Iindia- China: Emerging Powers

  • SumoMe

The international scenario is undergoing a change. The U.S is a mess. It created blunder in Afghanistan and then Iraq and is still struggling to come out of it. It cannot afford to meddle in other countries anymore. The hegemony of the West is crumbling and the focus is now on Asia with India and China as two major powers on the bloc. Both were a rich civilization, exploited by the colonial powers and now making waves around the globe in the twenty first century.

China has left the whole world in awe with its immense growth in a short span of 60 years. The Chinese phase of growth can be divided broadly into two phases: Maoist era (1949-79) and post -Maoist era (aftermath of 1979). At the time of Chinese revolution in 1949 the economy was disintegrated and society agrarian. Communist Party of China (CPC) abolished landlordism and redistributed the land. Steps like collective and later on cooperative farming were taken but individual ownership to land remained. However, with collectivization or nationalization of land individual ownership got abolished. Land and production came under social control and farmers got wages based on their work. By 1958, all land, factories etc came under ‘People’s Communes’. Each commune had 5000 families and there was a common kitchen. However, Great Leap Forward policy led to huge loss and famine that took million lives. The Chinese society under Mao’s regime became poor. “Infant mortality rate was around 165 per 1000 births. Den Xiaoping took over in 1978. Oil crisis occurred in 1979 but Chinese economy was opened for trade and capital inflow. In 1992, new economic policy to change socialist economy into socialist market economy was announced to bring economic development, liberate productive forces and to make China an international player.

Special Economic Zones (SEZ) were set up which offered cheap labour, easy regulations, tax holidays etc to attract foreign investors. “In 1980, China’s share in world trade was less than one percent. In 1999, China had grown to become the world’s second largest economy after US in terms of GDP.” In 2004, China became largest recipient of Foreign Direct Investment (FDI) with over US$60billion of foreign capital invested. It has been successful in maintaining around10percent GDP and has entered the export markets of developed countries. According to World Trade Organisation (WTO) China has become biggest exporter leaving Germany behind. It dominates in the manufacturing sector. Chinese electronic and IT goods are everywhere. It is also engaged in struggle with big countries to get hold of raw materials in Africa and has made inroads into oil industry of Sudan, Algeria, Congo, Guinea, and vying for Angola and Nigeria etc. It holds $1.8 trillion in foreign exchange reserves. It finances Russian pipeline projects. It is a member of WTO , Asia Pacific Economic Cooperation (APEC), International Monetary fund (IMF), World Bank, Asian Development Bank(ADB),Association of South East nations Regional Forum (ARF), ASEAN+3, Brazil, Russia, India, China (BRIC), has observer status in South Asian Association for Regional Cooperation (SAARC) etc. It is also a permanent member of U.N Security Council. The US is under huge financial debt and has turned towards China for help. Dollar hegemony is dwindling and China is trying to internationalise ‘Yuan.’

While China’s growth has been rapid, India took a gradual path. India under Nehru adopted a mixed economy model. Reliance on public sector, protected economy was there. Indians relied on agriculture. India remained way behind East Asian countries, which encouraged privatization and export. She did try to encourage privatization and liberalize licensing control on trade and foreign investment in the 80s but systematic reforms were introduced only in 1991 as ‘New Economic Policy’ under P.V. Narasimha Rao govt to deal with the balance of payment crisis, which paved the way for ‘market’ and roll back of state. “The average growth rate in the 16-year period from 1992-93 to 2007-08 was around 6.7 percent, which puts India among the fastest growing developing countries. This growth record is only slightly better than the annual average of 5.7 % n the 1980s , but it can be argued that the 1980s growth was unsustainable, fuelled by a build up of external debt which culminated in the crisis of 1991. After growing for first 5 years at 6.7 %, the economy slowed down to 5.4%. In 2001 it rose to 7.6 percent. India’s information technology export grew from a mere $ 150 million in 1991-92 to $31.4 billion in 2006-07, and is projected to reach $60 billion by 2010.

The SEZ act, 2005 that came into effect on Feb 10, 2006 is another revolutionary step towards modernization. India is a member of SAARC, BRIC, WTO, IMF, World Bank, India, Brazil, South Africa (IBSA), ADB, Bay of Bengal Initiative for MultiSectoral Technical and Economic Cooperation (BIMSTEC), Free trade Agreement (FTA) with ASEAN and negotiating with South Korea, Japan, and Gulf etc. It holds observer status at Shanghai Cooperation Organisation (SCO), active participant at Doha summits of WTO, ASEAN Regional Forum, trading partner of European Union (EU), and vying for permanent seat in Security Council. India also entered into nuclear deal with US 2008.

