Episode 145      24 min 18 sec

Neighbours with a difference: The India-China relationship in context

VOICEOVER
Welcome to Up Close, the research, opinion and analysis podcast from the University of Melbourne, Australia.

JENNIFER COOK
I'm Jennifer Cook. Thank you for joining us. For the first time since the 16th century the two most populous nations on earth, India and China have emerged as major economic powers, but what does this mean for the region and beyond? How will the relationship between India and China develop with such divergent political, cultural and economic landscapes? Is it even possible for the two continent size countries to have a mutually beneficial relationship without solving their long standing border disputes? And if the controversy of territory is resolved at a political level, would that trickle down to the grass roots and enhance exchanges between ordinary Indian and Chinese citizens? Joining us on Up Close to discuss these issues is Dr Pradeep Taneja from the University of Melbourne's School of Social and Political Sciences where he lectures in Chinese politics, political economy and international relations. Educated in India, China and Australia, Pradeep provides a unique insight into the economic and political climate in both China and India. Pradeep, thank you so much for joining us.

PRADEEP TANEJA
Thank you Jen.

JENNIFER COOK
Look I'd like to begin by reading you a quote by a colleague of yours, Professor Mohan Malik. He's from the Asia Pacific Center for Security Studies in Honolulu. Now he said this 'just as the Indian sub continental plate constantly rubs and pushes against the Eurasian tectonic plate and causes friction and volatility in the entire Himalayan mountain range, India's relations with China also remain volatile and friction ridden because of past experience, war, territorial disputes, unparallel interest, conflicting world views and divergent geo-political views'. It's a very interesting description isn't it?

PRADEEP TANEJA
It certainly is.

JENNIFER COOK
Now look I want us to examine not only China and India's relation with each other but also what that means to the region, globally as well as to each other's nations sense of identity. Look can you begin Pradeep by explaining to us why this understanding is even important.

PRADEEP TANEJA
These two countries are the most populous countries in the world. Together they have a population of nearly 2.5 billion people and therefore what happens in these countries and between these two countries is going to have an impact on the rest of the region and the rest of the world. Now that their economies are growing very rapidly for the first time in 400 years, we find that India and China are now moving towards occupying their historical position in the hierarchy of the world's major economic powers. The late Angus Maddison, the renowned economic historian, he calculated that in [the] 1700s, India and China together contributed nearly 45 per cent of the world's GDP. But because of colonial expansion, because of technological innovation, industrial revolution in Europe, their share of the world GDP at the time of their independence, in India's case and liberation in China's case in the late 1940s, that had dropped to less than nine per cent of the world's GDP. Now we are seeing that these two countries are emerging as significant economic players on the world stage and their economic emergence is bound to have consequences for the rest of the world, and I don't think these consequences are all negative. They will be largely positive consequences but at the same time as these two countries develop economic strength, they will also develop their military strength and that could be a source of potential tension if differences between these two countries are not resolved quickly.

JENNIFER COOK
Let's look at this commonality. What do India and China have in common apart from this big population? We've spoken about their rising economic power. They both have this determination to succeed economically and we're seeing that. But is that enough to overcome their deep grained political differences?

PRADEEP TANEJA
Well first of all in terms of similarities and commonalities between China and India, culturally of course India and China, on the surface, appear to be very different countries. Despite their close proximity India and China have major cultural differences. It is often said in India that not even chopsticks reach India, that the Himalayan barrier was so powerful that the Chinese cultural influence in India was negligible. On the other hand because of the spread of Buddhism from India to China, we see much greater cultural influence on China from India than vice versa. So culturally of course these two countries have remained apart and of course, remember that historically Tibet served as a buffer between China and India, but since 1950 of course that buffer has been removed and now for the first time in history we find that China and India actually face each other directly.

JENNIFER COOK
Now India's a multi party democracy, coalition governments are the norm there. China of course has a one party communist party which spends an official figure of $90 billion on defence. It's very focussed on raising the living standard of its people and ensuring the supply of minerals are there to keep its industrial economy working. So how deep are the divisions between them?

