China-India rapprochement makes sense

Ken Moak

India made a U-turn on its relations with China in April when Prime Minister Narendra Modi met with Chinese President Xi Jinping to reset ties. He met with Xi again on the matter of rapprochement on the sidelines of the SCO (Shanghai Cooperation Organization) Summit in May.

China-India rapprochement has taken the world, the US in particular, by surprise. Less than a year ago, the two countries were on the verge of a military conflict over a host of issues: the Doklam border dispute, China helping Pakistan (India’s nemesis) build the China-Pakistan Economic Corridor (CPEC) in a section of the Kashmir region claimed by India, China moving into the Indian Ocean, which India considered its “back yard” or sphere of influence, and others.

On top of these conflicts, India has never forgiven China for defeating it in a 1962 border war, culminating in calls for revenge by some nationalists to this day. India has spent large sums of money on importing weapons, seeking “like-minded allies” and joining the “diamond of democracies” or “quad” – the US, Australia, Japan and India – to counter China.

This raises the question: Why has Modi decided to mend fences with China, since none of these issues have been addressed or gone away?

Speculations on the question abound. Some attribute it to the coming election in India, with Modi wanting tangible actions that could boost his “Make in India” industrial policy. But whatever the motive(s) behind his decision, it serves both countries’ economic and geopolitical interests.

Economic benefits of rapprochement

Some Indian nationalists might disagree, but China is perhaps best equipped to boost the “Make in India” policy’s chances of making the country an economic and geopolitical powerhouse by 2025. The Chinese government has the authority and resources to invest in India’s infrastructures and establishing an industrial foundation. Perhaps more important, having India on side would enhance the success of China’s Belt and Road Initiative (BRI).

Western and Japanese investors are largely interested in short-term rates of return, explaining why they are shying away from the Indian market. Business media have reported that Western and Japanese firms are not only reneging on commitments but also pulling back investments they made when Modi launched his “Make in India” policy.

Modi launched “Make in India” in New Delhi with much fanfare on September 25, 2014, vowing to create 100 million new jobs by 2022 and making manufacturing worth 25% of gross domestic product by 2025. The World Bank and other international organizations, however, have reported that the Modi government produced fewer than 650,000 new jobs and manufacturing barely accounted for 16% of the economy in the 2017-18 financial year.

Year-on-year economic growth slowe  in the first quarter of 2018, from 7.1% recorded a year earlier to 5.7%, according to World Bank statistics.

Media such as Business Standard, Reuters and Bloomberg as well as the World Bank have offered many reasons that the “Make in India” policy failed to take off, including inadequate infrastructure, harsh labor laws, and demonetization of large banknotes.

According to a January 9, 2017, Business Standard report, demonetization alone might have been responsible for a 50% drop in agricultural prices and 35% of job losses in the “informal sectors,” industries consisting of small businesses, which account for 80% of the Indian economy. The main reason was said to be the elimination of large banknotes, which hit the sector hard because transactions are largely if not solely based on cash.

However, most Western and Japanese businesses and governments were not to be seen in India’s “moment of need.” Thus forging a cooperative relationship with China is economically desirable and necessary for both countries. India would gain from Chinese infrastructure investment, enhancing the country’s economic growth. China would benefit from an expansion of its BRI.

Rapprochement makes geopolitical sense

Since the 1962 China-India border war, the relationship between the two countries has been “complicated,” if not hostile. Neither side is willing to compromise on its territorial claims. What’s more, India is wary of China’s rise, viewing its as a national-security threat, thereby prompting it to spend huge sums of money on weapons acquisition.

According to the Stockholm International Peace Research Institute (SIPRI), India is the world’s largest weapons importer, accounting for 13% of arms purchases each year. Much of that expenditure is meant to deter “Chinese aggression.” Rapprochement would ease that threat, enabling the government to channel more funds for economic development and poverty reduction.

Would rapprochement be sustainable?

Rapprochement should and would likely work if both nations took a deep breath and thought through the consequences of continuous conflict. According to the International Monetary Fund, India and China are the world’s biggest, fastest-growing, and most populous developing countries, accounting for more than a third of the global population and more than 20% of its gross domestic product.

They are also nuclear powers capable of wiping each other off the map, or at least incurring irreparable damage and loss of human lives.

India’s recent reaching out to China suggests that Prime Minister Modi, many in the Indian business and political establishments and the majority of the population are probably well aware of the dire consequences of confrontation.

However, a workable and sustainable rapprochement requires that both nations bury the past of mistrust and suspicion fueled by territorial disputes, culminating in the border war in 1962.

Territorial dispute

India inherited the McMahon Line (ML) as the border between it and China when gained independence from Britain in 1947. According to Western scholars such as Alastair Lamb, British territory was west of the ML, along the the plains of Assam, which the colonial power conquered in 1826, known as the Inner Line.

But in a May 20, 2015,  article for The Wire, Imphal Free Press editor Pradip Phanjoubam wrote that British India’s foreign secretary, Henry McMahon, arbitrarily drew a line inside Tibet as the border between India and Tibet at the Simla Conference  in 1914.

Since gaining independence, India has considered the ML the Line of Actual Control (LAC). However, China never ceded the territory and considered Tibet as part of China, but was too weak to defend it. India reinforced its claim in light of the Chinese absence, arguing that Tibet was never a part of China.

The 1962 border war

Which country was responsible for the brief 1962 border war depends on which version of history one believes. India claimed that Chinese troops unexpectedly occupied Aksai Chin, located on the Indian side of the LAC or ML, forcing it to fight back. But Indian scholar Arun Kumar stated at the Indian Defense Forum held in Washington on January 28, 2007, that declassified US Central Intelligence Agency reports blamed India for the war.

Kumar, citing the CIA reports, argued that Indian prime minister Jawaharlal Nehru did not want to negotiate with China and demanded that the ML be the border between the two countries. The CIA reports showed that Nehru sent external affairs secretary general R K Nehru to China demanding total Chinese withdrawal from Aksai Chin.

The CIA also reported that India established military outposts along the LAC, forcing China to take military action although it could ill afford it at the time.

China had just emerged from the hugely damaging Great Leap Forward at the time. Its economy was in ruins, with millions of people starving to death. There was also factional fighting between the “reformers” and “radicalists,” the former wanting to abandon class struggle while the latter demanding that it continue.

It might have been because of China’s hard times that India decided to insist on the ML as the boundary between the two countries and was unwilling to negotiate a settlement with China.

However, India has a very different version of history, insisting that China invaded India without any warning.

Readers can believe whatever version of history they want, but the fact of the matter is neither country is able or willing to go to war over the issue.

One cannot undo what has occurred. Indeed, the primary reason for studying history is to avoid repeating past mistakes. Or as the Chinese put it, “Develop the future with history as the mirror.”

Image what China and India can accomplish and contribute to the world if they work together instead of against each other.


Ken Moak
Ken Moak taught economic theory, public policy and globalization at university level for 33 years. He co-authored a book titled China’s Economic Rise and Its Global Impact in 2015. HIs second book, Developed Nations and the Economic Impact of Globalization, was just published by Palgrave McMillan Springer.
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