India and China Butt Heads in South Asia

By David Caploe PhD, Chief Political Economist, EconomyWatch.com

It’s a truism that the 21st century future of not just Asia, but the entire world, will be significantly determined by the relationship between the globe’s two fastest-growing large economies, China and India.

As most observers know, there have long been kinks in the political military relationship between the two countries, most notably their direct armed confrontation in 1962.

This was generally seen as a military victory for China, and provoked a thoroughgoing rejection of the generally pacifist policy of India’s founding Prime Minister, Jawaharlal Nehru.

Indeed, this resulted in a significant militarization of India’s foreign policy throughout the 1960s / 70s / & 80s, and was marked by a series of victories over India’s “fraternal” enemy, Pakistan – which had become a strategic ally of BOTH China and the US, in opposition to India’s deep bond with the Soviet Union.

Tensions with both Pakistan and its sponsors, the US and China, escalated in 1974, with India’s inaugural “Smiling Buddha” nuclear test in the Rajasthan desert, and intensified and accelerated in the spring of 1998, when both countries held a series of nuclear tests marking their irrevocable “joint” entry into that deadly “club”.

This history of military confrontation – direct and indirect, hot and then cold, significantly moderated in recent years by agreements to maintain peace along their frontier, and on principles to settle disputes, going so far as the conduct of joint army exercises on both Chinese and Indian soil – forms the backdrop for Sino-Indian economic relations entering the second decade of the 21st century.

In the eyes of some observers, bilateral exchanges at the political, economic, military and cultural level have developed to the extent that China and India can expect the coming decades to be defined by a so-called competitive-cooperative relationship.

Expanding trade ties have given the two sides a huge stake in keeping co-operation alive. In 1992, their trade totaled $338 million. By 2004, it had mushroomed to $13.6 billion, and by the end of this year is expected to reach a whopping $60 billion – more than quadruple the amount from the middle of the decade.

And at the recently concluded, not particularly successful, Copenhagen climate talks, the two countries worked together to thwart what both considered a Western-oriented plan to cut carbon emissions at their expense.

Given this, some have envisioned a nearly indissoluble link between the two emerging superpowers, which do indeed have complementary strengths as they contemplate the dynamics of the 21st century global economy

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This is a vision we at EconomyWatch strongly endorse and share, seeing the possibility of a structural alliance between the world’s most powerful “sell” economy – China –

with the one country in the world that has the potential, if it can overcome its massive IN-equality of income distribution, to become at least a regional Asian, if not global, successor to America, whose power has come as the world’s “buyer of last resort”: India.