Tag Archives: India-China relations

India – China Relations Potentials of Cooperation and Dissonance

30 Mar

 BY Sumedh Lokhande 


Source: http://articles.timesofindia.indiatimes.com/2012-12-05/china/35619433_1_oil-exploration-south-china-sea-hong-lei

 Something important is happening in Asia which the whole world is watching with eagerness and anxiety. The two most populous countries of the world have started their march towards the core of the international economic system and seem to be marching at a fair speed. It may be early into the present century but there are unmistakable allusions by various Think Tanks all over the world that the current century is going to be shaped largely by the actions of these two Asian giants.

India-China declared 2012 as the year of India-China friendship and co-operation. High-level mutual visits, agenda for cooperation in a number of areas, burgeoning trade and investments, multilateral cooperation marked the positive direction in bilateral relations even as some core national interests continued to bog down the relations between the two countries. Their relation has travelled a long way from a position of conflict to being major collaborators in some aspect of their bilateral engagements in the last 60 years. The question is how to explain this relationship between India-China? Does this relationship gives us allusions of cooperation or is just an illusion and how long it will last? In this article I have tried to study the points of convergence of interest and the potential of rift between the two Asian giants in future.


Potentials of cooperation


Border trade connectivity

India and China are said to cooperate in bilateral trade through their land borders under Bangladesh China India Myanmar regional forum (BCIM) established since 1999. China in the long run looks at it as a vital physical economic entry into 1.3 billion people market of South Asia; whereas for India it will open access to other business centers in the western, eastern and south-eastern China which will help in developing its northeastern region.


 Source: http://www.energybangla.com/2013/02/26/2543.html#.UVHBpxxHKWw


The border trade between India and China is conducted along three mountain corridors Gunji in Uttarakhand, Namgiya Shipkila in Himachal Pradesh and Nathu La in Sikkim. Beside trade this connectivity can also help to promote tourism in this region. Sikkim connects the major Buddhist destination in India and its neighbouring countries Bodh Gaya, Rumtek, Tawang in India Lumbini in Nepal and Taktsang in Bhutan to Jokhang and Potala in Lhasa.  The Nathu la trade route, if opened to tourist traffic, could integrated the tourism industry of Himalayan states in the north-east and other regions with similar features in the neighbouring countries like China, Bangladesh, Bhutan, Myanmar and Nepal.

 The Chinese central government has set a high priority on the resumption of trade through India trough sub regional arrangement along with Bangladesh and Myanmar as it will play a major role in developing in southern Tibet region and south western Yunnan province. Further China will have easy access to the ports of West Bengal and Bangladesh through which it can trade its goods directly to its western region as the distance between Lhasa, Tibet and Gangtok, Sikkim is roughly 590 kms. 

 But India is reluctant to commit itself to this initiative. My contention is that the reason why India chooses to go slow and remain cautious about this sub regional arrangement with China is directly related to a non-economic issue, namely, the intermittent flare-ups on border issue and China’s claim over Arunachal. Further, India also apprehends economic trouble as it will further help China in dumping its goods in India. As a result, despite several visits by trade, development and investment officials from Yunnan Province hardly US $ 1.125 million worth of goods were exported and imported through border trade in 2012.


Cooperation in Climate Change

India and China have emerged as defenders of the global South in the international climate change arena which has been polarized into a North versus south negotiation. The climate change debate today is centered on whose responsibility it is to clean up and protect the environment. For years, India and China have presented a united front in various international negations and agreements. Both nations have asked developed nations to slash their carbon output and at the same time have refused to accept the cap on their carbon emission as it will hurt their growth.

In 2009 they made it official and signed a Memorandum of Understanding (MoU) for exchange of views on energy conservation and efficiency, to increase cooperation in renewable energy and forest management, to deepen mutual understanding, and strengthen coordination by enhancing cooperation.

The economic and social benefits of cooperation in Climate change could be huge for both countries as they both are in search of renewable source of energy as it will reduce their burden of importing large resources of oil, natural gas and coal and will also reduce their carbon emission without hurting their growth. Take for instance Government of India wants India to emerge as a global leader in solar power generation. It not only has a Ministry of New and renewable Energy, but has also set-up the Jawaharlal Nehru National Solar mission and is providing capital subsidies, for solar power generation. On the other hand China’s ambition is to become a major player in solar industry, and have already managed to reduce the price of their solar panels by 75% over their US counterparts. As a result China could be strategic partner for India in achieving its dream of generation 20, 000 megawatts of grid-connected solar power by 2022 under its Jawaharlal Nehru National Solar Mission.

