Sino-Indian Relations: Growing Yet Fragile

China and India are divided over several issues like territorial sovereignty, regional security and global governance. The main issue in Wen’s visit was the strong Indian reaction to China’s practice of issuing stapled visas to the Indian citizens from Jammu and Kashmir. S.M. Krishna told his Chinese counterpart, Yang Jiechi, that Delhi expects Beijing to show sensitivity to Indian concerns on territorial sovereignty in Kashmir. India's concern is about the structure of the bilateral trade that is utterly skewed in favour of China, writes C. Raja Mohan in RSIS commentaries.

The visit of Chinese premier Wen Jiabao to India has reinforced rather than resolve a paradox that has taken hold of Sino-Indian relations—growing political fragility despite the increasing economic engagement. China and India remain deeply divided over the critical issues of territorial sovereignty, regional security and global governance.

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Wen’s visit to India in 2005 was arguably the most substantive political exchange between the two countries. That visit produced the only negotiated document between the two sides on the boundary dispute that has hobbled bilateral relations during the last 60 years. In that year, Wen and the Indian prime minister Manmohan Singh also unveiled the aspiration to build a strategic partnership between the two countries. Wen’s visit generated a rare optimism in Sino-Indian relations and intense phase of all-round engagement between the two nations.

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China objected to the Indo-US civil nuclear initiative and launched an effort to provide a matching deal for Pakistan; Beijing came in the way of India’s search for a permanent seat on the United Nations Security Council.

China began to raise the ante on the boundary dispute in both Arunachal Pradesh in the eastern reaches of their frontier and Jammu & Kashmir on the West. Talk of an armed confrontation became common as both sides stepped up their military activity all along their contested boundary. As bilateral ties headed south, it was Wen who stepped in to bring a measure of calm. In his two meetings with Prime Minister Singh at the end of 2009 on the margins of multilateral conferences in Bangkok and Copenhagen, Wen sought to arrest the slide.

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Fixed at a relatively short notice, Wen’s visit raised hopes in Delhi that the spirit of 2005 in bilateral relations could be revived. The results, however, have been mixed. The main issue in the run up to Wen’s visit has been the strong Indian reaction to China’s practice of issuing stapled visas to the Indian citizens from Jammu and Kashmir. India suspended military exchanges in September 2010. A couple of months later, the Indian foreign minister S.M. Krishna told his Chinese counterpart, Yang Jiechi, that Delhi expects Beijing to show sensitivity to Indian concerns on territorial sovereignty in Kashmir. Krishna also reminded Yang that India has shown respect for Chinese sovereignty over Tibet and Taiwan.

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On the question of terrorism -- another major concern for India -- the joint statement fell well short of the clear and unambiguous demands from other great powers that Pakistan should shut down terrorist operations on its soil. Wen’s unwillingness to support the Indian demand for speedy justice to those in Pakistan who plotted the terror attack on Mumbai at the end of November 2008 has only reinforced the deep- seated Indian concerns about the nature of Sino-Pak strategic partnership.

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Meanwhile the news from the economic front during Wen’s visit to Delhi was more encouraging. Dr. Singh and Wen have now set a target of US$ 100 billion for bilateral trade in 2015. This is by no means ambitious. At the current rates of growth — about 40 per cent -- that landmark might be reached within the next couple of years. India's concern, however, is not about volume but the structure of the bilateral trade that is utterly skewed in favour of China. In 2010, out of a bilateral trade of US$ 60 billion, the deficit in Beijing’s favour is about US $20 billion.

On his part, Wen has promised to facilitate better market access to Indian goods and services. More broadly, Wen's visit has resulted in a number of agreements — from cooperation in green technologies to banking and from maritime security to the launch of a strategic economic dialogue. Wen's visit to India might have helped pause the recent downward slide in Sino-Indian ties. Wen and Singh, however, have much work to do to overcome the political fragility of their expanding economic engagement.

Wen Jiabao In India

In the Chinese Premier, Wen Jiabao's visit to India, there was an emphasis on developing closer business ties with India in different areas, which includes banking, finance and green technologies.The current imbalances are likely to persist as Indian exports are less competitive in Chinese Markets. Wen Jiabao’s visit facilitated closer integration of banking and financial sectors of the two economies. Crude oil imports played a role in enlarging the trade deficit,but they were not imported from China.However, both sides have committed to correcting the imbalance, writes Amitendu Palit.

Excerpts:

The Chinese Premier’s recent visit to India emphasised on developing closer business ties with India in different areas. Several agreements were signed, including in banking and finance and green technologies. The paper argues that despite both countries deciding to increase bilateral trade and addressing the current imbalance, the latter might persist due to low competitiveness of Indian exports in the Chinese market and the Indian industry’s inability to compete with Chinese imports.

Chinese Premier Wen Jiabao visited India five years and eight months after his last visit in April 2005. Much has changed during these years. No change, however, has been as remarkable as the rapid acceleration in economic ties between China and India. Between the Premier’s two visits, Sino-Indian merchandise trade has increased from US$12.7 billion (2004-05) to US$42.4 billion (2009-10).2 Overall trade figures will be even larger by including bilateral services trade, on which, unfortunately, no official estimates are available. The almost fourfold increase in trade during the last five years has led to China becoming India’s largest trade partner and India becoming one of China’s major trade partners.

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And business it was that dominated the visit. Both countries decided to lift bilateral trade to US$100 billion by 2015.3 Going by the rate at which bilateral trade has been increasing in recent years, the target might well be achieved before the chosen date. Both countries also decided to work together in infrastructure, telecommunications, investment, finance, information technology and environmental protection for achieving ‘win-win’ outcomes. Forty- nine Memoranda of Understanding (MOUs) were signed between Chinese and Indian business entities during the visit. Two key ones among these were between the Federation of Indian Chamber of Commerce and Industry (FICCI) and China Chamber of Commerce (CCC), and the Reserve Bank of India (RBI) and the China Banking Regulatory Commission (CBRC) respectively.

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The Chinese Premier’s visit will be remembered for facilitating closer integration of banking and financial sectors of the two economies. The Industrial and Commercial Bank of China (ICBC) – one of the largest global lenders by market value – has applied for setting up branches in India, while other leading Chinese banks such as Bank of China, China Construction Bank and Agricultural Bank of China are expected to do so in the future.5 Existing Indian banks in China [eg. State Bank of India (SBI)] are likely to expand operations.

