New Delhi | 13th Sep 2014
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President Xi Jinping of China
ringing with him as many as eight ministers and 130 top businesspersons from both the public as well as the private sectors, President Xi Jinping of China expects to build on the rapport established with Prime Minister Narendra Modi at the BRICS summit in Brazil to create a new paradigm for the Sino-Indian relationship, according to senior officials contacted on telephone and in person. President Xi touches down in Ahmedabad on 17 September after lightning visits to Maldives and Sri Lanka, and is expected to be welcomed by Prime Minister Modi himself, in the same way as the PM was welcomed in Kyoto by Japan's PM Shinzo Abe. "President Xi is very keen on seeing for himself the way in which Modi has transformed Gujarat, which is why he was particular to begin his visit in that state", a top official revealed, adding that "both Xi as well as Modi have a shared interest in unlocking the potential in cooperative relations between China and India".
According to a senior official, the total investment in the projects which are slated to be approved during the 17-19 September visit will exceed $200 billion, thereby dwarfing Japan's commitment of $35 billion spread over five years, made during the just-concluded Modi visit to Asia's second-biggest economy.
Senior officials mentioned some of the big ticket items that are on track for initiation during the Xi visit, which will be the most high-profile ever by a Chinese head of state to India. "Agreements for two China-specific industrial parks, each around 5 square kilometres in area, are to be signed", an official pointed out. The facility near Gandhinagar will involve an investment of around $5 billion for setup, entirely financed by Chinese banks, and will involve companies active in power transmission and conversion. The one near Pune will comprise auto ancillary plants designed for export, and will have about the same land area and dollar cost of setup. "More than 10,000 Indian workers will get jobs in each park", a Chinese official pointed out, adding that it is expected that "a total of ten such parks will get initiated over the next five years, thereby making India a manufacturing location equal to that created by Chinese companies in the US".
A major item under discussion is a plan to involve Chinese companies in dredging more than 600 canals and reservoirs in six states across the country, so as to enhance their water storage capacity. This is expected to boost water supply to farms in these states, and is estimated to cost $18 billion, funded by Chinese financial institutions. An agreement on this is expected to be arrived at before 19 September.
Another mega deal will involve (a) the doubling of speeds on existing railway tracks in the country through use of technology developed and tested in China for the purpose; and (b) partnering in the construction of "fast trains" reaching speeds of 160 kilometres per hour. These would shrink travel time considerably while being much cheaper than the "bullet trains" to be developed in cooperation with Japan, an official claimed. No figures were proffered as project cost, although these sources said that around $35 billion will get spent on power and highway projects which involve Chinese companies.
"We are aware that certain circles are unhappy at the way in which President Xi and Prime Minister Modi are for the first time creating a new and mutually beneficial relationship between the two sides", a senior official said, but added that "on both sides, the leaders are popular and decisive and capable of implementing what they decide to get accomplished".
Among the agreements expected to be signed is the facilitation of an exponentially increased tourist flow between both countries, as well as agreements designed to enable more students from either side to study in the other country Another agreement likely to get signed between the two sides is the entry of Chinese banks as major lenders to Indian industry, with Bank of China expected to set up a branch in India after a lapse of half a century. "Even without operating in India, Bank of China has already lent $5 billion to Indian companies. This will rise manifold once the bank begins large-scale operations in India", a senior official said. He added that part of the blueprint for mutually beneficial economic relations between Delhi and Beijing is that "Chinese banks will lend money to Indian corporates, which secure guarantees of Indian banks for such loans". As Chinese banks have much lower interest rates and far longer repayment schedules than banks in India, such activity is expected to ensure a return to health of several units and projects now stalled for lack of finance or high cost of finance. As such a role may conflict with the interest of US and EU banking institutions in retaining the lead role in financial transactions in India, it remains to be seen if the Reserve Bank of India (which in the view of some seems to have its gaze firmly fixed on Wall Street) will permit such a quantum jump in lending by the banks of a country challenging the status of the dollar and the euro as the prime reserve currencies of the globe. "Such obstruction (from individuals and entities with a focus on Wall Street) may persist despite the benefits of cheap and abundant financing by Chinese companies of projects in India with a long gestation period, such as in infrastructure", an official warned, although later expressing confidence that the Modi government is strong enough to override such obstacles.
"The Chinese side is hopeful that Prime Minister Modi will shake off the biases of previous governments and act solely in the interests of India by ensuring that the best deal for India (rather than for Wall Street or the City of London) gets consummated", an official said. Another said that the Prime Minister's decisions over the past three months "indicate a leader who acts in a manner entirely independent of outside pressure", and that "in this, he is on the same page as (President) Xi Jinping". A senior official calculated the likely total loans by PRC-based banking institutions to industry in India as "being in excess of $75 billion over the next five years".
The fact that President Xi found the time for a substantive conversation in Zhongnanhai with National Security Adviser Ajit Doval on the latter's first visit in his new role to China, indicates, according to an official, that President Xi is on board with Prime Minister Modi on the need to expedite the process of negotiating a final border agreement between the two sides, thereby removing a key irritant in relations. According to him, such an agreement is feasible "within the term in office of PM Modi and General Secretary Xi".
Another issue expected to be discussed is the possibility of both countries coordinating their views and actions on Afghanistan, a stance unlikely to be popular with the Pakistan Army.
However, "China believes that an expanded UN Security Council should include only developing countries and not developed countries as new members", thereby hinting that as long as India remains in the "Gang of Four" (India, Brazil, Germany and Japan) and asks for seats for all four, Beijing will not give it the nod. However, "as individual countries, India, Brazil and South Africa would be welcome in an expanded Security Council", a senior official revealed. It is improbable that Delhi would end the four-country alliance decided upon by the UPA, in view of the importance of Germany and Japan in the economic and strategic calculus of the new government. However, an official claimed that "in case Delhi has ended a joint quest for the UNSC seat and is instead going on its own, the Chinese side will not disappoint our Indian friends".
While the actual results of the 17-19 September Xi Jinping visit are still to reveal themselves, it seems clear that the Chinese side recognises (in the words of a senior official) that a "New India has stood up in 2014 now that Prime Minister Modi has taken over", and that President Xi is therefore looking to "establish a new partnership paradigm jointly with him" in a relationship which till now has shown scant actualisation of the economic and strategic potential inherent in better ties.
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