Energy Sector cooperation and competition

 According to World Energy Outlook in 2030 the world’s energy needs would be well over 50% higher than today. China and India together alone will account for 45% of the increase in global primary energy demand in this scenario.

Today China has already surpassed USA in terms of energy consumption and continues to import increasingly large quantities of energy to support its rapidly growing economy. India promotes itself as a major importer of energy from all possible sources and has emerged as a major energy market in the world. In short,increasing energy consumption is making it a necessary condition for them to cooperate, seeing it as their common interest to sustain their growth. Are they, really cooperating? The two countries collaborated in four cases, viz., Sudan, Syria, Iran and Colombia. In Sudan (March 2003), India paid $750 million for 25% of oil share while the Chinese company CNPC paid $441 million for 37%. In Iran (September 2006), India got only 29% shares while China got 51%. Further China has successfully out bid India in four other oil fields Angola, Kazakhstan, Ecuador and Nigeria and India is collaborating with other nations to compete with China e.g. India-Vietnam joint oil exploration.

It is clear that, even while cooperating in energy sector they are competing with each other; here China has upper hand over India due to its vast economic resources.

In the Following video Venu Rajamony a Senior Indian Diplomat talks about challenges and opportunity for India in energy security.



Potential of dissonance


The dams on Brahmaputra River

Despite a well-functioned relationship between India and China in recent decades, the Brahmaputra River may pose new challenge to the continued supply of fresh water for both countries in the future. China is constructing a major 510 MW hydro-power dam on the Brahmaputra River. This project in Zangmu in the Tibet Autonomous region (TAR) began to be built in 2010 and is expected to be complete in 2015. When India rose concern over this dam China assured that the Dam is a small project which will not have any impact on the river’s downstream flow into north-east India. But this year in January China has given nod for three new dams on the Brahmaputra river and one of the three approved new dams is bigger than the Zangmu Project.

A 640 MW dam will be built in Dagu, Which lies 18 km upstream of Zangum. Another 320 MW dam will be built at Jiacha, and the third dam will be built at Jiexu, 11 Km upstream of Zangmu.

ImageSource: http://www.thehindu.com/news/international/china-gives-goahead-for-three-new-brahmaputra-dams/article4358195.ece

This has alarmed Indian side as it can have a major impact on ecological system of India’s north eastern region and once the dams are completed, the control on the water of Brahmaputra will be in the hands of China. If China blocks the water in Brahmaputra it will lead to famine in Northeastern region of India. Further, the dams will block the flow of minerals through water and block the fish migration. All this will adversely affect the ecology and led to environmental imbalance of this region.

There are also reports suggesting that China in the long run wants to divert this water towards its northern and eastern region. However, with the three new approvals under the energy plan, four hydropower projects will now be built- on the main stream of the middle reach of the Brahmaputra which are enough to increase India’s water crisis in near and midterm future.


  Source:  http://www.thehindu.com/news/international/china-gives-goahead-for-three-new-brahmaputra-dams/article4358195.ece


As  a result its high time that India takes this issue seriously as it could be too late very soon.


Source: http://cartoonistsatish.blogspot.in/2011/06/chinas-swallow-india-mission.html


India and  China -Pakistan relations

From the very beginning, China has been projected the threat factor that could push India to cross the nuclear threshold. Further China has assisted Pakistan to lay hands on nuclear weapons. Today Nearly 70% of Pakistani battle tanks and 50% of combat aircraft are of Chinese origin. Since the beginning of this century, China has embarked upon massive modernization of its armed forces. This Chinese modernization programme forces India to pursue an effective deterrence programme. According to an Indian intelligence report China has at least 25 nuclear-tipped medium-range ballistic missiles based in Tibet, along with an undisclosed number of nuclear-configured short-range tactical missiles. These deployments are singularly India-specific as they have the range to strike major Indian cities or engage military formations in the Himalayas.



Given the gap in the conventional military capabilities between the two countries, it has become imperative for India to build credible deterrence with nuclear weapons. For instance India’s Agni 5 Nuclear Missile has created deterrence as it can hit all major Chinese cities including Shanghai and Beijing.

