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India and Japan: Impact of Relationship on China

There is an economic and a strategic angle to India’s expectations from the current visit of Prime Minister Shinzo Abe of Japan, who arrived in Delhi on August 21, to reciprocate the visit paid by Prime Minister Dr.Manmohan Singh to Japan from December 13 to 16 last year.

2. The economic angle relates to India’s expectations of a major role by Japanese investors in developing the infrastructure in India and by the Japanese Government in facilitating the Indian quest for nuclear energy by supporting the relaxation of the present restrictions on civilian nuclear trade with India when the matter comes up before the Nuclear Supplier’s Group (NSG)–most probably before the end of the year.

3. Both these issues are of considerable importance to India. Despite the remarkable improvement in its economic performance during the last three years with an average GDP growth rate of seven per cent plus consistently, it will not be able to catch up with the Chinese economy in the near and medium terms unless and until it is able to improve its infrastructure, which is in a pretty bad shape, and ensure the availability of energy.

4. It has been estimated that the improvement of infrastructure will involve an investment of around US dollars 320 billion in the next five years. That kind of money can come only from Japan. The efforts of the Government of India have, therefore, been towards making Japanese investors get interested in the infrastructure improvement projects in a big way. The first positive results are already evident, thanks to the personal interest taken by Mr.Abe. Japan, which had helped India in the past in the construction of the Delhi Metro, is now the main foreign financial backer of the $90bn project to build a Delhi-Mumbai Industrial Corridor (DMIC). The work on this is expected to start next January and conclude by 2012. During the visit, the two countries are expected to sign an agreement for a dedicated rail freight corridor connecting Delhi, Mumbai (Bombay) and Kolkata (Calcutta), which will significantly reduce the time taken for transporting goods from one city to another.

5. Nearly 475 Japanese companies presently have a presence in India. Of these, nearly one-third reportedly came to India after Mr.Abe took over as the Prime Minister.This indicates the interest taken by his Government in strengthening the long-neglected economic relations with India. In their fascination for the Chinese market and the cheap labour market there, Japanese investors had paid little attention to India. This lack of interest in the Indian economy has now been sought to be corrected by Mr.Abe.

6. Despite this, the bilateral trade continues to be sluggish– an average of US $ four billion per annum for some years now. As against this, India’s bilateral trade with China has been steadily racing towards US $ 30 billion. However, this is largely due to large-scale Chinese imports of raw materials such as iron ore from India. The value of the export of Indian iron ore to China accounts for nearly 60 per cent of India’s exports. The value of India’s imports from China also includes the value of Japanese electronic goods manufactured by the branches of Japanese companies in China. Thus, while there has been a spectacular rise in India’s trade with China, there are special reasons for it, which do not operate in the case of trade with Japan.

7. Even though Japan was strongly opposed to India’s military nuclear tests of 1998, it has now got itself reconciled to them. No opposition from Japan is, therefore, expected to the lifting of restrictions on civilian nuclear commerce with India at the NSG meeting, when it takes place.

8. While China does not view with concern the developing economic relations between India and Japan, it has been viewing with increasing concern the growing strategic relations between the two countries in the form of joint exercises by the Coast Guards of the two countries, exchanges of visits by military officials etc. If these relations were growing purely in a bilateral framework, the Chinese concerns might not have been that high. The heightened Chinese concerns are due to the fact that the increasing strategic ties between India and Japan have been taking place in a larger framework involving India, Japan, the US and Australia.

9. This four-power framework started in a low profile in July,2005, after a visit paid by the Indian Prime Minister to Washington DC. The agreement in principle on bilateral nuclear co-operation was reached during this visit. Though India and the US have projected this agreement as an act of purely economic significance to help the Indian economy to meet its growing energy demands, China suspects that there is an anti-China backdrop to it. The Chinese suspicion is that this agreement was the US quid pro quo to India agreeing to a quadrilateral strategic co-operation to contain the growing Chinese naval power in the Bay of Bengal/Indian Ocean region.

10. Though India has been denying any such anti-Chinese backdrop, Beijing is not convinced because many Western analysts have been projecting the Indo-US nuclear deal as a quid pro quo and not as a stand alone arrangement.

11. The Chinese prefer to take seriously such analyses coming out of Western scholars and not the assurances of benign intentions coming out of New Delhi. Dr. Manmohan Singh’s visit to Japan in December , 2006, caused ill-concealed concern in China, which tended to see an American nudge behind the sustained attempts since 2005 to bring India and Japan closer together. The Chinese did not see it as a natural corollary of India’s Look East Policy. Instead, they saw in it the thin edge of the wedge in what they apprehended as an American attempt to contain China.

