Asia's Three Futures and the Place of India and China in It

There is opportunity again for India’s transformation in the emerging global situation, if we take advantage of it.

This is the second article in a two-part series on the rise of China and its impact on world order, and India. Read the first part here.

At the systemic level, the Asia-Pacific faces at least three possible geopolitical futures: of a regional order centred on a single power, earlier the US and now China; of an open, inclusive multipolar concert of powers or collective security architecture; or, the pattern most familiar in history, of several powers of varying size and capability contending for primacy and influence and to maximise their individual interests. To me it seems that the last scenario is the most likely, the second the most desirable, and the first the least stable or likely.

India and China

What does this mean for India and China’s complex relationship?

China is and will be a significant factor in whether we are able to transform India. It is not the only one or the most important one. If we do not handle our internal affairs and economy better and keep treading water as we have for five years, what we do with China is unlikely to matter, and we will miss the bus anyway. But China, and the world that she shapes, will be increasingly important to us as we grow and develop.

India too, like China, is much more dependent on the outside world than before –  for energy, fertiliser, non-ferrous metals and other essential imports, for technology and capital, and for access to markets. Over half our GDP is accounted for by external trade in goods and services.

Shipping containers, including one labelled “China Shipping,” are stacked at the Paul W. Conley Container Terminal in Boston, Massachusetts, US, May 9, 2018. Credit: Reuters/Brian Snyder/Files

By 2014, India and China together accounted for about half of Asia’s total GDP. In PPP terms they are the world’s largest and third largest economies. Most of this is of course China. China and India’s combined share of world GDP in 2016, of 17.67% (in nominal terms) or 25.86% (in PPP terms) is still well below their share of world population of 37.5%, but represents a significant economic force today.

Between India and China, however, the gap has widened in the last 30 years. And that gap is widest in social indicators. China is about three decades ahead of India on most social indicators, one decade ahead on indicators of income, and about par on digital parameters. The gap in healthcare, measured in life expectancy (in which India is 30 years behind China), is similar to literacy (72.23% in India to 93.36% in China in 2015). Both societies display growing inequality despite rapid economic growth.

While India and China have a common economic interest in the world economy, as the two greatest beneficiaries of globalisation and of the decades of open trade and investment, their political relations have become more fraught in the last few years. The signs of stress are known to all.

Also read: The Reality of Narendra Modi’s Foreign Policy Failures Laid Bare

My prescription, for what it is worth, is to engage China bilaterally to see whether we can evolve a new modus vivendi, to replace the one that was formalised in the 1988 Rajiv Gandhi visit which successfully kept the peace and gave the relationship a strategic framework for almost 30 years. That framework is no longer working and the signs of stress in the relationship are everywhere from India’s NSG membership application, to Masood Azhar’s listing by the UN to Doklam (where Chinese behaviour differed from previous such instances but India’s did not).

The one factor above all others that has brought renewed stress into the India-China relationship is China’s much stronger strategic commitment to Pakistan, evident since President Xi Jinping’s 2015 visit to Pakistan which announced the China-Pakistan Economic Corridor (CPEC). The more we rise, the more we must expect Chinese opposition and we will have to also work with other powers, and in the subcontinent to ensure that our interests are protected in the neighbourhood, the region and the world. The balance will keep shifting between cooperation and competition with China, both of which characterise that relationship.

A publicity image for the China Pakistan Economic Corridor. Credit: Daily Pakistan

The important thing, for me, is the need to rapidly accumulate usable and effective power, even while the macro balance will take time to right itself.

As for the effect of the present geopolitical situation on India-China relations, the prevailing uncertainty means that India and China must display more skill and caution in our dealings with the world and each other. But it also means that at a time of change, there are opportunities for the capable. Let me illustrate what I mean:

