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China and India: towards greater cooperation and exchange.

The rapid and parallel rise of China and India on the world stage has resulted in rife critical comparisons of the two Asian giants. However, an exploration of potential scope for Sino-Indian cooperation to their mutual benefit may prove a more fruitful exercise. Whether in the economic or strategic sense, or whether pertaining to aspirations towards global power status, Sino-Indian interests are certainly converging. Already, progressively deeper Sino-Indian interactions signal a ripening of mutual trust. This could pave the way for the establishment of specific platforms of mutual collaboration, lesson-learning and aid which would not only be useful in themselves, but may serve as important confidence building-measures for the future.


China and India represent two of the greatest civilisations in the history of the human race. These two nations have in common not only great ancient histories, but have also arguably mirrored each other to some extent in the modern day: India and China both established new states within a similar period of time, (1) and also implemented revolutionary economic reform just outside a decade from one another. (2) But more importantly, the reform undertaken by both countries has resulted in a surprising parallel rise on the world stage that has elicited much excited comment and criticism. In particular, many analysts have postulated that the recent but rapid renewal of friendly relations between the two giants now signals the beginning of a new economic world order. In October 2003, Goldman Sachs economists Dominic Wilson and Roopa Purushothaman released a now-famous report which predicted that within 40 years, the economies of India and China, added to those of Brazil and Russia (the BRICs) would be larger than that of the US, Germany, Japan, Britain, France and Italy combined. China would overtake the US as the world's largest economy and India would be third, outpacing all other industrialised nations. (3)

Similarly, in 2004, a report by the US National Intelligence Council compared the rise of China and India in the 21st century to that of Germany and the US in the 19th and 20th centuries, respectively. (4) But, at the same time, the rapid growth of both nations cannot eclipse the fact that both are facing colossal difficulties on the home front. China has to deal with, for example, its relatively weak private sector and increasing levels of unemployment, while India's problems include difficulties with its cumbersome bureaucracy and poor infrastructure. (5) However, partial solutions for these dilemmas may well come from new and innovative alliances between the two countries.

The recent normalisation of Sino-Indian relations has resulted in several cooperative ventures between the two, such as the Greater Nile Project in Sudan, an increase in interaction across economic sectors in general. However, this is but the beginning of what could prove to be a long and fruitful relationship. Sino-Indian interactions have rapidly expanded from simple economic cooperation to progressively more complex projects and collaboration on the world stage. But more than that, the success of these ventures is giving birth to a tentative strategic political partnership, indicative of growing mutual confidence. It is argued here that given this burgeoning mutual cooperation and support between China and India, there is scope for the emergence of platforms for lesson-sharing and mutual policy exchange that will extend relations even further, and accelerate the further growth and development of both economies. It has become apparent that both are uniquely placed to lend a hand to each other. This is especially so because of the complementary nature of each nation's strengths and weaknesses.

This paper has two main purposes. Due to the hype surrounding this new phenomenon, the first purpose is to place the current evolution of Sino-Indian relations within a balanced historical context. The second is to put forward the idea that the progressively deeper and more complex interactions taking place signal a ripening of bilateral trust, and that this growing Sino-Indian confidence could act as a springboard for the creation of more specific forms of mutual collaboration, lesson-learning and aid. India and China both have the potential and need for the formation of such policy-exchange platforms in which integrated cross-sectoral lesson-learning and support can take place. Even so, the beginnings of this form of exchange are being formulated in the information and communication technology (ICT) sectors of both countries. It will be suggested that this is a useful model that can be formalised across many areas.

The Rocky Road to Warmer Sino-Indian Relations

Amidst both overly optimistic and overly pessimistic media reportage of Sino-Indian relations, it is important to try to put the bilateral ties within a balanced historical context. The relationship to date has been characterised by several specific issues of contention and conflict, with very marked upturns and downturns. However, while many of the contentious issues between the two Asian giants are not only serious but on-going, there is always some sense of political will for peace between the two, and, as in the case of the border war of 1962 for example, this amicable political will seems to appear at the most critical junctures.

The Tibet Issue

The first major modern Sino-Indian disagreement was over Tibet, a geographical and political buffer zone between the two countries over which India had been given special privileges during the British colonial rule. In 1950, China reasserted its control over Tibet by force. In keeping with a policy of friendship with China, and in an attempt at pacification, mixed with no small amount of condescension, Indian Prime Minister Nehru assured Chinese leaders that India had neither political nor territorial ambitions, and did not want to seek special privileges in Tibet, but that traditional trading rights must continue. (6) Through India's encouragement, Tibetan leaders signed an agreement in May 1951 recognising Chinese sovereignty and control while at the same time ensuring that the existing socio-political systems in Tibet would be allowed to continue as before.

Furthermore, in April 1954, India and China signed an eight-year agreement on Tibet that set forth the basis of their relationship in the form of the Panch Shila, literally five principles of mutual respect, mutual sovereignty, mutual non-interference, mutual benefit and peaceful co-existence. This effectively settled the Tibet issue in the short term, but was to be one of several major Sino-Indian conflicts to come.

The 1962 Border War

Up to 1959, despite border skirmishes and contentions over lines of delineation on territorial maps, Chinese leaders had amicably assured India that there was no territorial dispute along the border. However, the situation began to come to a head with the discovery of a completed Chinese road cutting across the Aksai Chin region of the Ladakh District of Jammu and Kashmir by an Indian reconnaissance team. To exacerbate matters, in January 1959, Chinese Premier Zhou Enlai wrote to PM Nehru rejecting the Indian Prime Minister's contention that the border was based on treaty and custom, asserting instead that China had never accepted the 550 mile McMahon Line drawn up during the 1914 Simla Convention which defined the eastern section of the border between India and Tibet, a demarcation which Zhou Enlai termed "a product of the British policy of aggression" against China. (7) A second cause for bilateral friction at that time was the fact that the Dalai Lama had sought sanctuary in Dharmsala, Himachal Pradesh, in March 1959, and thousands of Tibetan refugees settled in northwestern India, particularly in Himachal Pradesh. China accused India of expansionist intentions in Tibet and responded by claiming 104,000 square kilometres of territory over which India's maps showed clear sovereignty.

