Where do relations between New Delhi and Beijing stand following Prime Minister Narendra Modi’s visit to China the other week? Pretty much the same as before. The trip did little to alter the pattern of heightened strategic competition and modest economic engagement that began to congeal late last year.
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It bears emphasis that a key item India desires in its relationship with China is investment for its massive infrastructure challenges. This is what motivates New Delhi’s participation in two new Chinese-created institutions that are in the headlines these days: the New Development Bank, which will be based in Shanghai and whose inaugural president will be a veteran Indian banker; and the Asian Infrastructure Investment Bank, whose largest shareholders (per this Reuters report) will be Beijing (25-30 percent ownership stake) and New Delhi (10-15 percent).
Yet what will be New Delhi’s reaction when Beijing uses its massive leverage in these institutions to torpedo infrastructure loans destined for Arunachal Pradesh, a state in India’s northeastern region that China has taken to calling “southern Tibet” and claims as its own territory. In 2009, China blocked funding from the Asian Development Bank that had been earmarked for flood-control projects there. A related question concerns India’s response if either institution directs funding for the China-Pakistan Economic Corridor (CPEC), part of which will run through the disputed Kashmir region.
Mr. Modi reportedly voiced his concerns about the CPEC in his recent meetings with Chinese leaders. But one wonders whether New Delhi has ever had a frank exchange with Beijing about the NDB and AIIB funding issues.