Can India take over China economically

India

Michael Radunski

Michael Radunski studied history, politics and sinology in Berlin, Brighton and Beijing. Since 2013 he has been reporting from New Delhi for the Frankfurter Allgemeine Zeitung and other media.

The difficult relationship between the Asian powers India and China

The economic relations between India and China seem stable and based on partnership. In many other areas, however, there is great rivalry. How the relationship between the Asian great powers will develop in the future and how we will decisively shape the world of tomorrow. The USA has recognized this and has already carried out the foreign policy "swing to Asia". In Europe, however, the development is still hardly reflected.

Two Chinese soldiers at the Nathu La Pass, border area between India and China. (& copy AP)

India and China and their relationship to one another will shape the world of tomorrow. Both are nuclear powers, they represent huge sales markets for global trade. Their populations are by far the largest in the world. All of this unites them. But there is also a lot that separates the two Asian states: India is liberal, likes to call itself the "largest democracy in the world", there is a free press and an independent judiciary. China, on the other hand, is governed in an authoritarian manner, and the Communist Party determines the course in almost all areas of society. The fact that they are also geographical neighbors makes them partners and rivals.

Relations between India and China are shaped by these two poles. Sometimes it sounds like they are close allies: "Our relations with India are one of the most important concerns," announced China's President Xi Jinping shortly after taking office in March 2013. In May of the same year, China's new Prime Minister Li Keqiang went on the first trip to India Delhi, which was seen as a sign of the importance attached to Sino-Indian relations in Beijing.

Exactly between these two events, in April 2013, the political opposition also became clear: Chinese troops had advanced miles into Indian territory and set up a military camp there. For decades there has been disagreement about the exact course of the 3500-kilometer-long Sino-Indian border, and in 1962 a war even broke out over this. The crisis in April 2013 ended lightly, but it shows the shaky ground the relationship between the two countries is on.

history

For many centuries, the Chinese Empire dominated large parts of Asia. On the Indian subcontinent existed vassal states that were tributary to China. When the British colonial rulers withdrew from Asia at the end of the 1940s, a completely new situation arose: On the one hand, the governments in Beijing and Delhi harbored political sympathy for one another - Jawaharlal Nehru's socialist concept of democracy and Mao Zedong's communist rule seemed to be pursuing similar approaches. On the other hand, the unclear demarcation quickly turned out to be a burden for relations between the two countries.

In the fall of 1962, the disputes over the border escalated and war broke out. At that time India was completely unprepared for a military conflict with China. Prime Minister Nehru was therefore made serious accusations: he was too naive, too naive about China, and misinterpreted the signs. The Indian military was poorly equipped compared to the Chinese troops. Mistakes you never want to make again in India. The conflict lasted only a month, but since then there has been a deep distrust of China on the Indian side.

Over the years, the two states grew further apart: India allied itself with the Soviet Union and offered refuge to the Dalai Lama and his Tibetan government-in-exile. China, meanwhile, moved closer to India's archenemy Pakistan. The alliances survived the Cold War and still influence the politics of both countries today.

Economic development

Economically, the two states were on the same footing for a long time until Deng Xiaoping ordered the People's Republic to open up economically at the end of the 1970s. The first free market rules were introduced, special economic zones established, limited competition permitted. As a result, the Chinese economy experienced a decades-long boom with double-digit growth rates. China became the darling of foreign investors.

In India, too, China's economic development became a benchmark. The liberalization of the domestic economy was demanded louder and louder at symposia and in leading articles. But it was not until the 1990s - almost a decade and a half after China - that the first market economy reforms came under the then Finance Minister and later Prime Minister Manmohan Singh and the Indian economy was tentatively integrated into the competition of world trade. (See India's economy)

Years of economic growth followed - and it became customary to compare India and China. From 2001 to 2005, China's economy grew by an average of 9.8 percent, and from 2006 to 2010 by as much as 11.2 percent. India lagged a little behind with 6.5 percent and 8.6 percent, but in a comparison of the two periods it had made the bigger leap with 2.1 percent. The larger increase was seen as a signal that India would catch up with China's lead.

In addition, India had a major advantage from a Western perspective: while China was ruled authoritarian by communist party cadres, India was a free democracy. Experts praised their advantages. Some things run a little slower and more arduous, but there is no danger of a sudden collapse for political reasons in India. The Dalai Lama - closely linked to both countries in a fateful way - once said: China may look good, but beneath the surface it would boil, while in India it was exactly the opposite. The mixture of free discussion, cheap labor and English as the lingua franca appeared to India as a location for investments and outsourcing (Outsourcing) attractive. In the race between India and China, India appeared to be a logical ally of the West.