  • The return of power politics has made life more predictable. We should assume rationality, hope for the best but prepare for the worst. India and China have good and successful experience of CBMs and crisis management, which could have wider uses in Asia.
  • A concern is the consolidation of Eurasia under the Belt and Road Initiative. It is hard to tell whether and how it will work. However, connectivity useful and you should use what works for you.
  • On maritime contention, now that we are both so dependent on the outside world as a result of reform and opening up, India and China have a common interest in freedom of navigation and security in the seas that carry our trade and energy.
  • New security issues include cyber security and the militarisation of outer space – defence and offence – where there are both challenges and opportunities. There is a clear common interest in acting on climate change.
  • As global economic prospects dim, India and China – as the greatest beneficiaries of globalisation – have a common interest in keeping trade and investment flows open. Both countries have common interests in keeping energy flowing and cheap, in opposing protectionism and so on. However, domestic politics, the rise of authoritarians, ultranationalism, and strong mercantilist instincts in the leaderships, are pulling them in the opposite direction.
  • The heightened China-US contention should lead both China and the US to ameliorate points of friction in other relationships. This means not picking new fights and postponing old ones to concentrate on their primary preoccupation, which is each other. There are signs of this in China’s behaviour towards India and Japan in the Wuhan summit and the Abe visit.

The real question is whether these could amount to anything more than a tactical response to an immediate situation. The fact is that these are not short but medium to long term factors operating on India-China relations. It is therefore in both sides’ interest to explore whether they create conditions for a new strategic framework for the relationship, or even to manage and solve core issues such as the boundary, our common periphery, both countries’ use of outside balancers in their relationship with each other, and so on.

I am convinced that India and China must find a way forward that is better than our past, that enhances the well being of one-quarter of humanity. And that requires a degree of pragmatism and a new strategic framework for India-China relations.

A new modus vivendi

What might a new framework consist of? It would include respect for each other’s core interests; new areas of cooperation like counter-terrorism and maritime security and crisis management; a clearer understanding of each other’s sensitivities; settling or at least managing differences; and, a strategic dialogue about actions on the international stage. The new security issues, like maritime security which is increasingly important to both India and China, can be positive sum issues, if not looked at territorially. Both have an interest in keeping the sea lanes open and secure for their trade and energy flows and should be discussing them and cooperating.

Credit: Reuters

Credit: Reuters

It would include a revised framework for economic cooperation in the periphery that we share. China has reportedly proposed extending the China-Pakistan Economic Corridor to India. If we are to solve the trade imbalance, we must broaden the economic relationships to manufacturing, investment etc. Should not the two countries connect trans-Himalayas, using transit through Nepal to improve such trade, and China begin to treat both sides of Jammu and Kashmir equally in practice, while reverting to her stated position in the 1990s that J&K is disputed and to be settled by India and Pakistan between themselves?

If so, we might see a changed economic paradigm in the India-China relationship which would not appear so mercantile and exploitative to the average Indian. This would go beyond engaging China’s financial and other capabilities to build Indian infrastructure, as the present Indian government has attempted.

Also read: India-China Informal Summit a Good First Step, Need Actions Next

India too will need to adjust to new economic realities. For example, the rise of China and her economic strength has made the extent of India’s engagement in the Regional Comprehensive Economic Partnership (RCEP)  a matter of debate in India – this at a time when trade in goods accounts for almost half of India’s GDP. Equally, India now has an interest in freedom of navigation in the South China Sea, since $ 66 billion worth of her exports and about 33% of our trade passes through that waterway, but the nature and manner of safeguarding that interest are still an issue in India.

We thus face a double opportunity.

Tactically, China-US contention – which I think is structural and therefore likely to continue for some time with a paradigm shift away from cooperation to increasing contention, despite temporary deals and “victories” declared by one or both – opens up opportunities and space for other powers. Both China and the US will look to put other conflicts and tensions on the back burner while they deal with their primary concern, the other. We have seen this effect already in the Wuhan meeting and the apparent truce and dialling back of rhetoric by both India and China, even though this does not extend to a new strategic framework or understanding or to a settlement of outstanding issues.

Strategically speaking, there is opportunity again for India’s transformation in the emerging global situation if we take advantage of it. Is this the pie in the sky?  Lack of ambition has been part of the problem in the India-China relationship over the last few years. We will never know unless we try. And we must try. Our grasp must exceed our reach.

Shivshankar Menon was India’s national security adviser till 2014.

This article is adapted from a transcribed and edited version of the valedictory address delivered by Shivshankar Menon at the India Forum on China@Goa hosted by the Institute of Chinese Studies,  December 7 to 9, 2018