India-China Relations: Economics Is Not All

Here's the link to an article of mine on India-China relations, arguing that economics is not all. Trade and commercial ties have a limited role in fostering ties; in fact, they are subordinate to and occur within the more important structure of inter-state relations.

India and China have grown lot closer in the last few years compared to the previous decade. There has, however, been a simultaneous rise of mutual suspicions. While the economic interaction between the two sides may have reached great heights, this cannot eliminate the growing suspicion on the strategic front.



An NBR study recently argued that “Economic interdependence is hardly a “silver bullet” guaranteed to pacify interstate conflicts. Though it may constrain conflict escalation processes, interdependence also generates serious economic frictions that can easily offset or overwhelm its conflict-suppressing effects.”1 Meanwhile, there have been several studies arguing that economic traction between the two sides have several positive spin-off effects on India-China relations.2 I would argue that commerce clearly has a limited role to play in a country’s strategic game plan. Trade and commerce do not alter the realities of the strategic front.

India-China economic and trade ties have been growing in the last few years, from just US $ 1.99 bn in 1999 to nearly US $ 60 bn. in 2010. Despite the imbalance in the trade, trade is one area that has continued to flourish without major hurdles. Liberal theorists assume that improved trade relations will diminish the scope for international conflict. The theorists believe in the “trade brings peace” argument,3 which is opposite to what the Realists would argue. The Realists are of the view that “trade and investment flows as occurring within — and being subordinate to — the more significant and enduring structure of interstate relations. It is international peace that permits and enables trade, not the reverse.” Additionally, Realists argue that “rational and responsible national leaders never lose sight of the fundamentally anarchic nature of the global system,” and “consequently, where economic liberals stress mutual absolute gains from trade, realists are primed to notice relative gains in which one party, or one country, benefits more than the other.” 4 Realists essentially see international politics as a state of anarchy, with none able to enforce law. Even when states agree to certain international rules and regulations, it is up to the state to enforce such laws, depending whether those laws are favourable to the state or not; protect their interests/security or not. As Armijo explains, “In such a self-help system of mutual distrust, the only rational stance for a responsible national government, sadly but inevitably, leads to large defense expenditures, arms races, and the potential for instability and even war, as insecure states may be tempted to attack preemptively.” This clearly explains the emerging India-China dynamics. Is trade and economic well-being of the other in the mutual interest of India and China? While it may be the case, but this trade and well-being aspect need to be situated within the overall framework of inter-state relations between India and China. Under such a scenario, economic well-being of each other may not be the case. For instance, India trying to create its own markets in Asia will not seen favourably by China.

Another liberal argument is that both India and China have collaborated at various international fora on issues like climate change and WTO issues and that these interactions have fostered closer partnership between New Delhi and Beijing.5 Have these interactions, however, penetrated deep enough to reduce the suspicion and tension that has characterised India-China relations in the last few years? The answer may be no. While the two countries have worked together on some of these issues, competition and rivalry between them has only risen in the past few years.6 China has been increasingly testing India’s dominance in its own backyard. Despite SAARC being India’s creation, Beijing is much more active today in the organisation than India is.7 Beijing’s presence in South Asian countries, solidified through increasing trade and investment measures, have reduced India to a big geographical entity with not much influence.8 China’s pro-active approach towards South Asia appears to be a result of its own deepening relationship with South Asian countries as well as fulfilling its objective to emerge as a kind of “guardian” to all the South Asian countries. Second, it seems as an after-effect of the US-China Joint Statement in November 2009 for the two countries to jointly manage South Asia.

As India continues to re-define and modify its foreign and security policies, given its increasing stature in the international arena, there is bound to be competition for influence, resources and so on. For instance, China has been critical of India’s closer ties with the United States or other Asian powers that could be apparently detrimental to Beijing’s own regional and global role. Beijing has also been wary of India’s Look East policy, its strengthened relations with Japan, Vietnam and several other ASEAN countries. Beijing feels that India’s diplomacy in Southeast Asia could potentially hamper China-ASEAN ties as well as reduce Beijing’s manoeuvring space in Asia. China’s increasing foray into Indian Ocean region has been allegedly to secure its own energy supplies and ensuring energy security. China has been seeking to build alternate energy transport and trade routes, anticipating problems on the Malacca Strait sometime in the future. However, given the kind of China wariness that exists in New Delhi, China’s expanding influence and presence in India’s neighbourhood has clearly upped the ante within the establishment as well as outside.

