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India-China axis — the Wen and Hao of a new world ordernews
17 April 2005

The five-decade-old slogan ''Hindi Chini, Bhai Bhai'' is back in vogue after India and China concluded a border agreement earlier this week. But while the border issue may have overshadowed the visit, the actual agenda behind the visit seems to have been hard-nosed economics, which is likely to dominate the relationship between what many perceive as the two rising economies of the 21st century, says Ashwin Tombat

Wen JiaobaoThe visit of Chinese Premier Wen Jiaobao to India last week came to a head on Monday, when the prime ministers of the world''s two most populous countries signed 11 groundbreaking agreements. The main agreement was aimed at resolving the boundary dispute that has bedevilled relations between them for more than four decades.

The accords included improving trade and cultural ties, economic cooperation and expanding aviation links. India and China will "make meaningful and mutually acceptable adjustments to their respective positions on the boundary question, so as to arrive at a package settlement to the boundary question", the border agreement said, adding that "the differences on the boundary question should not be allowed to affect the overall development of bilateral relations". The boundary settlement must be final, covering all sectors of the India-China boundary, it said. The frontier "should be along well-defined and easily identifiable natural geographical features to be mutually agreed upon between by India and China", and interests of settled populations in the border areas will be safeguarded in any final settlement.

India says China is occupying 38,000 square kilometres of Indian territory in Kashmir, some which was illegally ceded to Beijing by Pakistan in the 1950s. China claims ownership of 90,000-square-kilometres in Arunachal Pradesh. The border agreement was signed by India''s national security advisor M K Narayanan and Chinese Vice Foreign Minister Dai Bingguo. China has already concluded comprehensive settlements with nearly all countries it had borders disputes with – including the erstwhile Soviet Union, Pakistan, Myanmar and Laos – except with Vietnam and India.

While euphoria over the border agreement may have overshadowed the visit, Wen was quietly pursuing an economic agenda, which may shortly dominate the relationship between what many perceive as the two rising economies of the 21st century. Reviving the five-decade-old slogan ''Hindi Chini, Bhai Bhai'' to a standing ovation at Delhi IIT on Tuesday, Wen asserted that the two countries were not rivals or competitors but friendly neighbours who wanted to further improve their relations through cooperation.

Noting that India and China were the largest developing countries with the fastest economic growth, he talked nostalgically about Panchsheel and emphasised that the two countries should work together to make the 21st century Asia''s. "Some see India and China as competitors... I disagree," Wen told IIT students. He said that his country wished to see India "prosperous and developed".

He quoted Mahatma Gandhi, Jawaharlal Nehru, Rabindranath Tagore and Amartya Sen, as well as Deng Xiaoping and the ancient Chinese traveller to India, Huen Tsang. Wen said India and China should "close ranks" on international issues and enhance communication and coordination to work together to promote establishment of a just international economic and political order, pointing out that trade relations between the two countries were not commensurate with their potential.

He said India was strong in a number of sectors like farm products, auto-parts and pharmaceuticals, which would be highly competitive in China. A strong demand existed for India''s service sector. Similarly, China was strong in areas like electronic goods, which could find a market in India, he said. It was "critically important" for the two countries to keep their relations on track for development of both the nations besides peace and development in Asia and the world at large. While Wen spent four days in the country, just one of them was spent with Indian leaders. The real story of the visit may have to be sought from his highly publicised visits to India''s software capital Bangalore, apart from his dekko at IIT Delhi.

Referring to a memorandum of understanding on financial dialogue signed during the visit, a Chinese Ministry of Finance communiqué said it had set up a financial dialogue mechanism with its Indian counterpart in a bid to boost their exchanges and cooperation on major international financial issues. "The mechanism will help promote the global economy in a balanced and orderly manner," the statement said. The dialogue between the two countries will be held once every 12 to 18 months at a deputy ministerial level or other levels the two sides agree upon.

Their dialogue will include matters related to international economic forums and institutions. China has also set up financial dialogue mechanisms with the United States, Britain, France and the European Union.

Where this exchange leads to finally will be decided by the political will on both sides to take the process forward, but initial reactions indicate that the potential is enormous. Within a few days, Russia officially indicated its strong approval of the process. The beleaguered former superpower has long been seeking an Asian troika with these two upcoming countries to create a counter to an America-dominated unipolar world order.

Influential sections of the western media, dominated as it may have been during the visit by events in Rome following the passing away of Pope John Paul II have, significantly, conceded that the agreements between the two Asian giants could produce a new world order. Prime Minister Manmohan Singh''s statement, that "India and China can together reshape the world order" has not gone unnoticed.

The fact that China has a growing dominance in cheap manufacturing and a new sophistication in computer hardware, while India is an emerging force in computer software and a variety of online business services has brought about a grudging realisation that the two countries'' economic strengths don''t so much compete as complement one another. If fused, it could make the pair a powerhouse in the technology-driven, Internet-wired world taking shape. "If India and China cooperate in the IT industry," Wen Jiabao told listeners in Bangalore, "we will be able to lead the world. It will signify the coming of the Asian century in the IT industry." It''s not an altogether new idea. A study last December by the US National Intelligence Council has warned as much.

