India and China: Conflict, Competition, and Cooperation in the Age of Globalization
It is time for India and China to move beyond a history of conflicts and start cooperating politically, economically and technologically for mutual benefits, writes Dr Aqueil Ahmad.
21st Feb 08 - Dr. Aqueil Ahmad ~ STWR
India and China are two of the world’s most ancient civilizations. For centuries they shared advanced ideas, inventions, religious and philosophical traditions. But their economies and societies stagnated during the colonial period. In the post-colonial era mutual relations suffered a setback due to political and boundary disputes. In contemporary times they have reemerged as leading techno-economic nations. It is high time for them to move beyond conflicts and start cooperating politically, economically, and technologically for mutual benefits.
Recent developments and exchanges indicate that the ball is already rolling in that direction. Globalization for common good requires coming together rather than falling apart, sharing resources and assets rather than wasting them in endless conflicts. In the context of currently shifting global political and economic power, no two nations are better equipped than India and China to show the world how the common concerns of humanity can be addressed through mutual respect, friendship, healthy competition, and sharing of resources.
Background
India and China are two of the world’s most ancient surviving civilizations. The Chinese built the 4000-mile Great Wall some 2000 years ago, about the time of the birth of Jesus Christ. As an awesome marvel of engineering, most of the wall still stands intact, the only man-made object visible from the outer space. They invented bureaucracy even earlier, thousands of years before Max Weber brought it eloquently to the attention of the western world (Gerth and Mills, 1958). There is not a single country anywhere that bureaucracies do not govern, manage or mismanage, corrupt and plunder, redeem or reform. The Terracotta Army built by Emperor Qin in the 3rd century BC is in almost perfect state of preservation to this day. Some of the greatest inventions that we live by even today came from China, including the gun powder – the most infamous of them all, the paper, paper money, printing, viaducts, dams, clocks, the compass, astronomical observatories, and countless other inventions (Needham, 1954).
As for India, R. K. Narayan, the famous Indian novelist tells the interesting story of his meeting with British philosopher and iconoclast, Sir Bertrand Russell. While extolling the contributions of ancient Chinese thinkers, Russell said to Narayan, “but you Indians created nothing.” Narayan vigorously protested this insulting remark. But Sir Russell kept on repeating, “You Indians created nothing, nothing, nothing.” Exasperated, Narayan got up and was about to walk out when Russell drew him near, looked him in the eye and said, “You Indians gave us the zero, which stands as the greatest contribution to the development of mathematics, and consequently, that of modern science.” Thereupon they embraced each other with delightful twinkle in their eyes.
Indian contributions to algebra, textile, chemistry, medicine, metallurgy, and astronomy in the Ancient and Medieval periods are legion. Sophisticated agricultural practices, architecture, and sewage systems were developed by the engineers in the Indus Valley civilizations of Harrappa and Mohanjadaro (Rahman, 1984; Habib, 1988). The wisdom of the Buddha flowed from India to China, while Confucius’ precepts of compassion, humility, and right conduct by merciful rulers influenced the behavior of emperor Ashoka in the 3 rd century B.C. who inscribed on his commemorative pillars, Satya amar jayte (Truth alone shall triumph).
India and China, along with the rest of the non-western world, lost their edge somewhere during the 16th and 17th centuries when the center of scientific and technological activity shifted to Europe, and later to North America for a set of complex cultural, political, and economic reasons (Needham, 1986). Contacts between these two great civilizations almost ceased during the colonial period because the new rulers of the world did not encourage such contacts. When the contacts were revived in more recent times between a democratic IndiaChina, they turned into conflict and hostility over rival territorial claims in the Himalayan region, the Chinese annexation of Tibet, and the Exile of Dalai Lama into (Dharamsala) India .
Recent Development History
India became a free country through peaceful transition of sovereignty from Britain in 1947. China had a proletarian revolution in 1949 led by Mao Zedong. Both democratic India and Communist China embarked upon ambitious science, technology, and economic development programs through centralized planning. Both emphasized self-reliance through local initiatives, restricting the flow of foreign capital and technology for nearly three decades. During this time, the Peoples Republic of China (PRC) controlled its economy and protected it from outside influences far more than did India. For at least 10-15 years since the revolution in 1949, the only source of foreign capital and technology for China was its ideological partner, the Soviet Union. That relationship began to crack in 1962 because of the USSR’s reluctance to transfer nuclear technology to the Peoples Republic. China continued its isolation and suffered serious stagnation for 20 or so more years, until after Mao’s death in 1976 (Ahmad, 1991).
