26 September 2016

** Pay heed to India's sensitivites including NSG and ban on Azhar Masood: Chinese politician to Xi Jinping

By Rajeev Deshpande

"Your(Jinping) ability to see beyond the curve has ensured that our party and people adjusted to the new normal of 6 per cent growth without significant discomfort," says Jeichi.

Respected President, 

The near and long term prospects for China present a unique opportunity to bring to fruition the dedication and sacrifices of the Communist Party, and realise your visionary and bold efforts to make our nation the leading economic and military power in the next decade. It is therefore time to evaluate the true worth of key partnerships and pursue strategies that will make the "China dream" a reality. 

Your ability to see beyond the curve has ensured that our party and people adjusted to the new normal of 6 per cent growth without significant discomfort. China's $11 trillion economy generates sufficient resources to protect national sovereignty in the neighbourhood and secure geo-political interests thousands of miles away. 

The courageous decision to crack down on corruption irrespective of rank and privilege and getting state owned enterprises to recognise primacy of market principles reflect your strong belief in preserving the party's legitimacy in the public eye and displays an insightful understanding of the global economy. 

China's natural trajectory will increase competition with the US. Though China is the pre-eminent power in Asia and the world is less unipolar, US military presence at our doorstep is a reality. Managing this challenge and retooling the economy for slower growth requires a radical rethink on our ties with India and its concerns over terrorism, the border dispute and its bid for Nuclear Suppliers Group membership. 

An important element of US policy towards India is a desire to balance China and the current regime in Delhi is pursuing strategic initiatives with Japan and Vietnam too. Cooperation with the US gives India military technology, nuclear and space knowhow, entry to missile control regimes and benefits in environment, health and agriculture. India's aggregate defence acquisition from US crossed $13 billion last year. The US and India share a "global strategic partnership". 

There is a new realism in India's decision to privatise and upgrade defence production. In 2014 FDI into India increased by 22 per cent and it reached $40 billion in 2015-16. China's economy of course dwarfs all comparison with its outbound FDI of $120 billion outdoing inflows in 2014. But with US support and internal reforms India is expected to retain 6 per cent plus growth till 2020 and then grow faster than China assisted by a younger population. 

China's containment of India hinges on its all-weather friendship with Pakistan. Our $46 billion investment in the China Pakistan Economic Corridor will closely enmesh interests and economies. But India's politics and economic prospects rule out the possibility of its becoming a client state. It will not even be as accommodating as Asean countries. If the chill in political ties spreads to trade, measures like a ban on China made mobiles will hurt our economy. 

After its NSG campaign, India has adopted a more pragmatic approach as was evident when PM Modi met your excellency in Hangzhou recently. This does not mean India will abandon its quest but opens the doors to some sensible negotiation on other aspects of the relationship. The One Belt One Road (OBOR) project, critical to realising our China dream, will benefit with Indian participation if we can steer ties away from more contentious issues. 

Our intelligence has often revealed the role of extremist institutions in Pakistan in motivating Uyghur terrorists. While Pakistan serves Chinese interests in bodies such as NAM and OIC, there is a pressing need to take a longer view. Not opposing India's request to sanction Jaish-e-Muhammed leader Azhar Masood under the UN 1267 resolution will remove an irritant. Several individuals in Pakistan are in any case subject to international sanctions. 

The resolution of differences over India's NSG membership is more complex. But your predecessor did accept a waiver for India and it will be wise not to adopt a rigid posture that isolates China. It might be useful to even claim credit for an eventuality that cannot be delayed indefinitely. Similarly the border dispute calls for more imaginative handling. Trading our expertise in SEZs to loosen India's embrace of the US and leverage border talks will be a display of smart power. 

India is an unpredictable and inefficient democracy and economic policies can change if future elections deliver weaker regimes. It is also prone to vastly overestimating its capacity to rival China, even dabbling in the South China Sea. But India is inching towards middle income status and its economy can reach $47 trillion PPP by 2050. 

Your far-sighted OBOR programme will be a lasting legacy of your leadership. The decision to encourage high-end manufacturing and promote services is showing results. There are, however, areas of concern. We need better understanding of mature markets and to expand in others. Cooperation with India can help sustain economic growth that is crucial to achieving the political objective of social stability. 

The ongoing strategic economic dialogue with India offers a chance to move ahead. Our industry is keen to manufacture in India. At your meeting at Tashkent in June PM Modi said ties can soar if we helped India join the NSG. We should play this to our advantage. It is time to think creatively. 

Sincere regards, 
Yang Jeichi

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