Pax Indica: India and the World of the Twenty-first Century (22 page)

India and China have inevitably been directly affected by the global trends of the post–Cold War era. On the one hand, we are both far more globalized economies than most, and more so than we ever were in the days when we raised the protectionist barriers to shield us while we developed our autonomous national capabilities. We are today more connected through trade and travel—much more than ever before—with the international system, and trade and foreign investment accounts for a steadily increasing share of our GDP, China’s much more than India’s. Today we can admit that our links with the world are one reason for the highest-ever growth rates that our countries enjoyed.

Our two civilizations had centuries of contact in ancient times; thanks mainly to the export of Buddhism from India to China, Chinese travellers came to Indian universities, visited Indian courts, and wrote memorable accounts of their voyages. Nalanda University, which flourished in northern India for seven centuries from 427
CE
and attracted students from across Asia, received hundreds of Chinese students in its time, and a few Indians went the other way. My wife and I had the great pleasure of visiting the famous Lingyin Si temple in Hangzhou, established by a Buddhist monk from India in 326
CE
. As mentioned earlier, the great admiral Zheng He visited India less than a century later; on his way, in 410
CE
, he erected a tablet in Sri Lanka, written in Chinese, Persian and Tamil, calling on the Hindu deities to bless a world of free trade! Kerala’s coastline is dotted with Chinese fishing nets, and the favourite cooking-pot of the Malayali housewife is the wok, locally called
cheena-chatti
(‘Chinese vessel’). It’s been a while, though, since Indians and Chinese had much to do with each other. The heady days of ‘Hindi-Chini bhai-bhai’ (‘Indians and Chinese are brothers’), the slogan coined by Nehruvian India to welcome Chou En-Lai in 1955, gave way, as we all know, to a more difficult period in our relationship, with the humiliation of the 1962 border war, after which it was ‘Hindi-Chini bye-bye’ for decades. The bitter border dispute between the two countries remains unresolved, with periodic reports of incursions by Chinese troops on to Indian soil and new irritants over the anti-Chinese protests of Tibetan exiles who have been given asylum in India. To speak of a ‘trust deficit’ between the two countries is arguably an understatement.

And yet, there has been some good news. Trade has increased twelve-fold in the last decade, to an estimated $73 billion in 2011, a figure that is more than 200 times the total trade between the countries in 1990, just twenty-two years ago. China has now overtaken the United States as India’s largest single trading partner. The two governments expect trade to keep growing and, in a joint statement of December 2010, have announced a trade target of $100 billion by 2015; if present trends continue, trade with China is poised to reach double the level of US trade with India before the decade is over. Each country’s top twenty-five exports are essentially mutually exclusive, making trade relations an easy example of compatibility. There are some 9000 Indian students in China. Tourism, particularly of Indian pilgrims to the major Hindu holy sites in Tibet, Mount Kailash and Lake Manasarovar, is thriving. (However, this is a relative term: after all, the two nations with a combined population of over two and a half billion people exchanged only 570,000 visitors, over half a million of those being Indians with wanderlust while only some 60,000 Chinese tourists travelled to India.) Indian information technology firms have opened offices in Shanghai and Hangzhou; there are many companies and ventures active in the two countries. One can find dozens of Chinese engineers working in (and learning from) Indian computer firms and engineering companies from Gurgaon to Bangalore; Infosys regularly hires mainland Chinese for its Bangalore campus, while Indian software engineers in those and other cities offer research and development support to the Chinese telecom equipment manufacturer Huawei (in turn sending the signal that eavesdropping devices are not integrated into Chinese telecom products). India has become a major market for Chinese engineering and construction project exports, and a vital source of raw materials, from iron ore to chemicals. New Delhi could do more to press China to reduce its non-tariff barriers, however, and promote Indian services exports to its giant neighbour.