India and China have shared bittersweet relations. Both share a diplomatic relationship since 1950. Chinese Premier Chou En Lai and Indian PM Nehru established ‘Panchsheel’ to further strengthen the ties in 1954. However, 1962 war led to cold relations between the two. In July 1976, K.R. Narayanan was India’s first Ambassador to China since 1962. In 1979, External Affairs Minister A.B. Vajpayee went there. In 1988; PM Rajiv Gandhi visited China and signed agreements on Science and technology, civil aviation and cultural exchanges, setting up of a joint working group (JWJ) on border issue. In 1984, both signed a Trade Agreement to become ‘Most Favoured Nation’. Border trade was resumed in 1992. In September 1993, Prime Minister P.V. Narasimha Rao signed an Agreement on the Maintenance of Peace and Tranquility along the Line of Control (LOC). A Sino-Indian Expert Group (EG) was set up to assist the work of the JWG on the boundary question. In 1994, Double Taxation Avoidance Agreement was signed. In November 1996, President Jiang Zemin visited India. Agreement on Confidence Building Measures in the Military Field along the Line of Actual Control in the India-China Border Areas was signed between the two countries. Bangkok agreement was signed in 2003 under which both offered trade concessions to each other. Agreement for trade via Silk route was also made. In 2004, India’s total trade to China crossed US $13.6 billion, with Indian exports to China touching $ 7677.43 million and imports from china at US $ 5926.67 million. In 2006, Nathula pass was opened for trade. “For the period 1997-2002, the trade balance remained in China’s favour. In 2003, the balance of trade shifted in India’s favour to the tune of US$908 million. However, since 2006 India recorded a trade deficit. In 2008, India’s trade deficit with China stood at US$11.2 billion. Both the countries have identified engineering, nano sciences, disaster management, biotechnology, climate change as areas of cooperation. They have set trade target of $60 billion by 2010.China imports iron ore and other minerals from India. Both are competing for oil in the world market. Wal-Mart that already has ventures in China has now entered India.

Despite the bilateral links between the two countries, the basic issues remain unresolved. China has followed a policy of praising and backstabbing India at the same time with ‘Hindi Chini Bhai Bhai’ agenda. It happened in 1962. It continues to date. In 1998, India openly declared China as its biggest nuclear threat. Tibet remains cause of rivalry. Repeatedly, China has tried to do things that make India suspicious. Unlike Sikkim that was finally recognised as India’s territory, it stakes its claim on Arunanchal Pradesh to date. India on its part accuses China of undertaking projects in Pakistan Occupied Kashmir (POK), occupying Aksai Chin, of making land and airspace incursions into Ladakh and secret building of a dam on river Brahmputra.

Furthermore, India protested when China gave separate visas to Kashmiri people. Chinese has even tried to hack computers of Indian government. It is trying to encircle India by forging links with neighbors and has signed development projects with Myanmar and Srilanka. India is currently facing security threats from Pakistan and Maoists, which is to China’s advantage. Without security, economic growth cannot be possible. India also complains about China’s export manufactured goods being value added. When India tried to ban Chinese toys in its market for six months, China threatened to go to World Trade Organisation (WTO). She also put ban on Chinese made cell phones, which do not have International Mobile Equipment Identity (IMEI) numbers and are an advantage for the terrorists. China criticizes India for not giving visas easily but India has made it clear that only skilled workers are welcome to India.

China has also been wary of India’s growing influence. It tried to oppose India’s bid for a permanent seat in United Nations Security Council and even block Asian development Bank (ADB’s) loan to India for the development of Arunanchal Pradesh in January 2009. It is also not quite happy with growing ties between United States and India and opposed joint military exercises by US, Japan, India, and Australia in Bay of Bengal.

Both the economies are competing at all levels. India has left China behind in telecom sector with ever-increasing number of subscribers every month. She has overtaken China in car exports in 2009, exporting 201,138 cars as against China’s 164,800. India provides young and english-speaking workers, which China lacks. China, however, possesses a better infrastructure and gets more foreign investment than India.

One of the crucial differences between India and China is that the latter is obsessed with power and would do anything to secure it. It proved its mettle in Beijing Olympic Games and now India is under immense pressure to conduct Commonwealth games in the same manner. India can learn some good lessons from China like its drive to develop at all levels be it sports or infrastructure. The world has its eyes on Asia and both India and China should not let political disputes spoil their bilateral relations.


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