During this period India also strictly regulated its economy, allowing only partial and highly restricted entry of foreign capital and technology. The Indian economy began to open its door a bit more widely by the middle of the 1980s, at about the same time as did China. By this time, the global economy had already taken hold of the national economies in North America, Europe, and the Pacific Rim. Post-Independence era regulations proved a mixed blessing for India. It missed 20 years of the information technology revolution that was sweeping the world and driving the global economy – remember how the IBM and Coca-Cola were kicked out of India in the middle of 1970s. The private sector stagnated under those regulations. The protected government sector thrived despite its magnificent mismanagement. India’s industrial development suffered. While these negative trends were the legacy of regulations, government policy of self-reliance helped built robust networks of techno-economic institutions and individuals that were ready to march forward when the global economy did finally reach India. Through regulations India was also able to protect its local industries and markets from unbridled speculation and exploitation by multinational corporations (Ahmad, 1998). Let me return to China for a minute.
Deng Xiaoping took command of China in 1979, three years after Mao’s death. With a massive shift of public policy, Deng opened the Chinese economy to foreign capital, technology, and competition. The scene that I witnessed in China when I went there for the first time in 1980 was a totally different scene than what is going on there today. Despite the open door policy, economic modernization remained laggard during the entire decade of the 1980s. Things began to change rapidly in the next decade. Since then, the Chinese economy has been growing at about 9-10% per year, surpassing any other country for a sustained growth at such a high rate. In terms of GDP per capita, modern China is the world’s 4th largest economy, and is likely to overtake Japan within the next 5-10 years. It is one of the world’s largest exporters of consumer items through retailers like Wal-Mart, Carrefour, Target, and Tesco. Even garlic in the United States is being imported from China. The American Wal-Mart is probably the biggest buyer of consumer goods made in China. “It bought $19 billion worth of Chinese goods in 2004, amounting to some 15% of China’s total exports to America in that year. (The Economist, September 23rd, 2006, p. 43)
Since 2000, China’s contribution to global GDP growth (in purchasing-power-parity terms) has been bigger than America’s, and more than half as big again as the combined contribution of India, Brazil and Russia, the three next largest emerging economies. China’s massive build-up of American Treasury bonds affects American interest rates and thus Americans’ willingness to spend. Its low-priced manufactures give western consumers more buying power. Its thirst for energy has helped push oil prices to record highs. Its entry to the World Trade Organization in 2001 has speeded up the opening of the world’s biggest market. (“A Survey of China,” The Economist, March 25th, 2006, p. 3)
India has finally left behind its “Hindu growth rate” of 3% to hit an annual growth rate of 8+%. Its technological capability is strong. It is the most preferred destination of IT outsourcing, now moving away from being the world’s call center to being a vital feeder to the global knowledge industry. India’s economic base is vast – 4th largest in the world in terms of purchasing power parity and 12th largest in terms of per capita GDP. It is projected to become one of the five largest economies in the world by 2050 along with China and Brazil. Its markets are huge, with the current consumer class estimated to be around 350 million, about the size of the entire European Community (Bhagwati, 2004).
The combined economies of India and China are already bigger than that of the EU countries put together. At the present rate of growth, the consumer class in the two countries will reach about a billion people within the next decade. But per capita incomes remain low and income disparities are wide in both countries in international comparisons. These developments have far-reaching implications for the two countries themselves and the world at large in the 21st century (Engardio, 2007).
