By Simi Mehta
In the era of globalization today, economics no longer forms the backdrop of world events, but instead has become the driver of foreign policy, representing a more valuable resource than military strength. A study of economic relations between the worlds two most populous countries, namely China and India highlights the mutually beneficial cooperation of national economies, amidst a complex global environment which has also enhanced the political linkages of economic partnership.
Asian Century, Chindia, The 21st century will belong to Asia, The world will look to Asia for economic leadership, are expressions that point to the two Asian giants, and their rising power on the world stage that has caused the entire earths economic and political landscape to shift in plain view. Being geographically proximate and demographic billionaires, India and China are high growth powerhouses in a range of significant areas, namely manufacturing, international diplomacy, military strength, technology, soft power and human capital. As a corollary, relations between these two countries have high potential of shaping the future of the global order, in this world of interdependence. However, the conflict potential between India and China is significantly wide-ranging especially after the bitter frontier war in the year 1962. Most flashpoints are security issues, unresolved border conflicts, Chinas displeasure at Indias sensitivity towards Tibet, and Indias abhorrence to Chinas Pearl of Strings strategy.
In spite of the differences, both countries share certain historical interactions, like the spread of Buddhism from India to China, the British trade on the Silk Route, and the remarkable Panchsheel Agreement. Their economic strengths are widely considered complementary. While Chinas strength lies in manufacturing, infrastructure and hardware, India excels in services, Information and Communications Technology and software. Although both countries are still reeling under poverty, their huge populations endow them with the potential to become major economic powers, if they achieve even a fraction of Western productivity levels; and both have, in recent years posted impressive rates of economic growth. The economic rise of China and India has revolutionized todays businesses.
This assertively affirms the study by Citigroup in the year 2011 that by the mid-21st century, China and India would be four times as large as the United States, which would restore the historic Asian dominance in the world before the advent of the European navies in the 16th century.
Economic engagement between India and China is one of the most rapidly evolving bilateral relationships today, and this is evident from the burgeoning trade figures. China is Indias largest trade partner, where bilateral trade in the year 2011-12 was worth 75 billion dollars and is aiming to touch 100 billion dollars by the year 2015. This is a huge jump over the last eleven years, when bilateral trade was worth a mere 3 billion dollars. India is the largest market for project exports from China, with present execution orders estimated at over 55 billion dollars. Over the years, India has become an attractive destination for about a hundred Chinese companies across a wide-range of sectors, while Indian investments into China are marked by the presence of companies in areas such as Information Technology, auto components, pharmaceuticals and banking.
There are complements of size and strength between the two economies which make India and China natural partners. With a combined population of 2.5 billion and a rapidly growing middle class, India and China are the fastest growing major economies, offering a huge market and rich human resources. There exist the most efficient manufacturing and services companies which need to work together. As the Chinese Premier Le Keqiang rightly pointed out during his visit to India in May 2013, linkages between our markets could be a game changer for the world and both sides willing, Sino-Indian ties would be the most important bilateral partnership of the 21st century.
The author is a Ph.D scholar in the American Studies Program at the Centre for Canadian, United States and Latin American Studies, School of International Studies, Jawaharlal Nehru University, New Delhi, and can be reached at simi@manavdhara.org