Interestingly, India’s Reserve Bank has sought clarity on whether investments from Taiwan would require government approval for foreign direct investment (FDI). It is to be seen if foreign investments from Taiwan face the same governmental scrutiny as some of India’s border countries before they are permitted. Under the latest FDI norms, overseas equity inflows from countries bordering India will have to get a prior government approval. Geographically, Taiwan or Formosa, known to be under the Republic of China (RoC), in the South China Sea, does not border India.

China’s objection is unjust and unsustainable since several countries, including the People’s Republic of China (PRC), have trade relations with Taiwan. In fact, PRC is the biggest importer from Taiwan. In 2019, China imported goods worth US$91.9 billion from Taiwan, or 27.9 percent of Taiwan’s total exports. The US occupied the second place with imports worth $46.3 billion. Hong Kong was the third largest merchandise importer from Taiwan worth $40.4 billion. Japan, Singapore, South Korea, Vietnam, Malaysia, Germany, the Philippines, the Netherlands, Thailand, the UK and India are among the other top importers from Taiwan.

A trade deal with Taiwan does not necessarily mean a political recognition of China’s break-away island nation. The United States, which does not recognise de jure Taiwan independence, even supports Taiwan’s membership in several international organisations such as the World Trade Organization, Asia-Pacific Economic Cooperation forum and Asian Development Bank. The US, under the administration of both the Democrats and Republicans, has been the biggest arms exporter to Taiwan since the time of Jimmy Carter in 1977. The US foreign policy towards Taiwan maintained a deliberate ambiguity to protect Taiwan from invasion by PRC. The latter could not prevent the USA from officially formulating the Taiwan Relations Act (TRA) ostensibly to ‘help maintain peace, security, and stability in the Western Pacific and to promote the foreign policy of the United States by authorising the continuation of commercial, cultural, and other relations between the people of the United States and the people on Taiwan, and for other purposes.’

The Indian government is presently thinking of categorising investments from Taiwan as ‘automatic’ while subjecting those from PRC to government approval. Ironically, Hong Kong is considered as a separate entity from China for the purpose of international trade and investment by the People’s Republic (PRC), which maintains two separate business rosters — one for China and the other exclusively for Hong Kong. PRC considers Hong Kong as part of its “one country, two systems” policy. Although politically, PRC considers Taiwan as part of China, most of the international trading nations, including India, treat Taiwan as a special entity. India doesn’t recognise Taiwan as a separate country. According to the WTO, Taiwan’s merchandise exports, last year, were worth US$331 billion and imports were valued at $287 billion. The US, China and Germany topped the chart of Taiwan’s trading partners.

It is not clear why PRC is so sensitive about India and Taiwan going forward with talks on a trade deal. Such a deal is to the benefit of both India and Taiwan in view of the growing trade with Taiwan. In 2018, India signed a bilateral investment agreement with Taiwan. The trade ties between the two are fast expanding as Taiwanese firms are aspiring to emerge as prominent investors in India. The growing India-Taiwan non-diplomatic relations are nothing new. The visa restrictions between the two started easing since the 1990s. In 1995, they established representative offices in each other’s capitals, namely Taipei Economic and Cultural Centre In India in New Delhi and India-Taipei Association for India in Taipei. In 2011, India and Taiwan signed ‘Double Taxation Avoidance Agreement’ and ‘Customs Mutual Assistance Agreement.’ There is nothing unusual about such deals and agreements between two trade and investment partners. Taiwan has such agreements with almost all its major trade partners. Thus, PRC’s oversensitiveness about India-Taiwan trade and economic relations is inexplicable and unwarranted.

However, the PRC thinks differently. “The 'One-China Principle’ is a universal consensus of the international community, including India,” Chinese Foreign Ministry spokesperson Zhao Lijian said recently. “It is also the political basis for China to develop ties with other countries. So, we firmly oppose any official exchanges between countries having diplomatic ties with China and Taiwan or signing any official documents. The Indian side should remain committed to the ‘One-China principle’ and approach Taiwan-related issues prudently and properly,” Zhao said.

Unfortunately, such statements are disconnected with reality. Can there be trade relations without signing official documents? If the world’s all major trading countries have deals and relationship with Taiwan, why can’t India? China knows very well that India has no intention to recognise Taiwan as a state, leave alone building diplomatic relationship with the strayed island entity, at least in the immediate future. However, global diplomacy has always been dynamic and, often, unpredictable.

This year, two Arab countries — The United Arab Emirates and Bahrain — formally established diplomatic ties with Israel, dumping their age old Palestine policy. Few were surprised. Lately, China’s coercive hegemonic intentions and trajectory have offended many countries in Asia and the Asia-Pacific region. Is PRC afraid of losing its ‘One-China’ claim on Taiwan? (IPA Service)