The Asian Century:
India-China Friendship Could Usher in a New Economic Era
By Walter Andersen and Surjit Mansingh

China challenges the intellectual imagination and contemporary experience of India as few other states do. India’s first prime minister, Jawaharlal Nehru, and his early Chinese interlocutors believed that friendship between China and India would bring about Asian resurgence and facilitate India’s policy of staying away from the politics of groups militarily aligned against each other in the Cold War.

Different approaches to colonial-era borders, as well as Beijing’s policies in Tibet and mutual misperceptions, however, put the two on a collision course resulting in a border war in 1962. That war, in which India was humiliated militarily, locked relations between the two Asian giants into a pattern of latent conflict reinforced by the Cold War and the Sino-Soviet rift. India and China appeared to be on different sides, as well as at different levels of military capability and status in global politics, disadvantaging India.

The ice-breaking visit of Prime Minister Rajiv Gandhi to China in December 1988 initiated joint mechanisms to tackle the border problem and a series of high-level exchanges in the early 1990s, resulting in agreements on maintaining peace and tranquility, building mutual confidence and trust and, most significantly, promoting trade.

The verbal jousting in the wake of India’s 1998 nuclear tests, which the Indians said was in response to a potential nuclear threat from China, only temporarily slowed the rapprochement efforts, suggesting that the Chinese did not interpret those tests to be a serious security threat. High-level exchanges soon resumed, along with regular discussions on the border problem and expanded economic ties. The year 2006 has been designated the “Year of Friendship” for India and China, and President Hu Jintao visited India and signed new sets of agreements in November.

Partnership Between Equals?
Despite the steady improvement of relations, Indians still have conflicting images of China, based in part on varying assessments of national security and different stakes in the new economic ties. What is striking today is that Indians as a whole and in the government are now more self-confident about their country’s ability to deal with China as a partner than in any other period since the short-lived idealism of the mid-1950s. India has a robust economy, second only to China in annual gross domestic product growth rates; the world’s major powers, especially the United States, are seeking to develop closer relations with India; and Indians perceive their land defenses and nuclear weapons capability as a hedge against nuclear blackmail or overt conflict. China is seen as still militarily and economically stronger than India, with a more “strategic” approach to national and international affairs, but Indians tend to see themselves as capable of catching up and with advantages of democratic politics and stronger legal and financial systems.

The change for the better between the two Asian giants is the result of deliberate government efforts on both sides and changes in the international environment. Beijing has effectively campaigned throughout Asia, including India, to present China’s “peaceful rise” to possible Asian predominance as benign, mutually beneficial and conducive to cooperation. India for its part has pursued policies since the early 1990s aimed at enlarging its strategic space and strengthening its strategic autonomy. 

Indian foreign policy increasingly is pursued with the objective of achieving faster economic growth rates—defined as 8 percent to 10 percent by the past two coalition governments in India and seen as a necessary ingredient of great-power status. Special attention has been focused on countries that could help in this respect with trade, high technology and investment. A “look East” policy toward Southeast Asia, Japan and China has been combined with a heightened engagement with the European Union and the United States. India has staked a claim to a permanent seat on the U.N. Security Council that is as yet unfulfilled, but cannot be ignored.

China no longer can exclude India from regional groupings such as the East Asia Summit or the Shanghai Cooperation Organization and, in return, has gained observer status in the South Asian Association for Regional Cooperation. While continuing Indo-Pakistani tensions and Pakistan’s “all-weather friendship” with China continues to be an impediment to India-China intimacy, China’s links to Pakistan are no longer an important obstacle. India was somewhat reassured when China in the mid-1990s moved from a pro-Pakistani position on the issue of Kashmir to a neutral position and subsequently advised Pakistan to resolve the issue bilaterally and peacefully—a formula that owes its roots to the Simla Accord that followed the 1971 war between India and Pakistan and that since then has been the core principle of India’s approach to Pakistan. Some Indians, however, fear that China’s military and infrastructure projects in Myanmar and other South Asian countries are designed over the long run to encircle or “box in” India.

Perhaps the most remarkable aspect of recent India-China relations has been the growth of two-way trade, which also may be the most significant driver of the improved relationship. When the groundwork was laid for this expansion in the late 1980s, two-way trade stood at only about $100 million. Economic ties between the two countries are now burgeoning, growing at the annual rate of some 30 percent over the past three years. Bilateral trade stands close to $20 billion today, and, at present rates of growth, China may soon replace the United States as India’s leading trading partner.

