In the aftermath of the Dalai Lama’s visit to Arunachal Pradesh, India-China bilateral relations have plumbed new depths. China accuses India of using the Dalai Lama to provoke anti-Chinese sentiment, and says that diplomatic relations are “seriously damaged”. But His Holiness is a popular and revered guest in India, and so the Indian government’s resolute defence of his right to travel anywhere in the country remains fully in harmony with popular sentiment. Still, we should expect a climate of “cold peace” between the two countries for some time to come, with bilateral political issues remaining unresolved. However, a Sino-phobic public climate can damage our own public interest, and this the government should work to avoid. Because China matters to India—if not politically—certainly in the realm of economic development. And it matters in four quite specific ways.
First, China is well on the way to becoming the world’s largest consumer. Its economy continues on its journey of rebalancing towards consumption as the dominant share (as against investment). Simultaneously, as China’s middle class grows to 800 million people (from the current 400 million) by 2022, its demand for consumer goods and services will grow manifold. This demand will include tourism, leisure services, appliances, wearables, health care including senior citizen care, green energy, financial services and digital/smart applications. All these goods and services will be sought from global as well as local sources. As a result, companies across the world will compete for a share of the Chinese consumer market.
India has a large and rapidly growing consumer market of its own. But our own companies would be well advised to pay close attention to both the Indian and Chinese markets. World-beating companies have never restricted their vision and ambition within national boundaries. By focusing on both India and China, Indian companies have an opportunity to achieve huge economies of scale. With low-cost, trained manpower and by revamping their systems to focus on “smart” manufacturing processes, Indian companies can capture the prime manufacturing space on the planet. Such a combination can power “Make in India” into a massive operation that is capable of generating the huge volume of employment demanded by India’s demographic dividend.
Secondly, China has the world’s largest investible reserves. And official Chinese policy is to invest these reserves to seek returns better than the current abysmally low numbers generated by holding US government bonds. Further, China has the advantages of both low cost as well as high efficiencies in the area of infrastructure development. This plays well with India’s infrastructure needs which are of the order of circa USD 500 billion over the next five years. Moreover, for China, India is a safe and stable investment destination. India has a well regulated and developed financial infrastructure and a reliable— though slow—judicial process. Chinese investment in India can also offset— through the capital account—the deficit in Sino-Indian trade on the revenue account. There is thus a natural complementarity here which needs to be brought to full flow for the mutual benefit of both nations.
Thirdly, China has already emerged as a new source of innovation and R&D. This is a novelty for India, long used to looking towards North America and Europe—with the occasional nod to Japan and Korea—as the fountainheads of scientific discovery. But all the indicators—patent registrations, citations in scientific journals, investment in R&D, the development and growth of scientific and technological talent—point towards China emerging as a global centre of innovation. Already, Chinese companies like Huawei andLenovo have displaced global leaders in their fields and gained huge market share on the basis of their innovatory technology and customer-friendly products. If India can unravel the business ecology of China, the innovatory potential can be harnessed for our own needs. And this can be a two-way process.
Fourthly, China’s launch of its ambitious “One-Belt-One-Road” (OBOR) initiative three years ago has the potential to recreate a new infrastructural and connectivity framework for the world, just as the Suez and Panama Canals and the great transcontinental railways did in the late nineteenth century. India has so far shied away from fromconnecting with OBOR because of worries that the China- Pakistan Economic Corridor (part of OBOR) challenges its legal claims on Pakistan-Occupied Kashmir (POK). But the OBOR presents an opportunity for India to link itself firmly into the trans-Asian production, supply and value chains of the future, and thus to enhance its global trade and to open markets for “Make in India” (MII). The economic and employment consequences of linking OBOR and MII would be massive. Surely, Indian diplomacy can figure out a way to protect THE INDIA-CHINA RELATIONSHIP: COMPETITION AND COOPERATION Ravi Bhoothalingam our territorial rights without sacrificing potentially large economic benefits for our population.
India, too, has a great many things going for it, but to leverage these to create an India-China partnership that will generate widespread benefits, India will need to master the art of managing political differences with China whilst pursuing a wider bilateral engagement encompassing economic and cultural dimensions. Japan is a master of this art. And provided the border remains peaceful, does it matter if the Sino-Indian boundary settlement takes another decade? But economic engagement with China—and the ‘vikas’ that comes with it—can ill afford a delay.
