India and China: Ready to Meet Halfway

The Modi-Xi Summit has evoked mixed responses from analysts. They have largely focused on existing concerns – talks on settling the boundary issue; whether a global power really intends to support the rise of a possible rival; India is being edged out of the emerging multi-polar world order. These formulations ignore the complexity of the relationship because it concerns each of these interconnected elements.

The Summit outcome recognizes that the border is un-demarcated. The principles for settling the boundary agreed in 2005 have been reiterated detailing steps for a final settlement, now described as a strategic goal. A settled border will enable us to review our military doctrine of fighting on two fronts and divert much needed resources for infrastructure development.

There has been considerable political movement recognizing the problem in terms of tension between two rising powers seeking to establish their territorial integrity rather than letting a colonial legacy dominate bilateral relations. An early demarcation of the boundary should be our litmus test for the partnership.

But can the two leaders go further and recognize the regional strategic interests of each other in the Pacific and the Indian Oceans? What about full support for India’s membership of the Security with the two countries working together in that forum?

At the global level, the most significant economic transformation the world has seen is currently making Asia—once again—the world’s economic centre of gravity. The scale and speed of the economic rebalancing occurring from the West to the East and South is many times larger than was witnessed during the Industrial Revolution. By 2060 these China and India will have a little less than half of world GDP with OECD’s share shrinking to one-quarter. In this changed context, instead of managing the competition in the relationship with China, the Modi-Xi Summit has provided the opportunity to re-frame issues and collaborate for an Asian century of prosperity.
Both India and China share the goal of democratization of multilateralism for sharing prosperity, seeking a greater role in shaping global affairs to replace the G7 grouping of developed countries, which has so far been deciding the global agenda. Already the first steps have been taken in this direction with establishment of the New Development Bank. Here, too, cooperation has triumphed over conflict. India agreed to its headquarters in Shanghai and China has not retained for itself the position of the head of the new bank or the supervisory bodies, thereby recognizing the emergence of a multi-polar world order.

At the global level, the compartmentalized arrangement between the United Nations General Assembly, Bretton Woods Institutions and the Security Council is not able to respond to trade-offs between economic growth and global ecological limits. By 2060, in Asia and other developing countries demand for food, water and energy is expected to double, and reshaping a global system that served the natural resource and human security needs of one-fifth of the global population for a shared vision of prosperity for four billion people who have yet to benefit from globalization will provide the legitimacy for new global rules.

The focus will have to be on use and distribution, rather than scarcity, of natural resources. Technological innovation will be a key driver, requiring a review of the Intellectual Rights Regime, which ignores societal concerns. New approaches responding to new challenges will be needed in areas such as energy, water, and food and cyber security. In climate change there is already a close collaboration with China. A shared global vision will overcome both the global rulemaking deficit and competition inherent in the re-emergence of two Asian giants, without unduly antagonising the others.

Economic cooperation should also be taken up a notch away as it benefits both, and will build trust and dispel notions that China will not support our economic growth for geopolitical reasons. China is already India’s largest trading partner. Premier Xi has made India an offer of linking manufacturing and back-office software expertise, and China’s investment in manufacturing in India will help to reduce the $30 billion trade deficit. The two countries need to go beyond this rebalancing.

India has the capacity for global leadership in developing new pharmaceuticals and crop varieties, as we are the only country with both extensive endemic biodiversity and a world class endogenous biotechnology capacity, along with global leadership in software development. China has developed global leadership in solar energy and information technology hardware. Together these are the foundation of the knowledge-based economy that will dominate the world a decade from now. Joint research for the next wave of innovation will be the real win-win dividend for both – keeping out of the middle income trap.

The time has come for India to move beyond notions of balance of power by adopting a vision of shared prosperity. Developing ASEAN as an economic and diplomatic bloc will enable the Asian Century, as the region has more than half the global population and the potential to have more than half the global wealth by 2050, and support a relationship with China based on multilateral rules.

Prime Minister Modi must now implement the BJP manifesto’s approach to foreign policy, for which he has the nation’s endorsement, by fleshing out the details with a bold vision for the future, instead of the reactive approach that we have adopted so far.

Mukul sanwal is Ex civil servant and UN diplomat

Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India