Zhou's brazen proposal was that China would relinquish its claim to most of India's northeastern territory on the condition that India abandon its claim over Aksai Chin. The Indian government, swayed by dominant domestic public opinion, took the stance that the idea of a settlement based on uncompensated territory loss would be unfair, not to mention humiliating.

Chinese forces launched an attack on India on 20 October 1962. However, although it was clearly winning the war, having successfully pushed back Indian forces and occupied key areas in Ladakh, China declared a unilateral cease-fire on 21 November. This unusual move proved that the situation was more a demonstration of Chinese military strength than a will to claim territory, and could even be construed as unwillingness on the part of the Chinese to cause irreparable damage to relations with its South Asian neighbour. However, the 1962 war rankles in Indian historical memory and at various levels still impedes the increasingly warm relations between India and China to this day.

China and Pakistan

Sino-India relations continued to worsen during the rest of the 1960s and the early 1970s in inverse proportion to the warming Chinese-Pakistani relations, and were exacerbated by the deterioration of Chinese-Soviet relations. The crunch came when China backed Pakistan in its 1965 war with India. Further- more, between 1967 and 1971, an all-weather road was built across Indian- claimed territory, linking China's Xinjiang Uygur Autonomous Region with Pakistan. India could only express its displeasure as it watched the situation unfold. Stopping short of using force, China launched an indirect attack against India on several other fronts, including the initiation of an active propaganda campaign against India on one hand while supplying ideological, financial and other assistance to anti-Indian dissident groups--especially to tribes in northeastern India--on the other. However, despite this, diplomatic contact between the two governments remained at a bare minimum and was never formally severed, even when in August 1971, India signed its Treaty of Peace, Friendship and Cooperation with the Soviet Union and the United States, and China sided with Pakistan in its December 1971 war with India.

Some semblance of desire to engage amicably still remained, as evident in renewed bilateral efforts to improve relations after the Soviet Union invaded Afghanistan in December 1979. China indicated some measure of goodwill by moderating its pro-Pakistan stand on Kashmir and by refraining from taking action either on the issue of India's absorption of Sikkim or on its special advisory relationship with Bhutan. China's leaders also agreed to open up for discussion the boundary issue as

a signal of a positive change in posture towards India. In 1981 Chinese Minister of Foreign Affairs Huang Hua accepted an invitation to visit India, which acted as a catalyst to eight rounds of Sino-Indian border negotiations between December 1981 and November 1987, but no successful outcome was achieved. However, China's construction of a military post along the border in 1986 and India's granting of statehood to Arunachal Pradesh (formerly the North-East Frontier Agency) in February 1987 resulted once more in the deployment of troops to the area by both parties, once again raising tensions and fears of a second border war. But by the summer of 1987, both sides had once more backed away from conflict and even readily denied that military clashes had ever occurred in the first place.

Thus, although Sino-Indian conflicts have been at times very serious, resulting even in war, there has never been a full unleashing of aggression. Rather, both sides have always managed to exhibit some, albeit often small, measure of restraint in their dealings with each other.

Sino-Indian Rapprochement

A more genuine warming in relations was facilitated by Rajiv Gandhi's visit to China in December 1988, the first by an Indian Prime Minister to China since Nehru's visit in 1954. This historic occasion saw the separation of ongoing difficulties in border negotiations from the other aspects of expanding relations between India and China. This trend of isolating the more volatile bilateral issues was to continue with Jiang Zemin's visit to India in 1996 which was to result in the de-linking of China's Pakistan policy from its India policy. Gandhi's visit was also marked by a joint communique issued by China and India that stressed the need to restore friendly relations, once again on the basis of the Panch Shila. India and China also agreed to broaden bilateral ties in various areas. Critics have observed that there occurred from this time forward an overt shift of emphasis away from the assertion of huge territorial claims and high moral principles. Instead there ensued an increased rhetoric concerning the need for "mutual concessions" and "accommodation" on the part of the Chinese, and an increased emphasis on historical, legal, geographical realities on the part of the Indians. Both parties now called for a "fair, reasonable and mutually acceptable" compromise solution to their boundary question. (8)

There was a display of determination by both China and India to resolve the border issue. The two governments agreed to hold annual diplomatic consultations between their respective foreign ministers, set up a joint ministerial committee on economic and scientific cooperation and establish a joint working group on finding a solution to the boundary issue. This was to continue with top-level dialogue, augmented by the December 1991 visit of Chinese premier Li Peng to India and the May 1992 reciprocal visit to China of Indian President Ramaswami Venkataraman. Between December 1988 and June 1993, no less than six rounds of talks by the Indian-Chinese Joint Working Group on the Border Issue were held, and border tensions were reduced through confidence-building measures which included mutual troop reductions, regular meetings of local military commanders, and the advance notification of the commencement of military exercises. A visible sign of the improved Sino-Indian bilateral relations was the resumption of border trade in July 1992 after a hiatus of more than 30 years. Consulates were also reopened in Bombay (Mumbai) and Shanghai in December 1992 and in June 1993 the two sides agreed to open an additional border trading post.

