China-India Brief #96


Published Twice a Month
June 28 – July 11, 2017

Centre on Asia and Globalisation
Lee Kuan Yew School of Public Policy

Guest Column

Border Regions as Economic Gateways:
Transnational Asian Connections between Yunnan and India

by Ritu Agarwal

Trade between India and China has expanded rapidly in recent decades. The commodities being traded usually have particular regional origins and destination markets in both the countries, so that trade is increasingly being shaped by regional and provincial considerations, rather than the policies of the central governments in both countries. In this context, China’s Southwestern province of Yunnan and India’s Northeastern region are increasingly connected in transnational networks of trade and commodity flows.

Yunnan is a border province in Southwestern China which lies in close geographical proximity to India’s Northeastern region. In comparison to other provinces in China, Yunnan has remained economically backward in terms of industrial development, transport infrastructure, and urbanization. Yunnan’s location in the mountainous hinterlands had historically created conditions of geographical isolation, which limited its economic integration with the rest of China. However, the provincial government’s innovative economic modelling, which viewed border regions as economic gateways, induced strong stimuli in economic and industrial transformations. This approach has two components.

Firstly, the border areas that Yunnan shares with Southeast Asian countries such as Myanmar, Laos, Vietnam, and Cambodia, are brought under an economic conception of gateway regions where the traditional fixity to borders are removed from economic planning. Secondly, the Yunnan provincial government introduced the opening up to the outside world as a key economic policy objective. The thrust of the new policy was to establish transport infrastructure by constructing highways as a means of attracting foreign investment. An ‘urban cluster model’ centred on Kunming, Yunnan’s capital, was envisaged. This involved greater connectivity between Kunming and other cities within the province, such as Chuxiong, Qujing, and Yuxi. Simultaneously, economic corridors were to connect Kunming with ports and cities in Myanmar, Vietnam, Bangkok, and India (as far as Kolkata).  

The objectives of the new development strategy, as unveiled by the provincial government, were geared towards procuring new markets for the local produce. Yunnan’s hinterland location and mountainous terrain posed formidable challenges in terms of finding market outlets for its produce. As such, it was imperative for the province to chart out a different economic model from that of China’s coastal regions. One possibility was to establish overland trade routes, which could result in lower transportation and logistics costs. Since China’s national market has already been dominated by manufactured goods from the coastal regions such as Guangdong and agricultural produces from other provinces such as Guizhou, the only way to offset the competitive domestic market was to find markets elsewhere, outside China.

In this regard, Yunnan’s geographical location, bordering the South-East Asian countries and the close proximity to South Asian countries such as India and Bangladesh, offered greater possibilities. Yunnan has a comparative advantage in hydrological resources, minerals, chemicals, and tobacco products. The search for new markets for these products has created new economic networks between Yunnan and the neighbouring regions. It has transformed backward border cities into important commercial centres and ports.

Yunnan’s provincial government has adopted different development strategies as compared to other economically backward regions of China. New mechanisms for transnational economic growth, such as the Great Mekong Subregional Economic Cooperation (GMS) and Bangladesh-China-India-Myanmar Forum for Regional Cooperation (BCIM) are being pursued by the central and provincial governments.

India has been assigned a special focus in Yunnan’s new development strategy, particularly since President Xi Jinping’s announcement of the ‘Belt and Road’ initiative. The Southwest Silk Road has historically served as a major trade and commercial linkage between Yunnan and India’s Northeast region. During the Second World War, the Stilwell Road was built as the main supply route from India’s Northeast to Kunming.

Since India’s metropolitan cities such as Delhi, Mumbai, and Bangalore are quite highly placed in production networks, the commodities which are produced in Yunnan, such as fertilizers, agricultural machinery, and textiles, have greater demand in its less-developed Northeast. Having said that, there is, at present, a negligible volume of trade between Yunnan and Northeast India.

The re-opening of the Stilwell Road, which connects Yunnan to India’s Assam state, through Myanmar, has gained wider public attention in China. This has the potential to facilitate greater trade between Yunnan and India’s Northeast. India has, however, been relatively hesitant to pursue greater connectivity with Yunnan, citing security issues.


Ritu Agarwal is Associate Professor Centre for East Asian Studies School of International Studies Jawaharlal Nehru University.


