“India and China have historically been neighbours and even in 1962, China withdrew from Indian territories after the war. This shows there is unlikely to be a big war between the two. They may exchange some harsh words,” said the Tibetan spiritual leader, the Dalai Lama, about the possibility of a looming war between the two Asian giants.
The eventual outcome of the current India-China standoff can be many, even if the two countries manage to de-escalate tensions across the border through their diplomatic channels. India took nearly three decades to overcome the sense of Chinese betrayal in 1962 Indo-China war. Most evidently, the very three decades of persistent reconciliation efforts to circumvent their political differences and work together on economic developmental aspects of bilateral interest seems to have derailed in 2008, after China opposed the nuclear exemption for India at the NSG.
Since then, their equations have suffered a setback and entangled in a host of bilateral and multilateral issues, starting with Chinese investment in Pakistan-administered Kashmir, China’s vexation over India’s unwillingness to join Belt and Road initiative, India’s displeasure over Chinese opposition to its nuclear supplier group (NSG) membership and China’s reluctance to support international sanctions against UN-designated terrorist Masood Azhar.
The present Chinese government under President Xi Jinping has seemingly adopted an assertive regional policy. Encouraged by its diplomatic success in the South China Sea and East Asia, China has now looked to pressurise India with the same coercive diplomacy. India, however, has been unfazed by the Chinese rhetoric, which, in fact, has generated a sense of resentment among the ordinary Indians with respect to buying Chinese products and India’s growing imports from its neighbour. This also explains why Indian government, bureaucrats and businesses are still reluctant to engage the Chinese and their businesses, even at a time when Indian government is actively encouraging foreign companies to invest in India’s manufacturing strength.
During Xi’s visit to India in 2013, he had committed a USD 20 billion investment in India’s infrastructure over the next five years. However, total Chinese investment since 2013 has been only a little over USD 1.2 billion, and USD 4.75 billion overall till 2015. Meanwhile, investment of other major Asian economies such as Japan, Singapore, and South Korea in India totally dwarfs that of China.
India’s trade with China averages USD 72 billion, but deficit averages over USD 50 billion, which is greater than its combined bilateral trade with Britain, Germany and Japan. India’s trade deficit with China reached almost USD 325 billion in the last seven-eight years, but with other countries such as Japan, South Korea and ASEAN did not reach even close to USD 300 billion combined. Even though India’s trade deficit with China remains a serious concern for India, its economic interdependence on China remains limited.
Potential cooperation between India and China
But all is certainly not lost! While the recent economic growth of these two Asian economies have outweighed that of many other developing and developed countries, both India and China have for long faced almost similar domestic challenges in the domains of education and society. They at home share the common tasks of preventing inflation, saving energy, managing capital flows and realising sustainable financial growth. This similarity gives India and China a natural opportunity to work on the very basic issues while contributing towards the regional development.
In the domain of trade and investment, India has long urged China to open up its services and pharmaceutical markets for Indian exports. For example, Chinese pharmaceutical companies, which manufacture medicines to cure cancer (There has been an alarming growth rate of cancer in China. In 2015 more the 4 million Chinese were diagnosed with the disease and over 2.8 million died from it.), is highly expensive and unaffordable for ordinary people. In stark contrast, India manufactures affordable medicine to cure cancer. A strategic cooperation in this segment would turn out to be mutually beneficial. India has advanced its trade ties with many developed countries in terms of its IT exports. A similar opportunity in the Chinese IT market could bridge their trade gap.
India’s expectations from China
There have been mutual differences, but they all seem political. Since the two have not quite been able to set aside their political differences despite half-hearted attempts, India would want China to continue its focus on financial and economic development by circumventing those differences, as they have done for nearly three decades. Political elites, businessmen and several analysts of the two countries have time and again identified economic and financial cooperation as the way forward for their bilateral development.
To create a smooth future roadmap for bilateral cooperation, India would seek a more transparent and trustworthy China towards New Delhi and other countries. India would also expect China to adopt a pragmatic approach to address bilateral trade, fiscal, financial, and most importantly, political disputes.