Chapter 3: The Sino-Indian Relations
3.1 Sino-Indian Relations in Historical Perspective
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Chapter 3: The Sino-Indian Relations
Since the end of the 1990s, both China and India have experienced significant improvements in terms of economic and political ties. This period can be compared to the prosperous years between 1954-1956 where the Panscheel Agreement was signed to ensure peace between the two nations. However, the Sino-Indian war of 1962 negatively impacted this relationship and since these countries have encountered many difficulties in terms of territorial disputes, rising economies, regional strategies and rivalries. Nowadays China has included India in its regional diplomacy despite the ideological tensions and almost considers India as its equal in Asia regarding to its population and its economic growth. However, third parties such as the US-Indian partnership and the Sino-Pakistan corridor present themselves as a threat to peace. Nevertheless, cooperation in the economic field was put as a top priority for both China and India in order to foster domestic development. The two countries became more interdependent and it is interesting to assess if the liberalist tradition of the Complex Interdependence fulfilled its duty as peace making tool and trust building process. Therefore, in this second chapter, the author will analyze the impact of the Interdependence Theory on Sino-Indian Relations and put economic ties and conflict management process as the center of its analysis. Indeed, this assessment will enable us to comprehend the real challenge of Sino-Indian Relations in the future. In the third chapter, the Liberalist Institutionalist theory will be used to emphasize a solution to react against the main negative issues of the Interdependence Theory. International Institutions could play a role as peace makers.
3.1 Sino-Indian Relations in Historical Perspective
Economic ties
In 1988, the Indian Prime Minister Rajiv Gandhi for the first time in thirty-four years visited China. This was a turning point for Sino-Indian Relations. India had chosen a path to promote a partnership between the two countries. Both leaders at the time acknowledged the
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difficulty of resolving the border issues and therefore choose to put the bilateral trade as top priority. They initiated the India-China Joint Economic Group on Economic Relations and Trade Science and Technology. Hence China and India both experienced a significant economic growth in bilateral trade in the 1990s. As such the amount of trade in 1990 was 264 Million USD and reached 2.9 billion USD in 2000 (Yuan 2016b).
Between 1996 and 2005, Chinese trade towards India doubled. China had a large demand for raw materials such as iron ore which was a major export for the Indian economy.
The Indian government led economic reforms and trade liberalization policies at the beginning of the 1990s which favored the expansion of Sino-Indian bilateral trade. In addition, China’s access to the World Trade Organization in 2011 helped to expand its exports to India (Basu, 2001). The financial crisis of 2007-2008 only effected Sino-Indian relations for a short period. They experienced a short decline of 25% but trade begun to increase again in 2010. Both economies recovered quickly, and they continued to promote trade and develop their bilateral economic relationship.
The composition of the China and India trade consists of: Chinese exports of manufactured goods (electrical machinery, iron and steel, organic chemicals, power equipment and nuclear reactors) and Indian exports in resource-based items such as minerals (iron ore, slags), copper, cotton, mineral fuel and other raw materials (Mohanty, 2014).
India and China also cooperate in the IT sector. In fact, both countries complement one another in a significant way within this field because "hardware" is produced by China and "software" is produced by India. Moreover, China and India are developing economically with their neighbors in order to better integrate their economies and foster connections in the region. For instance, these countries have planned a new corridor which includes Bangladesh and Myanmar. This joint corridor is also known as the BMI-EC. This initiative shows the
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willingness of India and China to develop their neighboring economies towards a common goal. The previous "Look East Policy" and the actual "Act East Policy" of India have favored these operations. In 2014, during the visit of the Chinese president in India, the Indian prime minister declared that this strategy would lead to a win-win situation based on economic development and regional integration. These initiatives were aiming to improve Sino-Indian Relations (Cabestan, 2015, p. 421).
However, India is the 8th trading partner of China and comes only after Brazil. India accounts for a mere two percent of China’s total global trade. On the other hand, China is India’s second largest. India is widening its trade deficit with China (16 Billion USD in 2009).
Moreover, ¾ of Indian exports to China consists of commodities and raw materials. There is little value-added compared to the Chinese exports of manufactured goods in India (Bajpaee 2010a). The Indian deficit over the Sino-Indian trade represented -12.84% in 2009 and -22.79 in 2011 (released by the Chinese customs). This increase should be seen as an alarm sign. The asymmetry continues to grow and will lead to negative consequences.
Nevertheless, scholars are pessimistic about the term "Chindia". Their economies are rivals and are always competing against one another on multiple levels. In particular, they are competitive on the non-domestic market, for instance in energy exporting countries (Africa) and in terms of foreign direct investment.
Since the Sino-Indian trade is unbalanced, India is implementing protectionist policies to limit Chinese importations which represent 11% of its foreign purchases. Moreover, there is a stagnation of economic exchange and there has been a slight decline since 2012 where their exchanges represented 73 billion USD and in 2014, 70.6 billion USD. There is also a rivalry regarding their economic growth rate (Cabestan, 2015, p. 434).