PRADEEP TANEJA
As I said there are cultural differences. There are also differences in terms of political and economical systems. China and India are two very different countries when it comes to their political and economic systems and institutions. India is a large, raucous democracy with the separation of powers in many of the political institutions you find in more advanced democratic societies. China on the other hand is also a large country with a very large population but at the same time a rather authoritarian political system. Its economic system also is dominated by large state owned Chinese companies. We've seen change in China. In economic terms China now has a large private sector also. But if you look at the so called commanding heights of the Chinese economy to use Lenin's words, the Chinese economy is still dominated by large state owned corporations. So politically and economically, apart from being culturally different these two countries are quite different. But that doesn't mean that because these two countries have systemic differences, they cannot co-operate with each other. So conflict or rivalry is not inevitable. Despite their differences they can co-operate but co-operation of course would require better mutual understanding and more serious effort at trying to understand each other's position in the world and try to understand each other's culture, politics and economy.

JENNIFER COOK
Look economically China started reforms in 1978 and India in 91. China's GDP growth is above 10 per cent and India's has hovered around six per cent for a long time. China's economy centred around manufacturing of consumer goods. India's is around service and IT and more recently precision engineering. Now so what does this tell us about their relationship in their future, taking into account what you said that difference doesn't necessarily cancel out co-operation?

PRADEEP TANEJA
As I said, although the Chinese and Indian economic systems are quite different we also have to remember that India practiced a form of socialism after India's independence. So India became independent in 1947 and the gut instinct of India's leaders at the time, leaders such as Pandit Jawaharlal Nehru, was that a country with such a large population needs to have an economic system where the state plays an important part in directing resources and state also plays an important part in making sure that the distribution of wealth in the country is fair. Therefore the Indian state beginning in the late 1940s became heavily involved in the economic development of the country. So while India did not have an economy which was dominated by state owned companies but India had an economy which was sometimes described as a mixed economy, in which the private sector and the public sector competed. But the private sector was not allowed to grow freely because the government felt that the private sector in India would use up all the necessary resources and those resources could be used up to serve markets for, for example luxury goods and other consumer goods for the consumption of middle class, whereas the people at the bottom of India's economy could be left out. And therefore Indian Government began to set up industries for example in steel, infrastructure, telecommunications. There were large companies in all of these sectors which were controlled by the state and at the same time the Indian Government imposed restrictions on the growth of private sector enterprises in India. So for example, if a private company wanted to expand its production capacity, it needed to get licences from the Indian Government. And therefore economic policies of individual companies were not determined by the company's management or by the laws of demand and supply but by the government. The government would decide whether a company was allowed to expand its capacity or not. So in other words despite being a democratic country, Indian economy was not a free or liberal economy. Indian Government exercise a great degree of control over Indian private sector companies. But since 1991 we have seen in India a programme of economic liberalisation and many of these restrictions which constrain economic growth or economic development of private sector Indian companies, those restrictions have been lifted either entirely or substantially and as a consequence we have seen Indian economy grow at more than eight per cent over the past decade.

JENNIFER COOK
You're listening to Up Close. I'm Jennifer Cook and I'm talking with Doctor Pradeep Taneja about the complex relations between India and China and what that means not only for the region but also globally. Now let's look at trade between the two countries. Who buys what from who? China is now one of India's top trading partners and what does this mean for them and for the rest of us?

PRADEEP TANEJA
There is a booming trade relationship now between China and India. Nobody could have predicted that China would become India's largest trading partner. Even 10 years ago we could not make that prediction. Today China is India's largest trading partner and the two way trade for 2010 was more than $60 billion US. That's quite a sizeable amount but at the same time there are concerns in India that this trade is not balanced. In other words China exports a lot more to India than it imports from India. India's exports to China are largely either raw materials or semi processed materials. Indian Government and Indian companies would like to sell more manufactured products. They would like to sell more pharmaceuticals for example to China. They would also like to have greater access to China's Government services market. In other words India's software companies which have a worldwide reputation for the quality and price at which they're able to produce and sell software. They would like to have access to the Chinese Government market because as we all know china is a very large market but at the same time the Chinese government is a big buyer of many of these services and goods. And therefore India's IT companies would like to have access to the Chinese software market. So the trade relationship is booming. At the investment level the potential that exists between these two countries has not been fully realised and that's largely because of a mutual suspicion between these two countries. In India for example security concerns have been raised about Chinese investment coming into India. In China also, Indian companies that want to expand their presence in China, they also face various types of restrictions so the two governments have been talking about removing some of these barriers to trade and investment but let's see how they go.

