, how are you making them aware that we have to settle the problem through dialogue, how are you preparing the people that there has to be a compromise? All these require a different stance now as we are getting more and more engaged with China. You cannot make the dialogue and the relationship hostage to extremist and/or alarmist views aired in the media.

proceeding incrementally. We have political commitment at the highest levels to take the relationship forward. The scope of common and mutual interests is expanding. The contradictory stands you refer to are not really contradictory. In fact, it would be highly unrealistic if countries did not raise their objections to something they found problematic. This is routine. The question is how India ought to balance its relationships with different powers and adopt the kind of strategies required to address its security concerns and national interests. India can calmly rebut the points raised by China. The response does not have to be going over the top. The issue is how do we interact with and respond to each other with regard to policy differences and/or diverging perceptions or even outstanding disputes? If the Chinese object to something, well, we have to do what is in our interests‌If China does something that goes against our interest, we also protest. This is part and parcel of international relations. 2IFRXUVH ZKHQ DFWLRQV RU ZRUGV DUH downright unfriendly, then other steps have to be taken.

SOME INDIAN WRITERS AND SCHOLARS CHOOSE TO TAKE EXTREMELY HARD-LINE POSITIONS ON THE BOUNDARY DISPUTE WITH CHINA. WHILE THIS IS LEGITIMATE IN ANY DEMOCRATIC SET-UP, SOONER THAN LATER WE HAVE TO UNDERSTAND THAT TAKING STRONG POSITIONS DOES NOT TAKE US CLOSER TO SOLVING THE PROBLEM

though as I said earlier, it is not picking up pace as rapidly as it could. China is India’s number one trading partner. A degree of optimism thus stems from the fact that the boundary dispute has not prevented the UHODWLRQVKLS IURP H[SDQGLQJ $ VL]DEOH SDUW RI WKH RI¿FLDO discourse is about shared perspectives on global issues, a welcome turn has been seen in recent times towards regional cooperation in initiatives like the BangladeshChina-India-Myanmar (BCIM) Economic Corridor. 2I¿FLDOO\ WKH ELODWHUDO FRRSHUDWLRQ DJHQGD LV H[WUHPHO\ broad; India has an army of MoUs with China on several fronts. There are agreements in the agricultural sectorat one end to space cooperation at the other. The problem, however, is in implementation of these MoUs; it is not very clear why we have so many agreements on paper and why these cannot be put into effect.

Q: There is talk of cooperation but then at times there is a slip back. For instance, displeased over PM Modi’s visit to Arunachal Pradesh, China recently summoned India’s ambassador, or for that matter, take the case of China’s reactions when the US President visited India in January. |40| India-China Chronicle ƒ March-April 2015

Q: Do you view media fuelling the matters? A: It cannot be denied that the media,

Q: ICS is the liaison institution for the BCIM Regional Cooperation Forum. Is BCIM likely to be instutionalised this year? In what way does India stand to gain from BCIM? A: 7KH ,&6 LV WKH OLDLVRQ RIÂżFH RQ WKH ,QGLDQ VLGH DQG KDV been involved in the BCIM Track -II initiative ever since LWV LQFHSWLRQ ,Q LW ZDV RIÂżFLDOO\ DJUHHG EHWZHHQ India and China that this economic corridor will be

A: China is playing larger and

operationalised. ICS has played a sterling role in conceptualizing the ideas and generating the policy inputs underpinning the Indian approach to the BCIM Forum and ZH DUH ÂżUPO\ LQ IDYRXU RI WDNLQJ this to its logical conclusion. The ICS scholars working on this PDWWHU KDYH SURGXFHG D VLJQLÂżFDQW monograph on this subject. The question of gains is simple, do you want to be an active part of the change or do you wish to be at the receiving end and simply respond to or accept the situation as it unfolds?

Q: China has readily adopted multilateralism as a pillar of its foreign policy. In contrast, India seems to have a lackluster approach in pursuing multilateralism. What fallout do you see for India in this context? A: It is a matter of some concern to me

THIS IS NOT DENG’S CHINA WHICH KEPT A LOW PROFILE; XI JINPING’S ‘CHINA DREAM’ VISUALIZES CHINA STEPPING OUT TO TAKE A LEADING ROLE IN ASIAN AND WORLD AFFAIRS

that we have not yet actually grasped the enormity of the transformation that is sweeping across Asia. Regional economic integration is galloping; roads, railway lines, pipelines are snaking merrily across boundaries all over Asia. These are unfolding before our eyes even as we speak. And yet, Indian foreign policy does not appear to be convinced DERXW WKH EHQHÂżWV RI WKLV FRQQHFWLYLW\ ZKLFK LV PRYLQJ LQ tandem with the changes in the manufacturing and service LQGXVWULHV VSLOOLQJ RYHU LQWR WKH ÂżQDQFLDO DQG VHUYLFH sectors and spurring development in the peripheries. So far we seem to have grasped that India has to get its neighbours on the same page, hence the active outreach under the new government. And yet, it is not the logic of multilateralism that we see; India has to play a leading role in taking SAARC to greater heights of cooperation, it has to become the driver of economic integration. It is not that India is not a part of the multilateral platforms, there is the RIC and BRIC and we will also shortly be members of the 6&2 7KHUH LV RIFRXUVH WKH SUREOHP RI RXU FDSDFLW\ DQG what exactly we can put on the multilateral table. This is not an argument about matching China, the question we must address is what kind of stakes we want in this new Asia and whether we want to move up with this rising tide or be left high and dry and alone on the beach.

Q: Of late, China is taking new initiatives and asserting its position on global platforms more forcefully than ever before. What do you make of Beijing’s assertive stance?

larger role in the Asian theater. It’s emergence as a global player is rooted in its economic rise. China’s foreign exchange reserves are close to 4 trillion USD and by 2020 it will establish its position as the world’s largest economy. This is not Deng’s &KLQD ZKLFK NHSW D ORZ SURÂżOH ;L Jinping’s ‘China Dream’ visualizes China stepping out to take a leading role in Asian and world DIIDLUV 7KLV PD\ EH VHHQ DV WKH ÂżUVW phase in the long-term structural transformation in international relations. But China is projecting this rise as good for the world and has categorically rejected any attempts at exercising hegemony. It would be careful not to antagonize or generate anxieties in other Asian countries – the success of its ambitious Silk Road project hangs in balance. The launching of the AIIB and the fact that 60 countries have signed up as original members appears to indicate that the RWKHU FRXQWULHV VHH WKLV ULVH DV EHQHÂżFLDO for them as well.

Q: Military diplomacy is acquiring greater salience in China’s international relations. What is Beijing’s mood?

A: There are two sides to the coin here. In WKH GRPHVWLF FRQWH[W 3UHVLGHQW ;L -LQSLQJ LV DGGUHVVLQJ the problem of corruption in the PLA but that way he is also asserting control over the military. The leader has to show that he is in control of the gun. The other aspect is that as China grows bigger, it is able to have a larger footprint in the region and in the world. It is acquiring assets abroad, which will require protection. Given China’s VL]H DQG UHVRXUFHV WKH SURÂżOH RI WKH PLOLWDU\ LV ERXQG WR become bigger and technologically more enhanced. There is also the matter of territorial and maritime disputes in its neighbourhood. China is now moving beyond the role of being a participant in the regional integration process to becoming an agenda-setter, both in the economic and security realm. Furthermore, as the non-traditional threats WR VHFXULW\ VXFK DV WHUURULVP QDUFRWLFV KXPDQ WUDIÂżFNLQJ and piracy are looming larger, the role of military is gaining more traction. Finally, China’s grand strategy of (XUDVLDQ FRQQHFWLYLW\ FRQFHSWXDOL]HG DV WKH Âľ2QH %HOW 2QH 5RDGÂś ZLOO FRPSOHWHO\ WUDQVIRUP $VLDQ JHRSROLWLFV DQG geo economics. The focus of China’s military development would be focused on enhancing its defensive capabilities and establishing credible deterrence. ‰ March-April 2015 ƒ India-China Chronicle |41|