Following video gives us Chinese perspective on Agni 5 


Although China views USA as its main strategic rival in Asia-Pacific region, it has actively sought to contain India by providing nuclear weapons capabilities to Pakistan. The current two Pakistani nuclear reactors Chashma 1 and Chashma 2 are Chinese made. China has also provided nuclear weapons technology to Pakistan, for e.g. it traded ring magnets used to produce enriched uranium for missiles in the 1990s. China and Pakistan reached a formal agreement last month to construct a third nuclear reactor in the northern province of Punjab. The secret agreement for the Chashma3 reactor was signed in Beijing which calls for the state- run China National Nuclear Corp (CNNC) to construct a 1,000 megawatt power plant at Chasma.

Further India has a long term ambition to join the Nuclear Suppliers Group NSG, but China is opposing the move and instead supporting Pakistan for the same. This all-weather friendship between China and Pakistan can cause an India China conflict; e.g. after the2008 attacks in Mumbai a senior Chinese leader gave an on record statement that if India attacks Pakistan it will annex Arunachal Pradesh as southern Tibet.


India China and the big fight in Indian Ocean


     Source: http://www.globaltimes.cn/content/739276.shtml

Both, India and China, seeking to develop economically rapidly need abundant and regular supply of many resources. China’s oil consumption doubled between 1995 and 2005, and it is estimated that it will grow even faster between 2005 and 2015 surpassing US consumption. As a result its demand for oil and gas will keep on increasing. Similarly, India’s energy consumption accounts for about 3.5% of the world; making it the fifth largest consumer, with its ever increasing population and its desire to become a superpower will force it to increase its primary energy supply by at least 3 to 4 times and its electricity generation capacity by 5 to 6 times  by 2031.

 Today, nearly 80 % of Chinese trade, particularly oil, and 97% of India’s trade are through the sea lanes of Indian Ocean. Beside this two-third of world’s oil trade and one-third of bulk cargo is carried through this region. India considers Indian Ocean as its own lake and justifies its legitimacy in these waters. On the other hand, increasing economic interest and the need to protect its trade lanes in this region has made China increase its naval presence. For this purpose China has collaborated and developed sea ports in a number of littoral states surrounding India. These ports can be used both for civil and military purposes.

This strategy is popularly known as String of Pearls, which India feels is to keep India boxed within South Asia and contain its Influence over Indian Ocean.


Source: http://www.theworldreporter.com/2009/06/chinese-string-of-pearls-theory.html

India has tried to counter balance this strategy with its so called Necklace of diamond. Under this strategy, it is building military relations with key countries in the Indian and Pacific Ocean with Australia, Indonesia, Vietnam, Japan, with our neighbouring countries in South Asia along the Chinese trade lanes. Last year India commissioned NAS Baaz, India’s first naval air station at Campbell Bay, the southernmost island of the Andaman and Nicobar group of Islands. This will enhance its surveillance capacity not only in the Straits of Malacca but also the Straits of Sunda and Lombok.


Source: http://www.telegraphindia.com/1120710/jsp/frontpage/story_15711340.jsp

 If one closely looks at the region stretching from Indonesia to Japan it resembles a necklace with Australia as its diamond. Further it has also developed relations with the gulf countries particularly Iran where it has invested in developing Chabahar port to counter China’s Gwadar port in Pakistan.


 Source: http://defenceforumindia.com/forum/subcontinent-central-asia/5536-chabahar-port-vs-gwadar-port.html

The above scenario makes it clear that Indian Ocean is one core area of divergence, if not conflict, as China which is not an Indian Ocean Power is investing a lot of diplomatic and military power to become one. On the other hand, India which is not a South or East China Sea power, is working hard to project itself as one of the main power by developing relations with littoral nations in this region. One can say that this is the crux of India China Strategic rivalry. These are important ponderings because the shape of the twenty-first century international system depends largely on the future juxtaposition of these two countries


The recent interactions between India and China in the last one decade indicate moves toward normalistaion of ties on certain issues such as bilateral trade, climate change etc. and yet stalemate on certain issues such as border dispute, defense ties etc. India is also not entirely comfortable with directly engaging China within any multilateral arrangement, wherein India may be a lesser player vis-à-vis China. The New Chinese President Xi Jinping has assured India that China would pay “great importance” to developing bilateral ties and expects to carry out close cooperation with India to create a brighter future of their bilateral trade. At the same time he also had given the nod to develop Chashma 3 nuclear reactor for Pakistan which is said to be India centric. As a result India should look at these developments with caution as there is a saying in international diplomacy: Watch what countries do, rather than what they say.