By and large, India is good at things that China needs to improve at, notably software; China excels at hardware and manufacturing, which India sorely lacks. So India’s Mahindra & Mahindra manufactures tractors in Nanchang for export to the United States. The key operating components of Apple’s iPod were invented by the Hyderabad company PortalPlayer, while the iPods themselves are manufactured in China.
Philips employs nearly 3000 Indians at its ‘Innovation Campus’ in Bangalore who write more than 20 per cent of Philips’ global software, which in turn goes to Philips’ 50,000-strong workforce in China to turn into brand-name goods.

In other words, the elephant is already dancing with the dragon. The potential for additional cooperation is immense and need not just be in each other’s countries. Inevitably, our search for markets, technology and resources to fuel our growth will be key drivers of our international relations. This is why we are both looking far afield, to Africa and Latin America, for opportunities.

There is an instructive comparison to be made between the FDI patterns of both countries. Indian capitalism drives our country’s outward investments in a commercial logic of supply and demand, whereas Chinese FDI is largely fuelled by its government and state-owned enterprises. India’s FDI is spent mainly in the developed world and is invested mostly in the manufacturing and services sectors, notably information technology and IT-enabled services, whereas Chinese FDI concentrates almost obsessively on the extraction of natural resources from developing countries, through oil and gas exploration and mining, where India has similar needs but a far more modest overseas presence. India’s strength—its comparative advantage, if you will—is anchored in its world-class managers, its track record in corporate governance and its exposure to the best global corporate practices, whereas China’s comparative advantage lies in the top-down strategic competence of its government and its single-minded economic drive abroad, which often subordinates conventional diplomacy to the pursuit of economic benefit. Whatever one thinks of the two sets of attributes, there is no denying that they are complementary, rather than a recipe for confrontation.

The opportunities for multilateral cooperation between India and China are great. There is, first of all, the regional plane. China and India have notably strengthened their cooperation in regional affairs. China has acquiesced in India’s participation in the East Asia Summit and invited India to join the Shanghai Cooperation Organization as an observer, just as India has supported China’s becoming an observer at SAARC. While Asia is devoid of meaningful security institutions, their interlocking economic and trade relationships with each other and with
other Asian countries will knit China and India closer together.

But multilateral cooperation need not be confined to the Asian region. China and India have broadly similar interests and approaches on a wide range of broader international questions, from most issues of international peace and security to the principles of world trade and the ways and means of coping with globalization. They have already begun working together in multinational forums on such issues as climate change, trade, labour laws, arms control and environment protection, and have no real differences on matters like encouraging biodiversity, promoting dialogue among civilizations, promoting population control, combating transnational crime, controlling the spread of pandemic disease and dealing with challenges from non-traditional threats to security. (Sadly, the two countries have even sometimes made common cause on human rights, with China and India agreeing on countering Western draft resolutions in UN bodies—China because it is usually guilty of the very practices being condemned in others, India because of its allergy to ‘country-specific’ human rights prescriptions.)

All of these areas provide a realistic basis for further long-term cooperation. One exception, alas, is the issue of combating international terrorism, where China’s indulgence of Pakistani terrorist groups at the UN is arguably not in its own long-term interests. But that can change, and China–India cooperation can also improve on the issues of piracy, oil spills and other international environmental issues, nuclear disarmament and arms races in outer space, human trafficking and natural disasters—all of which are issues on which the two countries could play mutually supportive roles, take joint responsibility and contribute to the establishment of new rules in the global system. New areas of cooperation could also emerge—wildlife conservation, for instance, where both countries could cooperate on issues like the smuggling of tiger parts to Chinese customers, or disaster management, where Asia’s two giants have much to learn from each other but have made little effort to do so.