Viewed from China’s perspective, India is an appealing investment destination. When goods and service tax (GST) comes into force, India will present itself to the world as a unified and practically seamless market of huge proportions. Given favourable demographics and good management, this market can grow annually at rates from seven to nine per cent for many years. India’s risk profile is also attractive, with a stable polity, reasonable regulatory and financial systems, and a reliable—if tardy—legal process. Its infrastructure may be under stress, but this very fact makes India a prime target for Chinese investment. And China’s experience and efficiency in the infrastructure realm make its investments particularly appropriate for Indian conditions.
Of course, India is culturally complex and not an easy place to do business. But the Chinese are used to difficult conditions and are not particularly fazed by hardships that might deter others. Chinese managers generally live quietly and modestly in foreign destinations and do not demand the cosseted lifestyles insisted upon by Western expatriates. Like their counterparts from Korea and Japan, Chinese managers are quite willing to get on to the factory floor or coalface, and put their shoulders to the wheel along with other employees.
All investors, however, need a conducive environment to conduct their business. This is not limited to tax concessions or profit repatriation or even to “the ease of doing business”. Investors have human feelings and like to feel welcome in their host country, and so do their skilled personnel, who execute the projects. Despite our political problems with China’s government, we should ensure that Chinese people—whether investors, tourists, academics, students or employees—are offered the same level playing field as other foreigners. Here, we can emulate Sino-Japanese relations. Despite a serious maritime dispute and historical grievances, Japan and China have thriving and reciprocal tourism trade, student exchange and business relations.
Another plus for India is its facility with the English language. Allied to this facility with English is India’s higher education network. Labelling the Indian university system an asset might be considered premature, considering how it is overburdened and underfunded. But its sheer size and scale is vast, and its potential even bigger. Yet, the exposure of our educational system to foreign students and faculty is pathetically small. But those students from abroad, who have qualified as doctors or engineers from India have a lifelong memory of the country. This is a “soft power” that India had in abundance in historical times, when Nalanda, Takshashila and Vikramashila flourished as great universities. India welcomed students who came by sea and by land, to learn from the masters in medicine, mathematics, logic and philosophy. We must revive this great tradition and open our doors wider to foreign students. Nothing builds friendship better than an education undertaken at an impressionable age in a foreign land.
Another strong weapon in our armoury is India’s prowess in management skills. Today, we see several Indians (amongst very few non-Westerners) as CEOs of multinational companies. Recently, China’s Global Times admitted the country’s failure to harness Indian management and information technology talent in the course of its development journey. But what if we can now put together Chinese capital and Indian management? We could then create powerful world-class multinationals bringing new perspectives to corporate performance: India and China are both populous and afflicted with serious pollution problems, so perhaps these companies would prioritise human, social and environmental consequences along with profitability. The New (BRICS) Development Bank may be a harbinger of this new breed.
Once we remove our self-imposed conception of India-China relations as a uni-dimensional win-lose game, the imagination can take flight. We can cite different arenas where contestation, competition, collaboration and cooperation can all be at work, sometimes in the same place and at the same time. Non-state actors such as companies, sportspersons or scientists, do it all the time. Our companies could compete, but also form joint ventures. Neighbouring countries could see Sino-Indian diplomatic contests on their soil but also host their collaborative development projects. Our youth could compete in the Olympics but also explore the oceans and deserts together on study missions. China and India share huge problems like desertification, water scarcity, epidemic disease and housing shortages, to name a few. Collaboration in research and development could redirect energy and resources into these areas and improve the lives of 2.5 billion people collectively in the two nations.
It is not difficult to set up the mechanisms to make these ideas operational. But the real change is always within us—in our mindsets. Are we bold enough? Is this vision of Sino-Indian relations a utopian dream? The same could be said in 1945 about Franco-German cooperation after three wars within a hundred years. We might well cite Goethe, who said, “Whatever you can do, or dream you can, begin it. Boldness has genius, power and magic in it”. We would do well to begin it now.
Mr Ravi Bhoothalingam is currently Founder and Chairman of Manas Advisory, a Consultancy practice focusing on Leadership Coaching as well as on business and cultural relations with China, Mongolia and Myanmar. He is an Honorary Fellow at the Institute of Chinese Studies, Delhi. This article was first published in two parts in Business Standard, May 1 and May2, 2017.