 Further since India and China share the same neighbourhood similar compulsions and similar self-perceptions they are bound to compete directly and also over the neighbourhood in all matters, most important among them being security in the future to come. For the time being they are trying to avoid direct confrontation, demonstrating commitment to cooperation and friendly relations.





2. http://www.idsa.in/idsacomments/IndiaandtheOutgoingChineseLeadership_RNDas_141112

3. http://ipcs.org/event-details/release-of-ipcs-task-force-reports-991.html

4. http://www.elp.com/news/2013/03/09/energy-cooperation-in-bcim-region.html


6. http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aFyFHkF6C3Fs

7. http://english.cbcsd.org.cn/dynamic/proseminar/3173.shtml

8. http://online.wsj.com/article/SB10001424052702303836404577476090216555460.html

9. http://chinawaterrisk.org/resources/analysis-reviews/china-water-portrait-past-future/

10. http://www.thehindu.com/news/international/china-gives-goahead-for-three-new-brahmaputra-dams/article4358195.ece

11. http://www.ipcs.org/article/india/india-china-and-bangladesh-the-contentious-politics-of-the-brahmaputra-3840.html

12. http://csis.org/files/publication/twq12winterpant.pdf

13. http://www.dnaindia.com/india/report_pakistans-new-loc-bunkers-have-made-by-china-stamp_1788414

14. http://www.pakistantoday.com.pk/2013/03/22/news/foreign/china-to-supply-nuclear-reactor-to-pakistan /

15. http://www.theepochtimes.com/n2/china-news/chinese-pakistani-reactor-hints-at-nuclear-weapons-cooperation-368740.html

16. http://www.indiandefencereview.com/spotlights/the-challenge-posed-by-chinas-military-posture-in-tibet/

17. http://articles.timesofindia.indiatimes.com/2013-03-05/india/37469245_1_defence-budget-defence-expenditure-indian-defence

18. http://www.sikharchives.com/?p=4365

19. http://www.rediff.com/news/slide-show/slide-show-1-india-to-counter-chinas-threat-by-necklace-of-diamonds/20120131.htm

20. http://www.india-seminar.com/2011/617/617_c_raja_mohan.htm

21. Pramod Kumar, “Asian Maritime Diplomacy: an Economic Analysis”, World Focus, January 2013.

22. ArunodayBajpai, “India’s Maritime Strategy: Challenges and Response”, World Focus, January 2013.


India China bilateral trade and India’s Fiscal Problem

22 Mar



The first decade of 21st century witnessed rapprochement of India China relations which were stagnant since the Sino-Indian war 1962. Bi-lateral trade between the two nations became  the main driving force towards normalisation of relations. Since 2000 there is steep rise in bilateral trade and is expected to reach US $ 100 billion in 2015. But the increasing lopsided balance of trade in China’s favour has become a source of anguish in Indian policy circles, and has played an important role in increasing India’s balance of payment woes. This year the trade deficit increased a record high to US dollar 29 billion despite of 12% fall in bi-lateral trade compared to last year. In this article I have made an attempt to understand the cause of trade deficit, its implication on India’s economy and what India should do to create a better balance.

Trade and economic relations

India and China officially resumed trade in 1978 and in 1984, the two sides signed the Most Favoured Nation (MFN) Agreement. From 1992 both nations began active bilateral trade which made satisfactory progress by 1994.In the same year both countries signed a Double Taxation Avoidance Agreement and the prevention of fiscal evasion with respect to tax on income. In three years from 1999-2000 to 2002-03, India’s export to China increased at an average of 50.2% per year, and imports from China at 26.6% per year. Further by deciding to offer some trade benefits to each other both countries signed the Bangkok Agreement in 2003. According to the Agreement, China extended concessions on 217 products from India while India offered concessions on 188 products exported by China. After this deal India-China bilateral trade got a boost and it surpassed US $ 10 billion in 2004, China became India’s largest trading partner by 2008, and in 2010 both proposed to achieve US $ 100 billion by 2015 as a result by 2011-12 the trade between both countries reached 73.9 billion.

The flip side is that much of the trade has been in China’s favour, leaving India with a deficit of $27 billion in 2011-12 and this year it reached US $ 29 billion despite 12 % fall in bilateral trade. For every $100 item that India sells to China, It buys back goods worth $320.