INFOCUS|INDIA-CHINA|ENERGY

China’s Burgeoning Oil Diplomacy with Myanmar ,Q ODWH -DQXDU\ 6LQR 0\DQPDU FUXGH RLO DQG JDV SLSHOLQH SURMHFW RI¿FLDOO\ commenced its operations. Is this new pipeline an asset for China? Is the geo-politics of the region likely to change owing to the new oil route? Dr. Rahul Mishra

T

he People’s Republic of China’s energy partnership with Myanmar is going from strength to strength; it’s evident from the quantum of deals that Beijing and Nay Pyi Taw have signed and implemented in recent years. Adding to their diplomatic bilateral energy moves taken lately, in late January 2015, China and 0\DQPDU GHFLGHG WR RI¿FLDOO\ RSHQ the Myanmar section of the ChinaMyanmar oil pipeline. It comes as the latest component of the China-Myanmar joint oil and gas pipeline project. 7KH VLJQL¿FDQFH RI WKH SLSHOLQH is that it shortens China’s oil supply route by around 700 miles, in comparison to the usual sea route that passes

through the Malacca Straits - the waterway connecting the Andaman Sea (Indian Ocean) and the South China 6HD 3DFL¿F 2FHDQ ,Q WHUPV RI GXUDtion, the time taken by the pipeline is around 70 percent of total time taken by the conventional sea route. Clearly, the new project is an asset to ChinaMyanmar energy partnership and is likely to boost the cost effectiveness of China’s new oil supply route. The most important contribution, however, is that it would reduce China’s dependence on the Malacca straits for its oil supplies. Thus, it strengthens the chances of China getting uninterrupted oil supplies in case of a strategically adverse situation in the Malacca Straits. China and countries of the Southeast Asian region

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(claimants include Brunei, Taiwan, Malaysia, the Philippines and Vietnam) have been apprehensive of the SUREDELOLW\ RI D FRQÀLFW RQ WKH LVVXH RI South China Sea Islands- Spratly and Paracel. While the Southeast Asian countries, locked in the South China Sea dispute with China are apprehensive of China’s assertive postures, China is anxious of the increasing US interests and re-engagement with the region (particularly with Myanmar) and rising bonhomie amongst other regional powers including Indonesia, Japan, Australia, South Korea and India as also their relations with the US. Nevertheless, both China and countries of the Southeast Asian region are PLQGIXO RI WKH SLWIDOOV RI D FRQÀLFW LQ the region. China is also conscious of

the possibility that Taiwan issue might ÀDUH XS ZLWK WKH 86 SXWWLQJ LW LQ D tight spot. Additionally, the new route would wean off the possibility of piracy attacks on the oil shipments that come from Western African countries to the Chinese shores. The pipeline would transfer the supplies to Kunming from Myanmar’s Kyaukpyu port, where most of the China-bound oil tankers would now unload. As far as the China-Myanmar crude oil pipeline is concerned, it was put up for trial operations on January 28, 2015. It is worth noting that the opening ceremony of the commissioning of Ma-De crude oil unloading terminal and pre-commissioning of Southeast Asia crude oil pipeline in Yangon, PDUNHG WKH FRPSOHWLRQ RI D ¿YH \HDU project and witnessed the participation of U Nyan Tun, the Vice President of Myanmar; U Zay Ya Aung, the Myanmar Energy Minister; and Liao Yongyuan, the General Manager of China National Petroleum Corporation, among others. It has also been reported that the Made Island Port, the starting point of China-Myanmar Crude Oil 3LSHOLQH ZKHUH WKH ¿UVW ODUJH RLO tanker of 300,000 tons capacity had been in place, was opened early this year. According to the reports, the oil supplies will be to Kunming, the capital of the landlocked southeast Chinese province of Yunnan that China is trying to connect to the ports and develop into a new commercial hub. In addition to Kunming, the new pipeline will enable Chongqing, an industrial hub along the Yangtze River delta to grow and eventually evolve into a big industrial and business hub. China plans to develop both Kunming and Chongqing as new hubs of Chinese economic activity. China-Myanmar Crude Oil Pipeline The China-Myanmar oil and gas pipeline is a double-layered project (crude and gas). It is worth noting that the gas pipeline, which is operating from the Kyaukpyu port, is functional since 2014. According to a June

8, 2014 CCTV (China) report, ‘the two pipelines are expected to provide Myanmar with 2 million tons of crude oil and 2 billion cubic meters of natural gas annually. Thirty years from now, the two pipelines will be transferred to the Myanmar government, becoming part of the country’s national assets’. The opening of the oil pipeline is a big leap for China in terms of achieving the long-term objective of securing stable energy supplies, and diversifying its sources of supply also. While the agreement was inked in 2009, the implementation began with the commencing of construction work in June 2010, and by mid-2014 major part of the joint venture of the China

THE NEW CHINA-MYANMAR PIPELINE STRENGTHENS THE CHANCES OF CHINA GETTING UNINTERRUPTED OIL SUPPLIES IN CASE OF A STRATEGICALLY ADVERSE SITUATION IN THE MALACCA STRAITS National Power Corporation and Myanmar’s state-run Oil and Gas Enterprise (MOGE) was completed on May 30, 2014. The pipeline runs for more than 2400 kilometres and also passes through the Rakhine and Shan areas of Myanmar. It extends 771 km with designed transmission capacity of more than 20 million tons per year. According to reports, CNPC owns 50.9 percent of the project and MOGE owns the remaining 40.1 percent of the share. A Smooth Sail? While China-Myanmar energy cooperation is sailing smoothly at this juncture, and energy diplomacy is poised to play a greater role if looked at as an independent factor, especially with the opening up of Ma-De crude oil terminal, situated in the Made Island, a deep-water port developed by China in western Myanmar. However, on a wider canvass, the situation seems a little complex. For instance, the ongoing problems along the border are

not a good omen for smooth long-term relations between China and Myanmar. China’s worries on Myanmar’s failure to resolve ethnic disputes internally, particularly with Kachins which VHHPV WR EH MXVWL¿HG DV LW KDV WKH potential to derail peace and stability along Myanmar’s northern frontiers where Kachins are located. Since the pipeline passes through Rakhine and the Shan states of Myanmar, China needs to be extra cautious to ensure that the supplies are safe, reliable and uninterrupted. Furthermore, China’s fear that Myanmar is gradually slipping into the US fold seems to have aggravated Beijing’s concerns on Myanmar. There cannot be two views that peace and tranquillity, along with mutual understanding on issues of prominence, are essential for robust ties in trade and commerce. China-Myanmar energy ties also fall in that domain. While it is understandable that Myanmar would not like to lose control over the ethnic situation, it remains to be seen how China’s concerns are allayed. With the opening up of the Ma-De crude oil unloading terminal and likely start of both oil and gas pipelines in full-throttle in near future, China KDV DFKLHYHG LWV WDUJHW RI ¿QGLQJ D alternative source of energy supply, particularly for its Yunnan province. 7KLV QRW RQO\ IXO¿OV &KLQDœV ORQJ WHUP strategic objective but is also a cost effective mode of sustained energy supply. The challenge, however, lies in ensuring that the supplies continue without interruptions and pave way for greater cooperation between China and Myanmar. That, of course, would involve making Myanmar an equal SDUWQHU DQG EHQH¿FLDU\ UDWKHU WKDQ just an oil and gas supplier to China. ‰

Dr. Rahul Mishra is Research Fellow with Indian Council of World Affairs, New Delhi. Views expressed DUH WKRVH RI WKH DXWKRU DQG GR QRW QHFHVVDULO\ UHĂ€HFW WKH views of the ICWA or the Government of India

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Ethno-religious Separatism in Xinjiang The most critical challenge to China’s stability is the ethnic tension and FRQÀLFW LQ ;LQMLDQJ 7KH Uyghur community and the Han Chinese authorities have had a number of violent clashes LQ WKH UHFHQW PRQWKV