Science, Technology, and Economy in India and China: Conflict, Competition, and/or Cooperation:
The West is becoming alarmist about what is happening in the world’s two most populous nations. In the United States, JapanChina bashing. China’s military machine is one of the most formidable in the world. But it is the Chinese economy that scares both the Indians and the Americans. Many Americans see both India and China stealing American jobs – China stealing manufacturing jobs (textile, shoes, furniture, hand tools, consumer electronics, Christmas ornaments, etc.); while India taking away IT jobs. Some in America have gone to the extent of suggesting that China is about to take over the United States’ economy by next year; as it was used to be said abut Japan in the 1980s and the 1990s. Of course, there is some truth in these morbid fears as Americans look back to the disappearance of their steel and consumer electronics industries through competition with Japan. And now here comes China, closely followed by India. Not to be left behind in IT outsourcing, China is rapidly developing its English and software development skills to compete with India in the American high-tech industry. Listen to what Tony Blair, the ex-British Prime Minister said in a major policy speech in Oxford, England:
But the international competition is intense and getting more so. Chinese R&D has been rising by 20% a year over the past five years. South Korean R&D has increased ten-fold since 1971. Indian R&D is even more astonishing - it has trebled in a decade. Indian engineers are flooding into the world's markets - 350,000 a year, forecast to 1.4m a year by 2015…. It is a warning to us that we have to remain world-leaders and that knowledge also needs to be transferred from the academy to the marketplace. (Speech at the Royal Society in Oxford, Nov. 3, 2006)
There is intense competition globally for R&D dollars. Technology and industry leaders understand that research and innovation are absolutely necessary for maintaining competitive advantage in their core competencies. Finding and hiring qualified scientists and engineers in the western countries is difficult and prohibitively expensive. “The truth is, China and India are increasingly attractive places for companies to do research and development.” (“Can Anyone Steer this Economy,” Cover Story, Business Week, Nov. 20, 2006, p. 62) India has an edge over China in attracting R&D investments due to the availability of more well-trained, English speaking scientists and engineers than in China. A high-tech company can hire an engineer in India at one-fourth the cost for a similar hire in North America, for example. Such investments will be growing rapidly in the coming years in both India and China, perhaps more so in India than in China.
Population in the western countries, excluding the USA, is declining. It is already below replacement levels in Russia and the Scandinavian countries. The current demographic balance between the West and the rest favors the latter: West = 1 billion; rest = 5.5 billion. It will continue to move in this direction. The same is true for the S&T human resources balance of power. Per capita production of scientists and engineers in the West (particularly the US) is still well ahead of the world average; but the total annual production in China and India surpass the US in about 4 to 1 ratio: US = 84,898; India = 103,000; China = 292,569 (India-China combined total = 395,569).
The American magazine Business Week organized its 10th annual CEO Forum in Beijing in early November (1-3) 2006. More than 700 global executives and government officials from many countries participated. Much of the discussion focused on competitiveness in ChinaIndia and the competition between them for world resources and markets. Is China with its command economy or India as world’s largest and most boisterous democracy better poised to utilize foreign domestic investment for sustained social and economic development, was one of the hotly debated topics. The experience so far suggests that without much public debate or dissension about its national plans and priorities, China has done much better than India in that respect. From the Indian point of view, the issue is that the values of individual freedoms, self reliance, and social development must not be sacrificed at the altar of economic development. These are indeed fine values to uphold in a democratic society, but the Indian policy planners need to look hard and fast how much they have or have not achieved by way of all-round social and economic progress and what needs to be done to correct the remaining gaps and imbalances.
The fact is both of these Asian giants have their own strengths and weaknesses, their own unique cultural traditions and political histories. They both are only half way home and a long way to go, as the saying goes, toward becoming advanced industrial societies. They have serious social and environmental problems to encounter – problems of poverty and disparity, the problem of rapidly deteriorating environments due to rapid industrialization, and a host of other problems like rural-urban disparity, and inadequate education, housing, health-care, and employment for their large populations. These are the areas where they can cooperate and learn from each other while they compete for world markets and resources. The CEO Forum in Beijing spent considerable time on the issue of global competition and rivalry between the two Asian superstars.