Source:        http://online.wsj.com/article/SB10000872396390443687504577563542149677000.html

As shown in the above figure India’s export to China mainly consist of raw materials, whereas China’s export consists of manufactured and value added goods. Though India has urged Chinese government to better the lopsided bilateral trade nothing much has happened. It is not easy for Indian goods to enter China and the most restrained are the Indian pharmaceutical products which find it difficult to reach the Chinese market.  According to Som Mittal, President, Nasscom (a trade association) Indian companies struggle in China due to non-tariff barriers such as requirements to obtain security clearances before doing business with government backed companies.

On one side Indian firms and value added goods are restricted from entering China and on the other hand Chinese manufactured goods are invading Indian markets this has adversely affected growth of manufacturing Industry in India. The image below shows the adverse affect of this bilateral trade on Indian economy.


Source: http://www.rediff.com/business/Union-Budget-2012-13/slideshows

Indian manufactures are unable to compete with cheap Chinese goods. The main problem is that China doesn’t have any strong Intellectual property rights laws. As a result whenever a new product is launched in international market Chinese firms are ready with their cheap replicas which look more or less similar to the original.


Source: http://www.91mobiles.com/video/24415/China+wholesale+Nokia+N87+style+qwerty+keypad+phone.html

Today 60% goods in Indian local markets are of Chinese origin raging from stationary, household, decorative, fine arts, God idols, firecrackers etc. This has resulted in stagnation of Indian cottage industry; according to a report in the last 10 years nearly 50 % of cottage industries in towns like Bhiwandi have shut down. It has also giving tough time for major manufacturing industries in India. For instance, Bharat Heavy Electricals a US $ 13 billion New Delhi- based producer of power equipment is struggling to compete against lower-priced products from Shanghai Electric and Dongfang Electric.

The main concern on India’s side is dumping of large number of Chinese goods in Indian markets. India has been most disgruntled by Chinese trade manipulations and has lodged a total of 137 cases with the World Trade Organisation (WTO) against China in the last 15 years. India imposed banned on a number of Chinese goods in India e.g. import of milk and milk products such as chocolates in 2008 and since then it has been extended. India also imposed ban on import of Chinese toys for six months in 2010 which was lifted after two months when China warned to take up issue in WTO. In 2011 India also imposed ban on import of Chinese telephone equipment. Even after celebrating 2012 as a friendship year, in January 2013 government of India has imposed safeguard duties on import of certain insulators from China   for a period of two years; 35% for the first and 25% for the subsequent year. India has also imposed a 20 % tax on imports of hot rolled flat products of stainless steel from China to protect local producers which is said to last for 200 days.  But these moves by government has not helped as despite a decline of trade by 12% between two countries the Fiscal deficit has still increased by US $ 1.79 billion taking it to a record high US $ 29 billion dollar; it means these moves have constrained competition rather than the competitor. Today china accounts for a fifth of India’s overall fiscal deficit.

How to tackle with this fiscal problem

India’s economic development is based on IT and Service sector whereas China’s development is based on manufacturing. As a result India dose not produces much that it could export to China and in case of IT and Service sector language becomes a problem; our specialization is English and not Mandarin which is phonetically different from English.  Hence the best way to tackle this trade deficit is to improve manufacturing and industrial sector which is on decline as Indian markets are becoming more dependent on Chinese products and if this dependency increases Indian markets will soon be monopolised by Chinese goods. On the other hand China is aggressively developing its service sector and if the growth continues it is likely to take over Indian service sector in future.

The image below shows the decline of 3.7% in industrial production this fiscal year compared to same period of 2011-12.


Source: http://www.rediff.com/business/slide-show/slide-show-1-indias-industrial-output-falls/20130212.htm

The image below shows the increase in China’s service sector


Source: http://www.economist.com/blogs/analects/2013/02/services-sector

Hence it’s high time that India rebalances its economy by developing Industrial sector, which is plagued in low productivity. If India is successful in building infrastructure for producing ancillaries it will dent India’s imports from China; this will not only reduce fiscal deficit but, in the long run help India to become self-sufficient in manufacturing, and will complement its service sector.

The main hurdle is India’s underdeveloped infrastructure and the rising cost of land, non-availability of electricity and water whereas on the positive side it has a large human resources and an increasing middle class that has emerged as a large global market. If India wishes to become a developed nation it’s over dependency on service sector will take it nowhere. If taken into account Indian government’s record in policy framing and its implementation it will take two decades from now to make India self-sufficient in manufacturing.