Contribution of crude oil imports in enlarging the trade deficit, hardly any of which are imported from China. Nonetheless, both sides have committed to correcting the imbalance.

The key to balanced trade is increasing India's exports. China has agreed to encourage Indian agricultural, pharmaceutical and service exports in its domestic market. These and other Indian exports will increase if non-tariff barriers (NTBs) in China's domestic market come down and they also become more competitive. While NTBs can probably be reduced by negotiating with the Chinese government, competitiveness of Indian exports in the Chinese market vis-à-vis similar exports from Southeast Asia and other competing countries cannot be increased in the same manner. Thus despite reduction in NTBs, Indian exports might not experience substantial increase.

On the other hand, Indian industry must also note that till now they have successfully lobbied against Chinese imports and precipitated anti-dumping measures largely because China is yet to be treated as a 'market' economy by the WTO. This will, however, change from 2016. It is important for the Indian industry to reconcile to the fact that Chinese imports will be as much a part of the Indian market as they are in most other markets of the world. Instead of clamouring for protection and lobbying against Chinese imports, it is more sensible to lobby for domestic reforms that will reduce production and operational costs, and make Indian exports more efficient and competitive.

As India struggles to analyse the pluses and minuses from the Chinese Premier's visit, it is clear that China wants to do business with India. Unresolved borders cannot and should not hold back two of the world's largest economies from exploiting mutual synergies. That is the message emanating from Premier Wen's visit. Will India play ball?

China and India need an ambitious agenda for engagement

Chinese President Wen Jiabao's will be visting India on 16-17, in the year when India and China will be celebrating the 60th anniversary of the establishment of diplomatic relationships, and both the countries have rediscovered each other. There are challenges as well as opoortunities. China is not only the neighbouring country of India, it is an emerging super power. Our borders are the most peaceful of all, though disputed, writes Nirupama Rao in a speech delivered to the Observer Research Foundation and republished in The Hindu.

This year saw India and China celebrating the 60th anniversary of the establishment of diplomatic relations. A couple of weeks from now, Premier Wen Jiabao will be in India and will participate in the closing ceremony of the Festival of China in India which will bring to a close the calendar of activities organised in both China and India to commemorate this occasion.

The six decades of the India-China relationship behind us have a record that is chequered. We became arbiters of our national destinies from the date of India's independence and China's liberation in the late 40s of the last century, inspiring many others in Asia and Africa to end colonialism and foreign domination. This was the time when India and China in a sense, rediscovered each other, understanding the potential of the synergy between two of the largest populated nations in the world on the global stage.

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The leadership in both our countries understood the untenability of any sustained estrangement between us. The last three decades have been marked by well-intentioned efforts of exploration towards establishing the framework of a stable, peaceful, productive, and multi-sectoral relationship between India and China. Contradictions are sought to be managed, and our differences have not prevented an expanding bilateral engagement and building on congruence. There are elements of cooperation and competition that form the warp and weft of our relationship.

There are both challenges that the relationship confronts us with and also opportunities. As our Prime Minister has said, India and China will continue to grow, simultaneously, and our policies will have to cater to this emerging reality. For India, the situation is complex since China is not only our largest neighbour but also because China is today a major power in the world both from the traditional geo-political point of view and the more current geo-economic point of view.

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China's rapid economic growth over the last three decades has been spectacular and riveting. It is now the second largest economy in the world with a GDP of roughly $5.5 trillion. China has begun to deal in the currency of global power, and its economic success is impacting its foreign, defence and security policies. The appellation of assertiveness is frequently applied to China's profile in global affairs today. The question that I am always asked is whether our relationship with China will be one dominated by increasing competition for influence and resources, as our economic needs grow.

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It is true that divergences persist. We have a disputed border. There are legacies as well as lessons bequeathed to us by history. This is a complex problem and the cartographies that define national identity are internalised in the minds of people in both countries. At the same time, we are making a serious attempt at trying to arrive at a fair, reasonable and mutually acceptable solution to the boundary question as the recent 14th round of the Special Representatives talks will testify. The absence of a solution to the question is not due to lack of efforts but arises from the difficulty of the question.

What also needs to be appreciated is that the India-China boundary is one of the most peaceful of all borders. We have in place a well organised set of confidence building measures to ensure peace and tranquillity on the border.

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Another issue of concern is the management of trans-border rivers. Many of the rivers nourishing the plains of Northern India and also areas in North-east India arise in the highlands of the Tibetan Autonomous Region and are a source of livelihood and sustenance for millions of our people.

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There is, then, the question of the China-Pakistan relationship. India firmly believes that a stable and prosperous Pakistan is in India's interest, and we are not against Pakistan's relations with other countries. While I agree that relationships between countries are not zero-sum games, we do not hesitate to stress our genuine concerns regarding some aspects of the China-Pakistan relationship particularly when it comes to China's role in PoK, China's J&K policy and the Sino-Pak security and nuclear relationship. The need for mutual sensitivity to each other's concerns cannot be denied.

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Our trade with China is growing faster than that with any other country and China is our largest trading partner in goods with trade likely to exceed US$ 60 billion this year. There is also serious discussion between the two countries on correcting the trade imbalance and we would like to see more Indian goods and services entering the Chinese market. Many Chinese companies are now well established in India and many Indian companies are also opening up in China. We in India have also worked to resolve hurdles that have sometimes been faced by Chinese companies to ensure a level playing field for all foreign investors.

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The results of our policy of engagement are manifest in many areas and are not limited to bilateral trade and investment alone. Over 7,000 Indian students study in China, and the CBSE is set to introduce Chinese in the curriculum of schools from the next academic session. There is also an information gap that keeps our peoples from understanding each other better and which we need to bridge by concerted public diplomacy from both sides. There is much work to be done to improve perceptions within the media in both countries.

The global trend towards multi-polarity and a more even distribution of power has been accelerated by the recent global economic crisis. While the immediate financial aspects of the crisis may have been addressed, its structural causes in terms of global imbalances remain unsolved. This provides an opportunity to India and China to work together.

