SHANGHAI ACADEMICS ON CHINA-INDIA RELATIONS

C O N F I D E N T I A L SECTION 01 OF 03 SHANGHAI 000515

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E.O. 12958: DECL: 11/26/2033
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SUBJECT: SHANGHAI ACADEMICS ON CHINA-INDIA RELATIONS

REF: A) 07 SHANGHAI 789; B) 07 SHANGHAI 785

CLASSIFIED BY: Christopher Beede, Pol/Econ Section Chief, U.S.
Consulate, Shanghai, U.S. Department of State.
REASON: 1.4 (b),(d)




1. (C) Summary: Shanghai scholars believe China-India relations
are improving with high-level visits, military cooperation, and
increasing bilateral trade, but unresolved border issues and
political distrust are hampering further progress. Many Indian
Government officials still maintain a "Cold War mentality" and
are "suspicious" of China, according to the scholars. They
think the lack of political trust is hindering closer economic
ties. They noted difficulties for Chinese companies to obtain
Indian business licenses and invest in certain sectors of the
economy which India deems "sensitive", such as IT. They also
noted difficulties obtaining Indian student visas. The scholars
expressed growing confidence that China already has surpassed
India in its development, and one scholar stated that India is
still "15 to 20 years behind China." End summary.

Warming Ties
--------------

2. (C) Shanghai scholars believe China-India relations have
maintained positive momentum from last year, with high-level
visits, military cooperation, and increasing bilateral trade
(Ref A). Wang Dehua, Professor at Shanghai Academy of Social
Sciences (SASS),noted that Indian Prime Minister Singh visited
China twice in 2008, and he thinks there will be a high-level
Chinese visit to India next year. Both Wang Dehua and Wang
Weihua, research fellow at the Shanghai Institutes for
International Studies (SIIS),said the Chinese and Indian
militaries will conduct a joint military exercise "very soon,"
possibly at the end of this year, marking the first such joint
exercise on Indian soil (Note: The first joint military exercise
took place in China in 2007. End note). The scholars pointed
to the USD 40-50 billion in bilateral trade this year, a
significant increase from last year's USD 25 billion, as another
indication of further warming of ties.

But Fundamental Distrust
--------------

3. (C) Although overall relations are improving, there is still
fundamental distrust on both sides, said the scholars. This
distrust stems mainly from historical border issues, over which
China and India fought a brief war in 1962. Shao Yuqun,
Professor at SIIS, believes the border issue will not be
resolved within the next ten years. The other scholars are
equally pessimistic, calling it a "very difficult, long-term"
issue that should be set aside for now while the two sides
develop closer economic ties. Zhang Jiegen, Professor of South
Asian Studies at Fudan University, thinks both China and India
are "sincere" in their desire to resolve the issue, but the
Indian Government cannot move forward with any agreement because
of its "complicated" domestic political situation. According to
Zhang, many figures in the Indian Government, as well as the
Indian public, are "strongly nationalistic" and oppose any
compromise. When asked if China would be willing to compromise,
Zhang did not present a clear answer, stating that the status
quo is good enough for now. (Comment: In previous discussions,
scholars told Poloff that compromise would be difficult due to
domestic pressure in both countries. See Ref A. End comment.)


4. (C) Despite closer military cooperation over the past couple
of years, the military establishment on both sides are still
"very suspicious" of each other, said Shao Yuqun. However, she
thinks this suspicion exists mostly at the higher levels of the
military. She said lower level border troops on both sides of
the disputed boundary (Arunachal Pradesh) actually get along on
a private level, often inviting each other for holiday
celebrations. According to Wang Dehua, Indian military
officials he recently spoke to are "positive" and "hopeful"
about the future direction of bilateral relations. Wang,
however, noted that despite a recent increase in military
exchanges, there are many conservative figures in the Indian
military who harbor a "Cold War mentality" towards China and
continue to consider China a threat.


