News / Asia

Chinese Premier Looks to Boost Economic, Political Ties

Chinese Premier Li Keqiang gestures as he speaks during his visit to the Tata Consultancy Services office in Mumbai, India, May 21, 2013.
Chinese Premier Li Keqiang gestures as he speaks during his visit to the Tata Consultancy Services office in Mumbai, India, May 21, 2013.
Chinese Premier Li Keqiang is on his first international trip, this week, with stops in India, Pakistan, Switzerland and Germany.  The trip not only highlights China's efforts to deepen its economic ties in Asia and Europe, but grow its political influence, as well.

Although the weather was hot when Chinese Premier Li Keqiang arrived in India this week, relations between the two Asian giants appeared to be cooling down, just weeks after facing their toughest border dispute in years.

National Singapore University’s Kanti Bajpai said that, so far, Premier Li has managed to make some positive inroads, reminiscing about his first trip to India two decades ago and presenting himself as very easy-going and friendly.

“I think what has probably not gone as well, from China’s point of view, is that the Indian prime minister has had to do some plain-speaking in their sessions together," said Bajpai. "And, one change that has occurred already in the Indian position after many, many, years is that Manmohan Singh has indicated that any repeat of the kind of incursion that occurred last month will make it virtually impossible for India to look at China through the business-as-usual lens.”

Last month, India strongly protested what it said was a Chinese incursion into the Ladakh region of the Himalayas.  Troops from both countries eventually withdrew.  But tensions rose to a level that even concerned officials in New Delhi with a softer view on China.

China and India are both powerful emerging economies and members of the global grouping called BRICS (Brazil, Russia, India, China and South Africa). The two are competitors who, at times, are very suspicious of each another, but are also actively looking for more ways to build cooperation.

Bajpai said choosing India as the Chinese premier’s first stop was a pre-emptive move on Beijing’s part.

“I think the Chinese have an interest that they are recognizing through this visit of trying to make sure that India doesn’t drift away completely from China, that it doesn’t go firmly into America’s sort of pocket and that it doesn’t become a troublesome state along China’s periphery like the Philippines and Vietnam,” said Bajpai.

After spending three days in India, Li Keqiang makes a brief stop in neighboring Pakistan before heading off to Europe where analysts say the Chinese premier is seeking to grow Beijing’s economic and political clout as well.

In Switzerland, China is nearing the completion of its second free trade agreement with a European country that is not a member of the European Union. Last month, Beijing inked its first such free trade deal with Iceland.

Zhang Lihua is the director of the European Studies Center at Beijing’s Tsinghua University.

“On the one hand the free trade agreement with Switzerland is sending a signal to the European Union," he said. "China and the EU frequently have trade disputes. Trade ties between Switzerland are better and their disputes are fewer. At the same time,  it will also help to boost two-way trade between the two countries.”

Jonas Parello-Plesner, a senior policy fellow at the European Council on Foreign Relations, agreed that the message China is trying to send by signing the agreements is that it is open to trade. But, he added, many in Europe are not only concerned about free trade, but fair trade as well.

“The mood in Europe, particularly in Brussels at the moment, is that free trade is a two-way street and China basically hasn't [recognized that] in the same way as Europe has," said Parello-Plesner. "The past ten years since China's EU WTO accession has not really delivered an opening up in more and more areas, and [China] is meddling its subsidies in other areas.”

At present, the European Union refuses to consider a free trade agreement with China because of Beijing’s precondition that it be considered a free market economy - a label many in Europe and other Western countries feel China has yet to live up to.

Still, China is hopeful that Li’s visit to Switzerland, and last stop in Germany, will have an impact on the rest of Europe, as well.

Germany is China’s biggest trading partner in Europe and the Chinese market is the top destination for German exports.

Parallo-Plesner said that China’s decision to start the premier’s first tour in India and end in Germany highlights the country’s omni-directional approach to foreign policy.

“It's two big economies, they are important in different ways," he said. "Germany, because of the technology it provides for China in its next growth phase. India, because it's a big neighbor because it's part of the BRICS corporation and sort of the emerging world order.”

After his stopover in Germany, Premier Li returns to Beijing on May 27.

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Comment Sorting
by: Ashim Kumar Chatterjee from: Delhi India
May 21, 2013 8:48 PM
Relationship a country develops with countries are shaped by many external and internal factors. China is no exception. A country catapulated into great heights by European & North American capital has emerged as a huge manufacturing hub, which tries to remain competitive by managing the value of it's currency and achieving advantages of scale. Chinese economy has today a manufacturing base, whose capacities far exceed internal Chinese demands. This manufacturing base cannot sustain and continue to generate and provide sustained employment and resultant slow but steady improvement in quality of life of millions and billions of it's people. Hence, China is trying for deeper inroads into vast Indian market. But given the low technological sophistication and being a higher cost cost economy than India is, Chinese goods and services cannot compete in India once the manufacturing bottlenecks like availability of power mainly is removed. China exports goods worth US $ 40 billion to fill up gaps between Indian demand of certain goods and local availability of those goods unable to meet demand. It makes sense, therefore, USA and Europe to adjust costs of their goods by removing the cost of R&D and patents and royalty etc and passing off the advantages of scale of their goods and services for their technologically advanced and futuristic products. And they should also come forward and invest in nuclear and non conventional solar power sector on build own and operate model, which will suffice to create a manufacturing base which will create demand for capital goods from US and Europe and help in returning and consolidating their economic growth. In China US & Europe has created a Frankenstien, which is competing US and Europe out in their own home. US and Europe can calibrate their economic and financial engagement in India in such a way that Indian economy remains domestically oriented unlike China and does not become a strategic menace. India imports oil and gas worth US $ 160 billion or more annually. This amount saved by US & European engagement in power sector alone shall enable India to import technologically refined technology and goods. China has to upgrade it's products to find market in India. However, China too has opportunities in investing in India's infrastructure on again BOO model on honourable terms and conditions provided it decides to end it's many disputes with India. If those disputes are not resolved to India's satisfaction, India's preferred partner in economic development shall remain USA, Europe & Japan. Customer is king. His terms and conditions have to be respected.

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