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As India and China continue to pursue their interests, and so long as their overwhelming preoccupation remains their domestic transformation, and both understand that this goal requires a peaceful periphery, it is my firm conviction that the elements of competition in the bilateral relationship can be managed and the elements of congruence can be built upon. As our interests get progressively more complex, the costs of any withdrawal from engagement will rise. I believe this is a big relationship with the clear possibility of an ambitious agenda of mutual engagement that will be one of the most important bilateral equations of our new century. It is in our interest to view it in a more wide-angled and high definition manner than ever before.

China needs to learn from India's legal system and protection of vulnerable groups: CASS study

Chinese think-tank, CASS, assesses national competitiveness, and finds China ahead of India on economic parameters, but says China needs to learn from India's legal system and protection of “vulnerable” groups, writes Ananth Krishnan in the article titled "Learn from India, says Chinese think-tank", published in the Hindu, on 27 October 2010.

A report on “national competitiveness” released by the official Chinese Academy of Social Sciences (CASS), which is China's leading think-tank, also forecast that China would become the world's second-most powerful nation after the United States by 2050, and overtake the U.S. to become the largest economy in 2030.

CASS publishes “blue books” ranking countries in terms of national power, which are widely read by academics and officials here. Many CASS scholars advise the government on policy issues.

The findings of this report, which measured economic factors, were published in many official newspapers on Tuesday. While the rankings are a subjective assessment by Chinese scholars, who assigned points on criteria ranging from progress in science and culture to technology and workforce talent, they are a reflection of how academics here view their country's position with respect to other nations.

The report ranked China 17th overall in terms of national competitiveness in 2008. India was ranked at 42, one spot below Bulgaria and ahead of Kazakhstan.

“China's overall national competitiveness is slightly stronger than India, but India is ahead of China in some areas,” said Ni Pengfei, the editor of the report.

The report pointed to the rule of law, protection of vulnerable groups and the preservation of traditional culture as areas where China ranked lower than India.

The study featured a detailed comparison of China's and India's respective advantages. It said before the year 2000, the two countries were “at a similar level,” but in the last decade China made “quick adjustments” that had resulted in a widening gap in competitiveness, since 2004.

India had “obvious advantages” in industrial structure, the report said, pointing to a services sector which accounted for 52.94 per cent of economic growth, compared with China's 41.89 per cent. It forecast “a more intense level of competition” for resources between “the world's two fastest growing countries.”

“China's comprehensive competitiveness has seen a leapfrog promotion over the past two decades, and it has huge potential and strong capability to catch up with and surpass developed nations in the future,” said Mr. Ni.

China, however, lagged behind the U.S. and Europe when it came to higher education, technological talent and cultural appeal. The report particularly stressed that China needed to do more to boost its soft power, amid increasingly negative perceptions of China's rise both in the West and among its neighbours.

“We should think of a country's cultural power when talking about its national competitiveness,” Chen Shaofeng, a scholar at Peking University, told the China Daily.

Soft power

"China’s state-led model of winning hearts and minds is no match for India’s private effort", writes Sadanand Dhume in "Likable India" in The Wall Street Journal (October 25, 2010). A few excerpts.

"Scholars and journalists alike tend to make much of China’s vaunted "charm offensive." It turns out, however, that when it comes to winning hearts and minds—at least democratic hearts and minds—China’s top down state-led model is not much of a match for India’s decentralized private effort."

"In terms of goodwill, India bests China in both Western and Eastern democracies. For instance, according to a poll released last month by the Chicago Council on Global Affairs, Americans place India in the same ballpark as long-term allies South Korea and Israel. China elicits only about as much warmth as Venezuela and Mexico."

"A recent BBC World Service poll of 28 countries says more or less the same thing. On average, more than half of Americans, Britons and Canadians feel "mainly positive" about India; only about one in six feel "mainly negative." With China the numbers are reversed. Barely one in three from the Anglophone countries feel mostly positive about the Middle Kingdom; for more than four in 10 the emotions evoked are negative. Similarly, more Japanese, Indonesians and South Koreans feel positively than negatively toward India; with China it’s the opposite."

"For many people, India is probably more likeable in part because it’s not nearly as threatening as a powerful, well-organized China."

A tale of two Games: Beijing Olympics and Delhi Commonwealth Games were two very different beasts

Despite the surface commonalities, the Olympics and the CWG are not in the same league, just as, despite being hyphenated, India and China are not on par, writes Pallavi Aiyar, in the Business Standard, titled "A tale of two games". Here are a few excerpts.

In China, the years leading up to 2008 saw Olympianism emerge as the country’s new religion; any questioning of the Games, the equivalent of blasphemy. With traditional beliefs like Confucianism having been battered by decades of communist struggle and in turn socialism’s egalitarian ideals punctured by the increasingly single-minded pursuit of mammon, the authorities in Beijing used the Olympics as a legitimising ideology which helped justify unpopular decisions.

But nowhere was the discussion, so prominent in India, of the desirability of the Games in a country with millions of citizens still mired in poverty, in evidence. Beijing as a city was architecturally re-wrought, with hundreds of thousands of citizens relocated and displaced. Some committed suicide. None had proper legal recourse. Yet, these alternative narratives were absent from the discourse surrounding the Games. Those who spoke out against were censored, fired and in the worst case scenario, imprisoned.

There was something glorious, at least to someone with China-habituated eyes, about how Suresh Kalmadi, the chairman of the CWG organising committee, was booed during the opening ceremony of the Commonwealth Games. In Beijing the loss of face thus suffered by a senior official would have been unbearable to the authorities. In Delhi, it was part of the freewheeling, chaotic melee of Indian democracy.

That the Nobel Prize for Peace was given to Liu Xiaobo, a Chinese dissident currently in prison for 11 years for advocating democratic reform in China, as the Commonwealth Games wound down, only served to underline the India-China divide. Dispersed and polyphonic, India is from a Chinese standpoint almost incoherent. And if the ability for a government to mobilise its citizenry on the one hand and deliver on its promises on the other are seen as necessary aspects of ‘coherence,’ the Chinese perspective is understandable.