Shagun Sharma

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ith the accelerated process of China’s rise, it has been closely facing various chalOHQJHV DQG LVVXHV OLNH HWKQLF FRQÀLFWV DQG VHSDUDWLVP 7KH PRVW FULWLFDO challenge to China’s stability is the HWKQLF WHQVLRQ DQG FRQÀLFW LQ ;LQMLDQJ ,Q WKH FRQWH[W RI &KLQDœV ULVH DV D world power, it is important for Asia’s overall strategy to see how China man-

|44| India-China Chronicle ƒ March-April 2015

ages its restive Muslims, especially WKH 8\JKXUV 6LQFH WKH V WKH LVVXH RI 8\JKXU VHSDUDWLVP LQ ;LQMLDQJ KDV EHHQ UHFDVW ,Q UHFHQW \HDUV WKH Uyghurs have rallied around a steadily solidifying ethno-political idenWLW\ &DOOV IRU JUHDWHU DXWRQRP\ KDYH culminated in a number of violent clashes between Uyghur groups and +DQ &KLQHVH DXWKRULWLHV 7KH ÂżUVW PDMRU YLROHQW LQFLGHQW &KLQD IDFHG ZDV in Barentownship of the north west of

.DVKJDU LQ $SULO )RU &KLQD WKLV challenge to the state was a turning point in its policies not only towards WKH 8\JKXUV EXW DOVR WR WKH HQWLUH ;LQMLDQJ UHJLRQ 7KURXJKRXW WKH V sporadic political violence occurred LQ ;LQMLDQJ )URP WKH EXV ERPELQJV LQ ERWK ;LQMLDQJ DQG %HLMLQJ WR DVVDVVLQDWLRQV RI +DQ &KLQHVH RIÂżFLDOV Uyghur resistance to Chinese rule had WXUQHG GHDGO\ 2Q -XO\ WKH 8\JKXUV LQ 8UXPTL ZKR SHUFHLYHG WKH 6KDRJXDQ incident as an anti-Uyghur violent mobilization by the Han Chinese settlers, organized a peaceful street demonstration to voice their discontent and to demand a full government invesWLJDWLRQ 6RPH RI WKH UHSRUWV VXJJHVW WKDW WKH VHFXULW\ IRUFHV XVHG H[FHVVLYH IRUFH DJDLQVW 8\JKXU SURWHVWHUV 2WKHU reports say the Uyghur demonstration in Urumqi erupted into violence when

Uyghur grievances were given no KHDULQJ These incidents point to Chinese regime policies that aimed to assimilate Uyghurs to the Han Chinese population by preventing them from practicing their religion and speaking their language as the source of disVDWLVIDFWLRQ DQG WXUPRLO LQ WKH UHJLRQ What prompted the manifestation of HWKQR SROLWLFDO FRQĂ€LFW LQ ;LQMLDQJ" $ YDULHW\ RI IDFWRUV H[LVW ZLWKLQ WKH ;LQMLDQJ WRGD\ WKDW OHDGV WKH 8\JKXU people to engage in political violence to address their ethnic, economic, soFLDO DQG SROLWLFDO JULHYDQFHV %HLMLQJÂśV economic policies have favoured the coastal regions and the Han nationality, contributing to relative economic deprivation for Uyghurs and other PLQRULWLHV 7KH QDWLRQDO PLQRULWLHV LQ ;LQMLDQJ DUH RYHU UHSUHVHQWHG DW WKH bottom of the socio-professional scale and the Han are over-represented

DW WKH WRS 7KHVH IDFWRUV KDYH OHG WR large-scale armed ethno-nationalist FRQĂ€LFW 0RUHRYHU H[WHUQDO VXSSRUW from radical organizations promotLQJ ,VODPLF IXQGDPHQWDOLVP SURYLGH the additional means for collective poOLWLFDO YLROHQFH DV 0XVOLPV LQ ;LQMLDQJ have a long list of grievances against WKH JRYHUQPHQW 6LQFH WKH V VXFFHVVLYH &KLQHVH political leaderships systematically formulated policies and carefully implemented actions to socio-economically as well as politically de-empower WKH 8\JXUV LQ ;LQMLDQJ 6XFK SROLFLHV DQG DFWLRQV FDQ EH GHÂżQHG DV 6LQLFL]DWLRQ 7KH VWDWH SROLFLHV WR VHWWOH WKH +DQ &KLQHVH LQ WKH ;LQMLDQJ UHJLRQ HII ÂżFLHQWO\ LQFUHDVHG ÂłDV D UHVXOW RI VWDWH sponsored population transfers from RWKHU SDUWV RI &KLQD ´ $ VHFRQG PDVVLYH 6LQLFL]DWLRQ LQ WKH IRUP RI V\Vtematic colonization took place in the

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V 7KH &&3 RIIHUHG DQ DWWUDFWLYH economic incentive program called WKH Âł%LJ 'HYHORSPHQW RI WKH 1RUWKZHVW´ WR WKH SRRU +DQ &KLQHVH DQG WKH Uyghurs were systematically denied opportunities to be a part of the rising SURJUDP 7KH VWDWHÂśV SROLFLHV DJJUDvated the indigenous Uyghurs against WKH +DQ &KLQHVH VHWWOHUV 7KH ODQJXDJH SROLF\ DGRSWHG VLQFH WKH V E\ WKH &KLQHVH &&3 GHQLHG WKH EDVLF rights for Uyghurs to continue their HGXFDWLRQ LQ WKHLU RZQ ODQJXDJH ,Qdeed, it has also been argued that the long-time central government policy of celebrating the ethnic identity of Uyghurs in an effort to appease them has had the corollary effect of reviviI\LQJ 8\JKXU SROLWLFDO FRQVFLRXVQHVV The rise of ethnic nationalism and HYHQ ÂłWHUURULVP´ LQ ;LQMLDQJ KDV DW LWV core an essential contestation of idenWLWLHV UHĂ€HFWHG LQ WKH VWDWHÂśV GLVFRXUVH RI GHYHORSPHQW DQG VHFXULW\ 7KH HVVHQFH RI WKH Âł;LQMLDQJ SUREOHP´ LV WKDW LWV HFRQRPLF development has come to be seen by many active parts of the indigenous population as a zero-sum game, in which they are not only the losers but will, by losing, also forfeit their culture and homeland and even their YHU\ H[LVWHQFH DV D GLVWLQFW SHRSOH ;LQMLDQJ 7XUNV DV OLNH PLQRULWLHV HYHU\ZKHUH ZKR IHDU ÂłDVVLPLODWLRQ´ into the culture of a larger ethnic

group, deeply mistrust Chinese talk of a multi-ethnic society and fear their IDWH LV WR EH DEVRUEHG LQWR D VSHFLÂżFDOO\ +DQ &KLQHVH ZRUOG +HQFH WKH\ VHH WKHPVHOYHV DV ÂżJKWLQJ WR SUHVHUYH WKHLU unique historical homeland, language, culture, and traditions from forces WKH\ EHOLHYH ZRXOG REOLWHUDWH WKHP STATE RESPONSE 7KH UHVSRQVH IURP %HLMLQJ KDV EHHQ RIÂżFLDOO\ UHDVRQDEOH EXW OHVV VR LQ SUDFWLFH ,Q 6HSWHPEHU ‘National Minorities Policy and Its Practice in China’ was released by WKH 2IÂżFH RI WKH 6WDWH &RXQFLO 7KH policy outlines a fairly generous policy toward minorities, but it was

