Issues whole Indian state. Bilateral economic relationship. China

Issues motivated for choosing this topic

The Doklam standoff, as we would discuss later in this assignment, is just the latest of
many irritants dogging relations between the world’s two most populous nations. For
years, China has vigorously wooed Bhutan and other, smaller countries in India’s
traditional sphere of influence, including Nepal, Sri Lanka and Myanmar. The old
saying, “When the dragon sneezes, the world catches cold ” has acquired a completely
new meaning after the announcement of the One Belt, One Road (OBOR) initiative
by China’s President Xi Jinping in 2013. India’s reluctance to embrace Beijing’s
promise of road building and connectivity is based on long withstanding strategic
mistrust. The country is wedged between two nuclear-armed neighbors and has fought
wars against both in the last 60 years. The historical baggage of the 1962 war still
looms large in India’s imagination. China also has complained bitterly for decades
over India accepting the Dalai Lama as a refugee in 1959. The Tibetan Buddhist
spiritual leader has kept his headquarters in northern India since fleeing Chinese-ruled
Tibet. Despite their disagreements, India and China entered a trade agreement in 1985
and have stepped up cooperation in agriculture, science and cultural exchange. But a
$46.6-billion trade deficit favouring China has irked Indian members of parliament,
who call regularly for more balance. The relationsip today showcases more and more
competition and less cooperation on the following 4 issues:

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Bilateral border dispute, particularly over one whole Indian state.

Bilateral economic relationship. China is India’s largest trade partner

in goods.

Regional security – their relationship between Pakistan, Afganistan, Indian

Ocean, SCS etc.

Climate change.



Existing scholarly work – Literature Review
Sino-Indian Relations; History, Problems and Prospects,Keshava Guha,2012

This study analyzes the growth trajectory and future prospects of the Asian powers. It
states that while China, deservingly, receives a majority of the said attention, India is not
lacking far behind. The study also talks about the potential rivalry between India and
China and how the current scenario could be dubbed as “the contest of the century”.

Sino-indian war 1962–Where do India and China stand today, Qasim Hameedy,

This study talks about how the countries view each other within an extremely
sophisticated framework of cooperation and antagonism. It states and analysis that China,
a member of the permanent five of the United Nations Security Council, gives the
impression that it is interested in having a more powerful role on the global stage. India, a
major contributor of military forces to the United Nations, but not a member of the
Security Council, perceives this to be threatening.

A Study of India’s Trade Relations with China in WTO Era Surendar Singh,
Gobind Garh, R. C. Mishra, 2014

This paper studies China’s joining of WTO in 2001 and how it completely changed its
economic structure. It also studies its entry in WTO and how it proved to be a landmark
event in the global economy. It further analysis China’s trade relations with the world
particularly with India.

The Sino-Indian Border Dispute: Implications of China’s Economic Reforms on the
1987 Border Conflic, Kunsang Gyurme, 2016

This paper builds on the existing works on the conflictual Sino-Indian relationship since
birth of respective nations to the late 1980s. The paper applies the liberal view of
economic interdependence and theory of trade expectations in the Sino-Indian case and
makes further interpretations based on the same.

Impact of FDI on GDP: A Comparative Study of China and India, Agarwal G.,
Khan M. A. (2011)

The study found that 1% increase in FDI would result in 0.07% increase in GDP of
China and 0.02% increase in GDP of India. It also found that China?s growth is more
affected by FDI, than India?s growth.

Current Situation

China’s keenness for a partnership with India is because China’s demography is its
Achilles heel. With the Chinese population aging at an unprecedented pace,
China’s working age population peaked in 2012, the median age will rise rather
abruptly to 49 by 2050, and with national debt at 300 percent of GDP, it has only a
small window to achieve the ‘national dream’ of becoming rich before getting old. In
contrast, India’s working age population will increase till 2050, enabling higher
growth rates and eventually overtaking the United States in terms of GDP. For India,
the fundamental question is that it cannot be a USD 10 trillion economy without
integration into the growing Asian market and benefiting from Chinese investment,
given the rise of protectionism in the United States. India-China strategic convergence
will need recognition of the Asian century composed of two nodes.

