China follows a vigorous policy to promote non-interventionist ties in its neighborhood. Chinese President Xi Jinping will undertake a tour to neighboring countries including Tajikistan, Maldives, India, and Sri Lanka. Following political turmoil in Pakistan, the country has been skirted off Xi’s itinerary and Maldives has been included. This would have been the first visit in eight years to Pakistan by a Chinese President and Pakistan missed out on the opportunity.

In India, agreements worth over US$ 20 billion have been pledged. It is a landmark visit as important discussions on China’s Economic Belt diplomacy will be unveiled with Tajikistan, India, and Sri Lanka. Substantial outcome is expected to come from it. 

Had President Xi visited Pakistan, agreements worth US$ 35 billion would have been inked under the China Pakistan Economic Corridor for which talks have been underway for a year or so. For the first time, Pakistan could not share the economic and commercial benefits offered by China.

While in Pakistan, the opposition passed unfavorable remarks about Chinese business activities in Pakistan and alleged that China is not offering investment but expensive loans with up to 7 percent interest rate. This was, however, not true. Propaganda has been launched to defame Chinese investment in Pakistan by stating that the mark-up of the aid is up to 7 percent.

Pakistan is one of the largest recipients of China’s Foreign Aid and Government-sponsored Investment Activities (FAGIA). Therefore, Chinese aid and investment go side by side. When commercial companies shy away from investment, strategic investment is brought by the Chinese Government. Mark-ups on these loans are concessional; between 2-3 percent of LIBOR payable over a longer period of time convenient to the recipient country.  Besides Pakistan, Venezuela, Iran, Nigeria, Indonesia, Malaysia, and Thailand are large recipients of FAGIA.

After 1962, this is the first time that a Chinese leader is visiting India but not Pakistan. Is this reflective of the new geo-politics of the region? A volatile political environment led to cancelled visits by leaders of Sri Lanka and Maldives to Pakistan last month, while India exchanged important visits with Japan and Australia at the same time. Australia offered uranium sale to India. Japan has been negotiating a nuclear deal with India to sell nuclear plants and components. So Pakistan’s diplomacy is at stake, even with China.

On the contrary, Indian leaders and the opposition welcomed the Chinese leader. India used to be more inward-looking than Pakistan; they are more cautious on exploitative issues such as aid than Pakistani leaders are. But an open Indian economy has been expanding cooperation with all countries irrespective of good or bad relations.

Xi will kicked off his maiden visit to Ahmedabad on 17th September via Modi’s hometown of Vadnagar at Gujarat State before travelling to New Delhi for talks. India’s imports from China reached 9 percent of its total global imports.  Bilateral trade stood at US$ 66 billion in 2013-14, with India’s accumulated trade deficit of US$ 35 billion. President Xi wants to bridge India’s trade deficit by offering lucrative investment and business opportunities to Indian businessmen. India also wants China to make easy access for its import items into China.

India is not wary of China. China considers India a two trillion dollar partner. President Xi would offer more to India. It is also in response to Prime Minister Narendra Modi’s visit to Japan taken two weeks ago. China might offer a more lucrative deal to India but China does not intend to encircle India.

China has been counter-balancing Japanese and American ties with India. Japan pledged US$ 35 billion investment to India in the next five years, about US$ 7 billion a year. Pakistan expected a similar deal from China, had President Xi visited Pakistan.

China has invested US$ 400 million into India, contributing 0.8 percent to its total Foreign Direct Investment (FDI). China plans to build two industrial parks- one in Ahmedabad and the other in Pune to build power equipment and automobiles.

Stronger Sino-Indian ties would ease traditional border rivalry between the two great joints. Whereas US-India and Japan-India ties are important, China-India ties cannot be undermined; Asian peace very much depends on them.

 The writer is Senior Research Fellow at the Institute of Strategic Studies Islamabad.