Good relations and mutual confidence were high on the agenda when, during Sharad Pawar's July 1992 visit to Beijing--the first ever by an Indian minister of defence--the two militaries agreed to develop not only academic, scientific and technological exchanges, but also military exchanges and a Chinese naval vessel was scheduled to make a visit to an Indian port.

1998 Nuclear Tests

While the determined but slow improvement of relations in the 1990s could not forefend the May 1998 Indian nuclear tests (Pokhran II), which once again brought Sino-Indian bilateral relations to a new low, it may have played a part in ensuring that the fallout of this with regards to Sino-Indian ties was less dire than it could have been, although there was indeed enough good reason for fresh hostility. Indian Defence Minister George Fernandes unequivocally declared China to be India's "potential threat number one" (9) and Beijing's choice to interpret India's nuclear tests as part of India's containment policy towards China in its quest for regional hegemony only further exacerbated the matter. (10) It is worth noting though, that while the Chinese Government was clearly offended and exerted much pressure on New Delhi to recant its rhetoric on the China threat, some critics contend that Beijing was not unduly concerned by the nuclear tests as any real threat per se. (11)

It is against this historical backdrop of alternating friction and goodwill that the latest phase of growing trust in China-India relations must be viewed. However, it must be underscored that the most recent warming in Sino-Indian relations is unique and cause for optimism. As previous bilateral hostilities stopped just short of prolonged war, the goodwill phases of Sino-Indian relations had also stopped just short of true or sustained rapprochement. The singularity of the newest upturn in Sino-Indian ties lies in the fact that it is accompanied by forays into joint ventures, various types of cooperation and even tentative beginnings of a strategic partnership (discussed below) as both governments begin to recognise opportunities for mutual benefit.

The most recent phase of good relations between China and India was ushered in by the successful visit of Indian Prime Minister Atal Behari Vajpayee to China in June 2003, during which he and Chinese Premier Wen Jiabao signed a Declaration on Cooperation as well as nine protocols on bilateral cooperation, thereby fully normalising Sino-Indian relations. (12) Both leaders had pledged that their countries would work together for regional peace and stability, and progress was made even with regards to the long-standing Sino-Indian boundary dispute: the two leaders reaffirmed their commitment of 1993 and 1996 to maintaining peace and tranquillity along the border, and to take steps to codify the Line of Actual Control (LAC). There have also been six rounds of talks held between designated Special Representatives from both countries on the border issue. (13) This is significant in that it has raised the level and stakes of border talks from the foreign secretary level of before. Seen in the context of the unsuccessful border talks of the 1980s as well as the 15 rounds (to date) of meetings under the auspices of the Joint Working Group, it is indicative of the renewed commitment on both sides to find a viable solution to the border issue, despite the fact that a political framework for solving the problem still proves elusive.

A significant aspect of the June 2003 agreement was that India reiterated its recognition of Tibet as part of Chinese territory, and made a pact not to support separatist activities by Tibetan exiles in India. China, on its part, agreed to open a point for border trade in Sikkim, thus indirectly accepting Sikkim's status as part of India. This was given even clearer emphasis by the deliberate publication of a new map in 2005 which includes the new delineations. In short, there is definitely room for growing optimism that these one-time adversaries are becoming, if not friends, at least productive partners. (14) Following the change of government in India from May 2004 onwards, the leaders of both countries have met again several times, including at the bilateral summit in New Delhi in April 2005, and are expanding relations on many fronts, not least the economic one. As Indian Prime Minister Manmohan Singh was quoted as saying recently, "Who could have imagined that China would emerge as [India's] second-largest trade partner?"15 Now it seems that past predictions of an "Asianism" in which India and China would come together to a prominent position on the world stage is emerging as a distinct possibility. (16) Both nations have, to date, ostensibly put aside their hostile past in favour of the benefits that friendly relations may bring. Indeed, accompanying their parallel rise is an inexorable sense that for India and China, whether in the economic or strategic sense, or whether pertaining to their aspirations towards global power status, their interests are certainly converging.

From Rapprochement to Cooperation

The first fruits of the recent Sino-Indian rapprochement are most evident, and naturally so, in the gargantuan growth in bilateral trade. While just a decade ago, it amounted to a mere $1 billion, bilateral trade in 2004 jumped to $13.6 billion. (17) More recently, between July to October 2005 alone, China's trade with India reached $6 billion. (18) There are indications that this growth may be a sustained trend rather than one likely to fizzle out. This mutual economic gain has helped melt away much of the previous fear and hostility between the two nations, and as Swaran Singh has demonstrated, trade can indeed be a powerful confidence-building measure between countries. (19) The rapid growth in bilateral trade is also indicative of a change in mutual perceptions by these two Asian giants, not just on an official level, but also in the less official business world. China and India are learning to see each other as opportunities. In the three years 1999/2000 to 2002/3, India's exports to China increased at an average of 50.2 per cent per year, and imports from China at an average of 26.6 per cent per year.

However, it would be injudicious to be taken in by effusive speculations of unfettered friendship between the two countries. While bilateral trade in real terms has increased significantly, bilateral trade with China still only accounted for 5 per cent of India's total foreign trade in 2004 and China's trade with India, a mere 1.1 per cent of its total foreign trade. (20) Chinese attempts to initiate a Free Trade Agreement (FTA) with India during Wen Jiabao's visit to India in April 2005, while not completely rejected, were nonetheless met with reservations, especially since Indian analysts believe that a Sino-Indian FTA would be more advantageous to China than to India, owing largely to the fact that since China already has fairly low tariff barriers compared to the rest of the world, no serious market benefits can be expected by Indian producers after the creation of an FTA where tariffs are significantly reduced. (21) While prospects for continued warm relations between India and China are certainly not out of place, in terms of trade at least, it has been more a case of steady expansion rather than a no holds barred scenario. But that which is most spectacular about current China-India ties is not so much the depth of their warming relationship but rather the breadth of it. From the energy sector, to the ICT sector, and teamwork on the multilateral stage to strategic partnership, China and India are finding more and more common space in which to occupy well together.

