September 15, 2014

Can Xi Jinping and Narendra Modi Establish an Economic Partnership?

The following post was published by the Asia Society Policy Institute on September 15, 2014.

As China’s President Xi Jinping heads to India, he should be cognizant of both the promise and perils in relations between the two Asian giants. Essentially, India’s relationship with China has three defining characteristics. The first is their sizeable economic and trade relationship, characterized primarily by India’s import of cheap manufactured goods from China. The second is New Delhi’s latent concerns about China’s territorial and military aspirations. And finally, there is cooperation on a host of global multilateral issues, from global governance to climate change. In this respect, India’s ties with China are not fundamentally dissimilar to those of Japan or the United States.
However, India’s perspective is colored by two further realities. The first is the unresolved land border dispute with Beijing, as well as the legacy of India’s humiliating loss to China in a 1962 border war. The second is the fact that India lags behind China in its development trajectory, with the gap widening.
The opportunities for India in deepening relations with China are consequently severalfold. China has the ability to finance and execute large-scale infrastructure projects to meet India’s vast requirements, particularly as demand drops in China’s domestic market. Beijing can also be a valuable ally for New Delhi in helping to ensure a greater voice for emerging economies on the international stage, and for defending cherished notions of sovereignty. Finally, as China’s economy evolves, it could yet emerge as a lucrative market for Indian exports.
At the same time, such avenues for cooperation are balanced by other considerations. India worries about Beijing’s strategic intentions and military modernization plans. China’s recent actions on its border with India and its recent use of visas and official maps to undermine India’s territorial integrity only add to worries. India also harbors legitimate grievances that the Chinese market is an unfair playing field, with opportunities denied to Indian companies to enter that market and thrive.
India’s strategic concerns, while real, need not necessarily hinder the pursuit of opportunities. The very fact that China and Taiwan were able to benefit mutually from economic exchanges despite their obvious political differences shows just what is possible. But as long as India has cause for worry, it will not be able to enjoy the kind of trust-based relationship with China that it has managed to establish with the United States, many European countries, or even Russia and Japan. Xi would do well to remember that.