JENNIFER COOK
I'd like to talk more deeply about China and India's military situation. Is it fair to say that China is seen as trying to contain India. I mean it supplied arms and nuclear missiles to Pakistan since the early 80s. How does India respond to this?

PRADEEP TANEJA
Well I'll return to the China Pakistan relationship a little later but let's talk about the military modernisation of China. Because of China's high speed economic growth over the past 30 years, Chinese military has been modernising its hardware, its training and at the same time trying to make the Chinese defence forces much more agile. And publicly China's defence budget is supposed to be nearly $90 billion a year. It's been growing in double digits over the last 10-15 years and that certainly is a matter of concern in India as it is in other parts of Asia. Indian economy is not as large as the Chinese economy if you're looking at the absolute GDP. India's GDP is about one fourth of China's GDP and therefore the resources at the disposal of the Indian Government and the Indian military are not comparable to the resources that the Chinese military enjoys. At the same time China has also been expanding its navy which has raised certain concerns, for example that China is building port facilities in all of India's neighbours. So for example, Pakistan, Bangladesh, Sri Lanka all have been beneficiaries of infrastructure construction by China and largely this construction relates to the construction of port facilities. The Chinese argument is that these ports are civilian ports. They are not ports for the navy's of these countries but at the same time the Chinese defence forces would have access to these ports in case of a conflict for example between China and India. Sometimes in the American media this is referred to as the string of pearls strategy. That China is creating these facilities to encircle India so that in case of a conflict with India, China would have access to these facilities. There are also concerns in India that China's military modernisation is widening that gap in terms of capacity and capability between China and India and therefore there are strategic planners in India who asked the Indian Government to increase defence spending and to try and match china's defence spending. And I think that of course, would be a typical security dilemma situation where India would be trying to catch up with China in military spending and that could have significant consequences for India's economy. Because I think personally India has other priorities and therefore as long as India can maintain its security it doesn't have to spend dollar for dollar as far as competition with China is concerned. But at the same time there are genuine concerns in India, particularly to do with China's relationship with Pakistan. As you know India and Pakistan have been rivals since their birth, the birth of Pakistan in 1947 and China, since the 1960s particularly has been a close ally of Pakistan. Often China and Pakistan describe their relationship as higher than mountains and deeper than oceans. In other words they have a very close relationship and China's relationship with Pakistan is largely seen in India as being India-centric and this raises concerns in India that rather than focussing on developing a proper and solid bi-lateral relationship, China continues to provide military support, technological support to Pakistan which Pakistan then uses against India.

JENNIFER COOK
I'm Jennifer Cook, your host for this episode of Up Close coming to you from the University of Melbourne, Australia where I'm talking with Doctor Pradeep Taneja about China and India, their relationship and what it means for the rest of the world. Now China and India, they've had this long standing border dispute in the Tibet region. Can you explain the significance of this and just what it means to them moving forward in real terms.