The council concluded that the rise of the Asian giants "could usher in a new set of international alignments" and pose new and unpredictable challenges for Washington, just as the rise of America in the 20th century displaced Europe — especially Great Britain — as the global economic leader.

"In the same way that commentators refer to the 1900s as the American century," the study said, "the early 21st century may be seen as the time when some in the developing world, led by India and China, come into their own." Already, Beijing has all but swallowed the American textile and toy industries, not just by undercutting American labour, but by matching US quality and attracting US industry.

The rise of India may have been far less well documented in the west, but if the pundits have it right, it''s India, not China, that will emerge as Asia''s economic gorilla. It is only a matter of time before India becomes the world''s population leader and, by 2020, India could pass China as the world''s fastest-growing economy, according to the National Intelligence Council study.

India enjoys other advantages over China. It has the largest English-speaking population on Earth – English being the lingua franca of global business. And it is a democracy that, in theory at least, should become a safer, more stable destination for investors in the long term.

The Indian-Chinese rapprochement is seen in the west as primarily economic. Both countries need an extended period of strong growth to reduce their mammoth unemployment problem. But the west sees strategic interests behind the bonhomie too. Both India and China have problems of Islamic militancy – in Kashmir and Xinjiang respectively – and both want to seal off any possibility of outside help for the militants.

A memorandum of understanding on the expansion of aviation allows the two countries to open their freight markets to each other. Passenger planes can fly to six cities in each country up to 14 flights per week, which will keep increasing year by year. The agreement also includes details on code-sharing cooperation of airline companies, aircraft leasing and foreign pilots hiring. China Eastern Airlines has already announced a Mumbai-Shanghai-Beijing service beginning April 18, four times a week. Air China and Indian Airlines are expected to follow.

In recent years, trade and tourism between the two countries have developed rapidly. Bilateral trade volumes reached $13.6 billion in 2004, up 80 per cent over the previous year and will surpass $20 billion by 2008. Personnel exchanges are expected to increase 30 per cent in 2005.

Wen''s visit to Bangalore was most remarkable; the premier spent his time visiting software major Infosys Technologies, the Indian Institute of Science (IISc) and the Indian Space Research Organisation (ISRO). He said that his country would send 100 students to Infosys for training in information technology. China has long-harboured ambitions to become a global leader in the software sector, which it already is in hardware. Wen stressed on the need for India and China to come closer in the areas of science and technology. "Science and technology can be a very effective bridge," he said, proposing a joint steering committee to guide bilateral cooperation in science and technology. He also called for collaboration at the level of institutions in the two countries, as well as and more student and faculty exchange.

Shortly after the premier''s visit, Infosys announced it would scale up its Chinese operations and take in 1,000 software engineers in Shanghai by March 2006. "We have a modest presence in China now with about 150 employees. Though our subsidiary generated revenues of Rs8 crore last year, it suffered a net loss of Rs8 crore. We will invest in technology as well as people to expand our operations in China," CEO and managing director Nandan Nilekani said.

Though politicians and industrialists from the two Asian giants differ over the merits of the free-trade agreement mooted by Wen, both agree on education for their citizens. Wen Jiabao, emphasised the importance of owning intellectual property and making school education mandatory. Innovation and ownership of intellectual property rights (IPR) were themes he returned to constantly — whether he was addressing industry at the India-China business co-operation conference organised by Ficci, CCPIT and CII, or to IIT students. "Innovation is the soul of a nation and, in future, there will be a competition for intellectual property rights in the global markets. The future belongs to countries which can create and retain IPR within their boundaries," he said.

One hundred engineering and technology institutions modelled on the IIT — that''s what a member of the Chinese education delegation privately claimed his country was working towards. Officially, however, there was no such admission. Fielding a question on China''s plans for IIT-like institutes, the Chinese premier said that the IITs were "famous institutions and world-class", but that China already has 2,000 institutes of higher learning with 20 million students.

By the end of 1998, China had 22,549 scientific research institutes, including 5,778 research and development institutes employing 9,35,000 people specialising in scientific research. Universities and colleges have 1,487 research and development institutes for science and engineering, industry, agriculture and medicine to form a complete scientific research system. But they still have nothing like India''s IITs, which are recognised the world over for excellence.

But then India has a great deal to learn from China too. Observing that India and China were at the crossroads of history, HRD Minister Arjun Singh said: "We have a great deal to learn from each other..." He advocated investment in education and social infrastructure and favoured exchanges between faculty and students of select institutions of excellence in higher education, saying it would help create a positive atmosphere. "For quality education, we have to devise innovative means," Singh concluded. Innovation, it seems, is the key to the future and, if Asia''s two strongest nations can take the tide at the flood, the talk about making the 21st century an Asian story will not remain a tall tale.

 


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India-China axis — the Wen and Hao of a new world order