Huang Jing: Managing Asian G2

India and China were really successful on nation-state building.In both countries nationalism arose against the defeats, humiliations and injustice these nations went through during the period of western imperialism. Both countries used western ideas to overthrow foreign domination.It is wise to avoid nationalism in India-China relations, as it is a double-edged sword.The AG2 framework will provide the institutional arrangements to secure the prevalence of wisdom over emotions in the bilateral relationship, writes Huang Jing in Business Standard.

Excerpts:

"Despite substantial cultural and religious diversity in both countries, India and China have been largely successful in nation-state building, as evidenced by the strong and unshakable national identity and pride among the Indians and Chinese."

"However, unlike western nationalism, which was associated with pride and jubilance for the triumph of capitalism and industrialisation, nationalism in both India and China arose due to defeats, humiliations and injustice endured during the age of western imperialism — India was under the British Raj and China was a victim of gunboat diplomacy."

"Ironically, the leading elites of the national movements in both India and China embraced western ideas and adopted western political methods in their fight to be rid of “foreign exploitation and operation”. Subsequently, these leaders led their countries towards the western path of modernisation. This deep-seated love-hate mentality towards the West and the bitter roots of their national consciousness have made the Indians and Chinese especially sensitive towards national sovereignty and independence — after all, they were determined never to let history repeat itself."

"In India-China relations, a wise and astute leader would want to avoid involving nationalistic sentiments on the issues — border disputes, trust deficit, mismatched geopolitical concerns, and inconsistent interests in energy, food and water security — that have handicapped the bilateral relationship. Doing so would only deprive the leaders of both the states of the rationality and manoeuvring room necessary for achieving a mutually acceptable solution for, or at least the practical management of, the existing problems in bilateral relations. Furthermore, playing the nationalism card would have dire consequences on political stability at home, as a nationalistic approach would, more often than not, benefit the extremists in domestic politics."

"Indeed, fast economic growth amidst globalisation has brought about an unprecedented transition in both China and India, giving rise to new contradictions, dilemmas and challenges, or exacerbating old ones, in domestic politics as well as bilateral relations."

"Both Delhi and Beijing must make a conscious commitment to contain nationalistic sentiments in the bilateral relationship, especially when the interests of the two countries are inconsistent or in conflict. Political leaders have to realise that playing the nationalism card would produce no benefits. As history has taught us repeatedly, nationalism is always a double-edged sword and it could potentially produce a backlash on those who ride on it for short-term gains."

"The simultaneous rises of the two great neighbouring powers have brought about unprecedented opportunities as well as challenges. The AG2 framework is to provide the institutional arrangements to secure the prevalence of wisdom over emotions in the bilateral relationship, so that the two nations can optimise the opportunities and handle the challenges with a rational and cool-headed approach."

Save the tiger: Environmental dividend from economic development

This is the Chinese year of the tiger and people are interested in saving the tiger from extinction more than ever. Several conferences are being held, and a lot of money is being thrown at saving the tiger, but all this can't work if the Government can't mitigate the conflict between locals and wild animals. The lack of agricultural productivity forces farmers to encroach on the habitat of the tigers. This has to be resolved. China and India can save the tigers by cooperating with each other, writes Barun Mitra.

A shorter version of this article was published in The Wall Street Journal.

Asia’s economic potential was first demonstrated by the four tiger economies. In recent decade, the focus has shifted to China, India and others. While economies are growing, the real tigers in the wild are living a precarious existence. It is time to reap the environmental dividend from growing prosperity, and save the tiger from extinction.

This is the Chinese Year of the Tiger! Undoubtedly, the focus is once again on ways of saving the wild tiger from extinction. This coming weekend the international Tiger Forum will meet in the north-eastern Chinese city of Hunchun. Next month a tiger summit is scheduled in St Petersburg, Russia. Last month 13 nations - Bangladesh, Bhutan, China, Cambodia, India, Indonesia, Laos, Malaysia, Myanmar, Nepal, Thailand, Vietnam, and Russia agreed, at a meeting of the Global Tiger Initiative (GTI), to double the tiger count from about 3200 at present to 7,000 by 2022. Incidentally, the tiger numbers have halved since 2002, when the claim was 7,000. Many today believe that these numbers were grossly inflated due to faulty counting procedures.

In 1900, it is believed that there were about 100,000 tigers in the forests of Asia. The number declined to about 40,000 by the 1950. Today, billions of dollars are being spent to save one of the iconic animals in the world, but the future of the tiger continues to be bleak.

According to estimates used in draft documents for the St Petersburg Tiger Summit, the economic benefit of ecological services coming from forestry and wildlife estimated in 1997 to be as high as $ 33 trillion annually, and would be much higher today. But another estimate claimed that for the people living in tiger forest in countries like Cambodia, the annual economic benefit per household to be barely $675. The numbers don’t add up!

Over the past decade, just the central government in India increased its allocation for Project Tiger, from $ 16 million (Rs 75 crore) in the 9th five year plan, to $ 32 million (Rs 150 crore) in the 10th plan, and $ 128 million (Rs 600 crore) in the current 12th Plan (2007-2012). This is equivalent of about $ 25,000 per tiger per year, for a mere 1200 animals. Compare this with the flagship rural employment programme for the poor that promises about $ 70 per family per year.

There seems to be growing gulf between the prescriptions offered by many international, largely western experts, and what domestic policy makers in China, India, and elsewhere confront on the ground.

Many of the international experts agree on the need to commit larger sums of money, monitoring of the tigers and their habitat, and almost military style enforcement to keep people and poachers out.

But these old prescriptions don’t inspire confidence any more. Indian policy makers are increasingly aware of the rising aspirations of the people, and the demand for land, for agriculture and other developmental purposes. For some others, the biggest threat to tiger comes from the growing intensity of conflict between man and wild animals. They would not like to stake everything on counting tigers.

Just in the past two months, two people lost their lives in the vicinity of the famous Ranthambore tiger park. Typical compensation for a life lost is only $2200. This is barely 10% of the annual allocation by the central government for every tiger each year, at present. Just this week, in the same park, a forest ranger who was bravely trying to shepard a tiger that had strayed near a village, armed only with a stick, was mauled.

Last year Bangladesh reported 50 deaths from tiger attacks in the Sundarbans area of the Gangetic delta. In India, the annual death toll from wild animal attacks range from 200-300 each year, in addition to injuries, loss of property and crops. Tigers and other wild animals will have a future, only if this conflict can be diffused. Otherwise the beasts will stand no chance against the ire of man.

