Mamallapuram: Prime Minister Narendra Modi and Chinese President Xi Jinping Saturday wrapped up their second informal summit in the historical resort town of Mamallapuram, with the two sides agreeing to expand two-way trade in goods and services, and consolidate strategic communication between them.
Foreign Secretary Vijay Gokhale said the two leaders had agreed that the differences between India and China should not be allowed to dominate the discourse.
In an unprecedented move, the two countries Saturday agreed to create a dialogue mechanism on bilateral trade, addressing New Delhi’s longstanding concern on its widening trade deficit with Beijing that is rapidly moving towards $60 billion.
Bilateral trade has always been a contentious issue between India and China, even though both neighbours have supported each other in multilateral trading forums like the World Trade Organisation (WTO).
Separate mechanism on trade & investment
The biggest takeaway from the second informal summit has been the fact that Xi and Modi agreed to create a separate “mechanism on trade, investment and services”, which will be co-chaired by Finance Minister Nirmala Sitharaman and Chinese Vice-Premier Hu Chunhua, according to Foreign Secretary Vijay Gokhale.
Gokhale said both leaders had a “good conversation on trade”, adding that the new mechanism on trade will be announced soon along with the meeting dates, after diplomatic-level talks.
“Trade has been an issue of concern (for India). President Xi has said China is ready to take sincere action in this regard and to discuss in a very concrete way how to reduce the trade deficit,” Gokhale said.
India is now planning export a greater volume of rice and generic pharmaceuticals to China, in addition to boosting services trade by sending its professionals there. All these modalities will be discussed when the trade dialogue takes place, Gokhale said.
New Delhi and Beijing have never had any preferential trading arrangement, though they were part of the Asia-Pacific Trade Agreement (APTA) or Bangkok Agreement that was signed in 1975 under the United Nations Economic and Social Commission for the Asia Pacific. But the APTA never functioned effectively.
China signed a free trade agreement with Pakistan in 2006. In fact, this year, India’s northern and western neighbours have entered the second phase of their agreement, which will give greater market access to a wide range of Pakistani goods.
Modi and Xi’s announcement also comes at a time when US and China are locked in a trade war, which has sent jitters across global economies and markets.
Gokhale also said issues such as easing of visa rules for professionals and other trading opportunities will be discussed when the mechanism is put in place.
“India and China will continue to work together for open and inclusive trade arrangements that will benefit all countries,” stated a press release issued after the summit.
Sources said India has also sought investment by the country’s IT companies into China, another long-pending demand of New Delhi. India has also been seeking China’s support to get membership at the Asia-Pacific Economic Cooperation (APEC) for over a decade now.
China to look at India’s sensitivities to RCEP
India is facing a severe backlash from its domestic constituency, including from propoents of the Swadeshi economic philosophy affiliated to the RSS, on joining the ASEAN-led Regional Comprehensive Economic Partnership (RCEP). Modi urged Xi to keep in mind the sensitivities of its industry and farming community.
“As far as RCEP is concerned, the principle point of the Prime Minister is that in any free trade agreement, it is important to have a balance, which involves not only trade in goods which is bringing duties down, but also services and in investment. This was the point the PM made to Chinese President,” Gokhale said.
He added that President Xi “accepted” India’s concerns on RCEP, and said he would “take them into account”.
India and China are both members of the RCEP along with 10 ASEAN nations — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam — and their trade partners — Australia, Japan, South Korea and New Zealand.
The 28th and final round of RCEP negotiations are underway in Bangkok, and member countries plan to conclude the talks by next month. The RCEP negotiations were launched in 2012.
This will be the last ministerial before the 3rd Leaders’ Summit to be held on 4 November in Bangkok. Modi is expected to attend the summit, according to the commerce ministry.
‘Consolidation of strategic communication’
According to official sources, the biggest takeaway from the informal summit had been “consolidation of strategic communication and how some of the differences should not be allowed to dominate the discourse”.
Both sides reiterated their commitment from the first informal summit in Wuhan in April last year that “India and China are factors for stability in the current international landscape and that both side will prudently manage their differences and not allow differences on any issue to become disputes”.
This comes even as China and India have had major differences in the open over the issue of Beijing being an all-weather friend of Islamabad, especially on the Kashmir issue.
However, it needs to be also noted here that it is post the Wuhan informal summit that China agreed to support India’s long-pending effort to designate Jaish-e-Mohammed chief Masood Azhar as a global terrorist at the 1267 UN Sanctions Committee in May this year, post the Pulwama terror attack in February.
In his opening remarks before the delegation-level talks began, Modi said: “The level of strategic communication has also increased (post Wuhan). We have decided to prudently manage the differences between us and not let them become disputes.”
No discussion on Kashmir or Huawei
Interestingly, Modi and Xi did not discuss the controversial issue of the scrapping of Article 370, which removed the special status of Jammu and Kashmir, Gokhale said.
However, according to sources, Xi did apprise Modi on his recent meeting with Pakistan Prime Minister Imran Khan.
After Khan’s visit to Beijing earlier this week, China and Pakistan issued a joint statement that said China is “paying close attention to the current situation in Jammu & Kashmir and reiterated that the Kashmir issue is a dispute left from history”.
“China opposes any unilateral actions that complicate the situation,” the statement said.
Both sides also did not have any discussion on allowing Chinese telecom major Huawei to participate in India’s 5G roll-out.
Special Representatives to meet soon on boundary affairs
Xi and Modi directed their special representatives (SR) on boundary talks to meet soon. The 3,488-km-long Line of Actual Control between India and China has never been officially agreed upon as a border.
The last round of talks, which was expected to take place in September, got postponed as the Chinese SR cancelled his visit to India. But at the same time, he visited Pakistan.
India’s SR for the border talks is National Security Adviser Ajit Doval, while for China, it is Wang Yi, State Councillor and Foreign Minister.
Xi is now keen to expand defence cooperation between China and India. He has also extended an invitation to Defence Minister Rajnath Singh to visit China soon.
Informal summits to continue
President Xi also told PM Modi that he would like to continue this practicee of informal summits with him, as it helps in “heart-to-heart” talks.
“We can continue with this (informal) form of meeting… Last year, we held the first informal summit, and I agree it is a good idea. The Wuhan summit ushered a new stage of healthy and steady development,” Xi said in his opening remarks before the delegation-level talks.
“For the past one year, the informal summit continues to produce visible progress… You (PM Modi) and I had heart-to-heart discussions on bilateral relations. We’ve had a really in-depth engagement and good discussions.”
Gokhale also quoted President Xi as saying that the next informal summit will take place in China in a year’s time.