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As Japan Goes All Out to Improve Ties With Beijing, India Fades Into Background

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While India has been emphasising that the improvement in ties between China and Japan will not have a negative impact on its relationship with the latter, recent trends in trade and investments indicate otherwise.

Japanese Prime Minister Shinzo Abe has asked Chinese President Xi Jinping to visit Japan twice this year as Tokyo seeks to further improve relations with Beijing through a series of top-level meetings, diplomatic sources told The Japan Times on Monday. If Xi does visit Japan twice this year, he will become the first Chinese president to do so since Hu Jintao in 2008.

In October 2018, India's External Affairs Ministry expressed confidence that the improvement in ties between China and Japan would not have a negative bearing on its relation with Tokyo.  

But some foreign policy observers are of the view that the growing camaraderie between Japan and China is a clear indication of trouble in India's proposed collaboration with Japan on infrastructure projects, especially in African nations.

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India and Japan decided to come together to take advantage of the growing scepticism over China's Belt and Road Initiative (BRI) and the associated heavy debt loads taken on by countries such as Angola, the Republic of Congo and Ethiopia.

According to figures published on 14 November by Moody's Investors Service, annual Chinese lending to sub-Saharan governments is now more than $10 billion as compared with less than $1 billion in 2001.

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"In 2017, India and Japan together announced the Asia-Africa Economic Growth Corridor (AAEGC), to extend joint infrastructure funding to Asian and African countries. However, in June 2018, Japanese Prime Minister Abe reversed course to offer to work with China in third countries to develop infrastructure. Fifty such collaboration projects were announced during his visit to China in October 2018, including a rail project in Thailand. AAEGC has receded into the background. Japan is now on board the BRI," notes Shyam Sharan, a former foreign secretary and current senior fellow at the Centre for Policy Research.  

India's ambitions in Africa and beyond may further erode with the renewed focus of Japanese firms on China. Japanese companies have bestowed a lot of confidence in the "China 2025" vision, as it offers them a bundle of opportunities in sectors like artificial intelligence, electric vehicles and quantum computing. On the other hand, India's tax and investment environment poses some concerns to Japanese firms, according to the Joint Report of the India-Japan Business Leaders Forum 2018.  

"While Japanese FDI into India has increased significantly from about $85 million in 2006-07 to $4.7 billion in 2016-17, the anticipated surge in Japanese FDI has not materialised… With China once again emerging as an attractive destination for Japanese investment, India may be pushed to margins," Shyam Sharan added.

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Going by the data published by India's Ministry of External Affairs, Japan's direct investment in India 2017-18 dropped to $1.6 billion.

To add to India's worry, the latest survey of Japanese manufacturing companies, conducted by the Japan Bank for International Cooperation (JBIC) in 2018, concluded that China has replaced India at the top of the list of most promising countries/regions for overseas business over the medium term. 

China took first place on the list for the first time in five years. Its percentage share rose 3.7 points from the previous year to 45.7 per cent. Over 90 percent of companies that named China as a promising country said that it is promising in terms of sales, adding that they have high expectations regarding China as a huge market. India, which came in first place for the third consecutive year until last year, fell to second place this year.

The views and opinions expressed by the fellow do not necessarily reflect those of Sputnik.

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