India and China had a roller-coaster relationship in 2017 which was highlighted by
issues pertaining to the Doklam standoff, blocking of India’s NSG membership bid
and moves to declare the JeM chief a global terrorist. But the year ended on a
promising note with both sides vowing to create favourable conditions

for development of their ties. Prime Minister Narendra Modi in
September travelled to China to attend the 9t h BRICS Summit on the sidelines of
which he met Chinese President Xi Jinping and held extensive talks. Currently the
two countries would be putting behind the Dokalam standoff, and taking forward their
ties in the right track.

Lessons learned

China and India became next-door neighbors with contested frontiers and disputed
histories in 1950, following the occupation of Tibet by Mao’s People’s Liberation
Army (PLA). While the rest of the world started taking note of China’s rise during the
last decade of the twentieth century, China and India have a longstanding 2,600-mile
border dispute; with China continuing to claim nearly 35,000 square miles of territory
in India’s eastern sector, tensions simmer. India also alleges that China occupies
nearly 14,670 square miles of Indian Territory in the western sector. This dispute
resulted in a short but intense war between the two sides in 1962 in which India was
defeated, followed by skirmishes in 1967 and 1987. Several rounds of talks held since
1981 have failed to resolve the disputed claims.

Economically in 2012, China-India bilateral trade stood at US $75 billion, and it is


predicted to reach US $100 billion by 2015. Today, China’s GDP is four times as
large as that of India, and Beijing spends three times more than India on defense.
While India’s economic growth rates in recent years have been impressive, China has
grown much faster over a much longer period.

Delhi must necessarily focus on accelerating its economic growth, which is critical
for the building up of India’s comprehensive national power. India, however, cannot
balance China’s rise on its own means. It needs deeper partnership with the United
States, Japan, and other middle powers in Asia to construct a regional security
architecture that can absorb potential shocks from a non-peaceful China.

Last decade China’s reluctance to support the U.S. initiative to integrate India into the
nuclear global order and it has support Pakistan’s quest for nuclear parity. An
unsettled border provides China the strategic leverage to keep India uncertain about
its intentions, and nervous about its capabilities, while exposing India’s vulnerabilities
and weaknesses, and encouraging New Delhi’s “good behavior” on issues of vital

Recommendations for Future

The last time Prime Minister Modi and President Xi met in Astana in June 2017, the
outcome was a milestone in the relationship. At Astana, India and China recognized
that “their relations are a factor of stability” in a “multipolar world, and at a time of
global instability” and that “differences should not become disputes”. The two ancient
civilizations need to become cooperative partners, develop complementary industries
and cooperate in protecting common security for achieving the dream of an Asian

Think tanks in China recognize India’s role in making timely success of infrastructure
based connectivity by enabling the digital economy. The digital economy is expected
to be the biggest generator of new market growth opportunities and jobs in the next
30 to 40 years. Knowledge-intensive flows, rather than labour, capital, or
resource-intensive flows, already account for half of global flows and are gaining
further share. Building on “Digital India” could add a value of about a trillion dollars
over the next five years in India.

Global trends support a partnership between India and China in shaping the rules of
the emerging Asia-centred order, and such a framework is also best
suited for settling the boundary question. China is India’s largest trading partner &
its investment is deepening in India. In partnership, the combined GDP of the Asian
giants will soon surpass that of the G7, thus providing the capacity to set the new
rules in Asia. In 2050 there will be a global economic triumvirate of the United
States, China and India. A re-emerging Asia gains more from a common market,
while a declining West benefits from a security focused balance–of-power rivalry in
the Asian continent.

India has to find creative ways of raising its concerns on the One Belt and One Road


Initiative (OBOR), rather than staying away. The future will be extremely challenging
for India, needing thought leadership in the new institutions and in the United Nations
on revisiting sustainability for late developers, becoming a global
knowledge-biotech-cyber power with clear goals and opportunities for business and
developing a better understanding of China and Asia.