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Political ties
In 1988, despite the lack of progress in border negotiation and bilateral economic ties (two-way trend) the two countries bilateral trade grew rapidly. This was encouraged and eased thanks to an overall improvement in Sino-Indian relations in both political and diplomatic spheres. In fact, Beijing and New Delhi initiated a joint working group on border negotiation in 1989. Moreover, repeatedly in 1993 and then in 1996, China and India signed two important agreements on military confidence building measures in the border region.
Jiang Zemin also visited India during that time and official visits became less rare (Yuan 2016). Indeed, the Chinese President Hu Jintao visited India and they signed the Bilateral Investment Promotion and Protection Agreement which targeted an amount of 40 Million USD in 2010. They also expanded their cooperation to energy, agriculture and education (Gentlemen, 2006).
Overall, political factors have contributed to the steady growth of bilateral trade between China and India. Firstly, leaders emphasized early on the importance of trade and economic ties for the normalization and improvement of Sino-Indian Relations. These political efforts encouraged dialogues and building a relationship which is in accuracy with the neoliberalist thought on cooperation. Therefore, economic cooperation was improved during Sino-Indian Summit meetings over the years. In fact, officials were often accompanied by business executives who allowed the two countries to sign multiple major business agreements. Positive official speeches towards both countries also contributed to boosting bilateral trade. Moreover they acknowledge the political significance of finding a resolution for territorial disputes (Yuan 2016). As such, in 2003, during Vajpayee’s visit to China, leaders chose to increase border negotiations to a higher level with the vision to expand their economic ties. More precisely, China and India decided that Changgu in Sikkim and Renqinggand in Tibet would be the venue to facilitate cross border trade (Narayanan, 2003).
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Secondly, the institutionalization of economic ties contributed to bilateral trade growth. Indeed, the bilateral institutional mechanism eased the settlement of trade and investment. For instance, in 2005, after the Chinese suggestion of Free Trade Agreement with India, they established a joint feasibility study on potential Free Trade Agreement (Ministry of External Affairs, Governement of India 2003). Besides, a FTA would dramatically boost their bilateral trade as China and India were predicted to be the two largest economies by 2050 (Asia Times 2005). Moreover, they also initiated other institutions on trade, agriculture and energy. In 2010, the India-China Strategic and Economic Dialogue was established.
Thereafter, many agreements, protocols,… were signed in an institutional framework which helped develop the Sino-Indian relations in a positive way (Yuan 2016). Lastly, the recent BRICS achievements and the new membership at the Shanghai Cooperation Organization confirmed this trend.
However, their relationship just entered into a more mature era. But we must highlight that their ideologies struggle to close a gap that would help bridge relations. Indeed, there is a disregard from the Chinese side about the anarchy and misery of India. On the other hand, Indians criticize the authoritarianism and the hegemonic tendency of China. These facts show their remaining differences that counter proper cooperation (Cabestan, 2015, p. 438).
Military issues
Despite the increase in bilateral trade and institutionalized dialogues, China and India experience tensions in terms of political strategy and military confrontation.
Prior to the armed incident of 2017 at the border dispute between China and India, China increased military presence at the disputed border making India feel insecure. The Chinese Doctrines switched from “dissuasive deterrence” to “active deterrence”. Therefore, India also increased its infrastructure project along the border in order to better prevent a
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Chinese attack and fast military response. It enhances India’s ability to deploy troops along the border (Bajpaee 2010). Indeed in 1962, India was taken by surprise by a Chinese attack along their borders. India’s response was slow. This conflict only lasted several months until both countries agreed on ceased fire and both declared victory. However, their border issues were never solved. Nowadays China is seen as untruthful by Indians. Indeed, the Indian media in 2010 were claiming alarmist predictions of a Chinese attack in the next few decades. This shows the internal pressure and the negative perception of China in India.
Regarding the military field, China and India developed their dialogue after 1998 and broadened the dialogue to Asian security as a whole. In 2002, they engaged in discussions about terrorism and persuaded the Chinese authorities to adopt a more balanced policy concerning the Kashmir issue. In June 2003, China and India declared that they would not regard one another as a threat and would always solve their issues non-violently. In addition, in 2005, the two countries launched joint military exercises on counter-terrorism operations and for the fight against piracy. Moreover in 2013, they organized joint military exercises once again against terrorism (Cabestan, 2015, pp. 418–419).
During the summer 2017, there was a standoff between hundreds of Chinese and Indian military staff at the Bhutan-China-India border. China’s rhetoric and public posturing was seen as hostile whereas India’s response to the incident was “measured and effective”. In fact, the Chinese were constructing a military related infrastructure and road as well as operating near the Bhutanese disputed border. While engaging their construction on the disputed territory they faced the Bhutanese military which asked to stop the construction. The Indian response was quick and in 48 hours, Indian troops were militarily present at the border to support Bhutan according to their 1949 Friendship Treaty. Thereafter thousands of Indian and Chinese troops were facing each other along the border and both countries were on high
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alert. This incident ended before the BRICS Xiamen summit and leaders decided to disengage from the border (Smith, 2017).
This incident and the military facts show the mistrust between China and India despite high interdependence, treaties, bilateral agreements and dialogues. The question of the efficiency of Complex Interdependence in reducing conflict is at stake. This is why it is interesting to analyze this theory in the case of Sino-Indian relations.