For the time being India should ask Chinese companies wishing to remain major suppliers to Indian companies start manufacturing in India. India should also ask Chinese companies and Banks to invest in India’s infrastructure. This will increase Chinese investment in India.

Further India must demand higher market access for Indian value added goods in China and should plug into the Chinese supply chain by exporting goods not found in China which will help decrease the fiscal deficit.

By taking into account China’s ability to produce low cost manufacturing goods and India’s inability to do the same, the fiscal deficit is likely to persist in near future. As a result in the current decade, India’s top economic priority should focus on infrastructure building to develop its industrial sector. The sooner the infrastructure deficit gets addressed, the faster India will start competing with China on the manufacturing front.

By Sumedh Lokhande


1        http://takshashila.org.in/wp-content/uploads/2010/03/PB-AnanthRitwick-IndiaChinaTrade-Sep2011.pdf

2        http://articles.timesofindia.indiatimes.com/2013-01-25/outsourcing/36547143_1_china-indian-bpos-convergys

3        http://www.bjreview.com.cn/business/txt/2012-12/31/content_509748_2.htm

4        http://www.businessweek.com/articles/2012-03-21/indias-misguided-china-anxiety

5        http://www.businessweek.com/articles/2012-02-23/chinese-imports-invade-india

6        http://www.iprochina.com/news_detail/newsId=2863bd68-8092-4ab1-94b8-8e7385c79cf3.html

7        http://www.bloomberg.com/news/2013-01-07/india-imposes-20-import-tax-on-chinese-hot-rolled-flat-steel.html

8        http://ema-europe.org/2012/04/india-vs-china-the-elephant-can-not-fly-like-the-dragon-unless-winged/

9        http://www.thehindu.com/business/Economy/indias-trade-with-china-falls-12/article4295117.ece

10    http://online.wsj.com/article/SB10000872396390443687504577563542149677000.html

11    http://www.indianembassy.org.cn/DynamicContent.aspx?MenuId=3&SubMenuId=0

South China Sea a Sea of Disputes

10 Mar


Source:   http://www.economist.com/node/17493342

South China Sea (SCS) is a marginal  sea around 3,500,000 sq km it is part of Pacific Ocean encompassing an area from Singapore and Malacca Straits to the Strait of Taiwan.One third of the world’s shipping transit through it;  it is believed that its seabed has huge oil and gas reserves. It comprises over 200 islands, rocks, and reefs and includes the Paracels and Spratly groups of islands. The unresolved maritime claims to all, or parts, of South China Sea involve Vietnam, Malaysia, the Philippines, Brunei, Taiwan, and China. Vietnam Taiwan and China have claimed entire area, while others have claimed contiguous zones.

Beside its dispute I have also made an attempt to understand the geopolitics surrounding South China Sea; its strategic importance to China, role of USA, and how India is trying to counter balance China with its “Necklace of Diamond” strategy against China’s so-called “String of Pearls”.

Historical background and claims in South China Sea (SCS)

Historically this sea was controlled by various Dynasties that ruled China from 206 B.C. to 589 A.D. From 7thcentury it was controlled by Kingdom of Champ which ruled today’s Vietnam and from 1644A.D. to 1911 by Qing Dynasty of China.Later, during WW II, it was under Japanese control. Hence, China, Vietnam and Taiwan claim entire SCS as they have historical evidences to support their claims. In 1887 China and France signed a boundary agreement which specified that islands situated east of the designated line belonged to China.In San Francisco Conference of September 1951 the allied powers failed to identify who had title to the SCS islands after they divested Japan from its possession. Article 2(f) of the San Francisco Treaty simply stated that “Japan renounces all right, title, and claim to the Spratly and Paracel Island.[1] This gave rise to a legal and political vacuum, and thereby allowed the littoral states to raise their respective claims. The separation of historical claims from actual occupation played a significant role for the subsequent development of the SCS dispute.

On 12 May 1977 Vietnam declared a 200 nautical mile Exclusive Economic Zone (EEZ), and included the Paracels and Spratlys islands in its territorial water, by 1999 some 27 islands and reefs were occupied by Vietnam in the Spratlys. During the same period Philippine occupied eight islands beginning in March 1978, and issued a declaration incorporating the claim into the Philippine territory in the following December. From one continental shelf in 1979 Malaysia occupied 5 shelves by 1999.