The views expressed in the article(s) are solely those of the author and do not necessarily reflect the position or policy of the Lee Kuan Yew School of Public Policy or the National University of Singapore.


News Reports

Bilateral relations
China and India border dispute raises fears of new Asian war
Newsweek, June 27
China has accused Indian border guards of crossing into its territory from the state of Sikkim on India’s northeastern border with Tibet, the Chinese foreign and defence ministries have said, complicating an already difficult relationship. Geng Shuang, a spokesman with China’s foreign ministry, said Indian guards “obstructed normal activities” by Chinese forces on the border and called on India to withdraw immediately, according to a ministry statement late on Monday. Nathu La connects India to Hindu and Buddhist sites in the region and was the site of a fierce border clash between Chinese and Indian troops in 1967.

China resolute in protecting sovereignty at Indian borders
Global Times, July 3
China will resolutely safeguard its border sovereignty in conflicts with Indian troops even at the cost of war, Chinese experts said. India’s defense ministry is surveying the China-India border in order to build an “all-weather railway corridor network” along the border, the India Today newspaper reported Friday, saying that a senior railway board official said the idea behind the corridors is to construct broad-gauge connectivity for the swift movement of troops and ammunition. Three of the four corridors are reportedly in the South Tibet area and the fourth is located in the Ladakh region of Jammu and Kashmir along the China border.

India urged to drop delusion of military strength
Global Times, July 6
China Wednesday urged India to immediately withdraw troops who illegally crossed the border to the Chinese side, in order to resolve a military standoff that has lasted 19 days, as experts said that India should not be overly confident about its military capability or have the delusion that China is afraid of it and will compromise on sovereignty issues. The military gap between China and India is even bigger than it was in 1962, the first time the two armies engaged in an armed conflict along the border, analysts said. There were two further border conflicts between China and India in 1967 and 1987, but neither was as large as that in 1962.

In a remote Himalayan corner, tensions rise between India and China
NPR, July 10
In a cold, isolated Himalayan plateau where three countries converge, an old rivalry is heating up. New Delhi and Beijing are locked in heated verbal exchanges over what each sees as encroachment onto a particularly sensitive spot: the tri-junction where India, China, and Bhutan converge. All three are parties to the simmering dispute. Tensions flared in mid-June, when China began constructing a road in the disputed Doklam Plateau. Both Beijing and Bhutan claim this territory. The Bhutanese note that the process of the boundary settlement is still under negotiation, and the status quo cannot be changed. The tiny Himalayan country turned to India, its long-time ally, for help.

India, China can handle border differences, foreign secretary says|
Channel News Asia, July 11
India and China can manage the differences that are likely to arise from time to time over their contested border, India’s Foreign Secretary S. Jaishankar said on Tuesday, commenting on recent tension sparked by Chinese road-building. In early June, according to the Chinese interpretation of events, Indian guards crossed into China’s Donglang region and obstructed work on a road on a plateau adjoining the mountainous Indian state of Sikkim. Troops from the two sides then confronted each other close to a valley controlled by China that separates India from Bhutan – a close Indian ally – and gives China access to the so-called Chicken’s Neck, a thin strip of land that connects India to its remote northeastern regions.


News Reports

China and India in the Regions

India, U.S. and Japan begin war games, and China hears a message
The New York Times, July 10
The navies of India, Japan and the United States began a set of war games on Monday with a particular target: submarines capable of sliding unannounced into the deep waters of the Indian Ocean, silently taking positions near the Indian coastline. It is not a mystery whose submarines are at issue. Last month, the Indian Navy announced a plan to permanently station warships to monitor movement through the Strait of Malacca, where many Chinese vessels enter from the South China Sea. And in recent weeks, navy officials here have reported a “surge” of Chinese military vessels entering the Indian Ocean. Routine maritime exercises have long served as a gauge of India’s uneasy relationship with China, prompting a shrug or a blast of condemnation, depending on the circumstances.

Vietnam is chasing India to escape the grip of China
Forbes, July 10
China and Vietnam have talked peacefully over the past year about cooperating despite a bitter, decades-old maritime sovereignty dispute. China needed to reconcile because a world arbitration court ruled in July 2016 against the legal basis for its claims to most of a 3.5 million-square-kilometer sea that overlaps waters heavily used by Vietnam. Vietnam wanted to talk because it depends so heavily on China’s economy, its top source of trade as of early 2017. Leaders in Hanoi weren’t sure whether U.S. President Donald Trump would help Vietnam military the way his predecessor Barack Obama had.

