By Selcuk Çolakoğlu
Relations between China and India, the world’s number one and number two most populated countries respectively, have always attracted worldwide attention. Today, these two countries are ranked among the most important economies of not only Asia but the entire globe. China is currently the second largest economy in the world, while India is the seventh. The increasing economic capacities of the two countries continue to boost their weight in global politics as well. In that regard, it is not surprising to see that both have been invited to the G-20, which came into existence as the G-7’s scope was widened. China and India also embarked on a quest to establish a non-Western global economic order by founding the BRIC in 2001 together with Russia and Brazil. This entity, which evolved into what we now know as the BRICS, with the participation of South Africa, has additionally given way to the foundation of a development bank. Likewise, India became a founding member of the Asia Infrastructure Investment Bank (AIIB), which was recently established by China as an alternative to the U.S. and Japanese-led Asian Development Bank.
Within this context, Indian Prime Minister Narendra Modi paid his most recent visit to China in May 2015, with the perceived convergence between New Delhi and Beijing stimulating worldwide excitement as bilateral relations between the two capitals had already gained momentum by the early 2000s. Clearly the leaders of both countries are determined to maintain the dynamism that underlies improved relations.
When Chinese President Xi Jinping visited India in September 2014, he began his visit in Gujarat, the hometown of Indian Prime Minister Narendra Modi. Prime Minister Modi kindly reciprocated the gesture by beginning his return visit to China in Xian, the hometown of President Xi.
Increased economic cooperation
Topping Modi’s agenda during his official visit to China was economic cooperation, which had also been the priority of his predecessors. The two leaders aim to boost not only the bilateral trade volume between India and China but also the depth and scope of reciprocal investments. Even though the volume of bilateral trade between the two countries increased significantly over the last 15 years, its current level of $70 billion is still far from satisfactory considering its largely untapped potential. On the other hand, India is confronted with the very same dilemma that is unavoidably tussled with by other countries with strong commercial ties with China, namely that the structure of bilateral trade between China and these countries – including India – favors the former due to the immensely competitive nature of the Chinese economy vis-à-vis any of its partners. Imports of high value-added goods from China cost India a trade deficit that nearly amounts to $40 billion.
The second pillar of the two parties’ overall push for further economic cooperation is mutual investments. India is planning to attract Chinese foreign direct investment (FDI) as well as funds from China that can be used to finance domestic investments. For that purpose, Modi and Xi have already signed 24 bilateral agreements in the sum of $22 billion. Industries such as iron and steel, telecommunications, and energy are set as the priority targets of increased cooperation. As part of the comprehensive deals reached at bilateral meetings, credits that are provided by Chinese lenders to the Indian telecommunications firm Bharti Airtel alone approach $2.5 billion. Indian telecommunications firms in particular are hoping to make the best use of China’s accumulated knowledge, technological know-how, and practical experience in the field. Another area in which India desires to benefit from Chinese experience is transportation infrastructure. India wishes to establish a high-speed railway network covering the entire country. To this end, Indian firms seem ready for joint production. Likewise, Chinese firms have given the green light to technology transfers to their Indian counterparts.
Border dispute
Despite coming a long way in a short period of time in terms of deepening economic cooperation, New Delhi and Beijing are still confronted with some fundamental problems that continue to impede further improvement of their bilateral relations. The essential obstacle here is the prolonged border dispute. The two nations are yet to reach a formal agreement on their 4000-km border along the Himalayas, with each party laying claim to territories controlled by the other. The boundary in question is the longest disputed border in the world. Relations between the two countries had been strained throughout the entirety of the Cold War period due to chronic border disputes which date back to the 1950s, and it was particularly the military conflict along the Himalayan border in 1962 that left the deepest wound in the memories of the two nations. Furthermore, negotiations that had been steadily carried out up until recently proved unable to yield any concrete results. Under such circumstances, the possibility of renewed conflict cannot be ruled out, even considering the fact that there hasn’t occurred even a single major skirmish along the border in question for the last three decades.
The border dispute was also among those topics that were brought to the agenda during Modi’s visit to China. However, no real progress could be made in the name of resolving the dispute. During his meeting with Chinese Prime Minister Li Keqiang, Modi pointed to the immense potential that bringing a fair and permanent solution to the dispute could tap, an act that would revolutionize bilateral relations. He further stressed the urgency of establishing intensive confidence building measures (CBMs) for the sake of the resolution process.
Competition in foreign policy
China and India are still strategic rivals despite their increased economic cooperation. Alongside the U.S., Japan, and Australia, India is also seen as one of the major actors that has an interest in offsetting China’s dominance over Asia. That India and China came to be known as fellow members of the BRICS does not suffice by itself to reverse the two giants’ inherent tendency towards taking sides with rival groupings which are once again beginning to overwhelm Asia’s strategic environment. Moreover, New Delhi set its permanent membership on the United Nations Security Council (UNSC) as a primary national goal in the name of being recognized as a great power on a global scale. In contrast, China pioneers the opposition bloc which stands firmly against any attempts to reform the UNSC because such would mean including not only India but Japan and several other countries in the Council as well.
The two countries’ strategic interests in South Asia are also mutually exclusive. China maintains intimate ties with Pakistan, with high-level defense cooperation at the core thereof, a reality that deeply disturbs India as might be expected. On the other hand, Beijing feels extremely uncomfortable with India’s hosting of the Tibetan opposition. China even fears that India might still be supportive of Tibet’s independence.
Likewise, there is a heated rivalry between Beijing and New Delhi for influence over Bangladesh, Myanmar, Sri Lanka, and Nepal. New Delhi shapes its foreign policy in tandem with the West, backing Myanmar’s opening to the rest of the world as well as its related democratization project. However, Beijing believes one of the essential motivations behind such a policy is to detach Myanmar from China’s larger zone of influence. Moreover, we can also talk of an intensified competition between India and China to ‘pull the strings’ in Sri Lanka. Beijing managed to establish amicable relations with Mahinda Rajapaksa, the powerful former President of Sri Lanka who had been ruling over the country for ten years until he unexpectedly lost his seat in the presidential elections of January 2015. The incoming President Maithripala Sirisena is known to have close ties with India, which led to the impression that India actually gained a significant diplomatic victory over China as far as global public opinion is concerned.
From a broader perspective, it seems that while an urge for closer cooperation motivates enhanced economic affairs between New Delhi and Beijing, competition is still what marks their bilateral diplomatic relations. The diplomatic rivalry in question is not limited to strategic concerns, but is further fueled by a chronic border dispute. On the other hand, neither Beijing nor New Delhi can afford to turn a blind eye to the huge benefits that intense economic cooperation can potentially bring about. Therefore both countries are trying to capitalize on mutual economic benefits while working hard to contain political frictions within manageable limits. Here, a delicately-designed strategic balance as such may not be easily upended in the foreseeable future.
*This piece was first published in Analist monthly journal’s June issue in Turkish language.
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