The United Nations Convention on the Law of the Sea (UNCLOS) in1982 has laid down a number of guidelines concerning the status of islands, continental shelves, exclusive economic zones (EEZ), enclosed seas, and territorial limits. UNCLOS states that countries with overlapping claims must resolve them though good faith negotiation.

Association of Southeast Asian Nations (ASEAN) has been keen to ensure that the territorial disputes within the SCS do not escalate into armed conflict. As such,  Joint Development  Authority have been set up in areas of overlapping claims to jointly develop the area and divide the profits equally without settling the issue of sovereignty over the area.


The image below shows their respective claims


Source:    http://www.economist.com/blogs/analects/2012/08/south-china-sea

The image below shows how UNCLOS (1982) has defined their maritime boundaries as regard to Exclusive Economic Zone (EEZ)



The latest escalation on friction has started with a confrontation between China and the Philippines over the Scarborough Shoal and International bids by China and Vietnam for oil exploration in areas of the SCS contested by the two[2].


Source: http://www.asiaobserver.org/asian-political-cartoons

Efforts by the Philippines and Vietnam to get the support of their ASEAN counterparts during the 45th ministerial meeting on 9 July 2012 resulted in ASEAN’s inability to issue a communiqué for the 1sttime. The disputes are likely to persist or even grow as there is a large potential for oil and gas reserves along with rich marine resources in SCS.

Therefore, without a strong, effective and permanent dispute settlements mechanism with a binding legal force, UN and ASEAN can only manage, not settle the disputes in SCS.

China’s Strategic interests in South China Sea (SCS)

China with its rapid economic and military growth has started playing a major role in shaping the geopolitics of world in general and Asia-Pacific in particular. In the longer term, China probably aspires to supplant America’s pre-eminence, but in the shorter and medium term it is preoccupied with domestic problems, with trying to expand its influence in neighbouring regions and warding off perceived US pressures or designs that are seen as inimical to China’s interest.[3] China has claimed almost 90 % of SCS as its own integral part according to its 9dash line map based on historical evidence.


Source: http://www.cnas.org/blogs/naturalsecurity/2012/11/beijing-pushes-diplomatic-envelop-south-china-sea-dispute.html

About 80% of China’s imported oil supply passes through SCS, and almost 90% of its export is through this region.Beside it is believed that SCS has a large number of hydrocarbon reserves mainly oil and natural gas. As a result, control of SCS is central to China’s strategic thinking. The most important priority in China’s foreign policy objectives in Asia-Pacific, including the SCS, is to ensure a stable external environment conducive to China’s economic growth and military modernization.

To enlarge its political and economic space and to conscribe the United States from undertaking perceived anti-China moves in this regionChina has been building various cooperative multilateral institutions and bilateral partnerships with neighbouring countries.


Source: http://www.economist.com/node/21562272

USA and its Strategic Interest in Asia Pacific

Long before USA became an Atlantic power it was a Pacific Power. United States has been dominant in the Asia-Pacific because of three structural factors: Its claims global leadership; secondly US perceives Pacific Ocean as a natural zone of American influence, as “our lake”; and the third is the outcome of the dynamics of the US political system.[4]



East Asia/Southeast Asiais a multi-billion dollar market for US agricultural products and supports, directly and indirectly, millions of American jobs in all sectors of the US economy. Besides its economic worth, Southeast Asia is of great strategic importance for the United States. It is situated in the middle of the sea routes from the Persian Gulf and the Indian Ocean to the Pacific, through which much of the world’s trade and energy supplies pass. Hence the fundamental goal of the US in the Asia-Pacific is to prevent the domination of Southeast Asia by any other power.


Source: http://www.asiaobserver.org/asian-political-cartoons

With this brief prescription it becomes clear that the issue SCS is a core issue of US National Interest. China wants to deal with each of its rivals one-on-one and is moving to exploit competing claims within ASEAN to keep its members divided. Meanwhile United States claims that it, is trying to foster a unified ASEAN code of conduct in the dispute with China.

The following video gives us glimpse of current situation in the disputed region


India’s rise and its strategic interest in South China Sea (SCS)

The East Sea/South China Sea’s geopolitics has an ancient as well as contemporary significance for India. Strategically, India believes that enhancing its engagements in East Asia is one of the measures to limit China’s influence on South Asia and Indian Ocean.