IS CHINA VICTIMIZING ITS UYGHUR MINORITY, USING TERRORISM AND SEPARATISM AS AN EXCUSE TO VIOLATE THEIR HUMAN RIGHTS? CHINESE LEADERSHIP FEARS THAT XINJIANG SEPARATISM HAS AND WILL CONTINUE TO GAIN SUPPORT FROM TRANSNATIONAL MUSLIM EXTREMISTS

|46| India-China Chronicle ƒ March-April 2015

IDU UHPRYHG IURP SUDFWLFH 2SHQ tolerance of minorities declined IXUWKHU LQ ;LQMLDQJ DIWHU 6HSWHPEHU ZKHQ &KLQD IHOW LW ZDV QRZ ERWK LQWHUQDWLRQDOO\ SHUPLVVLEOH WR ÂłFUDFN GRZQ´ RQ VHSDUDWLVWV LQ ;LQMLDQJ DQG nationally more urgent to protect its SRURXV ERUGHUV &OHDUO\ WKH &KLQHVH government has been cracking down RQ 8\JKXU PLOLWDQWV :HVWHUQ KXPDQ rights groups are concerned about overall treatment of prisoners and the targeting of minorities, while the Chinese government is concerned that ,VODPLF PLOLWDQW UKHWRULF DQG IXQGLQJ DUH ÂżQGLQJ WKHLU ZD\ LQWR &KLQD 7KH issue then becomes whether China is victimizing the Uyghur minority, using terrorism and separatism as an H[FXVH WR YLRODWH WKHLU KXPDQ ULJKWV or whether China itself is a victim of VHSDUDWLVP 7KH &KLQHVH WHQG WR UHIHU to this concern by the three character VORJDQ RI VHSDUDWLVP H[WUHPLVP DQG terrorism, implying a distinct link EHWZHHQ WKH WKUHH FRQFHSWV )RU LQVWDQFH IRUPHU &KLQHVH 3UHVLGHQW +X -LQWDR VDLG RQ -XQH WKDW Âł:H KDYH WR ÂżJKW DJDLQVW WKH WKUHH HYLOV RI VHSDUDWLVP H[WUHPLVP DQG WHUURULVP ´ LQ D VSHHFK DW D VXPPLW PHHWLQJ RI WKH VL[ QDWLRQ 6KDQJKDL &RRSHUDWLRQ 2UJDQL]DWLRQ 6&2 adding that terrorism in all forms must be suppressed and double VWDQGDUGV PXVW EH UXOHG RXW LQ ÂżJKWLQJ what is regarded as a grave threat to ZRUOG SHDFH DQG GHYHORSPHQW ,W LV clear that the Chinese leadership fears WKDW ;LQMLDQJ VHSDUDWLVP KDV DQG will continue to gain support from WUDQVQDWLRQDO 0XVOLP H[WUHPLVWV The central government’s policies on separatists include the use of IRUFH IRU H[DPSOH LQ $XJXVW the Chinese military undertook largeVFDOH H[HUFLVHV LQ ;LQMLDQJ ZLWK DQ imposing parade of military hardware through the center of the city of .DVKJDU $UPHG SROLFH KHOG D ODUJH VFDOH DQWL WHUURU H[HUFLVH LQ ;LQMLDQJ RQ $XJXVW 7KH LQLWLDWLRQ RI D ÂłVWULNH KDUG´ FDPSDLJQ DJDLQVW FULPH throughout China made Uyghurs and VHSDUDWLVWV LQ ;LQMLDQJ D NH\ WDUJHW $ UHQHZHG QDWLRQDO ÂłVWULNH KDUG´

campaign against crime was initiated LQ $SULO DQG KDV QHYHU IRUPDOO\ EHHQ EURXJKW WR D FORVH Economic incentives, however, may well be the biggest tool in the central JRYHUQPHQWœV SROLFLHV WRZDUG ;LQMLDQJ HVSHFLDOO\ WKH :HVWHUQ 'HYHORSPHQW SROLFLHV 7KH DWWHPSW WR XVH economic tools to address ethnic VHSDUDWLVP LQ ;LQMLDQJ UHÀHFWV WKH Chinese government’s long-standing belief that Uyghurs primarily want a JRRG HFRQRPLF OLIH 7KH FXUUHQW &KLnese government is acutely aware of the challenges and dangers that lesser development in the western UHJLRQV OLNH ;LQMLDQJ PHDQV QRW RQO\ for China’s overall continued prosperity, but also for political stability, WKH SRVVLEOH HQWLFHPHQWV RI ,VODPLF H[WUHPLVP DQG WKH FDOOV IRU HWKQLF VHSDUDWLVP 7KH XQGHUO\LQJ LGHD LV that if the western regions, most notaEO\ ;LQMLDQJ KDYH VXI¿FLHQW GHYHORSment, then the minorities will prosper, be less restive, give less support for VHSDUDWLVW DFWLYLWLHV 'RPHVWLFDOO\ WKH XQUHVW VXJJHVWV that China’s longstanding approach WR ;LQMLDQJ LV DW ULVN RI IDLOXUH GXH to the contradictions inherent in the ORJLF WKDW XQGHUSLQV %HLMLQJœV VWUDWHJ\ )URP %HLMLQJœV SHUVSHFWLYH FRQWURO RI ;LQMLDQJ VLQFH WKH HDUO\ V KDV been built upon accelerating economic growth and development in order to

MUSLIMS IN XINJIANG HAVE A LONG LIST OF GRIEVANCES WITH THE GOVERNMENT. BEIJING’S ECONOMIC POLICIES HAVE FAVOURED THE COASTAL REGIONS AND THE HAN NATIONALITY, CONTRIBUTING TO RELATIVE ECONOMIC DEPRIVATION FOR UYGHURS AND OTHER MINORITIES placate the region’s non-Han ethnic JURXSV <HW WKLV KDV RQO\ EHHQ DEOH to occur, in the authorities’ view, so long as security and control has been UHVROXWHO\ PDLQWDLQHG Regionally, throughout the last two GHFDGHV WKH ;LQMLDQJ DQG 8\JKXU LVsues have been of increasing salience LQ &KLQDœV GLSORPDF\ LQ &HQWUDO $VLD ,Q SDUWLFXODU WKH\ ZHUH LPSRUWDQW drivers of China’s efforts in estabOLVKLQJ WKH ¾6KDQJKDL )LYHœ JURXSLQJ of China, Russia, Kazakhstan, KyrJ\]VWDQ DQG 7DMLNLVWDQ LQ DQG the evolution of this grouping into the 6&2 LQ &KLQD KDV XVHG LWV JURZing strategic and economic weight in Central Asia to persuade the governments of the Central Asian states, both bilaterally and multilaterally through

WKH 6&2 WR VXSSRUW LWV SRVLWLRQ RQ ;LQMLDQJ DQG WKH 8\JKXU LVVXH +RZever, the growth of Chinese power DQG LQÀXHQFH LQ &HQWUDO $VLD KDV DOVR been coupled with an increasingly ambivalent and even negative perception of China amongst the public of the various Central Asian states and this has been reinforced by the recent unUHVW LQ ;LQMLDQJ 7KXV %HLMLQJ IDFHV a contradiction between its growLQJ LQÀXHQFH ZLWK WKH JRYHUQPHQWV of Central Asia and the simultaneous tarnishing of its image in the wider SRSXODWLRQ RI WKH UHJLRQ While a number of geopolitical changes in the international system over the past three decades have contributed to internationalisation of the Uyghur issue, it has arguably EHHQ %HLMLQJœV RZQ DSSURDFK WR ;LQMLDQJ GRPHVWLFDOO\ DQG LWV KDQGOLQJ of the Uyghur issue in its diplomacy, that have contributed to the internaWLRQDOLVDWLRQ RI WKH LVVXH ,Q SDUWLFXlar, China’s portrayal of Uyghurs as ¾WHUURULVWVœ VLQFH WKH DWWDFNV RI and the demonising of Rebiya Kadeer in more recent times have resulted in the generation of a much higher inWHUQDWLRQDO SUR¿OH IRU WKH 8\JKXU DQG ;LQMLDQJ LVVXHV ‰

Shagun Sharma is doctoral candidate at Center for East Asian Studies, Jawaharlal Nehru University, Delhi

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Of all the multilateral groupings in which India and China are a part, BRICS is gaining prominence. BRICS is different from other grouping as its top agenda is not based on the idea of regionalism, but commercial cooperation. Sana Hashmi