PRADEEP TANEJA
The border dispute is very complicated. There are claims on both sides. The Chinese side claims parts of Indian territory, or the territory that's under Indian administration, particularly the north eastern Indian of Arunachal Pradesh. China has staked claims to almost the entirety of that state of Arunachal Pradesh. India on the other hand has claims on Aksai Chin. If you look at the map of India, on the top north eastern corner of the maps of India published in India, you will see that there is an area which is known as Aksai Chin which is currently controlled by China but India lays claims to that territory. There are also other areas. So as I said the border dispute is a very complex one, but at the same time the two sides have failed to resolve this dispute, despite talking about, you know demarcation of their boundaries for more than 30 years now. This certainly is an issue which in my opinion is an important issue and China and India need to redouble their efforts to resolve this border dispute, because unless they resolve the border dispute the relationship will not be able to realise its full potential. So economically speaking and culturally speaking, China and India have a lot to offer each other. In tourism terms for example, recently when I was in India a tourism industry executive in India told me that if India and China can resolve their border problem and normalise their relationship, they don't need any other country. In other words if Chinese tourists go to India and Indian tourists go to China, they will have more than their current capacity can handle. So the tourism potential between China and India is tremendous but at the same time the current state of their political relationship and particularly the boundary dispute is such that until this dispute is resolved, the relationship cannot be described as being normal.

JENNIFER COOK
So from what you're saying, we can't expect China and India to have any genuine bilateral relationship without solving that border dispute.

PRADEEP TANEJA
The border dispute is at the crux of the relationship and at the same time it continues to mar even the best efforts of the two governments to improve their relationship. So for example, every time we see the relations improving, some incident happens on the border. Either incursions into Indian side by the Chinese soldiers or other commentary in the nationalist media in China or commentary by Indian strategic affairs commentators which offends the other side. And therefore the existence of the boundary dispute is a major irritant in the relationship. I'm not suggesting that this is an easy issue to resolve. The boundary dispute is a difficult one and as so many commentators have pointed out that for a democratic India, resolving this dispute is going to be very challenging. Raja Mohan who is a leading Indian strategic thinker once wrote that just the thought of resolving the border dispute with China sent shivers down the spine of Indian politicians because neither side is likely to get all of its claims accepted by the other side in any future settlement. Therefore in a democratic country like India, selling to the opposition, selling it to the Parliament, selling it to the general public is going to be very difficult. For the Chinese side it may be relatively easier compared to India. But on the Indian side any border settlement is going to be difficult to sell it to the public. But that of course doesn't mean that we allow this issue to fester. The issue has to be resolved particularly if India and China are to avoid any major conflict in the future and realise the full potential of their relationship.

JENNIFER COOK
Can you give us an insight into the everyday interactions between the two different countries? What does the people to people exchange tell us about the relationship between the two countries?

PRADEEP TANEJA
Cultural exchange of course is very important for two countries to have a normal relationship and cultural relations and cultural exchanges of course enhance understanding amongst people. Therefore it's important that not only at a government-to-government level the relationship is good, but at the people-to-people level also. We need a stronger relationship. There is certainly change in terms of people-to-people exchanges between China and India. Now there are more than 6000 Indian students studying in China. The number of Chinese students going to study in India and Indian universities and yoga colleges and all sorts of other educational institutions is also increasing. And there are thousands of business people from India who travel to China on a daily basis. The Chinese business people are also travelling to India but given the population of these two countries, given the size of the economies of these two countries, that is still only a fraction of what it can potentially be. Therefore if the relationship is deepened and the two countries can lessen the level of mistrust that currently exists between these two countries, then I think we will see an automatic flow of people and goods and cultural exchanges between these two countries.

JENNIFER COOK
Pradeep Taneja thank you so much for joining us on Up Close today and speaking to us about this relationship that has so many different facets.

PRADEEP TANEJA
Thank you Jen.

JENNIFER COOK
Our guest this episode has been Doctor Pradeep Taneja from the University of Melbourne's School of Social and Political Sciences where he lectures in Chinese politics, political economy and international relations. We've been talking to day about the relationship between India and China. Relevant links and a full transcript of this episode can be found at upclose.unimelb.edu.au. Up Close is a production of the University of Melbourne Australia. This episode was recorded on 17 May 2011 and was produced by Kelvin Param and Eric van Bemmel. Audio engineering by Gavin Nebauer. Up Close is created by Eric van Bemmel and Kelvin Param. I'm Jennifer Cook. Thanks for joining us.

VOICEOVER
You've been listening to Up Close. For more information visit upclose.unimelb.edu.au. Copyright 2011 the University of Melbourne.