But India's economic development has stalled. In 2014 the government expects growth of only 4.8 percent. The infrastructure is too dilapidated to be able to sustain greater economic growth. This became particularly clear in the summer of 2013 during the largest power outage in Indian history, when hundreds of millions of people in the north of the country were without electricity for days. In order to shine with China's growth rates, India would have to improve its infrastructure, because traffic routes and power grids are already overloaded. In principle, the financing of infrastructure projects with foreign capital would be conceivable, but for this the Indian economy would have to open up to foreign investment.

But China's shiny facade has also cracked: the economy is growing as slowly as it was last at the end of 1990, the credit volume has reached alarming proportions, the Chinese banks are ailing, economic growth has shrunk significantly. In addition, the People's Republic is struggling with the consequences of the one-child policy. The country threatens to grow old overnight, and the lack of a demographic foundation is jeopardizing the country's sustainable development.

In recent years, however, India and China have come to appreciate each other as partners, particularly in the economic field: The People's Republic has become one of India's largest economic partners. Bilateral trade increased more than twenty-fold from $ 3 billion in 2000 to $ 66.57 billion in 2012.

In order to continue to grow, China and India depend on one thing: energy. China's energy demand will increase by 71 percent by 2035, and India's by 135 percent. Delhi will have to import US $ 700 billion worth of resources. Accordingly, both countries are working intensively around the world to secure oil and gas sources and secure trade routes. They go part of this path together, for example in Sudan to develop new oil fields or, in the case of the Nathu La Pass between the Indian state of Sikkim and the Tibet region, to revive orphaned trade routes.

Political rivalry

However, the Indo-Chinese partnership is reaching its limits, including when it comes to water. The point of contention are rivers from the Himalayan region, especially the Brahmaputra. It rises under the name Yarlung Tsangpo in the highlands of Tibet. Its water is essential to supply large parts of India and Bangladesh. But even in China, water resources are regionally very unevenly distributed. Therefore, a few years ago, China started building the Zangmu Dam northwest of the city of Gyaca for the equivalent of 880 million euros. The Chinese side officially assures that no water will be diverted from the river. But rumors are circulating that Chinese engineers are planning to divert water from Tibet to drought-stricken northern China. India therefore fears a reduction in the amount of water in Brahmaputra.

Indian Prime Minister Singh and Chinese Prime Minister Keqiang at a conference in Bejing in October 2013 (& copy picture-alliance / AP, Pool Photo)
The rivalry between India and China is also openly evident in the area of ‚Äč‚Äčalliance policy: China recently took over the operation of the new deep-sea port in Gwadar, Pakistan. The port city is strategically located at the exit of the Persian Gulf, not far from the Iranian border. It opens up an overland corridor for Chinese commercial traffic and its energy imports, which would save thousands of kilometers compared to sea transport. India fears that Gwadar could become a Chinese naval base, which the government in Beijing has denied so far.

The port project, however, appears to be part of a larger strategy by China in the neighboring countries of India: like a pearl necklace, it is building bases in the region. Not only in Pakistan, but also in Nepal, Bangladesh and Myanmar (Burma), government leaders now have better relations with Beijing than with Delhi.

In any case, Delhi is convinced that China wants to encircle India and slow down its rise. Rajeswari mentions Rajagopalan, a China expert at the Delhi Research Institute, as an example Observer Research Foundation, India's efforts to secure a permanent seat on the UN Security Council. China, a permanent member of this body since the founding of the United Nations, is blocking India's plans with its right of veto. Beijing has never spoken out openly against a seat in India. "But China is undoubtedly not enthusiastic about the idea," says the scientist. Rajagopalan identified a clearly anti-Indian rhetoric in the analyzes of the Chinese think tanks and is convinced that China is trying with all means to prevent the rise of India.

Sometimes the People's Republic is so robust in terms of foreign policy that not only India looks at China with suspicion. A number of Asian countries are following China's behavior with growing suspicion, and there are increasing territorial disputes with Japan, South Korea, Vietnam - or even India. Armed conflict like the one in 1962 seems unlikely, but the relationship between the two Asian great powers remains marked by mistrust and rivalry.

While the developments in Asia are still hardly reflected in Europe, the United States has already changed its strategic planning in foreign policy: Pivot to Asia (analogously: swivel to Asia) is the new policy. Attempts are being made to balance the equilibria that have been shifted in favor of China on the Asian continent by a stronger India. Because whether as a rival or a partner, the relationship between Beijing and Delhi will probably be decided in the coming decades.