The Energy Sector

It is no surprise that rivalry in the oil sector between these two developing giants is aggressive, since India is just as hungry for supplies as China. The two are battling each other in the search for oil from Sudan to Siberia as they try to secure the resources to fuel their vast economies. Recently, the Chinese seem to be winning. The board of PetroKazakhstan, a Canadian- owned company with oil fields in Central Asia, accepted a $4.2 billion take- over bid by state-owned China National Petroleum Corporation (CNPC) on 22 August 2005. The CNPC had surpassed a $3.6 billion offer from India's own state-owned giant, Oil and Natural Gas Corporation (ONGC), and in 2006, the Chinese National Offshore Oil Corporation again beat India's ONGC to buy a 45 per cent stake in a Nigerian oil and gas field for $2.3 billion. (22) Both of Asia's largest rising powers desperately need energy, especially oil. China today imports roughly half of its oil. Consumption rose by 15 per cent last year and is forecast to jump by an additional 9 per cent this year. By 2025, according to projections made by the US Energy Department, China will be requiring 14.2 million barrels a day, double this year's level. India's oil imports are expected to rise to some 5 million barrels a day by 2020, up from around 1.4 million barrels now.

However, scope for cooperation in this cut-throat competition for oil has also already been demonstrated. A good example of the broadening spirit of cooperation between India and China is in Sudan's Greater Nile project, in which Indian ONGC Videsh Limited (OVL) and CNPC are working in a cooperative partnership: While China built a refinery in Khartoum, India was responsible for building a product pipeline from the refinery to the port of Sudan. India's Petroleum Minister Mani Shankar Aiyar has remarked, "there are enormous prospects for India and China to work together. Our interests are complementary." (23) He visited China on 12-13 January 2006 and signed not only a government-level Memorandum of Understanding (MoU), but also several MoUs between Indian and Chinese oil companies. Also in December 2005, China-India successfully launched their first ever joint venture, Himalayan Limited, that has already won its first bid of about $700 million, buying a 38 per cent stake in a Canadian company's operations in Al Furat, Syria's largest gas and oil fields. With the current success of the Greater Nile cooperation, Mr Aiyar's continued optimism seems warranted.

Sino-Indian Cooperation within a Multilateral Context

While straightforward cooperative projects have acted as effective bilateral confidence-building measures, they have had the follow-on effect of paving the way for other collaborations. The beginnings of this are already being hinted at. For example, in the energy sector, Mr Aiyar would like to build on the international cooperation of the Greater Nile Project. He asserts, "In Sudan, both India and China have been working together in perfect harmony. There has been not a single incidence [sic] of dispute ... this model of cooperation can be replicated in Iran, Africa, Latin American, north and Central Asia ... we want to learn and replicate Chinese success in energy and other sectors." (24)

But more than that, this cooperation may be expanding into a multilateral framework. On 6 January 2005, India hosted oil ministers from China, Japan and South Korea--as well as eight OPEC producers--to discuss creating a loosely named "Organisation for Oil Importing Countries" to ensure a stable, equitably priced energy supply for Asia. India also hosted the first Round Table of Asian Oil Ministers on 25 November 2005, where oil ministers from Russia, Kazakhstan, Uzbekistan, Turkmenistan and Azerbaijan along with principal Asian oil and gas consuming countries--Japan, South Korea, China, Turkey and India--agreed on a 13-point action plan for the development of the Asian oil and gas economy, including the Indian proposal to study the exploration of all alternative linkages by land and sea, especially the alternative of linking the Caspian basin to South Asian countries. (25)

By teaming up, former Indian Oil Minister Aiyar suggests China, and India as well as South Korea and Japan can cut a better price deal from OPEC producers through collaborative bidding. (26) Wenran Jiang, an expert on Asian energy at the University of Alberta postulates that "if these [Asian] countries collaborate and influence the Arab nations on energy, they will be a formidable new energy bloc". (27)

Simple bilateral cooperation is being successfully built upon, and even now, a semblance of solidarity between India and China in the international arena is beginning to form. Moreover, this is also happening within the more formal context of international institutions.

It had already been clearly demonstrated early on that when India, China and other developing nations band together, outcomes can be influenced. At the fourth WTO meeting in Doha, Qatar in November 2001, leading developing countries (DCs), namely, Brazil, India, China and South Africa, formed a group of 20 (G-20) members to articulate and negotiate on behalf of all the developing countries (DCs) at the meeting. At the ministerial meeting at Punta del Este in 1986 which launched the Uruguay Round, a similar group of ten DCs led by Brazil and India was also formed. But this latter group in effect disintegrated at the meeting. At Cancun, however, the G-20 were able to hold their position until the end. Analysts have suggested that China--as the world's fifth largest exporter and sixth largest importer, in joining forces with India's market size, combined with the other members of G-20--had a lot to do with why G-20 was taken far more seriously at Cancun than the G-10 was in Punta del Este in 1986. (28)

But more than that, India and China also share the common interest of preserving their own comparative advantage in various economic sectors. For example, while working together in the textile and clothing sector increases their leverage in the international arena, it does not adversely affect their individual national interest since both have comparative advantages in the production of different goods. (29) China has a relatively high advantage in woven textile, knit/crochet fabric and made-up textile articles while India's advantage lies in its export of textile yarn and woven cotton fabrics. (30) Thus, working together could ensure a win-win outcome for both parties.