This trade is buttressed by thousands of agreements and protocols that in themselves are narrow and technical, but cumulatively link individuals and institutions as stakeholders in a mutually advantageous economic enterprise. Indians at first were concerned that Indian manufacturers could not compete with cheap Chinese goods, but experience has demonstrated that Indians generally prefer their own products. One result of the effort to expand trade with China is the increased number of overland trade routes. A third post for border trade was opened July 6, at Nathu La in the Indian border state of Sikkim. For India, this has the added benefit of linking India’s landlocked and undeveloped northeastern states with new markets in Tibet and beyond.

Indian companies, especially in the pharmaceutical and information technology (IT) industries, are investing in China for the same reasons other international corporations do—favorable terms, market access and low-cost labor—and China has publicly honored such Indian entrepreneurs as Ratan Tata. China seeks permission to invest in much-needed infrastructure projects in India such as airport and container port facilities, but faces the same legal and political obstacles confronted by other potential foreign investors. Some 25,000 Chinese have received training with India’s highly rated IT firms and some joint ventures have been launched that combine China’s manufacturing prowess with India’s expertise in the knowledge economy.

The economies of China and India are compared frequently, and according to some studies, 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 does not necessarily translate into Indian emulation.

Competition and Cooperation
Washington’s belated recognition of India as a large and important country, another “rising power” with which a “strategic partnership” would be to mutual advantage, initially caused alarm in Beijing, though New Delhi carefully avoids giving an anti-Chinese orientation to growing ties with the United States and Japan. India has welcomed agreements with the United States on defense cooperation, energy security, science and technology, and civilian nuclear cooperation (the latter necessitates amendments to American law that Congress may pass by the end of the year), but is not likely to abandon its tradition of diplomatic independence defined as nonalignment. New Delhi will avoid antagonizing China even as it expands its economy and plays a more assertive role in the Indian Ocean and its littoral. As Nehru spelled out 60 years ago, India-China friendship could be the basis of an “Asian century.”

Notwithstanding these facts, Indian perspectives on China range widely from the positive and optimistic to the negative and suspicious. Overall, views are pragmatic, rational and rooted in assessments of national interest rather than sentimental, emotional or ideological. There is little public or parliamentary discourse on China, giving the political leadership and India’s Ministry of External Affairs greater latitude. The recent appointment of Shiv Shankar Menon as foreign secretary is a signal that Prime Minister Manmohan Singh’s government intends to put relations with China at the top of its agenda (while simultaneously working for a deeper relationship with the United States, underscored by the appointment of a senior diplomat to work exclusively on the proposed nuclear deal with the United States). Menon is perhaps the External Affairs Ministry’s leading expert on China. He has spent over a third of his career working in—or on—China in the ministry, including as ambassador to China, speaks Chinese fluently and is familiar with all the major bilateral issues. Both major political groupings in India, moreover, support a deeper relationship with China (and with the United States), with the influential Communist parties more enthusiastic about the former than the latter.

Yet, there is a lively debate in India regarding future Chinese interaction with India specifically and Asia generally. India’s open political system reinforces the culturally entrenched trait of its people 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 question how China will exercise that power with India and the rest of Asia. The two countries, for example, are now engaged in a major quest for reliable sources of energy for their rapidly expanding economies. That scramble has competitive elements, with China leading in the acquisition of new oil and gas resources abroad, as well as some cooperative elements in moderating prices. It is not clear which will predominate. Indians have developed a naval strategy that includes keeping open the Straits of Malacca and safeguarding from threats of piracy and terrorism the vital sea lanes that cross the Indian Ocean and over which much of the world’s oil is transported—and they would prefer the Chinese recognize Indian preeminence on this matter. The ambitious PLA (People’s Liberation Army) Navy may not oblige. Still another area of potential competitiveness is Southeast Asia, where Indian economic, cultural and political ties, while still significantly less than China’s, are catching up largely on the demand of Southeast Asian nations that need “two wings to fly” (as leaders in Singapore have referred to China and India). India’s “look East” policy as it applies to Southeast Asia has a security dimension, but at the present time emphasizes the cooperative aspects of a “shared neighborhood” and partnership between India and its Southeast Asian neighbors.

Similarly, cooperative and competitive strands intertwine in Indian and Chinese dealings with the United States, where stakes are equally high and U.S. policies are perhaps less predictable. As other articles in this issue of SAISPHERE show, U.S.-China relations are longstanding and complex. U.S.-India relations are of shorter duration but also complicated, primarily because of an earlier U.S. tilt toward Pakistan and Indian closeness to the Soviet Union in the 1970s.

Some members of the strategic communities in the United States raise the possibility of India’s counter-balancing China with American assistance. But it is widely recognized that India’s policies toward both the United States and China are shaped by its goal of strategic autonomy, which might be undermined by military alliances.

Indians see a strong and confident India as a vital contribution to a stable and prosperous Asia. They were heartened when Washington apparently adopted the same view when publicly presenting the case in 2005 for a “strategic partnership” with India.