With the likes of China Mobile (with 300 million subscribers and a $177 billion market capitalization), telecom gear maker Huawei Technologies, and India’s Tata Steel on the prowl for acquisitions overseas, China and India are “reshaping the global economy.” Can these giants get along? Their rivalry is bound to intensify as India moves more into low-wage manufacturing, a Chinese specialty. Both must create 15 million new jobs every year just to keep their young people employed. (“The Dragon’s Way or the Tiger’s?” Business Week, Nov. 20, 2006, p. 55)
Increasing energy use in India and China due to industrialization and rising automobile ownership is also a source of worldwide concern as is the intense competition between them for global energy resources. The issue is how to satisfy their voracious appetite for oil. With 17% of the world’s population, only 0.8% oil reserves, and an economy growing at breakneck speed, China is naturally frantic about meeting its energy needs through imports. It is actively courting African leaders and investing in African development and oil exploration. During a recent (Nov. 3-5, 06) summit of top African leaders in Beijing, the latter were lavishly treated by the Chinese President, Hue JinTao. Despite some setbacks, the Chinese push for African raw materials and markets has been quite successful:
Chinese companies have been sucking up oil from Sudan, cutting down timber in Guinea and mining copper and zinc from the Congo. Beijing recently bought a major stake in South Africa’s Standard Bank to fund infrastructure projects throughout the continent. And the Chinese are far outpacing their Western rivals……Last year’s trade between Africa and China topped $50 billion. By 2010 it’s expected to reach $100 billion. (Newsweek, December 3, 2007, p. 46)
The huge Chinese oil conglomerate, CNOOC, is actively seeking to buy oil companies overseas, including a failed bid to buy American UNOCAL. It has since invested in oil interests in Russia and the Middle East. India is faced with a similar energy crunch having only meager oil resources of its own. It is competing with China for oil in world markets. But that is also an area where the two countries can effectively cooperate. Discussions on these lines have already taken place between CNOOC and India’s Oil and Natural Gas Commission. India’s ex-energy Minister Iyar came up with an interesting idea while discussing cooperative energy exploration and acquisition strategy with his Chinese counterpart sometime ago. He suggested that there should be a Consortium of Oil Importing Countries to negotiate the supply and price of crude oil for the benefit of heavy developing country oil importers. Such cooperative strategies have been mooted from time to time in other areas as well but their implementation remains problematic, perhaps due to unresolved boundary issues and suspicions about their geopolitical intentions.
The history of border disputes between India and China going back to the war of 1962 is well-known. That dispute is yet to be resolved and continues to be a source of friction and mistrust between them. The friction is exacerbated by China’s military and nuclear cooperation with archrival Pakistan. In its economic expansionist mode, China does want to increase its investment in India but feels resistance by the Indian government. It claims double standards by India in the matter of economic cooperation. For examples, the Indian government requires four bureaucratic levels of approval for Chinese FDI instead of only the Reserve Bank of India clearance for others. Prospective Chinese workers in Indian enterprises face similar bureaucratic hassles. One of the cases in point was visa problems faced by 1,800 engineers from the Chinese Petroleum hired by Reliance India to lay a gas pipeline sometimes ago. I wonder why Reliance could not find Indian engineers to do the job; and whether the visas were finally issued.
Despite these problems, cooperative science, technology, and trade have been steadily increasing between the two countries. Late Prime Minister Rajiv Gandhi of India signed an Indo-China inter-governmental science and technology agreement during his visit to Beijing in 1988. This led to a Joint S&T Committee to initiate broad-based cooperative programs. Specific joint projects are mooted at inter-agency levels in such diverse fields as meteorology, ocean science and technology, space science and technology, and biotechnology. As recently as September 2006, India’s Minister for Science and Technology, Kapil Sibal and his Chinese counterpart signed a Memorandum of Understanding (MoU) to further cement S&T cooperation between the two countries as part of the India-China Friendship Year 2006.
India-China trade is currently running at $20 billion from only $1.8 billion in 1989-90. A substantial share of India’s mobile-phone market is run by Hutchison Telecommunications of China. Huawei Technologies has a software center in Bangalore that employs 1,150 Indian and 50 Chinese engineers. I understand that most of the Diwali lanterns for 2006 celebrations came from China. The Chinese computer giant Lenovo has recently established its global marketing hub in Bangalore to be run and managed by Indians. China imports iron ore and other minerals from India. From the Indian side, an estimated 150 companies are currently doing business in China, although India claims these business ventures are with other foreign firms operating in China, not with the Chinese companies. (The Economist, October 28th, 2006, pp. 50-51; and Nov. 18th, 2006, pp.43-44) The trend, nonetheless, is definitely pointing in the direction of increasing bilateral trade and technology agreements.
Concluding Remarks
This brief discussion of India and China in the context of globalization suggests several things. Nobel Laureate Amartya Sen, reports his teacher Joan Robinson at Cambridge University once telling him, “The frustrating thing about India is that whatever you can rightly say about it, the opposite is also true.” Interestingly enough, you can say exactly the same thing about China. It combines capitalism with communism, poverty and disparity with fast economic growth, impressive industrial development with neglect of its environment, and a massive rural-urban divide. These contradictions exist in India as well, with the exception of the first one. But they are due largely to long-standing historical and social factors, not exclusively to globalization, as some tend to suggest.