The prospect of continued and increased cooperation at the WTO seems likely, and a joint statement has already been issued to this end, pledging a regular exchange of views on major international and regional issues as well as a strengthening of cooperation "in the WTO and other international multilateral organisations". (31) Nations such as Brazil, India, South Africa and China are increasingly acknowledging that they share not only common social and economic challenges, but also common goals in international held in Hong Kong in December 2005, India and China, along with Brazil trade negotiations. Most recently, in the sixth round of Doha WTO talks and other developing countries are together pushing the idea of protection against "biopiracy" that would prevent corporations from using native plants or animal matter to make pharmaceuticals and other products without financial compensation to the original country. (32) These countries are coming to realise more and more that the chances of achieving goals in the multilateral arena increase significantly if they act together.

At the same time, multilateral cooperation has gone beyond trade to the realm of science and technology. The recent signing of agreements between these countries, ranging from biotechnology to AIDS treatment is a reflection of this trend. (33) Such collaboration need not end. The sharing of experience can take place across any number of fields whereby the weaknesses of one country can be bolstered by aid and technology from another. More than any other developing countries, India and China are uniquely well-placed for bilateral collaboration since they share similar problems with regards to energy needs, environmental issues and large populations.

From Economic Cooperation to Strategic Partnership

The latent potential in the Sino-Indian engagement does not end with joint economic or even collaborative action on the world stage. Germane to sustainable peaceful relations is mutual understanding and consensus on the security front. Tentative forays into the formation of a strategic partnership have already been made. Couched within Chinese Prime Minister Wen Jiabao's historic visit to India in April 2005 and the ensuing agreements, is the possibility of a strategic partnership between the two nations--one that would eventually "reshape the world order". (34) India's Foreign Secretary, Shyam Saran has alluded to the "global and strategic" implications of the new Sino-Indian partnership. It is possible that China and India, who have been critical of American unilateralism may join together in "balancing" the current hegemon. For instance, one critic has postulated that they might take action in opposing the US plan for the weaponisation of outer space. (35) The two rounds of bilateral strategic dialogue that have been held to date (the first in January 2005 and the second in January 2006) attest to the fact that at the very least, both countries are able to see beyond their ongoing disagreements, whether over the border issue or the Dalai Lama, to acknowledge the value of cooperation on the strategic front. They have come a long way from hostile posturing and outright war, to economic cooperation and the tentative beginnings of a productive security partnership.

China and India's Shared Interests and Complementarities

The fact that India and China are willing to extend their interaction from the economic sector into the political arena is indicative of the beginnings of maturing confidence between the two, but more than that, both are beginning to recognise the similar issues and concerns that they share. During former Indian Defence Minister George Fernandes' meeting with Chinese Minister Wen Jiabao in 2003, both came to the conclusion that their main domestic problems included unemployment, regional disparities and the enduring poverty of farmers, which led Fernandes, who was once famous for his hostility towards China, finally to concede, "we are both sailing in the same boat". (36) However, it is these surprising parallels between the two countries that make an even deeper form of cooperation advantageous. Both have embarked on radical economic reforms which have, to date, lifted their respective economies far beyond expectation. However, the two also share massive populations with correspondingly huge resource demands, especially for land, water and energy. Furthermore, environmental decay and high HIV infection rates are problems common to both. In terms of security, both face similar dilemmas: for China, its dispute with the US over Taiwan, and for India, the ongoing dispute with Pakistan over Kashmir. (37)

While broad parallels and similarities between these two vastly different countries do not necessarily count for much, there is a worthwhile point to be made in that in some significant ways, both are brought together by their shared interests. Clad has suggested that these two countries' similarities can be viewed in terms of their "common predicament" as well as their "common responses" in the face of global trends and pressures. (38) Thus more than just cooperation, lesson-learning and policy exchange can be even more profitable between India and China. One sector in which lesson-learning is already taking place is in the all important IT industry, where China's hardware sector is a complement to India's thriving software industry.

Lesson Learning in the IT Sector

There are four features of China's industrialisation which have been particularly impressive: a 43 per cent domestic savings rate, astounding progress in building infrastructure, surging foreign direct investment and a vast reservoir of hard- working, low-cost labour. As Luce and Kynge point out, "whether it is China's cheaper, more reliable power supply or the more rapid turn-around at its ports, China remains an incalculably better environment for most manufacturing than India, which is slowly waking up to this". (39) However, China is still very deficient in most services--especially retailing, distribution and professional services such as accountancy, medicine, consultancy and the law. (40)

India's economic development has also been impressive. Its success in services is a testament to its greatest strengths which include a highly skilled workforce in the scientific, technical, managerial and professional arenas, information technology competency, English-language proficiency as well as a significantly positive response from private enterprises to economic reforms and the globalisation process. This winning combination has turbo-charged India's IT-enabled services--software, business process outsourcing, multimedia, network management and systems integration--which have enabled India to fill the void left by chronic deficiencies in industrialisation. Critics have estimated that India is five to seven years ahead of China in the software sector, primarily because of the lack of English language skills among the Chinese and the absence of experienced project managers. (41)

However, India's IT sector has been held back by weak infrastructure, high administrative and regulatory barriers to business, as well as a relatively low ability to attract foreign direct investment. FDI in India was USD4 billion in 2003 as compared to the USD53 billion that poured into China in each of the last two years. (42) However, both countries are beginning to grow cognisant of the fact that their complementary strengths and weaknesses make collaboration a win-win choice. A prime example of Chinese-Indian collaboration in the IT sector is the Hwawei-Wipro cooperative venture.

