India on China

A cautious friendship

With bilateral trade growing recently at about 30 per cent a year, China will soon replace the United States as India’s leading trading partner, reports Walter K. Andersen

  China and India are rightly portrayed as the two major rising powers in Asia. How they work out their bilateral relationship will have a profound impact on Asian and world politics. The economies of the two countries are among the world’s fastest growing. They are among the major recipients of foreign direct investment, a new development for India. They both possess nuclear weapons and the means to deliver them. They both have large and well-trained militaries. The two Asian giants have gone a long way over the past several years to improve their bilateral relationship, following three decades of tension in the wake of their 1962 border war. As late as mid-1998, India justified its nuclear tests on the nuclear threat from China. While the relationship has improved significantly since then, there is still considerable suspicion in each country about the long-term intentions of the other.
   On the Indian side, these suspicions are stoked by China’s continuing close relationship with Pakistan, by the glacial progress in border talks, and by China’s construction of naval facilities at places that could threaten Indian shipping lanes — often referred to as China’s ‘string of pearls’ — for Pakistan (at Gwadar), for Myanmar (at Sittwe) and for Bangladesh (at Chittagong). The most recent incidents to stoke Indian concerns are Chinese troop forays over the past fall into a small but strategic area of the Kingdom of Bhutan adjacent to India’s vulnerable Siliguri corridor that links the north-eastern part of India to the rest of the country — and revives memories of the surge of Chinese troops in 1962 against the poorly armed Indian military in that area.    Perhaps as a precautionary response to these forays, the Indian Government decided to dispatch elements of the 27th mountain division to this strategically important area from its present deployment on the Indian side of the Line of Control in Kashmir. The Chinese for their part are concerned by India’s growing links to Japan and the United States, wary of the possibility of a new form of encirclement. The action taken by the US Congress in December 2006 to try to make India an exception to American nuclear non-proliferation legislation denying nuclear fuel and technology to countries, like India, that chose to stay outside the 1970 Nuclear Non-proliferation Treaty is interpreted by many Chinese analysts as an American effort to make India a strategic counterweight to China. India itself is careful to deny any such intention in its approach to China, though it is in India’s interest for Beijing to factor New Delhi’s option of moving closer to the US (or Japan) into its foreign policy calculus. As example of this Chinese concern about Indian links to the US was President Hu Jintao’s proposal made during his November 2006 visit to India that India and China should cooperate more closely on civilian nuclear matters.
   The legacy of the 1962 border war, a product of unresolved colonial era borders, locked relations between the two Asian giants into a pattern of latent conflict for decades and established a strong rationale for India’s military build-up and later a nuclear weapon capability. Each saw the other as involved in efforts to encircle it and the Cold War hardened these convictions. The visit of Prime Minister Rajiv Gandhi to China in 1988, the first Indian prime minister to visit China since 1954, again aroused hope in India of reconciliation that would have a wider and positive impact on Asia. The two governments created Joint Working Groups for negotiations on the disputed boundary, and, in a move that was to have very significant consequences, established mechanisms for trade, then almost nonexistent. The end of the Cold War soon after provided space for speeding up the process of improved relations and both countries simultaneously moved to give forward momentum to the relationship. Indian Defence Minister George Fernandes visited China in April 2003 and Prime Minister Atal Behari Vajpayee visited China two months later. Taking advantage of the April 2005 visit to India of Chinese Premier Wen Jiabao, the two sides signed a Bilateral Investment and Promotion and Protection Agreement that laid the institutional groundwork for a significant expansion of trade. The next year, designated in China as a ‘Year of Friendship’ between India and China, President Hu Jintao visited India and the two sides built on the earlier economic agreements to strengthen their trade and investment links.
   Perhaps the most significant aspect of Indian-Chinese relations over the past several years has been the dramatic expansion of trade, which itself may also be the most important driver of the improved relationship. Two-way trade in the early 1990s stood at only about $100 mn; it is now almost $26 bn (including Hong Kong). With trade between the two growing recently at about 30% a year, China will soon replace the United States as India’s leading trading partner. One result of the effort to expand trade is the increased number of overland trade routes and a third post for border trade was opened on 6 July 2006 at Nathu La in the Indian border state of Sikkim, which for India has the added benefit of linking India’s landlocked and undeveloped north-eastern states with new markets in Tibet and beyond. Indian companies are investing in China for the same reasons other corporations do and China seeks permission to invest in much-needed infrastructure projects in India. Some 25.000 Chinese have received training with India’s highly rated information technology firms and some joint ventures have been launched that combine China’s manufacturing prowess with India’s expertise in the knowledge economy. Comparisons between the economies of China and India are made frequently and China is judged to be about 25 years ahead of India in most respects, but the two countries have different assets and follow different priorities so that admiration for Chinese achievements do not necessarily translate into Indian emulation of them.
   Indians none the less still have conflicted images of China even as relations have stabilised after three decades of tension. What is different today is that Indians are now much more self-confident about the country’s ability to deal with China as a partner than in any period since the short-lived idealism of the 1950s. India has a robust economy, second only to China in annual GDP growth rates; the world’s major powers, especially the United States, are seeking to develop closer relations with it; and Indians perceive the country’s nuclear weapon capability as a hedge against nuclear blackmail.
   There remains a lively debate in India regarding the future Chinese interaction with India specifically and Asia generally. India’s open political system reinforces the culturally entrenched trait of Indians to be ‘argumentative’ and one can expect a vigorous debate on a relationship of such importance to India. Indians by and large concede China’s rise to superior power, but are more comfortable with that situation than they were before. None the less, they question how China will exercise that power with India and the rest of Asia. The two energy deficient countries, for example, are now engaged in a major quest for reliable sources of energy for their rapidly expanding economies. That scramble has competitive and cooperative elements and it is not clear which will predominate. Indians have developed a naval strategy that includes keeping open the Straits of Malacca and the vital sea lanes that cross the Indian Ocean used to transmit much of the world’s oil and gas — and would prefer the Chinese recognise Indian pre-eminence on this score. Still another area of potential competitiveness is South East Asia where Indian trade, while still significantly less than China’s ($160 bn for China and $30 bn for India), is starting to catch up. India’s ‘Look East’ policy as it applies to South East Asia has a security dimension and it is not clear whether its goals in the ‘shared neighbourhood’ of South East Asia will have a cooperative or competitive result. Most likely, there will be a bit of both not only regarding the countries south east of India, but also with the larger relationship with China.

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