By Vipul Tamhane
China was called 'the sleeping dragon', full of poverty, isolation, and political turbulence back in and before the 1970s. The beast awoke through the historic change carried out by the visionary leadership of Zhu Rongji, who cut red tape and opened the giant to foreign investments. However, China's aggressive foreign policy under President Xi Jinping, the Belt and Road Initiative, often left countries in crippling debt since these terms were always draconian. Instability affects the loan-trapped recipient nations across the globe and largely impacts trade and global confidence in any country's economic status. Trade wars with the US disrupt supply chains, making firms uncertain over their decisions, while foreign investors are on an exit.
Economic challenges from China are impacting trade relations with India and the US, therefore causing global spillovers and affecting regional security. The hope is to engage like-minded countries and promote multilateralism so that China's influence in Asia and beyond will be curtailed. It has become very important for Beijing to allow the trajectory of its economy to function smoothly since geopolitical tensions and internal pressures disrupt that path, as well as result in trade wars and suspicions of unfair practices.
These tensions unsettle international supply chains and obstruct Chinese exports, which means that policy action to rein in these unfair practices is vital to assure the stability of the international trade ecosystem. The G20 Summit has provenly worked toward such a policy. In January 2024, the India-US Trade Policy Forum wrapped up disputes in seven cases at the World Trade Organization, thus resulting in better trade relations for the two countries.
In recent years, there has been an effort to strengthen trade between India and the US, partly attributable to tensions between the two countries and China. Slightly dropping were Chinese exports to the US at $77.5 billion, while Indian exports rose significantly, whereas imports stayed at $40.8 billion. India had a trade surplus of about $28 billion with the USA during 2022-23 while having a trade deficit of about $83 billion with China during the same period.
China remains central to Indo-Pacific security politics, causing tensions and strategic competition. Even as this Indo-Pacific strategy continues to acquire a footprint in the regional political discourse, countries including Australia, India, Japan, and the US, find it difficult to balance internal challenges arising from within, aggravated by China’s aggressive geopolitics hindering the apposite trade. Beginning in 2018, the US-China trade war resulted in mutual tariffs of $450 billion in trade flows, which then led to a 26.3 per cent decline in the flow of US exports to China and 8.5 per cent on the part of China's exports to the US. Lest China forgets, the US remains an important market for Chinese goods.
On the other hand, in 2023-24, trade between India and China rose and China became India's largest trading partner. Exports to China grew by 8.7 per cent to $16.67 billion, and imports rose by 3.24% to $101.7 billion. China needs to be mindful of this growing trade and exercise caution in the case of any military rivalry and territorial tensions, understanding the strategic importance of its role in the Indo-Pacific region, territorial disputes, military posture, and security concerns with India.
Unresolved border issues between China and India, especially along the Line of Actual Control, may have the potential to bring instability and strain diplomatic relations. The US-led 'Free and Open Indo-Pacific' strategy focused on the wider issues has faced criticism for its strictly geopolitical nature. This has been taken up by China as a strategic pivot, heightening tensions and strategic competition. The delicate act of balancing internal challenges with global ambitions will be further tested as regional tensions rise and China's military expansion strains international relations, diverting resources from economic development.
Xi is facing hostile opposition from within his administration as a result of his hardline policies, especially those applied to trade relations with India and the United States. The opponents include military leadership, CCP (Chinese Communist Party) leaders in the anti-Xi camp and opposition parties. Xi's aggressive foreign policy has caused the political focus to stray away from important domestic affairs, such as economic reform and poverty alleviation. Observant to this, the opposing parties claim Xi's aggression in foreign policy comes at the expense of other more critical domestic issues. All in favor of those reforms that will lead to transparency, rule of law, and economic growth, advocate the notion of ousting the Premier in its entirety.
China's leadership and opposition are craving a shift from an obtrusive authoritarian regime to an inclusive global citizenship. And if this is not to happen, China must reposition itself from an export-driven model to a self-sufficient economy with a substantial domestic rotation; or increase its trade burden with its traditional partners who are already saturated markets. This would not be an easy route and only time will tell whether China will rise like a phoenix or go back to hibernation and become a cautionary tale for other nations.
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(The writer is a counter‐terrorism expert and a visiting faculty with Pune University (SPPU) at the Department of Defense and Strategic Studies.)