‘Third country’s’ army could enter Kashmir on behalf of Pakistan: Chinese media
Economic Times, July 9
A “third country’s” Army could enter Kashmir at Pakistan’s request, using the “same logic” the Indian Army used to stop the Chinese military from constructing a road in the Doklam area in the Sikkim sector on behalf of Bhutan, an analyst at a Chinese think tank said.  “Even if India were requested to defend Bhutan’s territory, this could only be limited to its established territory, not the disputed area,” Long Xingchun, Director at the Centre for Indian Studies at China West Normal University, said in the article he wrote in the Global Times. “Otherwise, under India’s logic, if the Pakistani government requests, a third country’s Army can enter the area disputed by India and Pakistan, including India-controlled Kashmir,” the article said.


News Reports

Trade and Economy

$1.9 million smuggled medicines from India seized by police
Global Times, June 30
Changchun Customs reportedly tracked down 13 million yuan ($1.9 million) worth of illegal medicines that are smuggled from India through online Daigou stores. After four months of investigation, customs officers captured 12 suspects smuggling medicines from India and hunted down 303 boxes of cancer drugs including Sofosbuvir and Daklinza in March, according to a report on Changchun customs’ website on May 31. It said that the suspects sent the medicines from India to China via direct mail by fabricating product names and then selling them to local Chinese at prices 100 to 124 percent higher than the price of medicines sold in India. Given the slow development in the domestic generic drug sector, medicine smuggling from India is a frequent occurrence, with six trials alone on  purchasing foreign medicines online in Shanghai, domestic newspaper Economic Information Daily reported Friday.

India has more in common with China than with US
Global Times, July 6
India clearly hopes it can stay in the limelight at the G20 summit. Trump’s decision to withdraw from the Paris climate agreement in June offers an opportunity for India to play a leadership role in some discussions. India is unlikely to give up the chance but it may have to work with China to seize the opportunity. In 2009 at the Copenhagen climate change conference, then-US President Barack Obama reportedly crashed a “closed-door” meeting between China and India to coordinate the positions of developing countries on climate change, although senior US officials subsequently denied that this had happened. Now, Trump’s decision to quit the Paris climate agreement means China and India, as the world’s largest and third-largest emitters of carbon dioxide, must show leadership on the issue, and enhanced coordination between Beijing and New Delhi is needed. In this context, the G20 offers an opportunity for China and India to ease the tension in bilateral ties from the border situation.

India-China IT and outsourcing services investment forum held
Global Times, July 9
The Consulate General of India in Shanghai along with Xuzhou Municipal People’s Government recently co-organized an India-China (Xuzhou) IT and Outsourcing Services Investment Forum in Xuzhou, Jiangsu Province Wednesday. The objective of the forum was to introduce the strengths of Indian IT/ITES companies to Xuzhou-based IT companies and to present specific sectors in which possibilities of cooperation with the Indian IT and service-outsourcing companies could be explored. A seven-member Indian delegation was led by Prakash Gupta, Indian Consul General in Shanghai, which included CEOs and senior representatives from Indian companies including Tech Mahindra, Zensar Technologies, Infosys and Wipro.

Modi’s India beats Xi’s China
Forbes, July 11
India has been on the radar of different international agencies in recent days and has been getting high marks for its reforms and growth prospects—beating China. Country risk monitoring agency Aon, for instance, is optimistic on India’s prospects. “India remains a relative bright spot in the region,” says Aon in its recent Political Risk Newsletter. “The government is moving towards implementing much-needed reforms and focusing on infrastructure in the current budget. These economic improvements offset the continued high level of political violence. The so-called demonetization process in November was not implemented very smoothly, but the impact seems to have faded and the economy is recovering. The ruling BJP has increased its share of vote’s preferences in various local elections, bolstering its position in the legislature. Although it is still well short of a majority, the government should be able to push through key reforms, which could bring some certainty for investors.” Meanwhile, Aon is less optimistic concerning China. “China’s tightening policy is set to be a strain on growth internally and abroad,” says Aon.