The problem in India, and some other tiger range countries, is not that there are too many people living in close proximity to wildlife. Typically, in such areas agricultural productivity is abysmal, poverty is endemic, and non-farm economic opportunities non-existent. Without resolving this human problem, neither a proliferation of conferences nor throwing cash will help the cause of the tiger.

But this need not be the situation. If India doubles its agriculture productivity the demand for agricultural land could fall by almost 40%. If non-farm opportunities are allowed to spread, dependence on subsistence agriculture will decline rapidly. One can already see glimpses of how the natural environment can recharge once the human pressure declines.

This is most dramatically visible in China. China’s agricultural productivity is almost double of India’s. The rapid movement of millions of people from rural to urban, and changing economic structure from agriculture to industrial, explains the rise in forest cover.

Between 1990 and 2007, according to World Bank database, China’s Per capita GDP increased 8 fold, from $ 314 to $2,566, while for India it just tripled, from $374 to $ 1,046. During this same period, China’s agricultural GDP shrank from 27% to 11%, and forest cover as a share of total area rose from 17% to 22%. It is this 30% increase in forest cover in 17 years, which makes it plausible for China to attempt to rebuild wildlife habitat, and reintroduce animals. In contrast, for India, agricultural GDP declined slowly from 29% to 18%, but forest cover stayed almost the same from 22% to 23%. This indicates that in India, there is a much higher pressure on forest from people who are not able to move beyond rural livelihood, and explains the continuing conflict between man and animal.

China and India, are neighbours and competitors in many fields. But in the arena of tiger conservation, they could greatly complement each other. China barely has 45-50 tigers in the wild, mostly near the Russian border in Siberia. India has among the best wildlife experts with capacity to manage tiger habitats.

India is already trying to reintroduce tigers in to two tiger parks where all the tigers were lost in recent years. India is also toying with an ambitious effort to reintroduce the Asiatic Cheetah, which had gone extinct in 1947. But today, India’s economic transformation is not yet deep enough to remove the potential for man and animal conflict. But it will happen. Working with the Chinese on tiger conservation would help build up Indian capacity to reap their own environmental dividend.

By cooperating with each other today, China and India would not only save the tiger in the wild, but redefine the meaning of “Asian Tigers”. Wildlife and forest are not mere intangible resources, whose values are only determined by creative book-keeping. For instance, in the US, the tangible economic benefit from wildlife and nature tourism, including fishing and hunting, was estimated at $125 billion in 2005. Asia could surely give the US a run for its money, if it manages the environmental resources better.

This will require a see change in thinking. Only when people profit from forest and wildlife, will they have any interest in preserving them, and then counting every tiger will become irrelevant. Tiger economies are better equipped to secure the future of the species too!

Changing climate: Hope for the tiger?

Two crouching tigers, some hidden dragons

The winds of change between the two giants could impact not only the environment but also politics. In this article published in the special issue (July-August 2010) of the "India China Chronicle", I look at the possible implications of the cooperation between these two countries at the climate conference in Copenhagen, last year. I believe a much bigger opportunity lies in the field of wildlife conservation, particularly in saving the tiger. Following is the text of the article.

Over the past half century, relations between the two Asian giants have been on a roller coaster ride. In recent years too the two countries have seen sentiments swing wildly on issues ranging from trade to Tibet, coloured periodically by the border issue.

Despite its history of turbulence, the two neighbours together made history at the climate summit in Copenhagen in December 2009, for the first time, the world got a glimpse of the possible consequence when China and India join hands for a common cause. prior to the climate summit, there had been a flurry of high level exchange between the two sides. Both countries came up with evidence to show that carbon intensity of their economies had been falling over the past decades. Both made unilateral announcements to reduce the carbon intensity further over the next decade. They also underscored the need for equitable share of the planet's atmosphere to meet the developmental aspirations of the people, and finally, they proposed to focus on a target of temperature increase in the future, as an alternative to the carbon emission targets which had been the cornerstone of the global climate negotiations.

While much of this information was trickling out of Delhi and Beijing prior to Copenhagen, there was very little appreciation of the possible implications of all this at the UN climate summit.

That became clearer in Copenhagen, when it was acknowledged that China and India were in constant touch, developing their negotiating strategies together. Even the ministers on the two sides were meeting almost on a daily basis to ensure that issues were smoothened out.

Today, it is clear that this joint positioning was the most significant factor in the ability of developing countries to withstand the pressure mounted by the rich countries in Copenhagen. With all the hype that was built up prior to Copenhagen, hardly anyone could have believed that at an international event of this magnitude, at an European capital, would have led to the marginalization of Europe itself. It was the Americans who seem to have realised the tectonic shift that was taking place, and decided to cut the losses by striking a deal on the political statement at the end. European governments had banked on the prospect of an agreement in Copenhagen to infuse new life to the Kyoto protocol, which is to expire in 2012, and so the political statement left them quite shocked.

China has been a member of various developing country groupings, including the G-20. But hardly ever was China seen taking the lead at international negotiations. At the WTO meetings over the past decade, it was the Brazilian and Indian ministers who typically articulated the developing country perspective. Copenhagen has changed all that. It is likely that the 2009 climate summit will be remembered not so much for its failure to reach an agreement to go beyond Kyoto protocol, but for the impact that China and India, by cooperating with each other, had on the whole process.

The question that arises: Is this a new phase of India-China cooperation in Copenhagen an exception, or would that become the norm for the future? Will the climate of relationship between the two giant neighbours undergo a fundamental shift in the aftermath of the climate summit?

Needless to say the two countries have a wide range of issues confronting each other. They range from economics to environment, from the unresolved border to geo-politics. While political frictions do surface periodically, both the countries seem to have matured enough not to allow the political cloud to affect the growing trade and economic relationship.

But the wide convergence on different environmental issues facing China and India, could help the two countries to seek common grounds on these areas. Without the historic baggage that affects the political relationship, and the periodic tensions that surface in any trade relationships, the prospect of better relationship on environmental issues because of the convergence of interest seem much brighter. And the cooperation on environmental issues may help improve the level of mutual trust and confidence that could rub off positively on political relationship as well.

