Why Does India Get Nonplussed By China?

Why have we reached such an unequal pass against China, asks Raghav Bahl.

Members of the PLA honor guards walk past a banner depicting Chinese president Xi Jinping near the Forbidden City in Beijing, on May 21, 2020. (Photographer: Qilai Shen/Bloomberg)
Members of the PLA honor guards walk past a banner depicting Chinese president Xi Jinping near the Forbidden City in Beijing, on May 21, 2020. (Photographer: Qilai Shen/Bloomberg)

China invariably leaves India … err … well … now, I am looking for a neutral word which would fly under the trolls’ radar, and here, I’ve got it! Nonplussed, yes, China simply leaves India nonplussed. We’re never quite sure how to treat our gargantuan neighbour. As a powerful enemy who needs to be poked gingerly, handled with kids’ gloves? Or an inscrutable giant we would like to befriend, but warily, with great trepidation? It’s this ambiguity in our collective national consciousness that leaves our foot hanging in mid-air. As soon as we move one step forward, we keep the second step dangling, unsure whether we should stride forward or roll it back.

Why Does India Get Nonplussed By China?

‘Creeping Acquisition’ In Ladakh

Before I am booked under the sedition law, let me explain with two recent examples. Take what’s happening on the India-China border. Every piece of evidence points towards a deep Sino thrust into what we consider our territory, especially in Ladakh. Unlike previous years, this is not a local skirmish between excitable patrols whose paths just happened to cross. There appears to be a calm, sinister pre-meditation about China’s provocation. There is mounting chatter – much of it credible – that while the action is being ratcheted down, the withdrawal is strategically ‘short of complete’, ie it’s not ‘back to the earlier base’.

In simple language, and borrowing from stock market terminology, there seems to be an unmistakable element of creeping acquisition here. Rumour and hearsay are claiming anywhere between 35 to 60 square kilometers of Indian territory which is currently under the Chinese jackboot. But what has been India’s response? A rather unedifying “no, we can’t share any specific details about what’s happening in Galwan Valley, but hey, we don’t want no trouble with the Chinese, so please don’t quiz us hard, pleeease!” It’s what you would call … err … well … right, a nonplussed response.
A Cowering Response To China’s Provocations May Lose India More Territory

Ban Chinese Foreign Direct Investment!

Even more unedifying is the clumsy manner in which we’ve tried to clamp down on Chinese investments. When the valuation of India’s largest mortgage lender HDFC was plumbing an unrealistic, panicky Covid-bottom in March, the Chinese central bank raised its stake in the blue-chip on our stock exchanges, to over 1%. Read that again. It was just one percent. It was a portfolio purchase on a freely traded, open market. But we were, well, nonplussed.

In a terrified, knee-jerk response, we decreed that “every investment coming from any country that shares a border with us will be removed from the automatic route. It shall be screened on a case-by-case basis before it is permitted”.

The target was clear – we needed to stanch the free flow of Chinese capital which could ‘overwhelm’ us by acquiring our assets dirt cheap. The intention was noble – in the middle of such a severe crisis, with impaired asset values, we should protect our ‘expensive family silver and china (oops)’ from predators. But since we were also wary about poking China in the eye, we thought up this ingenious category of ‘border states’, along with the inconsequential Pakistan, Bangladesh, Nepal, and what not.

So far so good. But then we were struck by our infamous ‘second step suspended in mid-air’ disease. We had ‘boldly’ (recklessly?) taken the first step without thinking through downstream implications. So now we needed to follow through with the critical second step by defining what exactly, ie which Chinese investments, would be put in fetters. But since the Chinese rolled their eyes in anger, we got, well, nonplussed. We froze.

So today we are trapped in no-man’s land. Every renminbi from China is stuck. 

It doesn’t matter whether a Chinese investor owns two percent or 80 percent, or whether he is a direct owner or a beneficial one who is two layers above the investment vehicle – everything has slammed shut. Why? Because India has yet to define what constitutes a ‘Chinese investment’. Worse, while the original objective—and I daresay a fair one—was to control predatory acquisitions, which invariably should have meant a ‘change of control in favour of the Chinese buyer’, today even the tiniest, most innocent portfolio investment is jammed. And the parody does not end here.

What about investments from Hong Kong or Taiwan? Since India plays along with China’s diplomatic fiction here, are these in the banned list too?
What about an Indian company which wants to list on Hong Kong Stock Exchange?
What about earlier warrants held by Chinese investors which are coming up for conversion? Will they require another approval?
What about rights issues? Should he, can he, subscribe?

Questions, questions, and more questions, but no answers, at least not yet, almost two months after the knee-jerk “ban”. And the consequences of this paralysis are lethal for companies that need, or had commitments or an active interest from Chinese investors.

All of this is … err … well, so utterly nonplussing!

Chinese Investments In India Need Deft Handling

India’s ‘Two Pulverisations’ Versus China

Finally, to distract from our own confusion, we’ve created an opium for our masses – just go swadeshi, buy local, boycott these bloody low-quality Chinese goods, hoping (naively) that an orchestrated consumer hysteria would replace a calibrated, thought-through response to a military or investment challenge.

Why have we reached such an unequal pass against China? The answer lies in ‘Two Pulverisations’. I am just borrowing the phraseology from two Chinese titans, ie Mao Zedong’s “The Great Leap Forward” and Deng Xiaoping’s “Four Modernisations”.

First, we got pulverised in October 1962, when China shellacked us in a brutal war to wrest Aksai Chin. Second, from an equal per capita income in 1991, China streaked ahead to become 5x – I’ll say it again, five times – our number. Today, their GDP is north of $15 trillion, while we are struggling south of $3 trillion. If these are not Two Pulverisations, then what is?

Arguably, these two comprehensive conquests have given China a palpable psychological dominance over India, whether we like to admit it or not.

But is everything lost forever? No, most certainly not.

If not equal, can we at least regain an honourable near-parity? Yes, we can (thank you, President Obama).

How? By giving up our economic defeatism and revving up to full potential.

How? By studying the big ideas which helped China pull off its economic miracle.

And then, by crafting and zealously implementing our own big ideas.

What are these?

The answer shall lie in Part Two of this article.

Raghav Bahl is the co-founder and chairman of Quintillion Media, including BloombergQuint. He is the author of three books, viz ‘Superpower?: The Amazing Race Between China’s Hare and India’s Tortoise’, ‘Super Economies: America, India, China & The Future Of The World’, and ‘Super Century: What India Must Do to Rise by 2050’.