After World War II, many global institutions were set up to enhance global cooperation. Most of these were dominated by the US and European countries. In the 21st century, which is slated to be “Asia’s Century”, Asian countries are pushing for more say in global affairs. However, for this to happen, two of the major economies of Asia — China and India — need to speak in a coordinated voice.
With the rise in anti globalisation and protectionism, both India and China are taking proactive steps for better cooperation and are moving towards the growth of the Asian economy. Both nations are already members of G20, BRICS, East Asia Summit and Shanghai Cooperation Organisation and this allows them to find common ground on most of the issues.
India-China relationship dates back several centuries to the Shang Zhou civilization and Vedic civilizations when conceptual and linguistic exchanges took place. Since the beginning of this century, China has emerged as one of the largest goods and trading partner with most of the countries, which in turn has made China the second largest economy in the world. It has also resulted in China becoming one of the largest trading partners of India. Trade between the two has recorded an exponential growth since 2014. Over a period of time, India’s predominant exports have been metals, cotton and precious stones. However, these have been overshadowed by its imports from China of machinery, power equipments, telecom, organic materials and fertilisers. However, this has resulted in a huge disparity with India’s trade deficit with China rising to USD 56 billion in 2018:
| India-China Bilateral Trade (Figures in $ Billion) |
| Year |
India's Export To China |
% Change |
India's Import From China |
% Change |
Trade Imbalance |
Total Trade |
% Change |
| 2014 |
16.41 |
-3.72 |
54.24 |
11.95 |
37.83 |
70.65 |
7.88 |
| 2015 |
13.40 |
-18.34 |
58.26 |
7.41 |
44.86 |
71.66 |
1.43 |
| 2016 |
11.75 |
-12.31 |
59.43 |
2.01 |
47.68 |
71.18 |
-0.67 |
| 2017 |
16.36 |
39.23 |
71.96 |
21.08 |
55.60 |
88.32 |
24.08 |
| 2018 |
18.57 |
13.51 |
74.92 |
4.11 |
56.35 |
93.49 |
5.85 |
After the escalation of the trade rift between US and China, and also to address the concerns of trade imbalance with India, China has given market access to non-basmati rice, rapeseed meal, fish oil and fish meal in 2018. During the latest round of trade talks with China, India has discussed scope of business partnership in a wide range of areas like renewable energy, railways, housing, electronics and information technology.
Though growth in the bilateral investments between the two Asian majors did not move in pace with the expansion in trade volumes, both India and China have become the top investment destinations in the world. The strength in the relationship between the two countries has led to the establishment of the Asian Infrastructure Investment Bank in Beijing. The New Development Bank headed by KV Kamath and headquartered in Shanghai is also a result of strategic bilateral cooperation of the two nations with other emerging economies. As a part of the strategic tie ups, India has signed the DTAA (Double Taxation Avoidance Agreement) with China in 1994 and revised it in 2018.
Despite bonhomie, China’s growing strength has always been a threat to India. Both countries provide economic and infrastructure aid to smaller South Asian nations, though China’s offerings are much more than India’s. China has been using its growing economic power to consolidate its political influence in the Asian region. Its strategic tie-up with Pakistan is a major security threat to India. Chinese military base operations at Djibouti and Pakistan and its plan to construct ports in Sri Lanka, Bangladesh, Maldives and Myanmar pose a risk for India. China’s provocative behaviour in the South China Sea and increased naval presence in the Indian Ocean has made US view it as a “strategic competitor”.
After the military standoff at Doklam between India and China in 2017, both nations mutually agreed to disengage in military activities in the area. Since then, officials from both the countries have discussed various issues such as China-Pakistan economic corridor and support for India to join Nuclear Suppliers Group. However, India has not been able to win Chinese support in listing Jaish-e-Mohammad’s chief Masood Azhar as global terrorist under the UN Security Council Resolution just as the Chinese face India’s opposition in establishing the China-Pakistan Economic Corridor (CPEC) which its plans to build through Pakistan-occupied Kashmir (PoK) despite India’s security concerns.
Despite hurdles, as both Asian neighbours grow, there is hope that the two nations will align their diplomatic negotiations and strategic ties to make “Asia’s Century” a reality.
The author is CEO of Karvy Stock Broking