In the late 1990s, when I was visiting Mongolia, an Indian diplomat there invited me over lunch at his place. He had some Indian contractors on the occasion as well. The contractors told me that they worked for an Indian company that was collaborating with a Chinese firm to establish a manufacturing unit near Ulan Bator. The Indian company was supplying software and the Chinese company hardware. Evidently, India has proved its prowess in software and China in hardware.
China and India are both rapidly expanding economies. Though China’s growth rate has declined from double digits to higher single digits, India’s is equally impressive as well. China, with a $10.98 trillion GDP, is the second largest economy of the world, only preceded by the United States, while India stands as the seventh with its $2.09 trillion-strong economy.
Besides working in third countries together like Mongolia, they trade with each other as well. China is India’s largest trading partner. In 2014-15, the volume of trade between these two ancient nations was $72.3 billion. India exported $11.9 billion worth of goods and services to the Middle Kingdom and imported $60.4 billion worth.
According to Globalist, a website, by 2050, the Indian economy is expected to surpass both the US and Chinese economies. Is it possible? Maybe, and maybe not. But what is clear is this: These two Asian giants have been cooperating with each other for shared prosperity, while trying to contain each other’s strategic heft.
Apart from trading, these two nations work together in international forums in a number of areas, including global economic governance, technology transfer, pro-growth policies, and so on.
They want a greater say of developing countries in such global organizations as the International Monetary Fund, the World Bank and others. Both want the developed countries to be generous with developing countries in transferring technology to tackle the multiple problems facing the world. In global forums, these two nations often band together, as it has been happening in the Doha round of trade negotiations, environmental dialogues, and patent rights administration.
China and India have pursued pro-growth policies and put pressure on the developed countries not to constrain developing countries with too many environmental and other standards to stifle their growth. That was clear during the Paris negotiation on the environment. At the United Nations, both countries actively pursue such policies in the G-77.
While their cooperation is more subtle, their rivalry and competition is more palpable. These ancient countries compete for markets within the region and across the world. Though China has moved far ahead in this area, India is also following its next door neighbour’s footsteps.
For instance, now it is common to see both Chinese and Indian fabrics and clothes sold in Western and African markets. Indian and Chinese vehicles have become a common sights in such far away places.
Indian-Chinese rivalry is fiercest in the strategic sphere and is mostly confined to Asia. They fought a deadly war in 1963 and New Delhi has consistently blamed China for supporting the Indian Maoists to create havoc in many rural areas. Though now their relations have considerably improved, they are far from close.
Both continue to maintain a high military presence — equipment and forces — in their shared borders — east and west of Nepal. Weary of each other, they use soft and hard power to influence their immediate neighbors and make them uncomfortable. At times, they have also resorted to military intervention.
Let me start with South Asia. India is losing its traditionally most influential role in the region to China, bit by bit. For intance, ever since its partition from India, Pakistan has largely remained in a state of war and low intensity war with its mother nation — they have fought three wars and continue to have low intensity conflict over Kashmir and disputed borders.
India lost its considerable leverage in Colombo when the former President Rajapaksya, with Chinese assistance, crushed in 2009 the 3-decade long Tamil insurgency, which had the blessings from parts and sections of India. Though Rajapakshya was defeated in the ensuing elections, Sri Lanka has moved considerably out of Indian shadow.
In Bangladesh, the pro-Indian Shekh Hashina Wazed and the nationalist Khaleda Zia, who has sympathy and support of Beijing, have alternated in power as prime ministers for last several years. India does not enjoy the same influence now in Afghanistan as it used to before the western attack on the Pakistan-supported Taleban and Al-Qaida operatives, who had planned and executed terrorist attacks on the United States on 9/11.
Nepal has had the history of love-hate relations with India. India views Nepal as its soft belly, security-wise. While Kashmiri separatists and Pakistan-supported terrorists have occasionally used Nepal as their transit country, India fears that any pro-Chinese leaning in its northern neighbor would hurt its security and economic interest.
Even the Maldives and Bhutan, which were traditionally very close to India, have been making efforts to attenuate the Indian influence in their countries. Jigme Thinlay, when he was prime minister of Bhutan, had sought to enhance his country’s closeness by getting with China over Indian apprehension. New Delhi had subsequently played a role in defeating Thiney in the general election.
In South East Asia, India has lost ground to China in Myanmar. In Africa, China has chipped away the Indian influence through its massive investment in infrastructure development and penetration of Chinese goods and services there.
However, it is not a one way street. While India is steadily losing its influence in South Asia and Africa, it has gained some foothold in East and South East Asia, where China enjoys a dominant place in economic and security spheres. The main triggering factors have been the encouragement from Washington and the established Chinese claim of several islands the China Sea that threatens the integrity of countries standing on the wrong side of the claim.
India is working closely with Japan, the Philippines, and Vietnam. India has participated in the US initiative to support these countries that do not have warm relations already and that have territorial dispute with Beijing.
Elsewhere, China is whittling away Indian political and economic influence. For instance, in the Middle East and Africa, Chinese presence and investment have won many countries over to its side, often at the cost of India, a dominant player in the region.
In the security sphere, Sino-Indian contest was limited to the immediate region until the United States began to involve India in the Pacific strategic corridor. China helped Pakistan to keep India engaged within the region, and not look beyond, and sought to catch up with the United States. India sought to keep up with China. But to contain China, India is eager to participate within a broad alliance in view of its border disputes in broad stretches of the border east and west of Nepal.
The collaboration between the Chinese and Indian companies in Mongolia was only a tip of the iceberg of the economic cooperation and competition between these two ancient countries.