And yet, there has been some good news. Trade has increased twelve-fold in the last decade, to an estimated $73 billion in 2011, a figure that is more than 200 times the total trade between the countries in 1990, just twenty-two years ago. China has now overtaken the United States as India’s largest single trading partner. The two governments expect trade to keep growing and, in a joint statement of December 2010, have announced a trade target of $100 billion by 2015; if present trends continue, trade with China is poised to reach double the level of US trade with India before the decade is over. Each country’s top twenty-five exports are essentially mutually exclusive, making trade relations an easy example of compatibility. There are some 9000 Indian students in China. Tourism, particularly of Indian pilgrims to the major Hindu holy sites in Tibet, Mount Kailash and Lake Manasarovar, is thriving. (However, this is a relative term: after all, the two nations with a combined population of over two and a half billion people exchanged only 570,000 visitors, over half a million of those being Indians with wanderlust while only some 60,00 °Chinese tourists travelled to India.) Indian information technology firms have opened offices in Shanghai and Hangzhou; there are many companies and ventures active in the two countries. One can find dozens of Chinese engineers working in (and learning from) Indian computer firms and engineering companies from Gurgaon to Bangalore; Infosys regularly hires mainland Chinese for its Bangalore campus, while Indian software engineers in those and other cities offer research and development support to the Chinese telecom equipment manufacturer Huawei (in turn sending the signal that eavesdropping devices are not integrated into Chinese telecom products). India has become a major market for Chinese engineering and construction project exports, and a vital source of raw materials, from iron ore to chemicals. New Delhi could do more to press China to reduce its non-tariff barriers, however, and promote Indian services exports to its giant neighbour.
By and large, India is good at things that China needs to improve at, notably software; China excels at hardware and manufacturing, which India sorely lacks. So India’s Mahindra & Mahindra manufactures tractors in Nanchang for export to the United States. The key operating components of Apple’s iPod were invented by the Hyderabad company PortalPlayer, while the iPods themselves are manufactured in China. Philips employs nearly 3000 Indians at its ‘Innovation Campus’ in Bangalore who write more than 20 per cent of Philips’ global software, which in turn goes to Philips’ 50,000-strong workforce in China to turn into brand-name goods.
In other words, the elephant is already dancing with the dragon. The potential for additional cooperation is immense and need not just be in each other’s countries. Inevitably, our search for markets, technology and resources to fuel our growth will be key drivers of our international relations. This is why we are both looking far afield, to Africa and Latin America, for opportunities.
There is an instructive comparison to be made between the FDI patterns of both countries. Indian capitalism drives our country’s outward investments in a commercial logic of supply and demand, whereas Chinese FDI is largely fuelled by its government and state-owned enterprises. India’s FDI is spent mainly in the developed world and is invested mostly in the manufacturing and services sectors, notably information technology and IT-enabled services, whereas Chinese FDI concentrates almost obsessively on the extraction of natural resources from developing countries, through oil and gas exploration and mining, where India has similar needs but a far more modest overseas presence. India’s strength — its comparative advantage, if you will — is anchored in its world-class managers, its track record in corporate governance and its exposure to the best global corporate practices, whereas China’s comparative advantage lies in the top-down strategic competence of its government and its single-minded economic drive abroad, which often subordinates conventional diplomacy to the pursuit of economic benefit. Whatever one thinks of the two sets of attributes, there is no denying that they are complementary, rather than a recipe for confrontation.
The opportunities for multilateral cooperation between India and China are great. There is, first of all, the regional plane. China and India have notably strengthened their cooperation in regional affairs. China has acquiesced in India’s participation in the East Asia Summit and invited India to join the Shanghai Cooperation Organization as an observer, just as India has supported China’s becoming an observer at SAARC. While Asia is devoid of meaningful security institutions, their interlocking economic and trade relationships with each other and with other Asian countries will knit China and India closer together.
But multilateral cooperation need not be confined to the Asian region. China and India have broadly similar interests and approaches on a wide range of broader international questions, from most issues of international peace and security to the principles of world trade and the ways and means of coping with globalization. They have already begun working together in multinational forums on such issues as climate change, trade, labour laws, arms control and environment protection, and have no real differences on matters like encouraging biodiversity, promoting dialogue among civilizations, promoting population control, combating transnational crime, controlling the spread of pandemic disease and dealing with challenges from non-traditional threats to security. (Sadly, the two countries have even sometimes made common cause on human rights, with China and India agreeing on countering Western draft resolutions in UN bodies — China because it is usually guilty of the very practices being condemned in others, India because of its allergy to ‘country-specific’ human rights prescriptions.)
All of these areas provide a realistic basis for further long-term cooperation. One exception, alas, is the issue of combating international terrorism, where China’s indulgence of Pakistani terrorist groups at the UN is arguably not in its own long-term interests. But that can change, and China — India cooperation can also improve on the issues of piracy, oil spills and other international environmental issues, nuclear disarmament and arms races in outer space, human trafficking and natural disasters — all of which are issues on which the two countries could play mutually supportive roles, take joint responsibility and contribute to the establishment of new rules in the global system. New areas of cooperation could also emerge — wildlife conservation, for instance, where both countries could cooperate on issues like the smuggling of tiger parts to Chinese customers, or disaster management, where Asia’s two giants have much to learn from each other but have made little effort to do so.
Energy is an obvious area for cooperation. The US Department of Energy estimates that China’s oil consumption will rise 156 per cent and India’s oil consumption will rise 152 per cent by 2025. While both countries are seeking to expand their domestic production, opportunities for growth are limited, and both countries will become more dependent on imported oil, making them more vulnerable to irregularities of supply and price volatility. This makes the quest for reliable sources of supply and secure sea lanes of communication a shared interest. After all, both China and India are relatively new entrants into the global oil system. They are facing fierce competition from much larger, more experienced and arguably more resourceful Western oil companies. Cooperation between Indian and Chinese oil firms is essential.