China's blocking of a development loan for India at the Asian Development Bank (ADB) has stirred anxieties here about Beijing using its clout in multilateral fora to flog bilateral issues. China reportedly blocked a $2.9 billion loan application for India at a meeting of the ADB board in Manila March 26-27. Although China did not give the reasons, Beijing, according to reliable sources, did so to score a point as this included $60 million loan for a development project in Arunachal Pradesh, the India state Beijing claims as its own.
India was the largest recipient of ADB funding last year. It got $3 billion in loans. New Delhi has yet to react officially to Beijing's move. But a source close to the government told IANS: "The use of multilateral fora by China for scoring points on bilateral issues is nothing new. We will do what we can and they will do what they can to further their interests.
“Our position is clear. Arunachal Pradesh is an integral part of India. Nothing stops us from going ahead with developmental projects there,” the source added.
Beijing objected to President Pratibha Patil's visit to Arunachal Pradesh this month. Last year, after Prime Minister Manmohan Singh announced a slew of projects for the state while visiting the northeastern state, Beijing was quick to reassert its territorial claims over the territory.
“It is clearly a case of muscle flexing. And we are going to see more and more of it with China's growing clout in global financial institutions and its stakes in international funds,” Srikanth Kondapalli, a China expert at the Jawaharlal Nehru University here, told IANS.
“China is trying to use its new status and muscle to score points vis-a-vis India. We should learn the right lessons from it. We have to face them down,” said Mohan Guruswamy, a China expert. “We should go ahead with the project in Arunachal Pradesh. We don't need ADB money for it.”
Guruswamy also pointed out China's opposition to the inclusion of India in the six-nation Shanghai Cooperation Organisation (SCO) to underline growing Beijing's assertiveness in multilateral institutions.
China has never been enthusiastic about supporting India for a seat in the UN Security Council and has tried blocking consensus for India at the Nuclear Suppliers Group.
The latest instance of blocking India's loan application at ADB could widen the trust deficit between the two countries.
China has the world's sixth largest wealth fund amounting to $200 billion and has $2 trillion in foreign exchange reserves.
China is using its increasing financial weight to push for a larger role in the International Monetary Fund (IMF) and other global institutions. Although both China and India have pushed vigorously for reforms in global financial institutions that remain the preserve of Western countries, Beijing is likely to have a bigger voice due to the sheer size of its economy.
India is not sitting quietly in face of China's aggressive posturing. India is on its way to becoming a member of the Financial Stability Forum and the Basel Committee on Banking Supervision - global institutions that were earlier the bastion of G8 countries.