Theoretically, globalization is about worldwide systemic interdependence, integration, mobilization, and redistribution of global resources that should lead to partial if not complete economic parity and equilibrium among the system members in due course of time. Generally speaking, all modern economies today are global in character. As Robert Reich (1991) said in his well-known book, The Work of Nations, there are no truly national economies any more. India and China are no exceptions. Economic globalization is driving and shaping national politics, economies, histories, social structures, environments, and international relations, and connecting them through interdependent networks as never before. A global power shift is indeed occurring that is still unseen and unrecognized by many among us. There are two major implications of this power shift. Ideology and politics are becoming the handmaidens of global economic forces, rather than the other way round, as the case used to be. The other development is unraveling of erstwhile hegemonies. The United States of America and Europe are no longer in the drivers’ seats. The balance of power is shifting from West to East, from North to South (Meredith, 2007). The recent demographic, economic, and political developments in China, India, Russia, Latin America, and the Middle East (barring some temporary setbacks here and there) all point in that direction (see endnotes). This shifting landscape strongly suggests that this century is poised to be an Asian century. And India and China, along with the Pacific Rim countries and Russia with her enormous natural resources, will be its biggest winners – unless the trend is reversed by unimaginative political and economic leadership in these countries, which is unlikely.
As mentioned above, perhaps the strongest factor causing this power shift is the worldwide distribution of qualified manpower that overwhelmingly favors both China and India. For example, there is intense competition globally for R&D dollars. China and India are increasingly attractive places for multinational corporations to conduct their R&D operations. India has an edge over China in R&D capacity due to the availability of more well-trained, English speaking scientists and engineers than in China. With increasing difficulty to recruit qualified scientists and engineers at affordable prices in the West, or at any price, for that matter, joint R&D projects involving Indian, Chinese, and third country scientists should soon be emerging within India, China, and some other more developed developing countries in such fields as biotechnology, alternative energy systems, pharmaceuticals, healthcare, environmental technologies, and perhaps even in space explorations. A recent report from Control Engineering, a free-lance think-tank, observes:
The vast majority of U.S. manufacturers are experiencing a serious shortage of qualified employees, which in turn is causing significant impact on business and the ability of the country as a whole to compete in a global economy. This is the key finding of the "2005 Skills Gap Survey"…. by the National Association of Manufacturers…. The problem for U.S.India, China, and Russia, are graduating millions more students each year…than the United States. These…individuals are actively participating in the development of innovative new products without regard for historical barriers, such as geography— thanks to technologies such as broadband, inexpensive Internet-ready laptops, and collaborative tools. With such international talent readily available and significant shortages existing at home, it is clear that the future of U.S. manufacturers is that this challenge is not universal. Countries with rich educational heritages, such as manufacturing may now be at stake, the report suggests. Details behind the talent shortage reveal a stark reality. More than 80% of respondents indicated that they are experiencing a shortage of qualified workers overall—with 13% reporting severe shortages.
The surfeit of qualified manpower out of China and India is yet to be fully and gainfully employed in the global production of knowledge, goods, and public services. In addition to being the knowledge factory for the world, these large numbers, if tapped properly, can be a source of enormous mutual benefit to the two countries themselves in their quest for excellence and a rightful place in the community of nations.
In 2002 (precisely 40 years after the{1962}war, the then Chinese premier, Zhu Rongji, visited India and told his hosts: “You are the first in software, and we are the first in hardware. When we put these two together, we can become the world’s number one” (The Economist, The World in 2005, p. 49)
This forecast may not be too far off to come true.
(Courtesy of Globalization, second special issue, December 2007)
Endnotes
Emergence of leaders like Hugo Chavez (Venezuela), Fidel Castro (Cuba), Lula de Sylva (Brazil), and Evo Morales (Bolivia) clearly indicate declining American hegemony in that part of the world. Their more independent (of America) and socialist leaning economic and foreign policies are redefining the nature of global economy in South and Central America.
The nuclear postures of North Korea and Iran indicate the declining influence of the European Union, NATO, and the United States on world politics. These postures are buffeted by the support of new international power brokers, notably China and Russia, both members of the UN Security Council.
The enormous economic power of the Middle East and Russia with their oil is going to play a significant role in defining world politics. Saudi Arabia, Iran, and the conglomerate of small Gulf States are bursting with economic activity. So is the Russian Federation.
American and British policy failures in Iraq and Afghanistan clearly indicate the impotence of these two largest military-industrial complexes. Such failures over a span of six years have turned them into paper tigers by their own counter-intuitive policies in world politics.
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