Much has been said of this being the “Asian Century,” and of the economic rise of China and India. As the West struggles to deal with a series of domestic problems, especially sluggish growth and high unemployment, many are looking to the giants of the east to power the next phase of global growth. Together these markets already account for nearly 40% of the global population, and much of the world’s economic dynamism will be found there in the years to come. But it remains to be seen whether China and India will compete or cooperate in their economic ascent to world significance. In a conversation with Indian Prime Minister Rajiv Gandhi during the late 1980s, Chinese supreme leader Deng Xiaoping commented, “The 21st century can only be the Asian Century if India and China combine to make it so.”
So what does the Sino-Indian relationship look like in 2012? In brief, it’s fairly contentious. With such a crowded geopolitical space in Asia, there are numerous points of conflict. The most persistent obstacle to closer Sino-Indian ties is a border dispute dating from the 1950s over the sparsely populated Himalayan regions of Aksai Chin and Arunachal Pradesh. A recent dispute over the outline of the map of China featured on China’s new passports has raised the ire of India’s officials; India retaliated by issuing a new visa that shows all the contested territory as belonging to New Delhi.
Such disputes, while petty in nature, are often the proxy for the deep-seated mistrust with which the two nations regard each other. While India and China likely understand the enormous economic costs of a military confrontation, both sides have undergone substantial military buildup, egged on in part by each country’s nationalist press.
Another long-running source of tension is India’s 50-year-old pledge to protect the Dalai Lama, former spiritual and political leader of Tibet. China’s relations with Pakistan and Sri Lanka, as well as Sino-Indian competition for influence in Myanmar, are further complicating aspects of a complex relationship.
Relations between India and China are indelibly marked by the disparity in the nations’ growth patterns over the past thirty years. While the countries share certain basic similarities – including populations over one billion people, high economic growth, and the expectation that they will lead the world’s economic recovery – China’s rise has been markedly more successful than India’s. Partly the gap can be explained through historical timing: while Deng Xiaoping began opening up China’s command economy in 1978, India only commenced dismantling the License Raj ten years later. In India, there is a persistent sense of inferiority. China’s image of clean cities, successful international events, and manufacturing prowess is often held up by the domestic Indian press to criticize conditions at home.
The comparison is not unwarranted. Even as India’s booming cities continue to grow and millions are lifted out of poverty, China is puling further and further ahead. A simple comparison of GDP growth rates tells the story: while China’s rate has been hovering between 9% and 11% for the past decade, India’s rate has been lower, and more volatile, varying between 10% and under 4%. In the areas of health care, quality of infrastructure, and foreign investment, China has a decisive lead over its southern rival.
An essential aspect of the divide between China and India are the separate ways the two countries have evolved economically. China produces so much of the world’s goods that “Made in China” has become a global cliché. Much as the United States passed from being the world’s manufacturer in the post-World War Two era to being primarily a services economy today, China is attempting to diversify its economy by stimulating domestic consumption and investing in the tertiary sector. India, meanwhile, appears to have bucked the historical trend and embraced its role as a global services provider without first developing a significant manufacturing base. While India has benefited immensely from U.S. companies’ hi-tech outsourcing efforts, much of the country remains unindustrialized. Even though India’s government has promised to increase the share of manufacturing in the national economy to 25% by 2025 (compared to 16% today), India’s relative lag will likely prevent it from ever competing with China in the production of durable goods, a highly valuable sector for any global power.
The comparison, however, is not entirely in China’s favor, as India benefits from a couple of distinct structural advantages. Aside from the resilient, albeit chaotic nature of India’s parliamentary system, which is frequently challenged by the task of democratically governing 1.2 billion people, India enjoys a free and relatively uncensored press. This acts like an escape valve for popular discontent in India, whereas in China, even internet comments are censored for possibly subversive content. Although departing Chinese premier Wen Jiabao has made many pointed comments about the “urgent” need for reform in China, no meaningful liberalization occurred under his and former Prime Minister Hu Jintao’s ten-year reign. The attitude toward reform of Xi Jinping, China’s relatively unknown new prime minister, remains to be seen and the extent to which popular discontent may build up and materialize further is a serious concern.
Furthermore, while India’s growth has comparatively sluggish, its demographic profile is well suited to continued economic expansion. While Chinese women give birth to 1.55 children on average, India’s women produce 2.58. The one-child policy may have been necessary to curb China’s huge population growth in the 20th century, but India’s young and growing workforce bodes better for the future. Moreover, as labor costs continue to increase in China, some experts predict that India’s manufacturing sector will enjoy some much-needed growth. That may help to offset the dark side of a fast-growing population, which is the creation of masses of unemployed young men. Despite their ongoing rivalry, Chinese and Indian cultures share many characteristics: a fondness for education, especially in the sciences; family loyalty and conservative values; an ethos of hard work; and of course, a never-ending thirst for tea. However, the most compelling similarity is their shared desire for growth, and especially domestic consumer growth: a walk around any major city in either country would likely convince the reader that the Asian Century is upon us. From Guangzhou to Mumbai, the optimism and energy that these cities encompass is simply electrifying. With continuing urbanization and young populations (especially in India), domestic growth seems secure in the short term. But will India’s economy be able to provide enough jobs in manufacturing and services, while continuing to drag people off the land? The country’s stability hangs in the balance, as the peril of unemployment and slow growth threaten twenty years of economic progress. And will China ever match its economic reform with a political overhaul that provides its people with a proper voice? The marked rise in protests in China over the 2000s, coupled with an increasingly aware population of “netizens,” bodes ill for the country if political reform is neglected by the new administration.
For both nations and indeed the world at large, stakes are high. How China and India attempt to resolve their internal problems while encouraging peace and cooperation has great implications for the future of the global economy. Most importantly, the conflicts over strips of Himalayan land need to be put to rest, as they present the risk of armed conflict between two of Asia’s strongest regional powers. Bilateral trade has fallen slightly in the first half of 2012, a worrying sign amid the nations’ diplomatic skirmishes over territory. But both Xi Jinping and Manhoman Singh appreciate the role of economic growth in ensuring peace, and vice versa. With complementary specialties, the Chinese and Indian economies have great prospects for integration. More trade and cooperation may require Chinese and Indian politicians to swallow their pride and trust their rival, but the mutual benefits would be enormous.