The two countries are already cooperating on conventional and non-conventional sources of energy. Other potential environmental areas where there could be complementary relationship are newer and greener technologies,     ship-breaking,     recycling of material, etc. But perhaps the highest political capital lies in the possibility cooperation in the area of tiger conservation.

Tiger is an iconic animal in culture and history of both China and India. There are perhaps two dozen tigers left in the wild in China, mostly along the Siberian border. India currently estimates that about 1400 tigers are roaming in the wild. But globally, tiger is a highly endangered species, and remains so despite many initiatives launched to save it over the past four decades.

India believes that the demand for tiger parts in traditional Chinese medicine is one of the major sources of threat to tigers in Indian forests. Others think that the pressure of poaching to meet demand in China constitutes a smaller threat, about 25%. The bulk of the threat to tigers in India comes from shrinking forest habitat and the consequent conflict between human and wildlife.

Tiger conservation is not primarily an issue of law enforcement. India has problem of protecting its tigers, just as China has problem in completely eliminating all trade of tiger parts.

Recently there were some indications that there is perhaps a shift from this mutual blame game. India recently recognized that protecting tigers is primarily India's responsibility, since the Chinese do not come to India to poach the tigers.

China, on the other hand, is exploring alternative conservation strategies. following its economic rise, increasing number of people are finding non-rural economic opportunities, as a result, human pressure on forest and wild areas in many parts of China have significantly reduced. In some of these parts, forests have made a dramatic comeback. Some of these old tiger habitats could be ready again to host wildlife.

China is seriously looking for ways of reintroducing tigers in a controlled manner, in a few areas where tigers once roamed. Hardly any country has as much expertise and experience of managing tiger habitats as India. With recent relocation of tigers into areas from where they had vanished, India is also grappling with similar problems.

China does not have wild tigers ready for translocation. so they have set up an ambitious effort to try to develop ways of re-wilding tigers that have been born in captivity. This is a very exciting scientific opportunity.

In both these aspects, preparation of tiger habitat, re-wilding and reintroduction of the tiger, China and India could cooperate, and if successful, it would secure not just the tiger, but generate huge amount of goodwill between the elephant and the dragon!

China poses an even more audacious challenge to old conservation mindset. It has almost perfected the art of breeding tigers in captivity. It has more than 5000 tigers in captivity in zoos and other facilities. It could initiate a controlled trade in tiger parts from its captive tigers, and that could lower the incentive to poachers to kill wild tigers.

Even if India does not wish to join in this effort to help the cause of conservation through commerce, it stands to gain if China is successful in meeting the demand for tiger parts from its stock of captive tigers.

From the history of world trade, it is clear that smugglers and criminals profit only when there is a restriction on trade, creating an unmet demand for goods and services. Naturally, when trade is outlawed, only outlaws trade! If China were to legalize trade in tiger parts from its breeding facilities, the poachers in India would have little chance of competing with the market forces. Consequently, threat of poaching will almost get eliminated in India. There are many examples from across the world where legal trade has eliminated illegal trade. Over a million crocodiles are harvested each year from farms, yet there is hardly any evidence of any crocodile being killed in India in order to meet the demand from the international fashion industry.

China and India need to find ways of building on the new climate they sought to create in Copenhagen. Their common position on climate was premised on the belief that economic growth would actually enable the countries to improve energy efficiency, reduce pollution, compete effectively and clean up the environment. And as economies improve, they de-carbonise, as the history of human development illustrates over the past 400 years.

This is the real potential of the changing climate between China and India - harnessing the power of commerce, benefiting people and improving the quality of environment. Today, economic potential of both China and India are now openly acknowledged by all. Now is the time to reap the environmental dividend from economic development

Success despite govt, courtesy jugaad

When an overwhelming majority of Chinese businessmen say that the main reason for their success is network connections (guangxi), especially with government officials, most Indian businessmen attribute their success to Jugaad, ability to get around prohibitive laws.Most Indian businessmen see corruption a problem when the Chinese success story is mainly Government led. China has been less resilient in dealing with the economic crisis and is likely to end up with a weaker workforce, writes Swaminathan Aiyar in Economic Times.

Read the whole article:

"No less than 93% of Chinese businessmen say the main reason for their spectacular success is network connections (guangxi), especially with government officials. Indian businessmen, however, have succeeded despite the government: 81% say the main reason for their success is jugaad, the ability to find innovative way round prohibitive rules and institutions."

"This is the key finding of a survey of 4,000 businessmen in the two countries by YouGov, a top online survey organisation, and the Legatum Institute, an independent think tank. "

"Most Indian business owners view the government as corrupt, wasteful and ineffective. They acknowledge major gains from liberalisation but see corruption as a terrible problem that merits top priority in the future."

"India's main successes are in the private sector, while its main failures are in the government sector. That is surely a major reason why India has lagged behind China for three decades. It may yet overtake China in the next decade because of its demographic dividend. In 2011-20, India's workforce will increase by 110 million, but China's by less than 20 million, according to a Goldman Sachs study. This advantage may translate into faster GDP growth."

"One-fifth in India and just over onethird in China believe the global financial crisis has made starting and running a business more difficult."

"This suggests that China has been less resilient than India in facing the financial crisis. This probably flows from China's greater dependence on exports."

"But the confidence now exuded by Indian and Chinese entrepreneurs shows that feelings of inferiority induced by the colonial era are almost entirely gone."

"Chinese entrepreneurs say the main reason for starting businesses is to make money. Indians give money a lower priority, and say their main motivation is independence, being one's own boss."

"Only a small fraction - 6% in China and 2% in India - sees philanthropy or volunteerism as the primary means for creating social impact. "

Why India Must Swing

This article by Nitin Pai was published in Yahoo on May 25th 2010. You can read the full article here.

...

Part due to the wishfulness of the rhetoric surrounding Barack Obama's campaign and part due to the economic crisis it sunk into, it became fashionable in the United States to ignore geopolitical realities, and instead engage in a fresh bout of fantasising about China. Influenced by intellectuals such as Zbigniew Brzezinski it became fashionable to believe in the existence of a tidy bipolar world where the United States and China, the G-2, would sit together and shape the twenty-first century. Tidy and familiar as this world may be to Cold War-era strategists, it does not even begin to mirror reality: it took, for instance, no less than a Group of 20 countries to co-ordinate economic policies to combat the global recession.

