It is the first time that China committed a big ticket investment in infrastructure in India. Even though Mr Modi yearns for Chinese investment to contain the yawning trade deficit, Chinese priority for large investment in India is to contain Japanese binge in India. Economy and market access play little role for Chinese investment in India. Instead, political consideration works more for Chinese investment in India. Era of new relations with China is closely linked to India’s relations with Japan, the staunch rival to China. It is said that the rivalry with Japan deepened during the period of Xi Jinping as President of China.

While Japan committed US$ 35 billion investment in Indian infrastructure for the next five years, China pledged US $ 20 billion investment in Indian infrastructure development in the next five years. Close on the heels of Japan, China offers its technical cooperation for high speed trains, bullet trains and development of Indian railway. To make Modi’s dream of “Make in India” a success and to reduce trade deficit, China committed to set up industrial parks in India. China also committed enhanced market access of products like pharmaceuticals and agro-foods.

Perceiving the Chinese assertiveness to foray in India in conjunction with Japanese aggressiveness, it is pertinent to study how are the India’s relations with Japan different from its relations with China and what Chinese President Xi Jinping accomplished during this visit to India. There are three fronts where relations between India -China differ from India –Japan. First, Japan has never had trust deficit with India. Trust deficit is perennial under-current in the leg –up of India- China economic relation. Second, China is the biggest trading partner of India , but with minimum economic engagement through Chinese investment in India. The total trade between the two countries was US $ 65 billion in 2013-14. It accounted for over 9 percent of India global trade. But, China’s investment in India was meagre with US $ 402 million during the thirteen year period ending March 2014. In contrast, Japan is one of the top four foreign investors in India, but lagging in trade relation with India. Third, India is the biggest receiver of Japanese aid for economic development. China is yet to open the account of financial aid to India.

Despite the trust deficit, Mr Narendra Modi was never averse to improving relations with China. His desire for special relation with China began when he visited China in November 2011 as Chief Minister of Gujarat. Seeds for betterment of economic relation were sown when Mr Modi was given a rousing welcome in 2011. In China, he was given an audience with a member of Communist Party of China’s politburo in the great Hall of the People. Not every visiting provincial leader is given that honour. Mr Modi was the first State leader in India who was active in courting Chinese investment. A large chunk of Chinese investment is centred in Gujarat

China has recently upgraded its diplomatic presence in Delhi. On September 16, President Xi Jinping appointed Mr. Le Yucheng as the new Chinese Ambassador to India. The decision reflects China’s keenness to deepen the relation with India. China deputes ambassador at Vice Minister rank only with those countries with which it has strategic importance. The countries like USA, Japan, Russia, North Korea and Great Britain have Chinese ambassadors at the rank of Vice-Minister. Now, India has got one with the same rank.

Despite suspected for hacking defence information, the Chinese are now in the priority list of Modi government for foreign investors. During the recent visit of Indian delegation to China, led by the Vice President Hamid Ansari, Indian Commerce Minister Nirmala Sitharaman signed MOUs with her Chinese counterpart for setting up four industrial parks in India with Chinese investment.

China is one of the biggest foreign investors in the world. In 2013, China was the third biggest foreign investor in the world. Chinese investment abroad boomed after the Go-Out policy, prodded by President Xi Jinping. From a below annual average of US$ 3 billion before 2005 , Chinese FDI abroad surged to US$ 50 billion in 2010 and further boomed to US$ 90.17 billion in 2013. The major recipients of Chinese investment are Hong Kong (a part of China) ,France, UK , USA and Singapore. The visit of President Xi Jinping signals a change in Chinese investment policy abroad, with India rallying for a major destination in future. Over 90 percent of Chinese investment abroad is by State enterprises.

The haste on Chinese side to make a thaw in relation with India sparked with the change of guards in Chinese leadership in 2012. Global realities forced China to buckle down and realize that in the event of gloomy western economy, which decimates export prospects , India will be of help to Chinese economy. China emerged the biggest trading partner of India since 2011-12. But the gushing export by China led to a yawning gap of trade deficit. For one US dollar worth of India’s export to China means three US dollar worth of imports from China. More than one-forth of India’s total trade deficit was accounted by Chinese export to India. The high trade deficit prodded the current account deficit above the comfort zone – nearly 4 percent of GDP

Before India outcries against widening trade deficit and fiercely use anti-trade measures such as anti-dumping, Chinese commitment for bulk investment and market access in China lever the mutual confidence in the economic cooperation between the two countries. It is here where President Xi Jinping accomplished his mission in abating trust deficit with a trigger in economic cooperation, despite being reticent in responding to Mr Modi's urge for settling border dispute. (IPA Service)