On 31 July 2002, Bangalore-based Wipro ePeripherals (WeP) announced its new venture with China-based Huawei Technologies in selling Huawei's high-end networking products under the WeP brand. The goal here is for WeP to take on rivals in the routers and switches market. Besides providing Huawei a direct channel and presence in India, the Huawei-Wipro venture has also proven to be a successful platform for research and development. The company's R & D operations, which employ 160 Chinese and about 200 Indians, is handling around 50 projects and growing fast. (43)

Meanwhile, many foreign software developers are attracted by low-cost skilled labour, tax breaks and government policies favouring locally developed software to be found in China. A number of Indian firms have also announced new or expanded China operations recently. According to Indian press reports, major Indian software companies Mphesis and Infosys, are tapping into China, and another important Indian firm, Satyam, has also recently announced it would set up operations in Shanghai. Indian outsourcing company Tata Consultancy Services (TCS), launched a subsidiary in Shanghai in June 2004 and has since set up offices in Beijing and Hangzhou. For Indian firms, which rely heavily on the outsourcing business, China presents a unique opportunity. On the one hand, the traditional skills of Indian companies, in terms of management and ability, to tackle complex projects are complementary to the weaknesses of Chinese developers. On the other hand, the local and language-specific expertise of Chinese professionals, meanwhile, will allow Indian firms to reach the domestic market as well as others in the region, especially those of Japan and South Korea. (44)

While India can help China expand its base of ICT skills and participate in the global knowledge economy, India too can benefit from this developing talent stream. It is predicted that Indian ICT companies will be the largest procurers of Chinese programming talent over the next few years, once the country has created relevantly skilled professionals. Indian ICT professionals are also moving into higher-end segments such as project management, systems integration, consultancy, analysis, design, R&D, solutions architectures and product development, and will source programming material from China. (45) Besides which, China can provide India with a model for infrastructure development. For even though China remains weak in terms of HR resources, it has built up its strengths in the area of infrastructure, an important prerequisite for the success of the ICT sector. Chinese cities such as Shanghai, can thus offer ICT investors some of the more advanced physical and telecom infrastructure--roads, highways, airports, land line, internet and mobile connectivity--that is currently available anywhere. (46)

At the same time, China also appears keen to learn from the Indian ICT trade advances in its quest to become a knowledge-based economy. As Singapore's Minister Mentor Lee Kuan Yew has observed:
 The Chinese are keen to develop a services sector like India's....
 The Chinese want to attain international standards for the software
 outsourcing industry and learn how to deal with US and European
 clients as India is doing. (47)

The recent appointment of Vijay Thadani, the CEO of NIIT (one of India's most renowned ICT firms specialising in ICT training), as Economic Adviser for western China's largest city, Chongqing, reiterates China's desire to gain from the Indian ICT experience. (48) To facilitate this goal of mutual learning, the Confederation of Indian Industries (CII) signed an MoU in June 2004 with the Shanghai-Pudong Software Park to promote Sino- Indian co-operation in software and facilitate the move of Indian firms into the park. (49)

The sharing of resources and lessons will strengthen both countries' positions in the ICT industry. Chinese Premier Wen Jiabao has already acknowledged this fact. During his visit to India's southern technology hub of Bangalore in April 2005, he compared India and China's ICT sector to "two pagodas (temples), one hardware and one software", and that, "combined, [India and China] can take the leadership position in the world". (50) But this is not the end of the story. The ICT sector is but one of many avenues in which policy and lesson exchange platforms will be beneficial to both India and China.

The Next Step: Policy-Exchange and Lesson Learning in the Future

With the recent warming of Sino-Indian relations and the confidence gained through successful cooperative projects, it seems very plausible that both China and India may reach their shared goal of development (especially economic) more quickly if they choose to deepen their mutual interaction, exchange and aid, especially given that in many sectors, one country's strengths are the other's weaknesses and vice versa.

Steps have already been taken towards this end. In the joint statement issued in Delhi on 11 April 2005, India and China agreed to further promote cooperation in education, science and technology, healthcare, information, tourism, youth exchange, agriculture, dairy development, sports and other fields on the basis of mutual benefit and reciprocity, as well as to strengthen air and sea connectivity, having established an MoU for the major liberalisation of civil aviation links between the two countries. In fact, 2006 was declared the Year of Friendship between India and China during Wen Jiabao's visit to New Delhi in April 2005.

India and China have also decided to establish a China-India Steering Committee on Scientific and Technological Cooperation chaired by their respective ministers for science and technology, and are starting consultation rounds for an agreement on mutual recognition of academic certificates and degrees. Furthermore, the two sides announced the launching of regular youth exchange activities. China is planning to invite 100 Indian youths to China and hold an exhibition on advanced and applicable technologies in India. (51) All of this bodes well for a more formal bilateral lesson-sharing approach to augment growth and development. In time, these exchanges may develop into formal policy exchange platforms which, besides being a highly positive end in themselves, may also prove to be further steps forward in confidence- building. This may prove all important, since despite efforts to put issues of contention on the back burner, bilateral irritants continue to surface between the two countries.

Historically, booming trade relations and even formal agreements on strategic issues may have served to mute the consequences of bilateral hostilities, but have not been able to completely forestall them. For example, in 1999, Sino-Indian trade rose to a remarkable USD1.16 billion as compared to the mere USD2.5 million in 1977, and in 1994, both parties signed protocols granting the other Most Favoured Nation Status. (52) On the security front, agreements such as the nine point "Agreement on Maintenance of Peace and Tranquillity along the Actual Line of Control" was signed between Prime Ministers Narasimha Rao and Li Peng in 1993, and another similar agreement was signed during President Jiang Zemin's visit to Delhi in 1996. (53) However, none of these efforts successfully put a stop to India's decision to hold nuclear tests in 1998 which were in part aimed at sending a warning to China.

