Xi and Modi: After Wuhan, What?

As curtain comes down on the high-profile albeit 'informal' summit between Indian Prime Minister Narendra Modi and Chinese President Xi Jinping in the central China city of Wuhan, Indian analysts are busy poring over the fine print to interpret what exactly was achieved at a meeting that had no agenda nor promised any outcome.

Widely perceived as an attempt to "reset" relations and rebuild trust, following an extended period of diplomatic estrangement between the two neighbouring nuclear powers, foreign ministry officials have dubbed the summit as an "understanding-centric" one for want of a better phrase.

“It remains an understanding-centric summit, rather than an outcome-centric one,” Ashok Kantha, former ambassador to China, who now heads the Institute of Chinese Studies, told an Indian news magazine. “There are a lot of concerns about each other's strategic intentions, and there is a need for closer strategic cooperation.”

Indeed there is. Bilateral relations, usually tense, have never been frostier. They hit a nadir after a 73-day-long military standoff in Doklam, a region overlapping Bhutan and India's eastern state of Sikkim last year where Indian and Chinese troops were locked in eyeball-to-eyeball, triggering fears of a war. Flashpoints in recent months have included China's frenetic activity in India's own strategic backyard and its attempts to woo New Delhi's old friends like the Maldives, Sri Lanka, Bhutan as well as the recently elected government in Nepal headed by Prime Minster K P. Oli.

Another reason why Xi and Modi are choosing communication over confrontation at this juncture is the escalating complexity of the regional and global landscape. For Xi, this summit came at a time when he is battling with America and keen to establish his legacy at home. He is also concerned about last year's meeting of India, the US, Japan and Australia - informally known as the Quad - after a decade-long hiatus, and their joint efforts to develop alternatives to the BRI. By engaging Modi, Xi hopes to arrest India's drift towards Washington.

Modi, on the other hand, seeks to engage with Xi on an equal footing to raise his own profile in front of his domestic audience (elections are due in 2019) as well in the region where he likes to project himself as an elder statesman. Interestingly, this was Modi’s fourth visit to China since he became prime minster in 2014. His first bilateral visit to China took place in 2015 followed by a visit to Hangzhou to take part in the G20 summit in 2016 and BRICS summit in Xiamen last year.

"The Wuhan summit," wrote The Economic Times, "may be informal in nature but has a geopolitical significance and context that can’t be overlooked. All these meetings will allow world leaders to position themselves amid the geopolitical flux...India is hoping to play the role of balancer in an international politics marked increasingly by uncertainty."

There were other issues playing on the two leaders' minds. Perhaps the most contentious was Beijing’s US$50-billion China-Pakistan Economic Corridor, part of its ambitious One Belt One Road plan that aims to link 70-plus countries to Beijing through infrastructure investments. Part of this project loops through contested-Kashmir which is making India skittish. However, Beijing is keen that India sign up for OBOR even though India has declined this citing national security concerns.

Be that as it may, both India and China recognize the need to iron out their differences and focus on convergences. Trade and investment offers huge payoffs for both. Economic ties have strengthened in recent years. The state-run Xinhua news agency reported that bilateral trade reached a record high of US$84.4 billion last year, up 20.3 percent from 2016, the fastest growth for five years. China has become India’s largest trading partner, with imports rising by more than 40 percent in 2017. Bilateral trade in Q1 hit US$22.1 billion, up 15.4 percent year-on-year. Chinese and Indian businesses signed 101 trade agreements in March, with a total contract value of US$2.4 billion.

Both neighbours realize that trade can be the pivot for resetting the relationship. However, the trade imbalance needs to be fixed. The current figures for the trade deficit between the two countries is US$63 billion. India’s trade deficit with China increased more than two-fold (219 percent) from US$16 billion in 2007-08 to $51 billion in 2016-17, according to commerce ministry data. India’s imports (US$61 billion) from China were six times its exports (US$10 billion) in 2016-17.

So far Beijing has given no hint that this situation is likely to change. China's statement following Wuhan doesn't refer to balance, instead it says the two will “tap into the full potential of business and investment cooperation, set new targets, harness positive forces, and explore new ways of cooperation to achieve win-win results.”

However, the big economic opportunity that India presents it with can't be lost on Beijing. By 2027, the nation of 1.2 billion is expected to be the world’s third-largest economy behind only the US and China. Also, with Donald Trump waging a global trade war, both Delhi and Beijing consider it prudent to join hands and engage in robust economic exchanges.

Keeping that in mind, Modi and Xi have agreed to undertake a joint India-China economic project in Afghanistan. In March, both nations’ trade ministers met to step up trade activities and Beijing gave a commitment on accelerating market access for Indian pharma products and agriculture commodities, both items Indian companies have long been keen on exporting to China.

Analysts also point to the intangibles that resulted from Wuhan. For instance, there is a heightened expectation now that military tensions along the the border since Doklam will likely de-escalate as both nations have agreed to actively work towards establishing a hotline between top commanders as well as resuming military exchanges and exercises, points out The Times of India.

"Strategic guidance" will also be issued to respective militaries to whittle down confrontations during patrolling in accordance with existing protocols and mechanisms. However, the Border Defense Cooperation Agreement inked between the two countries in October 2013, for instance, is yet to become fully operational.

Nobody on either side is under the illusion that post-Wuhan, differences will magically disappear. Or that the two-way strategic competition for power and influence will slow. China will continue to power its aggressive global outreach which India will continue to contest. Xi will also determinedly keep pushing his pet Belt and Road Initiative which New Delhi will vehemently oppose.

However, what is being hoped is that amid Wuhan's salubrious surroundings, the East Lake boat rides sans diplomats, a better understanding was achieved about each other's core concerns, sensitivities and ambitions. And that this augmented understanding will now inform their future strategic choices and diplomatic manoeuvres towards each other.

Neeta Lal,a New Delhi-based editor & journalist, tweets at @neeta_com. She is a regular longtime contributor to Asia Sentinel