R

ecent developments on the domestic front of politics in both China and India have been noted with interest by the media, diplomatic community and scholars alike. While in India, Narendra Modi DVVXPHG WKH RIÂżFH RI WKH 3ULPH 0LQLVWHU ;L -LQSLQJ EHFDPH WKH 3UHVLGHQW RI WKH 3HRSOHVÂś 5HSXEOLF RI &KLQD 35& %RWK WKH OHDGHUV DUH FRQVLGered as decisive and hard-headed, who have a strong support of their respective political parties. The change in leadership seems to be logically culminating into a change in policies, on both fronts- internal and external. As a result, both India and China have begun to look at each other with a new perspective. There is a growing realisation for these two Asian giants that cooperation weighs more than FRQĂ€LFW %RWK FRXQWULHV KDYH UHSHDWedly used the phrase - “there is enough space in the world for India and China to coexist and riseâ€?. This does not come out of nowhere. One of the major reasons for such a trend is the emergence of scores of successful multilateral institutions. Though the differing perception on the demarcation of their common border and huge trade LPEDODQFH WLOWHG LQ &KLQDÂśV IDYRXU DUH VWLOO WZR RI WKH PDMRU GHÂżQLQJ IHDWXUHV of India-China relations, cooperation and mutual trust at multilateral fora mark a clear and positive shift in their bilateral relationship. Clearly, India DQG &KLQDÂśV LQWHUHVWV DUH FRQYHUJ-

India-China Cooperation in BRICS ing, at least on the issues pertaining to global commons and those that are of international importance. Concerns and interests of the developing countries at the WTO, climate change negotiations, the Afghan conundrum, rise of the ISIS, and attempts to collecWLYHO\ ÂżJKW WKH QRQ WUDGLWLRQDO VHFXULW\ threats have the potential to bring the two countries closer than ever. This is despite lingering apprehensions on their half-a-century old territorial dispute; India and China are advertently inching closer on multilateral fora such as G-20 and BRICS. Additionally, India has been one of the founding members of several multilat-

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eral, regional and sub-regional groupings such a BIMSTEC (Bay of Bengal Initiative for Multi Sectoral, TechniFDO DQG (FRQRPLF &RRSHUDWLRQ 0*& 0HNRQJ *DQJD &RRSHUDWLRQ ,25$ ,QGLDQ 2FHDQ 5LP $VVRFLDWLRQ DQG SAARC (South Asian Association for 5HJLRQDO &RRSHUDWLRQ +RZHYHU DOmost half of the groupings have been regarded as failures. In the time of extensive regional integration, BRICS is considered to be moderately successful. Of all the multilateral groupings of which India and China are members, BRICS is gaining prominence. BRICS is different from such groupings, as it is not based on the idea of regionalism.

BRICS: A Historical Insight BRICS stands for Brazil, Russia, India, China and South Africa. The term Âľ%5,&Âś ZDV ÂżUVW FRLQHG LQ LQ D SDper titled ‘Building Better Global EcoQRPLF %5,&VÂś E\ -LP 2Âś1HLOO D VHQLRU HFRQRPLVW DW *ROGPDQ 6DFKV +H VXJgested that collectively Brazil, Russia, India and China could play a dominant role at the economic high table DQG LQĂ€XHQFH LQWHUQDWLRQDO HFRQRPLF architecture. The basis for such an assumption was that rapid economic growth of the BRICS countries. While, LQ V %UD]LO EHJDQ WR FRQWURO K\SHULQĂ€DWLRQ DQG SURPRWH SULYDWLVDWLRQ ZLWK WKH RIÂżFLDO EUHDN XS RI WKH

USSR (Union of Soviet Socialist ReSXEOLF LQ 5XVVLD ZDV PDNLQJ D transition to a market-based economy. So far as India is concerned, it initiated the policy of economic liberalisation in :LWK UHJDUG WR &KLQD LWV HFRQomy not only escaped the damages of the Asian Financial Crisis, but Beijing also managed to offer support to the Southeast Asian countries affected by WKH ÂżQDQFLDO FULVLV ,Q $SULO DW the G-20 London Summit, the BRICS FRXQWULHV PHW WR PDNH DQ RIÂżFLDO SURnouncement regarding the establishment of BRIC as a multilateral groupLQJ 6XEVHTXHQWO\ LQ -XQH WKH ÂżUVW %5,& VXPPLW ZDV KHOG DW <HNDW-

erinburg, Russia. Later, in December 2010, South Africa was also included in the grouping, and with its inclusion, the BRIC was renamed as BRICS. BRICS hold importance because it accounts for more than 40 percent RI WKH ZRUOGÂśV SRSXODWLRQ DQG PRUH than 20 percent of global Gross DoPHVWLF 3URGXFW *'3 %5,&6 KDV IDVW emerged as a key grouping with economic issues as one of the top agenda points. It may be noted that though WKH %5,&6 LV MXVW ÂżYH \HDU ROG LW VWLOO managed to cover a wide array of issues. In such a short span of time, a score of mechanism has been estabOLVKHG 2Q WKH ÂżQDQFLDO IURQW %5,&6Âś

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1HZ 'HYHORSPHQW %DQN 1'% DQG &RQWLQJHQW 5HVHUYH $JHQF\ &5$ were concluded. These initiatives are PDLQO\ WR ¿QDQFH LQIUDVWUXFWXUH GHvelopment in these developing countries. Additionally, Business Council and think-tanks forum have also been set up. These mechanisms have made it easier for BRICS member-states to exchange ideas to promote trade and investment and also strengthen intellectual support for pragmatic cooperation. Secondly, there is a sense of equality amongst BRICS members. For instance, it was agreed that these countries will contribute an equal amount of US$ 10 billion for the BRICS bank. BRICS’ New Development Bank 7KH PRVW VLJQL¿FDQW DFKLHYHPHQW RI BRICS has been the establishment of its own bank, NDB (National DevelopPHQW %DQN 7KH PDLQ SXUSRVH RI WKLV ¿QDQFLDO LQVWLWXWLRQ LV WR GHYHORS WKH infrastructure in the BRICS countries. It is in this context that the set up of the NDB and CRA has been seen as a welcoming step, indicating constructive cooperation between these countries. One of the fundamental reasons is that the emergence of BRICS Bank is rapidly turning into what this author

CLOSER INDIA-CHINA RELATIONS WOULD NOT ONLY MAKE THE OTHER MEMBERSTATES MORE COMFORTABLE IN DEALING WITH EACH OF THE TWO ASIAN GIANTS BUT ALSO ENABLE THE ‘BRICS’ COUNTRIES TO TAKE A MORE COMPREHENSIVE STAND ON ISSUES THAT THEY FACE AT THE WORLD TRADE ORGANISATION has termed as the ‘Bank for the New :RUOG 2UGHUÂś 7KH UHDVRQV FLWHG IRU this are;unlike the World Bank, where the votes are determined on the basis of capital share, NDB follows the LGHD RI ÂľRQH FRXQWU\ RQH YRWHÂś L H all members have equal votes. What makes the NDB even more remarkable is the fact that no member has the veto power, which would stop one country from dominating the decision-making process and functioning of the bank. 2Q ,QGLDÂśV LQVLVWHQFH LW KDV EHHQ

|50| India-China Chronicle ƒ March-April 2015

agreed that each country will have equal share of capital (US$ 10 billion HDFK FXUUHQWO\ DQG QR FRXQWU\ FDQ LQcrease its share of capital without the approval of the other four members. Clearly, this wipes out the possibility of one country dominating the system– a dominant feature of the World Bank; it has also been argued that with the NDB and AIIB, dollar-dominated world economic system would come to an end. While it seems a far-fetched conclusion at this moment, considerLQJ &KLQDœV JURZLQJ HFRQRPLF SRZHU such a scenario cannot be ruled out. India-China and the Way Forward for BRICS 7KH \HDU SURYHG WR EH VLJQL¿cant for BRICS as the agreement for VHWWLQJ XS WKH 1'% ZDV ¿QDOO\ FRQcluded. In fact, all the BRICS counWULHV VSHFL¿FDOO\ &KLQD VKRZHG SXUsuance for the speedy establishment of the bank. The trend shows optimistic results about India-China cooperation in BRICS. It is evident that both sides want to expand their cooperation through multilateral exchanges as such cooperation serves mutual benH¿WV DQG SURPRWHV HFRQRPLF JURZWK and regional integration.

