Chinese Premier Wen Jiabao?s visit to India has generated much interest all across the world. This is expected, given that it brings together the two fastest growing countries comprising over a third of the world?s population. Although media attention has generally been grab-bed by the rapid growth of bilateral trade that jumped 79.1% in one year to cross $13.6 billion in 2004, there is substantial potential for a mutually beneficial strategic partnership.
First, such a partnership will help exploit the growing synergies between the two economies. India has emerged as a leader in software development and other knowledge-based industries. China, on the other hand, has become a major base for manufacture of IT hardware. This matching of India?s software capability and China?s hardware strength could produce a formidable combination. This could be facilitated by joint ventures among their enterprises, extending production networks to each other, as already visible?China?s Huawei Technologies doing chip design in Bangalore, and Indian firms taking advantage of cheaper hardware manufacturing costs in China.
Second, booming demand for energy and their high dependence on oil and gas imports has pushed them to secure oil equity abroad. Very often, Chinese and Indian oil and gas companies have competed for stakes in overseas fields. A strategy based on cooperation, however, will help them secure better terms collectively, besides spreading risk. For this, a consortium or joint venture approach for joint bidding in prospective fields may be desirable. They could also invest together in building joint pipelines and share the costs for such infrastructure.
Third, their coordinated position in international negotiations can be highly fruitful. The world would have to take note when the two countries speak with one voice. This is evident from the outcome of coordination in WTO negotiations. For instance, a paper on investors and home country obligations in the WTO debate on multilateral fra-mework on invest-ment in November 2002, co-sponsored by India and China along with four others, was a turning point in the dropping of the subject from the Doha Agenda. The fact that G-20 has emerged as a credible negotiating platform on agriculture issues is also largely due to participation of the two. Such coordination should be extended to other WTO issues such as Mode 4 in services.
With their substantial foreign ex-change reserves, India and China should grow their role in the decision-making process in the Brettonwoods organisations, and should push for long-pending reform of the international financial architecture. Another area is reform of the UN Security Council. China should support India?s place in the expanded UNSC, which will increase Asia?s clout in world affairs.
? Their synergies in IT and growing oil imports spell the need for cooperation ? A coordinated position in international negotiations will prove to be fruitful ? By working for broader integration, the two can bring Asia back into focus |
Finally, China and India need to work together for broader regional economic integration in Asia, and help in making the 20th century Asia?s in reality. At the recently concluded Asean Summit in Laos, important steps were taken. Besides deepening of economic integration of Asean as a grouping, it was agreed to organise an East Asian Summit (EAS) in November 2005 in Malaysia to launch the process of broader East Asian integration. Discussions are still on, whether the participation in the EAS will be limited to Asean+3 (Japan, China and South Korea) or Asean +3+India. Clearly, there are merits in a more inclusive approach.
Like the plus three countries, India is an annual Summit-level dialogue partner of Asean. Like China and Japan, India is evolving an FTA with Asean. India is also studying an FTA with each of the plus three countries. Studies conducted at RIS have shown that the Asean+3+India (Japan, Asean, China, India, Korea or Jacik) approach will yield much larger welfare gains compared to an Asean+3 approach, presumably because of profound synergies between the economies of India and Asean+3 countries.
India shares not only a land border with China and Myanmar, and maritime boundary with Thailand and Indonesia, but also centuries-old civilisational links with East Asia. India?s economic integration with East Asia has intensified in the past decade, making East Asia its largest trade partner accounting for nearly 40% of her trade. With a $650 billion economy growing at 7-8% per annum and an even faster growing middle class, India brings its own dynamism to the emerging Asian regionalism. India?s need for investment in infrastructure could also provide opportunities for the East Asian construction companies with significant underutilised capacities.
There are increasing linkages among the production networks of India and East Asian countries. India could also serve as a bridge for East Asia for the markets in the south, west and central Asian countries, given its well-developed transport and trading links with them.
Growing economic integration of East Asia and India is capturing popular imagination. A recent World Economic Forum survey reveals that over 37% of new Asian leaders surveyed, support Asean+3+India as the most desirable model, compared to 26.8% preferring Asean+3. Some observers feel that Jacik will be more balanced and sustainable.
China should support India?s participation in the proposed Summit. The China-India strategic partnership can make Asia regain its place as the centre of gravity of the world economy that it once was!
The writer is director-general, Research and Information System for Developing Countries (RIS). These are his personal views
