Academic journal article Indian Journal of Economics and Business

The Strategic Context of India's Economic Engagement with China (1)

Academic journal article Indian Journal of Economics and Business

The Strategic Context of India's Economic Engagement with China (1)

Article excerpt

Recent scholarship has focused on China and India as the world's fastest growing economies, their expanding bilateral trade, and the vast potential for closer cooperation. There is, however, little attention devoted to what prevented cooperation in the past, how economic engagement factors into their respective "grand strategy," and how it influences the scope, pace and context of bilateral economic interaction.

This study addresses some of this deficit. Section One examines the changing position of each country in the other's security calculus. Section Two analyses domestic imperatives driving mutual economic cooperation. Section Three discusses the specifics of current and proposed engagement, including respective strengths and weaknesses. Section Four assesses elements of current cooperation and competition, and which security considerations might promote or inhibit future economic cooperation.

INTRODUCTION

A spate of recent academic and policy scholarship has focused on the rapid economic growth of China and India, comparing them across myriad indices of development. A similar body of scholarship has focused on the historical Sino-Indian security disputes, and how their current military modernization and geo-political interests will influence bilateral security ties in the future. However, there has been relatively little attention devoted to exploring the linkages and overlaps between the security and economic dimensions, and even less attention to what factors prevented cooperation in the past, how economic engagement factors into their respective "grand strategies," and how it influences the scope, pace and context of bilateral interaction.

This article addresses some of these overlapping issues. It begins with a review of the evolving template of Sino-Indian security relations, and then identifies key factors that underlie their recent decision to explore closer economic ties. It then discusses the spectrum of current and proposed bilateral economic engagement, and concludes by assessing whether and which security factors might curtail economic cooperation in the future.

I. THE LONG SHADOW OF SECURITY DISCORD

India's relationship with the People's Republic of China over the past fifty years has traversed the entire spectrum: the initial phase of camaraderie jolted by outright hostility, followed by a protracted period of mutual antagonism, gradually ushering in a phase of "uncomfortable co-existence." In the past decade, both sides were seeking to identify a domain of minimum convergence when the fall-outs of the Indian nuclear tests of 1998 rudely disrupted this process.

The ensuing period has witnessed a new phase of incremental rapprochement (Sidhu and Yuan, 2003) (2), notably underlined during Chinese Premier Wen Jiabao's April 2005 visit to India when the two sides signed an agreement identifying the core principles and parameters within which their security disputes would be resolved. The agreement, elaborated within its 11 articles, is based upon "Panchsheel", or Five Principles of Peaceful Coexistence. It states their strong preference for a political solution to the boundary dispute, "convinced that an early settlement will advance their basic interests ... and should therefore be pursued as a strategic objective."

To better appreciate the significance of this and other recent developments, it is instructive to review the changing position of China in India's strategic calculus, and vice versa. Following its independence in 1947, and the onset of the Cold War that pitted the world in East v. West camps; India avoided joining either camp as that would have narrowed its options for external assistance to meet its pressing developmental imperatives. Instead, along with Egypt, Indonesia, Yugoslavia and China, it led the non-aligned movement to promote South-South cooperation and improve North-South dialogue and policy coordination. …

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