There are several indicators to measure the level of cooperation between two countries. One such indicator is economic cooperation. India and China are the two largest economies in the grouping. While the two sides are poised to reach new heights in terms of economic growth, keeping the group united would require some effort. There are, however, a few challenges that need the attention of the BRICS members in general and India, China in particular. India-China boundary demarcation process has been a persistent challenge to the cordial relations between the two countries, and demands careful handling. Rising tide of nationalism in both India and China has been phenomenal. For better or worse, this tide is based on the hopes that the people of the two countries have on their leaders. If the reforms are not realised and the two leaders fail to keep their promises, the situation would negatively affect the India-China relations in the form of economic protectionism. It may be said that the onus lies on China, as it LV \HW WR EDODQFH WKH KXJH WUDGH GH¿cit in India-China trade. The balance of trade is in China’s favour, and India has raised the issue over and again,

WELL-ESTABLISHED MECHANISMS OF BRICS HAVE MADE IT EASIER FOR MEMBER-STATES TO EXCHANGE IDEAS SO AS TO PROMOTE TRADE AND INVESTMENT AND ALSO STRENGTHEN INTELLECTUAL SUPPORT FOR PRAGMATIC COOPERATION asking China to rectify the same. A comprehensive engagement with India, aimed at addressing the latter’s concerns would only help China gain more access to one of the world’s biggest markets. The Indian Prime Minister’s visit to China in May 2015 would become a major milestone if the two sides carefully work towards making it a success. Regional, multilateral and institutional cooperation is a natural outcome of strengthened India- China ties, and in that context, BRICS becomes a key grouping. Closer India-China relations would not only make the other members more comfortable in dealing with

the two Asian giants, but would also be able to take a more comprehensive stand on issues that face the WTO. In addition, BRICS countries can greatly EHQH¿W LQ WKH FOLPDWH FKDQJH QHJRtiations, South-South Cooperation, UNSC (United Nations Security CounFLO UHIRUPV LQ ¿JKWLQJ WHUURULVP amongst others, if India and China are able to achieve a qualitative change in their relationship. The Seventh BRICS Summit, to be held at Ufa, Bashkortostan, Russia is likely to take place in the second half of the year. BRICS enthusiasts are looking at the year 2015 with a lot of hope. The year 2015 can indeed be a major milestone for BRICS, provided the challenges pertaining to cohesion, sustaining low demands for oil and rapid downfall of oil (especially for Russia) and mutually agreeable common agenda are pushed with determination. Lot of it depends on how India and China work with each other and what turn their relationship takes in the future. ‰

Sana Hashmi is Associate Fellow, Centre for Air Power Studies, New Delhi

March-April 2015 ƒ India-China Chronicle |51|

INFOCUS|INDIA-CHINA|FIRST PERSON

Ushering in Spring: Xin Nian Kuaile Tilak Jha, studying in University of Zhejiang, shares his experience of the Chinese Spring Festival in China.

I

n India, a total bandh-like situation can perhaps be seen only during the 5-yearly Lok Sabha elections but in China, bandh-like situation is a yearly phenomenon; from Januaryend till mid-February when the Middle Kingdom celebrates the Spring Festival and the Chinese New Year! During the festival, it is not unusual to see even the busiest shopping alleys and localities wearing a deserted look ZLWK RQO\ WKH VRXQG RI ¿UH FUDFNHUV

and few lights shooting here and there in the sky offering a break. As I write this piece nearly a fortnight after the Year’s Spring Festival, I notice the photocopier and bread shop nearby, still closed. The city is almost soaked in red colour with red lantern lights hanging all across (Red is an auspicious colour in China). During this ‘deserted’ period, for me, a pleasant break came from my University (University of Zhejiang)

which organized a get-together for a few Chinese and foreign students who chose to stay on. The celebrations were held in a hall, dominated by a red-carpet. The get-together included several activities for us such as solving Chinese puzzles, writing New Year and Spring Festival wishes in Mandarin on red papers and winning sheep teddys (as 2015 is year of the sheep). An energetic host commentator regaled us and offered RMB 100 in

a red envelope! The cash bounty can be plenty if you have invitations from your Chinese friends to join them in their family get-together. I went to a Chinese friend’s home and stayed with his family for three days during which I experienced new insights about China and its culture. Celebrations: Past and Present The Spring festival is considered to be festival of Hans, an ethnic group that constitute nine-tenth of China’s population, however, the festival (and the Chinese New Year) is celebrated by everyone. The beginning of the New Year celebrations is marked by cleaning up of homes (大扫除, da sao chu) and lighting of big candles in memory of ancestors. Cleaning is important, as it is believed that it facilitates the arrival of new and good luck (新的，Xin de) and departure of bad luck (旧的，jiu de). This is nearly 4000-year-old tradition in which 15day festival begins with the Chinese New Year and ends with the Lantern Festival on the 15th day of the Chinese Lunar calendar. In modern times, the legend of chasing away monster ‘nian (年 ¶ ZLWK ¿UHFUDFNHUV DQG UHG EDQQHUV with spring couplets (春联，chun lian)

|52| India-China Chronicle March-April 2015

SPRING FESTIVAL IS THE SECOND BIGGEST CELEBRATION ACROSS THE GLOBE AFTER CHRISTMAS. THE AUSPICIOUS RED COLOUR IS THE ‘THEME’ OF CELEBRATIONS. CHINESE CITIES ARE NEARLY SOAKED IN RED COLOUR WITH RED LANTERN LIGHTS HANGING ALL ACROSS THE STREETS

the younger ones in the family while wishing them good luck and prosperity. Shopping and dining are the other two things which have picked up among an increasingly rich Chinese generation. This is unlike early times, when people saved money for the entire year to arrange big purchases (办年货,ban nian huo) and a family party. Partying and shopping have now become a regular phenomenon amongst most Chinese families, and during the Spring Festival, people buy a lot. If shops and malls are closed, shoppers order online.

has taken the form of celebrations. The red banners are often painted with homophonic couplets. One of the popular messages on these banners is Nian nian yu yu-abundance through the year (年年鱼余). Here the homophone Yu PHDQV ¿VK DV ZHOO DV abundance and is usually written in traditional Mandarin. Similar messages and others like single character chun (椿) and fu (福) are also found plenty on envelops and gift packs. Red envelops (红包, hong bao) containing brand new notes in even numbers or in counts of digits containing 8 is given by elders to

Sharing Meals and Gratitude One of the very interesting features about Chinese culture in general, and Spring Festival in particular, is that all generations of a family get together. Irrespective of their economic backgrounds, it’s a time when family members come together, (often) cook and share meals together. It’s a time when happiness, gratitude and courtesies are exchanged. I had gone to my friend’s place with the textbook notion of Chinese society being deeply hierarchal. It is hierarchical but at the same time, there is a remarkable ‘equality’ and

March-April 2015 India-China Chronicle |53|

INFOCUS|INDIA-CHINA|FIRST PERSON

togetherness at the dining table. The servings to guests or friends usually begin with candies (糖果，tang guo), green tea and seeds (瓜子，gua zi). Food is laid on a big round table with revolving server (‘Lazy Susan’ dining table) where main dishes are placed. Everyone uses his or her chopsticks (kuaizi) to take food. As elders dig on wine and cigarettes, others raise toast with bowls of juice or other drinks. You better not decline rice; having ULFH PHDQV \RX DUH VDWLV¿HG ZLWK WKH food. Hearty meals are followed by a round of cards or TV-watching. In most hierarchal societies, women are not considered at par with men. Not so in China, where the society treats its women fairly equally and well. Tradition Follows Everywhere China’s has had a drastic “makeover” in the last four decades, however, the cultural rooting remains uniquely ¿UP /LWWOH KDV FKDQJHG LQ WKH VSLULW with which the Spring festivities are celebrated. Chinese community anywhere in the world celebrates it with equal zest and fervor. Lion dance celebrations in particular, have gained popularity around the world during the New Year festivities. The colourful dance of gongs and chimes, with lots of sound to scare away monsters, has come to attract elders and youngsters world over alike.