Chinese actions raise suspicions in Delhi mainly for two reasons. One, factors like history and unsettled boundary and territorial issues will continue to hinder any prospect of India and China forging closer meaningful ties in the foreseeable future. The baggage of history continues to be a strong factor in India-China ties. The history and unsettled boundary issues as well as their respective roles in the emerging Asian strategic framework have created severe constraints in working out a good partnership between India and China. The trust deficit between New Delhi and Beijing is not something that is going to change dramatically in the next few years. Border issue is a symptom of the larger problem that exists between India and China. It is India’s increasing role and influence which is the crux. Even while both India and China recognise their inevitable role in shaping the Asian security order, they do differ radically on the kind of Asian layout for the future.9 India has continued to work at an inclusive approach as opposed to the Chinese’ exclusivist approach which appears directed against India, US and Japan. Beijing has continued to believe that its peaceful rise and the emergence as a dominant power in Asia is only an assumption of its rightful place in the region and in fact a return to the old, but natural order for the region. India may not be willing to see an Asia dominated by any one power.
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1 William R. Thompson and David P. Rapkin, “Will Economic Interdependence Encourage China’s and India’s Peaceful Ascent?,” in Strategic Asia 2006-07: Trade, Interdependence and Security (National Bureau of Asian Research, Washington), available at http://www.nbr.org/publications/strategic_asia/pdf/Preview/SA06/SA06_China_India_Rise_preview.pdf.
2 For example, Christopher J. Rusko and Karthika Sasikumar, “India and China: From Trade to Peace,” Asian Perspective, vol. 31 no. 4, 2007, available at http://www.asianperspective.org/articles/v31n4-d.pdf;

3 John R. Oneal, Bruce Russett and Michael L. Berbaum, “Causes of Peace: Democracy, Interdependence, and International Organizations,” International Studies Quarterly, vol. 47, 2003, pp. 371-93; Christopher J. Rusko and Karthika Sasikumar, “India and China: From Trade to Peace,” Asian Perspective, vol. 31 no. 4, 2007, available at http://www.asianperspective.org/articles/v31n4-d.pdf, cited in Leslie Elliott Armijo, “The BRICS Countries (Brazil, Russia, India, and China) As Analytical Category: Mirage or Insight?,” Asian Perspective, vol. 31 no. 4, 2007, available at http://www.asianperspective.org/articles/v31n4-a.pdf.

4 Leslie Elliott Armijo, “The BRICS Countries (Brazil, Russia, India, and China) As Analytical Category: Mirage or Insight?,” Asian Perspective, vol. 31 no. 4, 2007, available at http://www.asianperspective.org/articles/v31n4-a.pdf.

5 Christopher J. Rusko and Karthika Sasikumar, “India and China: From Trade to Peace,” Asian Perspective, vol. 31 no. 4, 2007, available at http://www.asianperspective.org/articles/v31n4-d.pdf.

6 The increasing number of intrusions /and transgression on the India-China border, even in the sectors that were otherwise peaceful; Chinese Ambassador in India stating that the entire State of Arunachal Pradesh belongs to China; China’s issuance of stapled visas to people from Jammu & Kashmir; denial of visa to Gen. BS Jaswal, Commander, Northern Command; China gaining de facto control of Gilgit-Baltistan region, are instances of China trying to test India on the politico-strategic front.

7 While one can say that India has been laid back and even apathetic to its own neighbours, China’s argument that it is simply engaged in practical diplomacy may be farfetched.

8 China is clearly taking important steps to solidify its relationship with SAARC as a whole, in addition to having excellent relations with each of the member countries. At the recently concluded SAARC Summit, Beijing proposed an assistance of $300,000 to the SAARC Development Fund.

9 Gwadar Port in Pakistan and Hambantota Port in Sri Lanka are cases in point. However, each of the relations that Beijing has cultivated in India’s neighbourhood has had its negative impact on India’s own bilateral ties.