Economic and trade realities in the US, Australia and India are thawing their relations with China
Albanese’s Australia has made restarting dialogue a priority, while in the US, Republican complaints reflect a growing sense of more Chinese investments being approved
In India, Chinese retail giant Shein’s app, banned after the 2020 border clash, is making a comeback even as carmakers import battery parts from China
Signs of a diplomatic thaw are emerging in the American, Australian and Indian relationships with China.
Since April, the Biden administration has sent representatives to Beijing in an attempt to restart dialogue and discussion. Secretary of State Antony Blinken, Treasury Secretary Janet Yellen and even climate envoy John Kerry have all made trips to China to find ways to stabilise ties.
Similarly, on the sidelines of the Association of Southeast Asian Nations and BRICS meetings, Indian Foreign Minister Subrahmanyam Jaishankar and National Security Adviser Ajit Doval met China’s top diplomat Wang Yi who urged that the bilateral relationship not be defined by a single issue, in a reference to Sino-Indian border disputes.
Still, after the Indian media highlighted a Chinese foreign ministry readout of the Wang-Doval meeting which said that Indian Prime Minister Narendra Modi and Chinese President Xi Jinping had reached a consensus on stabilising relations at the G20 summit in Bali in November last year, India’s ministry of external affairs clarified that while the two leaders discussed ways to stabilise relations on the summit’s sidelines, there was no consensus. Nevertheless, there are signs of a thaw all around.
Australia is way ahead of the other two and has been approaching the stabilising of its relations with China with a sense of urgency. Since Prime Minister Anthony Albanese took office, there has been a concerted effort by both the business community and policymakers to restart dialogue. Australian businessmen have travelled to Beijing to discuss trade and business issues.
Furthermore, Australia openly advocates for more stable relations between the United States and China. When Kevin Rudd met US President Joe Biden to present his credentials as Australian ambassador, the former prime minister told Biden he would work to improve the US-China relationship.
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Talking Post: Kevin Rudd unpacks the risk of war between China and the US with Yonden Lhatoo
Talking Post: Kevin Rudd unpacks the risk of war between China and the US with Yonden Lhatoo
The diplomat’s initiative is a product of Australia’s precarious position – having to do good by its security partner, the US, and also its largest market for exports, China. While Australia’s dependency on China is not new, and makes it extremely difficult to decouple or even “de-risk”, that the private sector in the US and India is beginning to take a relatively dovish approach to China again is noteworthy.
Washington and New Delhi have embarked on similar industrial drives to revive and boost their domestic manufacturing while lessening their trade dependencies on Beijing.
India’s definition of sectors and businesses deemed a threat to its national security is broad and its Chinese bans were successfully executed. This was unlike in the US, which continues to struggle to ban TikTok and has failed to limit Chinese businesses’ involvement in strategic US sectors. Several Chinese businesses have already found back doors to evade US restrictions.
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An unwinnable conflict? The US-China trade war, 5 years on
An unwinnable conflict? The US-China trade war, 5 years on
For example, Chinese battery maker CATL has agreed to support a Ford Motor project to make batteries for electric vehicles. While their plans to set up facilities in Virginia were warded off by Republican governor Glenn Youngkin, they were quick to find another host in the Midwestern state of Michigan under Democrat governor Gretchen Whitmer.
Other Chinese-linked investments across the US have also come under scrutiny by Republican lawmakers after being approved by the national Committee on Foreign Investment. The Democrats and the Biden administration, while keeping the momentum on China policy from the Trump years, appear to have steadily dialled back their hawkishness towards China over the last six months.
Similarly, since the 2017 Doklam stand-off and the 2020 Galwan Valley skirmishes, New Delhi has banned Chinese apps and businesses across various sectors, particularly in the digital domain. In May, it approved what has been dubbed Production-Linked Incentive Schemes 2.0 for IT hardware and has doubled down on targeted subsidies. But there are signs that restrictions are loosening up.
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China and India: How economically linked are they?
China and India: How economically linked are they?
For example, Chinese clothing retail giant Shein’s app was among those banned after the 2020 deadly clashes on the Himalayan border. Fast forward to 2023, and Reliance Industries, India’s largest company by market capitalisation, is bringing Shein back to India through a partnership.
There are also signs that India may be losing track of the intent and purpose of its industrial policies. Last month, in a display of its hi-tech ambitions, India hosted a gathering of over 8,000 people from 23 countries in the state of Gujarat for the SemiconIndia conference. That same month, it reportedly rejected Chinese carmaker BYD’s plan to invest US$1 billion in a car and battery plant – even as it continues to rely on Chinese inputs for several advanced and critical technologies.
Most recently, in response to Tesla’s interest in setting up carmaking in India, the government reportedly suggested that Tesla emulate Apple’s sourcing model in finding local players to partner with any Chinese vendors involved. Notably, this is not an issue unique to Tesla. India’s largest maker of electric vehicles, Tata Motors, continues to import battery parts from China.
Despite the US, India and Australia being part of security groupings and mechanisms such as the Quadrilateral Security Dialogue, Aukus alliance and regular military drills, economic and trade realities supported by neoliberal policies continue to blunt their deterrence measures against China – particularly in the US and Australia.
On July 31, the US extended an invitation to Wang Yi, recently reappointed as foreign minister, to visit Washington; soon after, Australia followed suit. If this trend continues, it will become clear that commercial ties are superseding even national security interests. Unless the business community decides to heed the counsel of national security experts, policymakers will continue to have their hands tied vis-à-vis China and have to work toward stabilising bilateral relations.
Akhil Ramesh is a senior fellow at the Pacific Forum