12. Even before Dr. Singh had embarked on his visit to Japan, his interview to the Japanese daily “Yomiuri Shimbun” (December 5,2006) caught the attention of China’s India-Japan watchers —particularly for two reasons. The first was the subtle differentiation in Dr. Singh’s characterisation of India’s relations with Japan on the one side and with China on the other. He characterised India and Japan as “the largest and the most developed democracies in Asia, which share a strong commitment to freedom, the rule of law and respect for human rights.” As against this, he characterised India and China as “the two largest developing countries” of Asia and added: ” My own view is that the world is large enough to accommodate the development ambitions of both countries. And, therefore, there is immense scope for us to cooperate with one another.”

13. The second reason was what Dr. Singh had to say about Mr. Abe’s reported proposal for a new four-way framework for strategic dialogue involving Japan, India, Australia and the US. He said: ” Our bilateral relations (between India and Japan) are rooted in similar perceptions about the evolving environment in our region….. I wish to use my forthcoming visit to Japan to gain a better understanding about Prime Minister Abe’s idea of closer cooperation among major democracies in the region.”

14. Many statements during the visit of Dr. Singh to Japan added to the concern of the Chinese. Examples:

  1. “India and Japan are natural partners as the largest and most developed democracies of Asia, with a mutual stake in each other’s progress and prosperity. Indeed, a strong, prosperous and dynamic India is in the interest of Japan, and likewise, a strong, prosperous and dynamic Japan is in the interest of India. They have responsibility for, and are capable of, responding to global and regional challenges, and they must play an active role in the promotion of peace and stability in Asia and world at large. Recognising that Asia is emerging as the leading growth centre of an increasingly interdependent global economy, the two countries are also keen to pursue a comprehensive economic partnership in the region and nurture sustainable economic growth, social peace and political tolerance in open and cooperative regional frameworks. Given their shared determination to raise bilateral relations to a higher level, the two leaders decide to establish a Strategic and Global Partnership between India and Japan. This will impart stronger political, economic and strategic dimensions to bilateral relations, serve long-term interests of both countries, enhance all-round cooperation and contribute to greater regional peace and stability. The Strategic and Global Partnership will involve closer political and diplomatic coordination on bilateral, regional, multilateral and global issues, comprehensive economic engagement, stronger defence relations, greater technological cooperation as well as working towards a quantum increase in cultural ties, educational linkages and people-to-people contacts. This partnership will enable both countries to harness the vast potential of bilateral relations, drawing upon complementarities and each other’s intrinsic strengths, and also work together to address regional and global challenges.” (From the joint statement issued at the end of the visit).

  2. “Strong ties between India and Japan will be a major factor in building an open and inclusive Asia and in enhancing peace and stability in the region. Our partnership has the potential to create an arc of advantage and prosperity across Asia, laying the foundation for the creation of an Asian economic community.” ( From Dr. Singh’s address to the Japanese Parliament on December 14 ) .

  3. “This will be the most important bilateral relationship (for Japan) in the world”. (Mr. Abe while inaugurating the India-Japan Friendship Year–2007 on December 15).

15. The Chinese concerns have been further enhanced by the forthcoming joint naval exercise in the beginning of September in the Bay of Bengal involving the Navies of India, the US, Japan, Australia and Singapore. The officials of the participating countries have projected this exercise as having two objectives over which China should not be concerned. The first is humanitarian to facilitate joint operations for disaster relief in the case of natural disasters. The second is joint/co-ordinated operations against non-State actors such as pirates, maritime terrorists and maritime smugglers of weapons of mass destruction material. They have sought to remove any suspicion that this exercise is really directed against a State actor such as China. Despite this, the Chinese suspicion that this exercise is meant to contain the presence and role of its naval power in the region is strong.

16. It is the Chinese anger over the real purpose of this exercise, which should explain the seeming hardening of the Chinese attitude to the expected move in the NSG to remove the restrictions on nuclear trade with India. Shri D.S.Rajan, Director, Chennai Centre For China Studies, has drawn attention to this in his article “Beijing Hardens Its Stand on the India-US Civil Nuclear Cooperation Agreement”.

17. This hardening does not necessarily mean that the Chinese will oppose any concessions to India at the NSG. The Chinese attitude will depend upon to what extent the US is prepared to exercise its powers of persuasion on the Chinese. China is still dependent on the US for access to the US market and for the continued flow of investments. Moreover, next year’s Olympics is a highly prestigious event for Beijing. Its success as a spectacle and as an international sports event will depend on the US assistance in organising it and in ensuring its security. Any mishap could mean a loss of face for the Chinese leadership in the eyes of its own people and the international community. This gives a leverage to the US in seeing that the Chinese go along with the consensus in favour of India at the NSG. (22-8-07)

(The writer, Mr.B.Raman, is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. He is also associated with the Chennai Centre For China Studies. E-mail: )

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