What can be done differently this time round is the creation of non- official platforms of exchange which can facilitate the lesson-sharing across a variety of sectors for which India and China are particularly well-placed. While there is room to be optimistic that the warming of relations between India and China will be long term, it would be wrong to assume that there are not difficult issues that still need to be resolved. Added to the ever present disagreement over the border issue, India's nuclear intentions, China's alleged assistance to Pakistan in the nuclear arena, is the growing sense that the US will use India on the frontline as part of its strategy to contain China. The recent signing of a 10-Year Defence Agreement between the US and India in June 2005, aimed at expanding security-related bilateral cooperation on many fronts, as well as the contentious US-India nuclear cooperation may be indicative of just such a possibility. More than ever there is a need to step up and strengthen confidence-building platforms of mutual exchange between these global giants, which may go some way in building a store of political capital that could be drawn upon in the future.

It is crucial that more scholarly research and dialogue take place encouraging further bilateral collaboration between China and India. For the first time in the modern era, the world's two most populous countries (by a huge margin) are becoming major global players in their own right. The international community must play its part in responsibly fostering and facilitating the stable and sustainable development of both these global giants, for in time to come, China and India may indeed prove to be the two "major arbiters of all our futures". (54)

(1) The Republic of India was formed in 1947, and the People's Republic of China was established in 1949.

(2) China launched its economic reforms in 1979, while India's were begun in 1991.

(3) Quoted in Malcolm Maiden, "India is Becoming [One] of the Top Economic Players. But Are Our Companies Ready to Benefit?", The Sydney Morning Herald, 7 Feb. 2005 at <> [20 Sept. 2005].

(4) Quoted in Ramesh Thakur, "The Dragon and the Elephant", United Nations University Newsletter, Issue 37, May-June 2005 at < issue37_8.htm> [23 Sept. 2005].

(5) Pranab Bardhan, "Crouching Tiger, Lumbering Elephant: A China-India Comparison" at < inequality/papers/BardhanCrouching.pdf> [6 Oct. 2005].

(6) For more details, see Francine R. Frankel and Harry Harding (eds.), The India- China Relationship: What the United States Needs to Know (New York: Columbia University Press, 2004), pp. 29-30.

(7) Zhou Enlai, in a letter written 23 January 1959 to Nehru, quoted Xuecheng Liu, The Sino-Indian Border Dispute and Sino-Indian Relations (Lanham and London: University Press of America, 1994), p. 21.

(8) Swaran Singh, "Building Confidence with China", in Across The Himalayan Gap: An Indian Quest for Understanding China, ed. Tan Chung (New Delhi: Gyan Publishing House, 1998), pp. 58-9.

(9) For more details, see Mira Sinha-Bhattacharjee, "Recent Statements by Defence Minister George Fernandes", Institute of Peace and Conflict Studies, India, 11 May 1998 at < action=showView&kValue=330&country=1016&status=article&mod=a> [10 Jan. 2006].

(10) See John W. Garver, Protracted Contest: Sino-Indian Rivalry in the Twentieth Century (Seattle and London: University of Washington Press, 2001), pp. 337-8.

(11) For example Waheguru Pal Singh Sidhu and Jing-dong Yuan, China and India: Cooperation or Conflict? (Boulder and London: Lynne Reinner, 2003), p. 32ff.

(12) See "China, India Sign Nine Documents in Beijing", Shanghai Daily at < paper1/943/class000100004/hwz143868.htm> [7 Sept. 2005].

(13) "India-China: Long Haul Ahead", Rediff, 25 Oct. 2005 at < 2005/oct/25guest.htm> [12 Jan. 2006].

(14) David Shambaugh, "China Engages Asia: Reshaping the Regional Order", International Security 29, no. 3 (Winter 2004/5): 64-99, 82.

(15) Quoted in Lee Kuan Yew, "A Rising Asia", Forbes 176 (2005): 039 at <> [25 July 2005].

(16) Gillian Goh, "Nehru's Vision for India and China", The Globalist, 20 Oct. 2005 at < StoryId.aspx?StoryId=4862> [21 Oct. 2005].

(17) Ethirajan Anbarasan, "Trade Powers India-China Ties", BBC News, 8 Apr. 2005 at < south_asia/4425831.stm> [3 Oct. 2005].

(18) See "Not Japan, but India Can Be at UN: China", Express India, 6 Oct. 2005 at < fullstory.php?newsid=54613#compstory> [10 Oct. 2005].

(19) Swaran Singh, "Building Confidence with China", in Across The Himalayan Gap: An Indian Quest for Understanding China, Ch. 5.

(20) For more details, see Swaran Singh, China-India Economic Engagement: Building Mutual Confidence (New Delhi: Raman Naahar, Rajdhani Art Press for Centre de Sciences Humaines, 2005), p. 18.

(21) On the other hand, since Indian tariffs are comparatively high (around 20 per cent), the Chinese exporters (such as exporters of electronic goods and steel products) can expect significant gains from mandatorily lowered tariffs. See Arvind Panagariya, "An India-China Free Trade Area?", Economic Times, 20 Apr. 2005 at <> [1 Dec. 2005].

(22) Sino-Indian competition over energy resources is not restricted to oil and is taking place in various parts of the world, for example in Myanmar, where both countries are vying for natural gas pipelines to be built. China signed an agreement in November 2005 for consideration of a pipeline from Myanmar's Shwe field to Yunnan Province. On 11 March 2006, Indian President Abdul Kalam made a similar proposal for India and Myanmar.

