China and India possess one of the world’s most important yet malnourished bilateral relationships. While cross-border trade between the countries doubled nearly 20 times over the last decade to reach US$73.9 billion last year, exports to India represent just a fraction of China’s global total.
Meanwhile, cross-border investment between China and India is virtually negligible. Only 0.05% of China’s outbound investment goes to India, and India’s investment in China is even smaller. National security concerns are often grounds for rejection, as was the case for Chinese telecom firms Huawei and ZTE. “We are still suspicious of Chinese investment in India,” Indian environmental minister noted in 2010.
Add to this tension a long-simmering border dispute, which flared into a one-month war in 1962 over their shared Himalayan claims. India and China continue to have intermittent spats over land, and both are building up military forces along the border.
“I think the boundary issue is not going to be solved soon. That’s my personal view,” said Zhao Gancheng, director of South Asia Studies at the Shanghai Institute for International Studies. “On the other hand, to keep peace in the area is a common political view and the two governments are determined not to let the boundary issues affect China-India relations as a whole.”
Feed the beast
There are strong reasons to strengthen India and China’s anemic relationship. The countries together have roughly 40% of the global population, giving their cooperation a huge potential to shape the future of global trade. Closer ties will also be instrumental in helping to ensure regional stability in South Asia, especially as it pertains to Pakistan.
“I think there’s a high probability that over the next three four decades the India-China relationship will be very important, possibility as important as the US-China relationship today,” said Pieter Bottelier, a professor of China studies at Johns Hopkins’ School of Advanced International Studies.
Chinese officials have taken some steps toward improving relations with India. In January, for example, China’s ambassador to India, Zhang Yan, urged his countrymen to put aside “historical issues” and cooperate in expanding bilateral trade to US$100 billion by 2015.
But some Indians continue to be deeply suspicious of China. Critics have plenty of fodder: India’s growing trade deficit with China, border disputes in the Himalayas and conflicts over the Brahmaputra River. China is also purportedly the major obstacle to India gaining a permanent seat on the UN Security Council.
Meanwhile, India rarely makes headlines in Chinese media. Many Chinese still frown upon the term “Chindia,” for example, arguing that India’s perennial poverty problems and inefficient governance render it a poor choice for China’s partnership.
Unfortunately for both Beijing and New Delhi, these unflattering perceptions will be hard to defeat.