Narendra Modi-Xi Jinping SCO meet plagued by complexities in ties; trade ties, terrorism to be on top of agenda

Among many key bilateral engagements on the sidelines of the 19th Shanghai Cooperation Organisation (SCO), all eyes will remain focussed on Prime Minister Narendra Modi's interaction with Chinese president Xi Jinping. The meeting will take place at a time when the memory of Doka La standoff is still fresh, relations with Pakistan remain a flashpoint between two nations, and the impasse over the border dispute remains impregnable as ever. But the two countries do find themselves at crossroads, facing a common obstacle in their respective paths to earn greater influence in the East and expand their economy: the increased and more aggressive US protectionism.

The two leaders will meet with the weight of a range of complex issues behind them. Their interaction in Bishkek should be viewed in this context.

US trade war

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Describing Prime Minister Narendra Modi and President Xi Jinping as "good friends", China expressed hope that the two leaders would discuss their respective trade frictions with the US and reach a consensus on opposing trade protectionism during their "very important" meeting this week on the sidelines of the SCO summit in Bishkek.

File photo of Prime Minister Narendra Modi and Chinese president Xi Jinping. Reuters

While China and the US have been in an escalating conflict over trade for the past year, India too has faced the brunt of Donald Trump's erratic and increasingly protectionist policies.

The scope of the US-China trade war expanded in recent months as Washington has tightened trade restrictions on Chinese telecom giant Huawei. India, on the other hand was left to face a surprise presidential proclamation ending India’s access to preferential trade terms under the US’ Generalized System of Preferences (GSP).

Under GSP, the US allows preferential duty-free entry for thousands of products from about 120-plus designated beneficiary countries. India is the largest beneficiary nation under the GSP and exported goods worth $6.35 billion to the US.

In contrast, Trump is demanding that China reduce its massive trade deficit which last year climbed to over $539 billion. He is also insisting that China should workout verifiable measures for the protection of intellectual property rights (IPR), technology transfer and more access to American goods to the Chinese markets.

Chinese officials hope that India, which is also facing trade frictions with the US would join the fight against Trump's protectionist policies.

"Whether they will talk about trade fictions between China and the US and the spectre of trade frictions between the US and India, such things are not surprising. I believe this could become an important topic in his bilateral meetings with the related leaders," Chinese Vice Foreign Minister Zhang Hanhui was quoted as saying by PTI.

"Trade protectionism and unilateralism are very much on the rise. How to respond to the bullying practices of the US, its practice of trade protectionism — this is an important question not only to China, but also has a direct bearing on the recovery of global economy. So I would say it will be helpful if the two leaders could exchange views and we hope their communication will lead to extensive consensus on upholding justice and opposing trade protectionism. I hope with their cooperation, the two countries will not only enhance bilateral trade but also play an important role in promoting the global economy," he said.

Bishkek meet in foreground of Wuhan, but Doka La casts long shadow

Another thorny issue is the longstanding territorial dispute, which manifests in various indirect ways: from Beijing's constant opposition to India's engagement with Dalai Lama, to the various development projects in the North East, to the 73-day Doka La standoff in 2017, triggered by Chinese troops' attempt to build a road close to the Indian border in Doka La, an area also claimed by India's ally Bhutan.

The Doka La standoff became the worst crisis between the two sides since they went to war in 1962 and lasted for two months before they agreed to pull back their troops in late August.

The 27-28 April Wuhan summit between Modi and Xi was largely credited to have turned around the bilateral relations soured by the 73-day standoff. After the Wuhan summit, both the countries stepped up efforts to improve relations on different spheres including the military-to-military ties.  Zhang said the Wuhan summit provided strategic guidance for the development of India-China ties, paving the way for stable growth of China-India relations in the long run. It was also a better idea in wake of the frosty ties because both sides had emerged bruised from the standoff, and the informal summit allowed both leaders to sell their preferred versions of how the standoff ended for domestic political purposes.

Whether the progress made during constant political engagement maintained through last year will prevail in the current interaction or not remains to be seen.

Terrorism and Pakistan

Modi is likely to raise the issue at this week's summit as part of India's strategy to isolate Pakistan at multilateral forums but China made clear its ally, Islamabad, should not be targeted at the event.

While the Ministry of External Affairs signalled that Modi is likely to continue on India's official line against global sponsors of terrorism, Zhang signalled that Pakistan should not become the focus of the counter-terrorism agenda under the SCO framework. “The establishment of the SCO is not to target any certain country but the summit of this level will certainly pay attention to major international relations and regional issues,” Zhang said.

The vice foreign minister said the “institutional building” of the SCO will be discussed that would involve economic cooperation and security cooperation particularly on counter-terrorism.

Modi, during his Maldives visit, slammed Pakistan for "state sponsorship of terrorism" and said it is the "biggest threat" facing the international counter-terrorism campaign.

"Terrorists do not own banks. They don't have their own mints, nor armament factories. But neither money nor weapons seem to be in short supply for them. Where do they get these from? Who provides them the facilities they need?" Modi asserted.

The Hindu reported quoting 'Chinese sources' that after fulfilment of India's long-standing demand — that Masood Azhar be designated a global terrorist — China would expect that India begins to ease its pressure on Pakistan at the meetings of the Financial Action Task Force (FATF), where Islamabad has already been grey-listed. In case Pakistan enters the FATF’s black-list, it could face further international economic isolation, putting enormous strain on its already fragile economy.

India, meanwhile, is unlikely to see eye to eye with China on this as Modi rode to victory on the back of an anti-Pakistan rhetoric, aided by his image to act 'tough' on sponsors of terror. A walk back on that stand so soon after an overwhelming mandate might not be in BJP's domestic interests.

With inputs from PTI