Few eyebrows were raised when Costa Rica announced in early June it would switch diplomatic allegiances from Taipei to Beijing. China is, after all, the rising star in world economics and, potentially, the next superpower.
To a lesser degree, something similar could be said of India.
With an economy growing at around 9% every year and a corporate elite intent on establishing a global footprint, Indians are spreading their influence to boardrooms in Europe and the US. What’s more, India’s long-term potential may be even bigger than China thanks to its robust, democratic and relatively well-governed institutions.
If established precedent holds, economic clout sooner or later translates into global political influence.
"Stronger economic performance is increasing India’s voice," said Dr Amitendu Palit, of the Indian Council for Research on International Economic Relations (ICRIER).
But the considerable hype over the emergence of China and India as global powers may be well out of proportion with reality. One domestic feature common to both India and China is the push-pull inherent in the income disparity between wealthy urbanites and poor farmers. Both recognize that improving the economic fortunes of 1.5 billion that still live in rural villages is a priority that supersedes international politics.
With each country focusing on their own narrow spheres of influence, dabbling in geopolitics has been limited. Of the two, China has been more proactive – playing a key role in regional issues like the nuclear crisis in the Korean peninsula and making friends in Africa and South America – but it has yet to develop a voice loud enough to sway the global agenda.
"Growth and global power may be targets but today [India and China] have to keep their levels of growth just to employ people," said India’s ambassador to China Nirupama Rao.
In the long-term, though, there is little doubt that the countries’ day will come. China and India are already the second and third largest economies in the world. by purchasing power parity. Alongside Russia, their stock markets are the only ones from the developing world to top US$1 trillion in total capitalization.
Quite simply, they are the lynchpins of the BRIC economies (Brazil, Russia, India and China), which have been touted as the next economic power block.
During the next century, the China-India relationship has the potential to redraw the geopolitical map. This invites questions as to what the nature of the relationship will be. Will China and India build on the world economy or drain it? How will they relate to each other? Will they compete or collaborate?
"There are strong chances that India and China will collaborate. This is important for maintaining a strategic equilibrium in Asia. They are already taking common stances on major issues like global warming and climate change," said Palit.
"India is following a policy of constructive engagement… Economic diplomacy is a key tenet of its foreign policy."
If the two countries have found some common ground, their interests internationally may differ from those of established powers, particularly the US.
An increasingly assertive China stepping out onto the global arena could create new priorities, said Harry Harding, a renowned China scholar. The US may hold terrorism as the focus of its foreign policy agenda, but China is far more interested in development.
It is possible that US attitudes to international security will send more countries searching for a new leader.
The relationship between China and the US is complicated. Washington is openly suspicious of China but the Americans have benefited from its economic rise.
At a time when a lot of countries are losing their faith in the leadership of the US, Chinese people are more positive about it than most, Harding told an audience of students in Hong Kong.
And there is another interesting dichotomy in policy terms.
"China talks liberally globally but not domestically. The US talks liberally domestically but not globally," said Harding. "We are seeing the implosion of American soft power as China rises."
At a political level, however, the US is closer with India than it is with China. Many Indian families have relatives in the US, know someone who has moved there or want to move there themselves.
"India and the US are closely linked economically and even people to people," said Prakash Satya Metaparti, a professor with Hong Kong University’s China-India Project at Hong Kong University.
A highly publicized nuclear deal between the US and India first announced at the end of 2006 should have been an example of the close ties between the two countries but, as the negotiations progressed and the months passed, the deal became more uncertain. By late May, it appeared stalled.
"There is strong opposition in India to accepting more safeguards and conditions," said Metaparti. "At the same time, India is also keen to get this thing going… They want this agreement to come into place and maybe they’ll find a way."
The issues surrounding the nuclear deal are indicative of India’s foreign policy – New Delhi is fiercely independent but it is trying to balance this with national strategic needs.
With China also juggling a set of often conflicting diplomatic priorities, it is unsurprising that a degree of rivalry has sprung up between the two.
China has tried to befriend countries like Myanmar and Bangladesh, while Pakistan has long been an ally, which could suggest that it is trying to circle India. Furthermore, when India launched a bid for a permanent seat on the Security Council, China was the first to speak out in opposition, even if it were ultimately US concerns that ended the bid.
But the main differences are political rather than military, though.
Remnants still remain of old mistrusts that led to a short war in 1962 over a tract of disputed territory. Both countries have agreed to resolve their differences through negotiation but tensions spike from time to time. For example, in mid-May China denied a visa to an Indian civil servant from one of the disputed areas and an entire Indian delegation cancelled a scheduled training trip.
"It’s not an important issue. Both countries have tried to ignore it," said Metaparti. "There is no single issue that is hindering bilateral relationships but it’s all these issues put together."
Pressing the flesh
In the last year there have been at least two visits by heads of state of India or China and a further three by heads of government. The countries have also agreed to establish a strategic and cooperative partnership and are examining the possibility of a regional trade agreement.
There are already 45 Chinese companies operating in India with US$6 billion in ongoing projects.
"The rapidly growing economic and commercial relations between India and China provide a sense of satisfaction," said India’s ambassador to China, Nirupama Rao. "Both countries have decided to take relations forward and build on mutually beneficial ties even while addressing the differences."
China’s growing ties with India are part of wider diplomatic efforts on both a global and a regional level.
It has worked hard to develop relations with countries in Latin America and Africa, regions the US has neglected as a side-effect of its war on terror. Last year, the China-Africa Cooperation Forum saw Beijing play host to the largest gathering of African leaders outside the continent; this year, Shanghai was the venue for only the second meeting of the African Development Bank to be held outside of Africa.
It has also spared little effort or money courting Southeast Asian countries in an effort to displace the US as the preeminent regional power, getting involved in myriad regional organizations to balance out Western-led groups like NATO.
Stuck in the middle
India’s foreign policy is not nearly as sophisticated. It shares democracy with the Western powers yet domestic hurdles keep it separate from them; its level of development is comparable to many Asian countries, yet a history of protectionism has created barriers. For about 15 years, India has been trying to address this.
"India’s Look East policy… renews our time-tested linkages with the ASEAN [Association of Southeast Asian Nations] region," said Rao. "India has been a keen participant in the East Asia Summits. We also favor the goal of an Asian Economic Community."
The transition from agrarian societies into industrial and information-based economies poses significant challenges to both India and China and it is keeping them from fulfilling their potential on the international stage.
However, the long-term upward trajectory of their growth is something to which the West must respond.
"India and China are trying to grow, the US and Europe are trying to preserve," said Kaustav Mukherjee, a New Delhi-based vice-president at AT Kearney.