...

... If the United States has the capacity to project power globally, China has nurtured proxies like Pakistan and North Korea to tie it down both indirectly and inexpensively. If the United States outguns it in traditional areas of warfare, China has sought to gain an advantage in cyberspace and outer space. The waters of the Indian Ocean therefore, are merely one of the several theatres where China and the United States will challenge each other.

To be sure, the United States military establishment is aware, concerned and preparing for a confrontational relationship with China. However, even at the best of times Washington-like New Delhi-finds numerous domestic vectors pulling in different directions to be able to fashion a focused strategy. Worse, at this moment, the Obama administration is not only confused by the dissonance between its beliefs and reality. It is also constrained by a weak economy, fiscal pressures and a mountain of debt that it owes to its geopolitical rival.

What does this mean for India?

First, despite irreconcilable differences in the way India and China view international relations, the high Himalayas prevented large-scale military conflict between the two civilisations for nearly two millennia. ...

Second, given the relationship with China, it is in India's interests for the United States to remain the predominant power in the world....

If strategic sense were to prevail in Washington, the United States would do everything to woo India into a tight alliance. There was a period during the much-maligned George W Bush administration that it appeared that the United States had chosen just such a course. No longer-given its bipolar fantasies, the Obama administration has substantially abandoned the project.

...

To paraphrase Henry Kissinger, India's options toward the United States and China must always be greater than their options toward each other. It serves "our purposes best if we maintained closer relations with each side than they did with each other." ...

... ...

The reason why India is unable to get the swinging right is perhaps because our political leaders and much of the strategic establishment are wedded to their pet dogmas. Prime Minister Manmohan Singh, for instance, is committed to improving relations with the United States. And it was Mr Ramesh, after all, who popularised-if not coined-that ghastly word, "Chindia". Now turn on your television or open the op-ed page of a newspaper, and you'll spot their opposite numbers, forever opposed to the United States or China or both.

...

Do awakening giants have feet of clay?

China and India’s rapid rise has spawned many books and controversy. YaleGlobal, the online journal has two new articles that looks at the diverse strategies in China and India.

In the first article, economist Pranab Bardhan, author of "Awakening Giants, Feet of Clay," takes a contrarian view, detailing challenges often overlooked by the financial media in celebrating short-term growth. He points out that both nations have lifted millions from poverty but cautions that political incertainty could hamper growth.

For the financial press, China and India have become poster children for market reform and globalization, even though in matters of economic policy toward privatization, property rights, deregulation and lingering bureaucratic rigidities both countries have demonstrably departed from the economic orthodoxy in many ways. If one looks at the figures of the widely-cited Index of Economic Freedom of the Heritage Foundation, the ranks of China and India remain low: out of a total of 157 countries in 2008, China’s ranks 126th and India 115th. Both are relegated to the group described as “mostly unfree.”

Contrary to popular impression, the level of economic inequality is actually lower in globally more integrated China than in India...

The relationship between democracy and development is quite complex, and authoritarianism is neither necessary nor sufficient for development. In fact, authoritarianism has distorted Chinese development, particularly as powerful political families distort the allocation of state finance and unaccountable local officials in cahoots with local business carry out capitalist excesses, both in land acquisition and toxic pollution.

Democratic governance in India, on the other hand, has been marred by severe accountability failures. Nor can one depend on the prospering middle classes to be sure-footed harbingers of democracy in China. In many cases the Chinese political leadership has succeeded in co-opting the middle classes, including the intelligentsia, professionals and private entrepreneurs, in its firm control of the monopoly of power, legitimized by economic prosperity and nationalist glory. Indian democracy derives its main life force from the energetic participation of the poor masses more than that of the middle classes.

While both China and India have done much better in the last quarter century than they have during the last 200 years in the matter of economic growth, one should not underestimate their structural weaknesses. Many social and political uncertainties cloud the horizons of these two countries for the foreseeable future.

You may read Prof Bardhan's complete article here.

In the second part, Börje Ljunggren, Sweden’s former ambassador to China, argues that the rise of Asian powers has momentum. In particular, China’s rapid economic development is likely ”the biggest change” of our lifetime. China’s pace as an economic power is more rapid than India’s, Ljunggren argues, and its global status could depend on increased investment in public goods like infrastructure, education and health. Empowering greater numbers of Chinese would rally popular support for the government system.

The established notion is that China has become a much more unequal society than India. Bardhan questions this, saying that the Gini calculations have been based on income in the case of China but consumption expenditure in the case of India. Bardhan’s analysis goes, however, far beyond the question of income distribution as such as he explores the “initial conditions” for equitable growth. This is where India has failed. Land reform was very haphazard, and a vigorous policy to develop basic education wasn’t launched. The sad fact remains that 44 percent of the Indian labor force is illiterate (World Bank, 2009). In China’s case, the foundation was, laid already in the pre-reform era when literacy increased more than three times and life expectancy by more than 50 percent.

One aspect ignored by scholars like Bardhan is the dimension of what is happening in research and development. In this sphere, China in recent years has done much better than its authoritarian nature would suggest, and India less well than its smart industry and “Bangalore image” suggests. According to a study by Thomson Reuters for the “Financial Times” (January 25, 2010), “China has experienced the strongest growth in scientific research over the past three decades of any country” with a 64-fold increase in peer-reviewed scientific papers, and the pace does not show any sign of slowing. This growth has put China in second place to the US, while India has not moved up the ladder. The quality was naturally very uneven, the figures just telling about the number of articles passing the peer-review threshold. Chemistry and material sciences are areas where China was found to do very well. The same is true for nano and energy technology, two areas where China will likely surprise the world.

One weakness common among many authors analyzing China’s rise, and Bardhan is no exception, is a failure to appreciate the nature of the Chinese authoritarian state. They fail to recognize fully how repressive and arbitrary the seamless Chinese party state is at its very core.

The Chinese party state will to have to manage increasingly rough weather, not least the IT revolution, which Bardhan mentions only in passing. IT will have a big impact on both societies, but put the Chinese authoritarian structures in particular to fascinating tests. An online civil society is emerging with “rights activism” as an important feature. This development will have profound consequences in just a 10-year perspective...