News Reports

Energy and Environment

Vietnam and India to spoil China’s South China Sea ambitions
Forbes, July 7
Vietnam and India are teaming up to tame China’s ambitions to control the South China Sea and the riches that are hidden beneath. Early this week, Vietnam granted Indian oil firm ONGC Videsh a two-year extension to explore oil block 128, according to a Reuters report. Vietnam’s and India’s challenge to China comes at a time when tensions between New Delhi and Beijing have flared on several fronts. Like the Dokalam area of Sikkim, where India has been trying to block China’s efforts to build a road, and where in reply Beijing has warned New Delhi that it is risking to suffer “greater losses” than 1962.



Strategic communication necessary for Sino-Indian ties to strengthen
Global Times, June 29
Strategic communication between China and India is necessary for the two countries. The Indian government refused to participate in the Belt and Road Forum for International Cooperation in May this year, which exposed the strategic discord between the two to the international community. Strategic mutual suspicions seem to be increasing. China and India should take efforts to remove and clear the suspicions as soon as possible. Enhancing bilateral trust will greatly benefit Sino-Indian relations and bilateral cooperation in the region. The content of strategic communication mainly concerns security and development interests in China and India, which can be explained from the bilateral, regional and global levels. It is worth noting that the overlapping areas of security and development interests should be the focus of the two countries’ strategic communication.

Sikkim standoff: China is angry because India has changed the rules of the game
Hindustan Times, July 9
All the elements of drama in high places are there. Six thousand soldiers from the world’s two largest countries are eyeball-to-eyeball, sometimes literally, on a remote chunk of Himalayan rock. The official discourse is becoming increasingly undiplomatic. The media on both sides is baying for blood. Amid all this the leaders of both countries are crossing paths in a far-off continent, trying to avoid discussing the crisis. One reason they aren’t: neither has a formula for resolution besides the other side playing dead. Best then to wait, watch and keep your powder dry. The real story may be elsewhere. India and China have some spectacular run-ins every few years.

India breaks international law over unwarranted fears
Global Times, July 9
On June 26, the spokesmen of China’s foreign affairs and defense ministries said that China has taken corresponding measures in response to Indian frontier officers illegally crossing the Sino-Indian border in the Sikkim sector, thwarting the normal activity of China’s frontier forces in the Doklam area. Some Indian media hyped up the incident, saying that the Chinese army invaded Indian territory. The Indian government did not release any relevant information then. On June 30, the Indian Ministry of External Affairs issued a statement about the standoff, which did not say that the Chinese army intruded Indian territory, as alleged by Indian media. The statement also admitted the Indian personnel approached the Chinese construction party at the Doklam area. 

Does the shrillness of the Chinese media on Doklam crisis indicate that Beijing is rattled?
Scroll, July 11
Another day, another salvo fired at India. Not by China per se, but by its relentlessly propagandist media. On July 9, it was once again the turn of the Global Times newspaperwhich got Long Xingchun, director at the Centre for Indian Studies at China West Normal University, to write that a “third country’s” Army could enter Kashmir at Pakistan’s request, using the “same logic” the Indian Army used to stop the Chinese military from constructing a road in the Doklam area in the Sikkim sector on behalf of Bhutan. No points for guessing the identity of the third country. Doklam is strategically important due to its location close to the Siliguri Corridor, the narrow strip of land connecting India’s seven northeastern states to its mainland.


Books and Journals

A Comparative Analysis between Green Industrial Policies of India and China: Review and Implications
Industry Policy and Sustainable Growth, May 2017
In the last century, the world has experienced adverse impacts of myopic industrialization on the environment in various countries. It drives policymakers to focus on designing an environment-friendly industrial policy i.e., “Green Industrial Policy.” In this context, the role of developing economy countries such as India and China becomes instrumental. This motivates the paper, by Arnab Adhikari and Shromona Ganguly, to investigate the green industrial policies of India and China and perform an in-depth comparative analysis. Here, Adhikari and Ganguli propose a framework encompassing different dimensions, namely, drivers, policy level reforms, and barriers of the green industrial policies of the abovementioned countries. Subsequently, the paper presents a comparative analysis between India and China in the context of policy level reforms. It narrates the comparative study of the green industrial policies of these two countries from the perspective of legislation and government programs, economic policies, and technical research and development policies. Finally, the paper explain the challenges associated with the green industrial policies of India and China and how these issues can be addressed.

Compiled and sent to you by Centre on Asia and Globalisation and
the Lee Kuan Yew School of Public Policy, National University of Singapore