Spring Festival is the second biggest festival celebrated across the globe after Christmas. Apart from being celebrated by a billion-plus people on the Chinese mainland, it is celebrated in Hong Kong, Macao, Taiwan, Singapore and the huge Chinese diaspora across the world from Manila to Kolkata and San Francisco to London. The Chinese media gives generous coverage to the festivities. Western media equally picks up the fervor. The nearly 700,000 foreigners living in China also celebrate the New Year enthusiastically. It is no wonder then why there is a growing recognition of the Chinese New Year. Christmas, Chinese New Year and Commerce Les Standiford, historian and director of Creative Writing Program at the Florida International University, in his

THE BIGGEST VIRTUAL HONG BAO (RED ENVELOPES WITH CASH) OF ALL WAS CCTV’S FIVE-HOUR SPRING GALA WHEN WECHAT USERS SHOOK THEIR SMART PHONES 11 BILLION TIMES TO TRY THEIR LUCK IN WINNING HONG BAO.

|54| India-China Chronicle March-April 2015

2008 book ‘The Man Who Invented Christmas: How Charles Dickens’s “A Christmas Carol” Rescued his Career and Revived Our Holiday Spirits,’ argues how Christmas became what it ultimately did, courtesy Charles Dickens’ mid-19th century classic, A Christmas Carol. As Standiford notes, Christmas was a “relatively (very) minor affair” compared to Easter and Dickens novel resurrected Christmas in its popular avatar. American soft power dominance has made Christmas by far the most celebrated festival worldwide in which record volumes of shopping is done. China’s biggest TV network, CCTV, hosts the Spring Festival Gala on every New Year’s Eve. This year its viewership was nearly 700 million, said to be six times higher than what was witnessed in America’s most popular TV show ‘Super Bowl 2015’. However, there is another number that is likely to make this one go small - that of number of times you ‘shake-your-

mobile’. Shake-your-mobile’/ ‘Mobile Shake’phenomenon swept China this year throughout the Spring Festival. Mobile Shake is a virtual Hong bao (Hong bao, red envelopes with cash, are usually given on occasions such as the Lunar New Year and weddings.). In giving out digital hong bao, Internet giants were trying to keep nearly 700 million-plus Chinese social network users hooked to their sites. The biggest virtual Hong bao of all was CCTV’s ¿YH KRXU 6SULQJ *DOD ZKHQ :H&KDW users (messaging platform) shook their smart phones 11 billion times. Internet giant Alibaba’s online payment platform Alipay said that more than USD 600 million was H[FKDQJHG GXULQJ WKH ¿YH KRXU &&79 gala. The markets caught up on the Spring Festival bandwagon and with the tradition of online marketing and gift exchange habit picking up, it seems, digital formats are all set to entrench itself among young Chinese is their upgraded forms.

Advantage Spring Christmas is associated with Christianity but is celebrated world over by people following different religions. People love to celebrate, merry-making alongside the generous 19th century Santa Claus so much that James Twitchell famously wrote, ‘You can keep Christ out of Christmas but not Santa’. For obvious reasons, Christmas has emerged as one of the most popular celebrations in China as well – especially in the urban areas where all-year-round huge Christmas tree scan be seen installed in front of malls and squares. Spring Festival on the other hand, is not associated with any religion. It remains a tradition which has thrived in the Chinese culture in newer avatars. China is leaving no stone unturned to popularise this festival through extensive media splash in order for its soft power to gain traction. China looks poised to be the world’s foremost economy in the near

future; coupled with economic power, soft power exertion only adds to the leadership charm. Spring Festival may not have its Dickens yet, but probably it would not need one. The Chinese populace continues to hold this 4000-year-old festival close to their hearts, despite PRGHUQ FKDQJHV LQ IRUP DQG ¿UPDment. If China is able to export its popular culture, then Spring Festival, undoubtedly, will become the next most popular global festival. As Professor George McKay of the University of Stanford Culture Studies says, “Modern Christmas was quite about coming together of practices and innovations in social and commercial life alike.” That said, for Spring Festival to be truly global,the Chinese state too needs social innovation along with the commercial rise. Tilak Jha is doctoral researcher on Chinese media at the Jawaharlal Nehru University, New Delhi. He is currently in China’s Zhejiang University.

March-April 2015 India-China Chronicle |55|

Shows

Exhibitions&Trade In India x In China

INDIA EXHIBITION

DATE

VENUE

EVENT PROFILE

LED Expo 2015

O7- 09 May 2015

Bombay Exhibition Center

LEDs play an indispensable role today in all the electrical and electronic devices used daily. They come in different sizes & colors, can work with very low volts & are antishock. All these are getting more widely used in lighting, automobiles, televisions, computers, cell phones, city lighting, building faces, billboards etc.

International Animal Industry Expo

03- 05 May 2015

Pragati Maidan New Delhi, India

CONTACT PERSON

The IAI International Animal Industry Expo is the world's leading trade fair for dairy products, poultry and livestock industry, which takes place once a year in New Delhi. It is regarded as the showcase of the animal industry. Exhibitors show the latest fattening, feeding, meat and disinfection systems, innovative refrigeration, cooling and sanitation technology, but also feed and feed additives.

Pixie Consulting Solutions LtdTel: +91 (0)98120 82121

CHINA EXHIBITION

DATE

VENUE

EVENT PROFILE

CONTACT PERSON

Boat China & Water Sports Expo

28 April-03 May 2015

Asia International Yacht City Guangdong, China

Boat China & Water Sports Expo in Guangzhou is a fair for sailing, windsurfing and water sports. Visitors have the opportunity to see the most beautiful yachts and the fastest motor boats. In addition, modern equipment is presented for water sports. With a wide range, and their interesting framework program, the fair is a great opportunity to spend a relaxing day with the family.

Guangzhou Grandeur Exhibition Services Co., Ltd

SpringFair CantonTex

07-09 May 2015

PWTC Poly World Trade Center 1000 Xingang East Rd Haizhu Guangdong, China

The SpringFair CantonTex is an international trade fair for apparel fabrics and yarns, to be held in Guangzhou. Numerous exhibitors from many countries show their products. This exhibition is communication and information platform in the industry and offers the exhibiting companies the opportunity to present to an audience of experts here.

Tel: +86 (0)20 87015017

World Travel Fair

08-10 May 2015

SEC - Shanghai Exhibition Center Shanghai, China

World Travel fair is China’s largest and most influenced outbound travel exhibition. Co-Hosted by Shanghai Municipal Tourism Administration and VNU Exhibition Europe, the World Travel Fair (WTF) was designed to be a platform for international tourism players to provide their overseas travel resources for China´s market.

Tel: +86 (0)21 61956088

Wenzhou Optics Fair

08-10 May 2015

Wenzhou International Convention & Exhibition Center Zhejiang, China

Taking place under the patronage of the Wenzhou Glasses Chamber of Commerce, Wenzhou Optics Fair has turned into one of the most important fairs for the chinese optical manufacturing and into a leading event on the eyewear sector. Local and international exhibitors will provide a preview on new products, latest technologies and market trends to the visitors from China and abroad.

Tel: +86 (0)577 88905186

Sugar Asia

22-23 May 2015

Bombay Exhibition Center BEC Mumbai, Maharashtra, India

Sugar Asia in Bangkok is an international trade fair for sugar, ethanol, distilleries, bioenergy and agriculture. Numerous exhibitors are presenting their technologies for the sugar industry and related industries.

Tel: +91 (0)11 41536990

Palm Expo

28-30 May 2015

Bombay Exhibition Center BEC Mumbai, Maharashtra, India

The Palm Expo, being held at the Bombay Exhibition Center of Mumbai, is one of the most important events of the audiovisual and live entertainment sector in India. It is a specialised fair showing more than 1000 products equipped with the latest technology of the business.

Diversified Communications India Pvt. Ltd.

