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The Second India-China SED

Prashant Kumar Singh is Associate Fellow at the Institute for Defence Studies and Analyses, New Delhi.
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  • November 30, 2012

    The second India-China Strategic Economic Dialogue (SED) was convened in New Delhi on November 26, 2012. Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission of India, and Zhang Ping, the Chairman of the National Development and Reform Commission (NDRC), led the Indian and Chinese delegations respectively. The SED format is quite recent and probably the newest forum for contacts between Indian and Chinese officials. The first SED was held in China in September 2011. In fact, the idea that the two countries should hold a strategic economic dialogue regularly came up during Premier Wen Jiabao’s 2010 India visit. Incidentally, the only other country with which China holds this type of a dialogue is with the United States.

    The message that has gone out from the second SED is that India-China economic relations will continue to chart their independent course free from security concerns.

    The main objective of the strategic economic dialogue is to enhance cooperation in critically important sectors such as infrastructure and high-technology. Nevertheless, the canvass of the SED is quite broad. The joint handling of the present global economic situation, cooperation in international monetary and financial systems, global commodity markets, sustainable development and climate change, and food and energy security were the significant broad themes discussed at the second SED.1 In the light of these broad themes, important issues such as “strengthening communication on macroeconomic policies”, “deepening and expanding trade and investment” and “promoting bilateral cooperation in the financial and infrastructure sectors” were discussed on the occasion.2

    To follow up the first SED held in 2011, five working groups were formed. The work done by these groups has been deliberated upon in the second SED. The five working groups were on policy coordination, infrastructure, energy, environmental protection and high-technology. The working group on policy coordination focused on “skills development and industrial park development”, improving “the investment environment”, and “skills development for employability”. The infrastructure working group worked on “high-speed rail development programme, heavy haul and station development”. The energy working group explored opportunities and underscored challenges in the wind energy sector and also looked into the business potential of power equipment for Chinese manufacturers in India. The working group on environmental protection worked on energy efficiency. The Hi-Technology Working Group endorsed cooperation in the Information Technology and Information Technology Enabled Services (IT/ITES), to conduct joint business studies in this field. Importantly, this working group agreed to develop “common standards for digital TV, audio and video codec standards and mobile communication technology”.3

    On the lines of the working groups’ reports and suggestions, around 11 Memorandums of Understanding were signed at the governmental as well as private levels on the occasion of the second SED. The total business volume these MoUs have is around $5 billion (Rs. 27,865 crore). The MoUs signed at the second SED are focused on allowing the financial institutions of the two countries to access each other’s market. Besides, a number of the MoUs focused on critical infrastructure. India’s Reliance Power and China’s Ming Yang Wind Power Group would invest $3 billion to develop 2,500 mw renewable energy projects. China Development Bank will provide project financing to the Ming Yang Wind Power Group. Lanco Infratech and China Development Bank signed a pact under which China Development Bank would provide $600 million of finance Lanco’s Anpara phase II 4x660 mw power projects. NIIT will invest $800 million for setting up an IT park in Hainan, for which NIIT and the provincial government of Hainan signed a deal. The Indian and the Chinese government expressed interest in cooperation in areas such as “high-speed trains, modernization of railway stations, energy efficiency and IT sector, water-recycling, digital science and micro-irrigation”. India’s Bureau of Energy Efficiency and China’s NDRC as well as Indian Railways and China’s Ministry of Railways signed MoUs to enhance technical cooperation in some of these areas. Incidentally, the issue of better and improved transportation links was also taken up for discussion. NASSCOM, the India IT industry association, and China’s China Software Industry Association (CSIA) also signed MoUs to enhance cooperation in the IT and ITES (IT enabled services) sector.4

    Building and implementing best practices in trade, information exchanges and skills development in other sectors also figured during the discussions. India’s Planning Commission signed an MoU with China’s National Development and Reform Commission to carry out joint studies in this regard.5

    Ahluwalia reiterated that business between the two countries would be augmented under the free trade regime. The SED also decided to enhance the target for bilateral trade from $74 billion to $100 billion.6

    The SED between India and China assumes importance against the backdrop of frictions over territorial issues between China and its neighbours, which are coming to the fore once again. In fact, only a couple of days before the SED, China started issuing e-passports with a map depicting almost the entire South China Sea as well as Akasi Chin. The move has evoked protests from countries such as Vietnam and Philippines. Although the issue has been highlighted in the Indian media too, National Security Advisor Shivshankar Menon clarified that such issues need not be exaggerated and should be seen from the perspective that territorial disputes do exist and the two countries have their contending claims.7 Montek Singh Ahluwalia also clarified that the map issue was not discussed at the SED. He even categorically stated that India does not have “any China-specific security concerns” and averred that “Security is relevant not only vis-a-vis China. It is not specific. General security precautions are being taken”.8

    What is more important in the context of the SED is India’s concerns about trade imbalance with China and obstacles that Indian companies face in accessing the Chinese market. Prime Minister Manmohan Singh raised this issue during his recent meeting with Premier Wen Jaibao in Phnom Penh. He demanded that Indian companies be given greater access to Chinese IT, ITES and pharmaceutical markets, and also stated that China should increase its investment in India’s infrastructure sector. Empathising with such Indian concerns, the Chinese premier responded that all these issues will be sorted out gradually.9

    Finally, the SED is an important forum that can render valuable service to the cause of greater economic cooperation between India and China. Menon and Ahluwalia have chosen wise words to keep it away from the shadow of security issues. It is advisable to continue to do so. In fact, the outcomes that it could provide have a potential to work like an effective confidence building measure.

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