Energy is an obvious area for cooperation. The US Department of Energy estimates that China’s oil consumption will rise 156 per cent and India’s oil consumption will rise 152 per cent by 2025. While both
countries are seeking to expand their domestic production, opportunities for growth are limited, and both countries will become more dependent on imported oil, making them more vulnerable to irregularities of supply and price volatility. This makes the quest for reliable sources of supply and secure sea lanes of communication a shared interest. After all, both China and India are relatively new entrants into the global oil system. They are facing fierce competition from much larger, more experienced and arguably more resourceful Western oil companies. Cooperation between Indian and Chinese oil firms is essential.

Prior to 2002, India and China competed aggressively with each other to acquire oil and gas fields abroad. Wisdom dawned, however, with improved energy cooperation starting that year, when India’s Oil and Natural Gas Corporation (ONGC) purchased a 25 per cent share of Sudan’s Greater Nile Oil Project, operated by the China National Petroleum Corporation (CNPC). The experience has been positive and continued cooperation in the global energy sector, including some examples of joint bids and at least one successful joint acquisition, has occurred. The prospects for further collaboration, to jointly explore and develop oil and natural gas resources in third countries, are high.

To take another example: our demand for food will inevitably rise as well, perhaps by 50 per cent in the next two decades, as a result of our growing population, their rising affluence and the improved dietary possibilities available to a larger middle class. We will need to multiply our sources of food, including acquiring agricultural land abroad, in Africa and even Latin America. Lack of access to stable supplies of water is reaching critical proportions, particularly for agricultural purposes, and the problem will worsen because of rapid urbanization over the next twenty years. We will need skilful and creative diplomacy to ensure that interruptions in the flow of water across our borders do not bedevil relations with our neighbours.

The only question is whether the two countries can prolong the elephant–dragon dance, or whether political tensions could bring the music to a screeching halt. Critics argue that the good news is in fact good only for China. The trade surplus is undoubtedly in favour of Beijing: of the $73 billion in 2011, $50 billion consisted of Chinese exports to India and only less than half of that, $23 billion, of Indian exports to China.
China conserves it own domestic resources of iron ore by importing this commodity from India and selling finished steel to it. Indeed, some critics have argued that India is largely exporting its primary commodities to China and importing finished products from that country, a pattern of trade relations reminiscent of the exploitation of India’s raw materials in the colonial era. A large proportion of Chinese exports involves items that are so much cheaper than Indian alternatives that they are making Indian manufacturing unviable. And the focus on trade, critics suggest, underscores an issue of interest to Beijing, while taking attention away from the broader strategic contest between the two countries, which China’s economic interests prompt it to gloss over.

The critics may be right in suggesting that good trade relations do little to help resolve the perennial political problems between countries. But there are two counter-arguments worth making. First, trade contributes to a positive atmosphere between two countries, which at least makes political hostility less likely. More important, in this instance, it ensures that China has far too high a stake in the Indian economy to contemplate engaging in any military adventurism against India. There are some strategic advantages to offering a potential adversary a large market: it is more likely that the Chinese establishment will learn to see Indians as consumers rather than as enemies.

This raises the issue of the risk of conflict between the two countries. As all Indians painfully remember, we went to war in 1962—a decisive triumph for China, which wrested 23,200 square kilometres of Indian territory. At the same time, Beijing has taken pains in recent years to remind India that it still claims a further 92,000 square kilometres, mainly in the north-eastern Indian state of Arunachal Pradesh. It doesn’t help that the two countries share the longest disputed frontier in the world, since the Line of Actual Control (LAC) has never been formally delineated in a manner accepted by both sides. India’s borders were defined by British imperial administrators in the 1913 MacMahon Line, which China rejects (though it accepts that line as its frontier with Myanmar, which was in those days part of British India). With the LAC
coming into being in the wake of China’s military success in 1962, the situation is even more unclear. Whenever troops from either side build roads, construct or repair their bunkers and other routine fortifications, or conduct patrols close to the LAC, tensions can and repeatedly do flare up. When the two sides are anxious to avoid provoking each other, such activities are kept to a minimum, but it seemed that since 2008 Beijing has taken a conscious decision to keep the Indians on their toes.