China Glass

20-23 May 2015

CIEC - China International Exhibition Center, Beijing, China

The China Glass Expo is one of the largest glass-fairs of Asia and is one of the most important international trade fairs for glass production and processing. It was founded in 1986 and is aimed both at professionals as well as to public audiences.

Beijing Zhonggui Exhibition Co. Ltd. Sanlihe Road 11, Haidian District 100831 Beijing, China

Jewellery, Pearl & Gem Fair

05-07 June 2015

Hitex Exhibition Center, Hyderabad, Andhra Pradesh, India

The Jewellery, Pearl & Gem Fair is the most important fair for the international jewelry industry in India's space. An excellent platform to present new collections, to attract potential customers and business contacts to build.

UBM plc Ludgate House 245 Blackfriars Road SE19UY London, Great Britain &

Hospital Build & Infrastructure

23-25 May 2015

Dalian World Expo Center Xinghai Bay 116022 Dalian, Liaoning, China

Hospital Build & Infrastructure China in Dalian is an international event for investment, planning, design, construction, operation, management and rehabilitation of health facilities, institutions and organizations.

Informa Exhibitions Head Office House 30-32 Mortimer St CH-6300 London, Great Britain & Northern Ireland

Intec Coimbatore

05-09 June 2015

Codissia Trade Fair Complex Coimbatore, Tamil Nadu, India

Industrial leaders from all over the world present their technological ideas: This exhibition is communication and information platform in the industry and offers the exhibiting companies the opportunity to present to an audience of experts.

Tel: +91 (0)422 2221582

International Building & Construction

02-05 June 2015

Shanghai World Expo Exhibition & Convention Center Shanghai, China

International Building & Construction is an international construction trade show in Shanghai. It takes place in conjunction with the exhibition for kitchens and bathroom furniture Kitchen & Bath instead.

Tel: +86 (0)21 32224777

CIEPEC China Environmental Protection Expo

09-12 June 2015

CIEC - China International Exhibition Center Beijing, China

CIEPEC - China International Environmental Protection Exhibition and Conference is one of the leading showcases in China in the key sectors of environmental protection technologies. Its objective is to provide a platform for those companies and organizations, which are engaged in supply, development and manufacturing of systems and equipments for water treatment, air pollution control, waste disposal and recycling and renewable energies.

Tel: +86 (0)10 51555020

Beijing Essen Welding & Cutting

16-19 June 2015

Shanghai New International Expo Centre - SNIEC Shanghai, China

Beijing Essen Welding & Cutting is a trade fair for welding and cutting technology.Here exhibitors from all over the world machines and systems for welding, torch cutting, soldering, brazing, thermal spraying, bonding as well as destructive and nondestructive testing. Other exhibition themes are the Occupational Safety and Health at Work.

Tel: +49 (0)201 72440

BioPh China

24-26 June 2015

Shanghai New International Expo Centre - SNIEC Shanghai, China

The BioPh China is an international trade fair for biotechnological solutions for the pharmaceutical industry. It takes place once a year in Shanghai and has firmly established itself in the market. Here, companies and organizations in the development and research of new methods of treatment using biotechnological methods or made from living organisms and derived from them are represented.

UBM plc Ludgate House 245 Blackfriars Road SE19UY London, Great Britain & Northern Ireland

Automotive Engineering

07-09 June 2015

Chennai Trade Center Chennai, Tamil Nadu, India

Automotive Engineering Show is a trade fair for automotive and industrial modernization. The exhibition focuses primarily on vehicle components and the optimization of production facilities.

Tel: +91 (0)22 28324830

India Packaging

10-13 June 2015

Pragati Maidan New Delhi, India

The India Packaging Show in Neu Delhi is a trade fair for the packaging industry. International manufacturers and suppliers of machinery, materials and services for the food, pharmaceutical and packaging industry from India and neighboring countries are meeting there.

Tel: +91 (0)22 27812093

The Solar South in Chennai is a B2B exhibition for the solar industry and provides visitors from the sector a wide range of possibilities. They can meet here with colleagues, network, collaborate and make business contacts, and generally get a better access to the solar industry, with all its opportunities and possibilities.

Tel: +91 (0)44 22501987

The Logmat is an international trade fair for logistics and material handling, which will be held in Chennai. It is aimed at professionals from the fields of logistics, storage, transportation, supply chain management, material handling and packaging.

Tel: +91 (0)44 22501987

Solar South

Logmat

19-21 June 2015

19-21 June 2015

Chennai Trade Center Chennai, Tamil Nadu, India

Chennai Trade Center Chennai, Tamil Nadu, India

|56| India-China Chronicle March–April 2015

March–April 2015 India-China Chronicle |57|

INFOCUS|CHINA|FESTIVAL

T

Chinese New Year!

o celebrate Chinese New Year 2015, Embassy of China and India-China Economic and Cultural Council organized a cultural evening of acrobatic performances at Sirifort Auditorium in New Delhi on Friday, 27th Feb 2015. The extravagant show was performed by the Guangzhou Acrobatic Arts Theatre Group from China. The Art group is recognized by

the government of People’s Republic of China ever since the troupe was founded in 1959. One of the largest auditoriums in New Delhi saw a heavy crowd admiring display of excellent skills such as the Chinese diabolo, contortion, duo balancing, swinging hoop, juggling, etc. The occasion was graced by His Excellency Le Yucheng, Chinese

|58| India-China Chronicle March-April 2015

Ambassador to India along with Mr. Zhang Zhihong, Cultural Counsellor, Embassy of China in India who extended warm greetings to everyone on the happy occasion of the Chinese Lunar New Year, the year of Sheep. Adding further to the spirit of the occasion, Mr. Mohammed Saqib, Secretary General, India China Economic and Cultural Council thanked the audience.

March-April 2015 India-China Chronicle |59|

INFOCUS|CHINA|FESTIVAL

|60| India-China Chronicle March-April 2015

March-April 2015 India-China Chronicle |61|

INFOCUS|CHINA|FESTIVAL

T

Exhibition of Fine Arts of Contemporary China by Chinese Embassy

O commemorate the 65th anniversary of the establishment of diplomatic relations between China and India, an exhibition of contemporary artworks was organized by the Chinese Embassy in association with China Public Diplomacy Association on March 26, 2015 at India Habitat Center, New Delhi. The Chinese Ambassador to India, His Excellency Le Yucheng inaugurated the event that saw artworks from a group of renowned Chinese artists that included works of noted painter and sculptor Mr. Wu Weishan and Mr Li Ning among others. On display were 80 pieces of artwork and sculpture that showcased paintings of Mahatma Gandhi as well

as Narendra Modi with the Chinese President Xi Jingping. Exquisite ink-work pieces from Mr. Ling Ning titled ‘Dragons of the East’ and ‘The Wisdoms of Vajra’ kept the audience spellbound. Oil paintings from Mr Wang Keju titled, ‘ India: First Trip to Varanasi’ and ‘India-Varansai: The Town of Ganges’, as well as sculpture from Mr. Wu Weishan titled,’ Sound in the Empty Valley: Laozi Leaves China’, received high admiration from the visitors. “We have brought here various styles of Chinese artwork that include water colours, ink, oil on canvas. We are here to celebrate the special relationship that the people of China and India have had for so many

|62| India-China Chronicle March-April 2015

years,” said the painter-sculptor Mr. Wu Weishan also the Director General of China’s National Art Museum and vice-president of Chinese Arts Association. The paintings showcased the essence of the contemporary Chinese arts. The exhibition was aimed toward understanding of the Sino-Indian culture and art and strengthening of affection and friendship between the people of the two countries. Also present at the event were Mr. Zhang Zhihong, Cultural Counsellor, Embassy of China in India, Mr. Song, Director, China Public Diplomacy Association and Mr. Mohammed Saqib, Secretary General, India China Economic & Cultural Council. March-April 2015 India-China Chronicle |63|

INFOCUS|CHINA|FESTIVAL

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info@icec-council.org Mr. Irfan Alam (9811059646) |64| India-China Chronicle March-April 2015

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