Source: http://globalbalita.com/2013/01/15/island-nations-play-china-and-india/

Under the look East Policy launched by India in 1991, a new phase of economic and engagements with ASEAN and East Asian states was initiated. This brought India and China face to face. India has a strong strategic interest in keeping sea lanes open in SCS, in order to promote its political, military, economic and cultural cooperation with the East Asian region. In 1996 India became member of ASEAN Regional Forum (ARF;in 2005 it was included unequivocally in East Asia Summit. This means that India has transcended its South Asian Focus and has emerged on the wider regional scene as an actor with significant broader Asian interest.

In December last year India hosted India-ASEAN commemorative Summit celebrating the 20th anniversary of Indian-ASEAN dialogue partnership and 10th anniversary of Indian-ASEAN summit level partnership. Wary of continued Chinese aggression in the SCS, ASEAN nations are looking at India to take a leading role in this region’s maritime politics.

The SCS is not only a strategic maritime link between the pacific and the Indian oceans, but vital gateway for shipping in East Asia, almost 50% of India’s trade transits through the SCS. Besides the political, security, trade and connectivity significance India is also interested in the energy resources of this region. Apart from helping secure energy supplies for countries like Japan and Korea, India has the unique distinction of shipping oil from Sakhalin to Mangalore through sea routes of this region.


Source: http://www.thehindu.com/news/international/china-summons-us-diplomat-over-south-china-sea-row/article3731681.ece

India’s (ONGC Videsh) oil exploration in collaboration with PetroVietnam  annoyed China and resulted in a small skirmish between them;China deliberately tried to hammer India’s oil exploration.In December 2012,Indiastated that its interest in this region are purely commercial, aimed at energy exploration and it will use force if needed to secure it.

The following video further supplements my argument.





From the above explanation it becomes clear that Southeast Asia is witnessing an emergence of a new tri-polar structure with China, USA and India as its poles and where USA’s hegemony is challenged by China.

India is now being courted by USA as a counterweight to China as both are huge countries and know how to calculate their national interests.  The recent rise of China’s assertiveness in SCS has a direct linkage with its acquisition of Gwadar port (Pakistan), it is believed that it will drastically reduce China’s dependency on the Malacca strait and hence will allow China to even use coercive measures against its opponents. If China continues to assert dominance over these waters, it will be difficult for India to continue with its activities through this channel. Therefore, it is vital for India to have access to the region.

China’s recent acts in the SCS indicate that it is unilaterally trying to change the status Quo in SCS through its revisionist agenda i.e. a shift from land centric to maritime diplomacy. On India’s part if it is concerned about freedom of navigation this is an issue that will profoundly impact Indian foreign policy.



The difference in economic and military potentials between India and China is so great that today it is impossible to talk about parity, but it is equally true that despite its limited resources India  possess biggest challenge to China’s Hegemony in Asia-Pacific. Hence India will continue to actively indicate its presence in this and other regions vital to its interests, but it is unlikely that they will start a direct confrontation with each other at least in near future.

By SumedhLokhande


[1]LeszekBuszynski & IskandarSazalan, Maritime Claims and Energy Cooperation in the South China Sea, Contemporary Southeast Asia, Vol. 29, no.1 (April 2007), p. 144.

[2]Vikram Nehru, Collision course in South China Sea, The National Interest.

[3]Daljit Singh, Asia-Pacific Political & Security Dynamics, in Political & Security Dynamics Of south & SEA, (ISEAS)2007, p., 27.

[4]JornDosch, United States Security Policies in Asia, Hodeley&Ruland, (ISEAS) 2006, p., 112.

5 Vo XuanVinh, India’s Stand on the East Sea/South China Sea Disputes and its Implications, World Focus, January 2013.

6 Dr. Jagannath Panda, South China Sea: ASEAN wants India to Counter China, World Focus, January 2013.


8 http://www.thejakartapost.com/news/2012/07/28/open-war-south-china-sea.html

9 http://www.bbc.co.uk/news/world-asia-pacific-13748349

10  http://www.eia.gov/countries/regions-topics.cfm?fips=SCS

11 http://www.voanews.com/content/south-china-sea-dispute-poses-challenge-for-us/1592927.html

12  http://maritimeindia.org/article/south-china-sea-dispute-and-india

13  http://www.rediff.com/news/slide-show/slide-show-1-india-to-counter-chinas-threat-by-necklace-of-diamonds/20120131.htm#1

14 http://www.futuredirections.org.au/publications/associate-papers/613-india-s-strategic-perceptions-dilemmas-and-opportunities.html