5. (C) According to the scholars, India is suspicious of

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China's intentions in South Asia, which India considers its
backyard. Zhang Jiegen thinks China used to be engaged in a
balance of power struggle with India in South Asia but that it
is now just looking "to make friends" with India's neighbors,
respectful of India's "unique position" in the region. Shao
Yuqun said India still thinks China harbors regional ambitions
in South Asia. She criticized India for only blaming China for
regional tension (e.g., between India and Myanmar) without
"taking responsibility as the biggest player in South Asia to
help its small neighbors."

Political Distrust Hindering Economic Ties
--------------

6. (C) Although bilateral trade has grown over the past few
years, the scholars uniformly believe the trade and investment
volume would be even greater if India lowered its protectionist
barriers. Quan Heng, Professor at the Shanghai Academy of
Social Sciences who spent a year in India doing research on
rural development, said the lack of political trust is hindering
closer economic ties. He said he knows several Chinese
businessmen who tried but failed to set up businesses in India
because the Indian Government "without clear reason" refused to
issue business licenses. According to Quan, since it is
difficult to obtain Indian business licenses, many
businesspeople from Zhejiang Province travel to India posing as
tourists, carrying with them small items in bulk to sell in
India through informal channels. Wang Dehua thinks India's
negative trade balance with China is due to India's reluctance
to sell China "sensitive technology" and iron ore. He noted,
however, that the Indian Government recently moved to sign a
long-term contract with China to provide iron ore since global
demand has been dropping.


7. (C) Both Quan Heng and Wang Dehua think India only wants
China to invest in certain sectors, such as road and bridge
infrastructure. Whereas China is open to Indian investment in
all sectors, they said, India is wary of Chinese investment in
what it considers "sensitive" sectors, such as IT and harbor
infrastructure. (Note: Indian IT companies in Shanghai told
Econoff last year that the Chinese Central Government and local
city governments were aggressively lobbying Indian IT companies,
such as Tata and Infosys, to invest in China. See Ref B. More
on Indian IT companies in Shanghai to be reported septel. End
note.) For example, Quan talked about the Chinese
telecommunications company Huawei's effort to invest in India's
IT infrastructure. He said Huawei's application process was
very long, and the company was eventually forced to scale down
its project. According to Quan, the Indian Government cited
"potential harm to national security" as its reason.

Student Exchange a One Way Street
--------------

8. (C) Shao Yuqun believes China is open to Indian students,
noting that many Indian medical students are enrolled in Suzhou
University (in Jiangsu Province) and Zhejiang University. But
the scholars complained that it is difficult for Chinese to get
visas to study in India. Wang Weihua said many Chinese go to
India on business visas, which are easier to obtain than student
visas, and then change to student status while in India. Quan
Heng said that Chinese students are "not welcome" in India.
Those who are lucky enough to get student visas have to renew
them every three months, he said. Zhang Jiegen talked about his
own experience a few years ago when he was refused a student
visa to do research in India. He speculated that his research
topic of India's nuclear strategy may have been "too sensitive"
for the Indian authorities.

Comment
--------------

9. (C) Although the basic positive trajectory of the bilateral
relationship appears unchanged since last year (see Ref A),the
scholars were pointedly critical of what they perceive as
India's unfounded suspicions of China. The scholars seemed to
pin the blame for political distrust on India, saying India does
not understand that China has moved beyond the Cold War balance
of power struggle. The scholars' criticisms of India may
reflect growing confidence in China's economic, political, and
military strength, and underlying feelings that India is no
longer playing at the same level as China. Shao Yuqun flatly
stated that India is "15 to 20 years behind China" in its

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development and that, although China recognizes India's
progress, "in our hearts, we do not consider India to be at the
same level." Some scholars also asserted that India sees China
as a threat more than the other way around.


10. (C) The degree of academic interest on China-India
relations in Shanghai is difficult to assess. Although these
scholars recognize India's important role in China's foreign
policy, they believe India is "not a hot topic" like other
developing regions, such Africa and Latin America. One said
there is currently "almost zero interest" in academia on this
subject. However, Quan Heng noted that a Center for China-India
Comparative Studies will be officially launched at SASS in
mid-December, indicating that SASS, which is closely affiliated
with the Chinese Government and currently has only one or two
India scholars, may be looking to focus greater attention on
South Asian affairs.
CAMP