India has the advantage of a being an electoral democracy, but hostage to vested interests and short-sighted politics that have left India developing far below the potential of a more open economy and a more inclusive society.

You may read Ambassador Ljunggren's complete article here.

China and India in the decade ahead

As 2009 came to a close, and the new year dawned, two prominent Indian economists and columnists picked up their crystal balls, and looked at the decade ahead. Among other things, both of them compared the future economic trajectories of both China and India.

Sawminathan Aiyar makes eight predictions in his article "India to overtake China in 2020" in Times of India, on Jan 1, 2010. The first prediction compared China and India.

India will overtake China as the fastest-growing economy in the world. China will start ageing and suffering from a declining workforce, and will be forced to revalue its currency. So its growth will decelerate, just as Japan decelerated in the 1990s after looking unstoppable in the 1980s. Having become the world's second-biggest economy, China's export-oriented model will erode sharply - the world will no longer be able to absorb its exports at the earlier pace. Meanwhile, India will gain demographically with a growing workforce that is more literate than ever before. The poorer Indian states will start catching up with the richer ones. This will take India's GDP growth to 10% by 2020, while China's growth will dip to 7-8%.

In a more ominous vein, Mr Aiyar foresees the possibility of a water war between China and India.

China, alarmed at India's rise, will raise tensions along the Himalayan border. China will threaten to divert the waters of the Brahmaputra from Tibet to water-scarce northern China. India will threaten to bomb any such project. The issue will go to the Security Council.

Please Read Swaminathan Aiyar's complete article here.

Surjit S Bhalla, in his column, "The new decade will belong to India; when will this reality be recognised by Indians?" in the Business Standard, on Dec 26, 2009,

Two key conclusions emerge about Indian GDP growth. First, that this growth is now at a plateau level of 8-9 per cent. Second, that very soon, analysts and punters will have to change their Word documents to “India is the fastest growing economy in the world” rather than, “excepting China, India is the fastest growing economy”.

There are three separate reasons for this, all of which have been outlined numerous times before in these columns (and a detailed assessment was provided in Bhalla-2007*). The reasons refer to the broad determinants of economic growth — capital, labour and productivity. On the first, India is investing at the same rate as China (approximately 40 per cent of GDP), on the second, India’s labour force growth is about 1.8 per cent per year faster than China, and on the third, China has outpaced India by about 2 per cent per annum (for the last five years). Most of this outpacing has had to do with the deep and deeper currency undervaluation practised by the Chinese authorities which led to two unsatisfactory outcomes: the great financial crisis of 2008, and now the largest and fastest growing polluter of the world. For how long will the international community stand idly by? Not very, and this is the first big forecast for the ensuing decade: China’s exchange rate will appreciate significantly starting 2010. How significantly? A first year appreciation to about 6 yuan per dollar from the present 6.8 level.

This scenario will have predicted effects — China’s GDP growth should moderate to a less polluting 8.5 per cent in 2010 and then proceed on a declining trend for the rest of the decade. This will mean jobs for the rest of the world.

Please read Surjit Bhalla's complete article here.

It would be interesting to know how some of the Chinese and international economists are looking at the decade ahead. If you come across other interesting analysis, please do share it with us.

Challeges for China at 60

Professor Pranab Bardhan, a renowned economist at University of California at Berkley, has an an article in YaleGlobal on "Challenges for China at 60". He looks at the relationship between the political authorities in the Communist Party, and the leaders of enterprises in China. The online journal which studies globalisation, summarises the article as follows.

China is in many ways a land of contradictions, confounding outside observers. And such contradictions are nowhere more obvious than in China’s economy: a market-driven allocation of resources overseen by the Communist Party. But as Berkeley Economics Professor Pranab Bardhan notes, the contradictions lie at an even deeper level. Simply establishing private ownership of some of China’s largest companies is decidedly serpentine and many of the owners have familial ties with, or are themselves members of the Party. Moreover, many state-owned enterprises are controlled by political families. Such fuzzy lines between political connections and business have led to particularly egregious abuses of power that are precisely the predatory tendencies of capitalism that the Chinese Communist Party originally sought to defeat. Indeed, as Bardhan points out, many government officials now find it difficult to control their own colleagues’ venality, collusion, or depredations. But as some assert, as long as control of the economy remains with the state, such ills will continue to plague China. Though Chairman Mao believed that contradictions were the nature of society, it is doubtful he would have imagined all the contradictions that obtain in China’s society today. – YaleGlobal

A few key points.

• While party retains monopoly over political power, resource allocation in the Chinese economic is mostly market driven.
• About one third of the private entrepreneurs are members of the Party, and members get help in the form of finance, protection, and gain legitimacy.
• The nexus between political and economic agents is best evident in land seizures in cities and countryside.

Prof Bardhan's new book, "Awakening Giants, Feet of Clay: Assessing the Economic Rise of China and India”, is to be published shortly by the Princeton University Press.

Death of a Chinese indologist, a former Indian foreign minister remembers

Recently, a former foreign minister of India, Jaswant Singh, a member of the Lok Sabha, belonging to the BJP, paid tribute to a Chinese indologist, Ji Xianlin, who died at the ripe age of 98, on July 11, in Beijing.

Ji Xianlin’s greatest scholarly accomplishments were in the realm of “the history of Indian Buddhism and comparative linguistics.” He was a greatly venerated Chinese scholar who had “secretly translated the Sanskrit-Hindu text of the Ramayan into Chinese during the Cultural Revolution”.
Ji travelled to Germany in 1935 for study. At the “University of Gottingen he moved in a new direction, choosing to major in Sanskrit and other ancient Indian languages under the direction of Ernst Waldschmidt and Emil Sieg.” Ji received his Ph.D. in Germany and after World War II returned to China where he took a position at Beijing University and founded the Department of Eastern Languages."
Ji pioneered a method of “using comparative linguistics to verify historical events and to track changes over time.” Ji’s scholarly findings over the course of his career won for him “academic prizes in India, Iran and Japan”.

Read the complete article here. 31 July 2009

It would be interesting to read some of Ji's interpretation of India.