(23) "Oil Firms Can Invest $25 bn in Acquisitions", Business Standard, New Delhi, 24 Mar. 2005 at < autono=184297> [4 Oct. 2005].

(24) Addressing a Confederation of Indian Industry conference on "The China Miracle", quoted in "India Can Invest up to $25 b in Buying Oil Fields Abroad", Hindu Business Line, 24 Mar. 2005 at <> <h2110700.htm> [4 Oct. 2005].

(25) For more details, see "Asian Oil Ministers Draw up Action Plan", The Tribune, 26 Nov. 2005 at <> [3 Jan. 2006].

(26) See "India says China Oil Cooperation at Early Stage, Will Still Compete", Agence France, 26 Aug. 2005 at <> [4 Oct. 2005].

(27) Ibid.

(28) Furthermore, it is in both countries' interests to come together to diffuse protectionist threats, which include the recent protectionist response to competition from low- cost labour by the US and EU. These nations, especially those in the EU, have yet to come to terms with the fierce competition from Asia, as evinced by the so called "bra wars" trade dispute which left 75 million Chinese-made garments at EU ports after textile import quotas were exceeded, and more recently the complaints against the "dumping" of plastic bags and shoes by China, Malaysia and Thailand. However, both India and China want to work with the EU to resolve these issues, as demonstrated at the EU-China and EU-India summits held in September 2005. See T.N. Srinivasan, "China and India: Economic Performance, Competition and Cooperation, An Update", 2004, pp. 25-6 at < C&I%20Economic%20Performance%20Update.pdf> [10 Dec. 2005].

(29) For more details, see Anil Sasi, "Asian Textile Nations to Join Hands to Rule Global Markets", Hindu Business Line, 3 Sept. 2005 at < 2005/09/04/stories/2005090402370100.htm> [15 Sept. 2005].

(30) See V.N. Balasubramanyam and Yingqi Wei, "Textiles and Clothing Exports from India and China: A Comparative Analysis", Journal of Chinese Economic and Business Studies 3, no. 1 (2005): 23-37, 28.

(31) From the Joint Statement of the People's Republic of China and the Republic of India, Section XVIII, published by the Xinhua News Agency, 12 Apr. 2005 at <> [15 Sept. 2005].

(32) For more details, see for example Eric Bellman, "India to WTO: Help Us Protect Herbs, Tea, Yoga", Wall Street Journal, 19 Dec. 2005 at < display.article?id=6638> [6 Jan. 2006].

(33) David Dickson, "South-South Collaboration Picks Up Steam", Executive Intelligence Review, 18 Feb. 2005 at < index.cfm?fuseaction=readEditorials&itemid=95&language=1> [16 Sept. 2005].

(34) John Cherian, "Moving Closer", Frontline 22, no. 9, 23 Apr. 2005 at <http://www. fl2209/stories/20050506003900400.htm> [5 Sept. 2005].

(35) Ibid.

(36) "Tiger in the Front", The Economist, 3 Mar. 2005 at < PrinterFriendly.cfm?story_id=3689214> [8 Sept. 2005].

(37) Ibid.

(38) James Clad, "Convergent Chinese and Indian Perspectives on the Global Order", in The India-China Relationship: What the United States Needs to Know, ed. Francine R. Frankel and Harry Harding, p. 271ff.

(39) Edward Luce and James Kynge, "India Starts to See China as a Land of Business Opportunity", Financial Times, 27 Sept. 2003 at < Indian%20&%20China%20Trade%20&%20Business%20(FT%209.23.htm> [20 Sept. 2005].

(40) See Stephen Roach, "The Challenge of China and India", Financial Times, 31 Aug 2004 at <> [13 Sept. 2005].

(41) See Srinivasan, "China and India", p. 625.

(42) Roach, "The Challenge of China and India".

(43) Bertrand Bidaud, John Calvert and Sumit Malik, "Huawei Technologies, Wipro ePeripherals Take On India's Networking Market", 6 Aug. 2002 at <http://gartner.> [12 Sept. 2005].

(44) "China: Software Sector Could Learn from India" at < 10/23/2004> [4 Sept. 2005].

(45) Rajendra Pawar, "India and China as IT Powerhouses of the New Millennium", Economy and Business, 2 May 2005 at < eb11484200551.asp> [20 Sept. 2005].

(46) Ibid.

(47) In "Managing Globalisation: Lessons from China and India", a speech delivered at the Inaugural Conference of the Lee Kuan Yew School of Public Policy, Singapore, 4 Apr. 2005.

(48) Ibid.

(49) "China: Software Sector Could Learn from India".

(50) Associated Press, "Chinese PM Seeks Indian Tech Cooperation", 11 Apr. 2005 at < 2005.04.11-chinese_pm_seeks_indian_tech_cooperation-ap.html> [1 Sept. 2005].

(51) From the Joint Statement of the People's Republic of China and the Republic of India, Section VII.

(52) See Swaran Singh, "Building Confidence with China", in Across The Himalayan Gap: An Indian Quest for Understanding China.

(53) Ibid.

(54) Martin Jacques, "With Strength in Numbers, China and India Will Become Superpowers", The Sydney Morning Herald Online, 28 Oct. 2004 at <> [15 Sept. 2005].

Gillian H.L. Goh ( is a Postdoctoral Fellow at the Lee Kuan Yew School of Public Policy, National University of Singapore. She completed her doctorate in Asian Studies and Comparative Literature at the University of Western Australia. Her current research focus is the bilateral relationship between India and China, and the scope for potential cooperation and policy-sharing between both countries.
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Author:Lynn, Gillian Goh Hui
Publication:China: An International Journal
Geographic Code:9CHIN
Date:Sep 1, 2006
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