China, India Balance Rivalry with Cooperation

May 14, 2015

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BEIJING (AP) — India's prime minister is visiting China this week to build friendship between the two Asian giants despite a long history of disputes and rivalries, along with some areas of cooperation, especially in the economic sphere.

India and China have disagreed for decades over which country controls two chunks of Himalayan territory. China says the northeastern Indian state of Arunachal Pradesh is part of China, while India insists China is illegally occupying Aksai Chin, a rocky and largely empty region far to the northwest. The two sides fought a brief war in 1962 over the latter territory. But the disputes have been low key for years now, with both countries much more concerned about boosting cross-border trade and investment. Diplomats from the two countries now regularly discuss the territorial dispute in scheduled talks, but even if little progress is ever made, neither country seems to care very much.

STRING OF PEARLS

India is deeply unsettled over China's growing presence in the Indian Ocean, a scenario some analysts call the "string of pearls" strategy linking China's interests in the countries surrounding India — Sri Lanka, Myanmar, Bangladesh and Pakistan. In Sri Lanka, off India's southern tip, China began by building the port at Hambantota and significantly upped the stakes with a massive development project off the coast of the capital, Colombo. Then, Sri Lanka allowed two Chinese submarines to dock off its coast, threatening to derail ties between India and Sri Lanka. The two sides moved to reconcile after the election of a new Sri Lankan government that put the Colombo port project under review. However, the U.S. Defense Department predicts China will keep establishing "access points" in the area over the coming decade.

THE PAKISTAN FACTOR

The longtime friendship between China and Pakistan, rooted in a time when both countries were deeply mistrustful of India, has long made New Delhi nervous. The relationship has mainly gone one way, with China providing economic assistance and political backing to Pakistan. Islamabad is also anxious for an alliance it can use to balance the growing economic and political clout of India. But Pakistan also offers China a gateway to South Asia, Iran and the Arabian Sea, one of the economic beltways that President Xi Jinping has sought to build through the region. Earlier this year, during a visit to Islamabad, Chinese Foreign Minister Wang Yi said China and Pakistan have an "all-weather friendship."

INDIA ACCELERATES, CHINA SLOWS

India's economic growth rate is finally overtaking China's — although the sheer size of China's economy ($10 trillion) remains much larger than India's ($2 trillion). The World Bank expects India's economy to grow 7.5 percent this year compared with 7.1 percent for China. Last year, India's economy expanded 7.2 percent and China's grew 7.4 percent, the slowest annual rate in nearly a quarter century. India's growth could accelerate further if New Delhi addresses long-standing problems such as poor infrastructure and a strangling bureaucracy. In China, the central bank has cut interest rates to try to prevent the economy from slowing too quickly. After two decades of double-digit growth that has raised incomes but also caused significant environmental damage, China is trying to nurture an economy with greater reliance on service industries, which grow at slower but more sustainable rates.

REBUILDING NEPAL

When a magnitude-7.8 earthquake hit Nepal on April 25, both China and India sent immense amounts of aid and military forces, and both pledged long-term support in rebuilding the impoverished nation. Competition for influence in Nepal has been brewing for years, with China courting India's traditional ally with infrastructure projects like roads and hydropower dams. Chinese annual investment overtook India's in 2014, and Beijing persuaded Kathmandu to clamp down on anti-Tibet demonstrations. Nepal's location between India and China makes it geopolitically strategic, as a buffer between the two Asian giants which fought a brief border war in 1962. It also shares a border with the fraught territory of Tibet, defusing tensions between China and India, where Tibet's exiled government and Buddhist spiritual leader the Dalai Lama are based. Its water resources are also crucial to the region, with melt from its Himalayan glaciers feeding rivers in both of the neighboring countries.

TWO BIG MILITARIES

While India and China are both sprawling nations with similar-sized populations, China is spending $144 billion on its military this year compared to India's $40 billion. Still, India operates two aircraft carriers to China's one, along with conventional and nuclear submarines, latest-generation fighter jets and an array of ballistic and cruise missiles. Both China and India possess nuclear weapons. While there have been no armed clashes since 1967, China's support for Pakistan has long been a sore point in relations. China's military expansion, which includes the largest naval fleet in Asia and a pair of stealth fighter development programs, is seen as geared mainly toward displacing the U.S. as the dominant power in the Asia-Pacific, as well as securing territorial claims such as Taiwan and the islands of the South China Sea. India has grown close to the U.S. on defense issues and wishes to retain its status as the premier force in the Indian Ocean.

COOPERATION

Despite their rivalries, the two countries have played up their cultural links — such as the importation of Buddhism into China by wandering Chinese monks more than 1,500 years ago — and have found ample room for economic cooperation. Both are members of the BRICS grouping of emerging economies, which is now establishing a formal lending arm, the New Development Bank, to be based in China's financial hub of Shanghai and to be headed by a senior Indian banker. India also was a founding member of the China-backed Asian Infrastructure Investment Bank, which plans to be formally established by year's end and seeks to emulate institutions such as the World Bank and International Monetary Fund. While the sides are seeking to expand bilateral trade to $100 billion this year, China exports far more than it imports, something Indian Prime Minister Narendra Modi hopes to alter with increased market access for Indian goods and services.