Building bridges

Modi: it could be his call

In 2010 when your correspondent was living in Delhi, she left her house to find the road outside had been completely dug up.

There was nothing particularly odd about this: India’s capital seems to be in a permanent state of reconstruction.

What was strange, however, was the nationality of the workers.

Instead of local labourers in crumpled cotton using tools that would not look out of place on a farm, the site was teeming with Chinese engineers in blue overalls and hard hats.

They worked for Luneng Taishan Cable, a company from the eastern province of Shandong which had been hired to lay high-voltage copper cabling as part of an upgrade to the Indian capital’s power grid.

They were struggling to get used to the food and the heat, they said, but on the whole they felt welcome. It was a rare but tangible example of how the two Asian giants could work together.

Back to the here and now, and China is said to want to take such cooperation much further by funding a third of the infrastructure projects earmarked in India’s current five-year plan – an offer worth about $300 billion.

According to a report in the Indian newspaper the Economic Times, Beijing presented Delhi with the plan in early February and Indian ministers are meeting this week to discuss it.

Details are limited, but the plan envisages a deal in which financing is tied to Chinese companies getting the construction contracts.

“Chinese interest is particularly high in railways, in particular electrification, high-speed trains, wagons, last-mile connectivity and gauge conversion. China has also identified sewage treatment and tunnel building as areas where it can offer substantial expertise,” the newspaper said.

An opinion piece alongside the article said that the Indian government should accept the offer “with open arms”. However, as the Economic Times also pointed out, similar proposals have been rebuffed in the past “over security worries.”

Such concerns often stem from fairly recent history: China and India fought a brief but decisive war in 1962 in which People’s Liberation Army overran the northeastern state of Arunachal Pradesh – known as south Tibet by China – before withdrawing to their pre-conflict positions. The defeat is raw in the minds of the Indian military and there has been no resolution of the border issue since.

So why would China make this offer now? The reasons are part commercial, part political. For years Chinese companies have wanted to break into the Indian market, where underinvestment and population growth has made the need for new roads, power stations and sanitation systems an imperative.

But the timing of the offer probably has a lot to do with Abe Shinzo, Japan’s prime minister. He recently proposed that Hawaii, Australia, Japan and India form “a diamond to safeguard maritime commons stretching from the Indian Ocean region to the western Pacific”.

Abe was India’s guest of honour at the country’s republic day parade on January 26 and around the same time Delhi invited Japan to participate in naval exercises that it holds with the US every year.

The reaction in the Chinese press was alternatively dismissive and aggressive, with one cartoon showing a confused, turban-wearing elephant being led along by a sly-looking Japanese solder.

The timing may also be linked to India’s upcoming election, where there is a good chance that the controversial BJP candidate Narendra Modi will become prime minster. This raises the possibility of Chinese companies getting more of a look in. Modi, who came to China in 2011 to drum up investment for the state in which he is chief minister, is widely seen as pro-business.

But he’s also a bit of a firebrand, which was demonstrated this week during a visit to Arunachal Pradesh when he called for China to “drop its expansionist mindset”.

Such nationalist remarks suggest that should Modi take high office, it’s by no means certain he’d take the Chinese offer.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.