China-India Brief #94

china-india-brief-94


Published Twice a Month
May 16 – 30, 2017

Centre on Asia and Globalisation
Lee Kuan Yew School of Public Policy


Guest Column

China and India: Twin Engines for Regional and Global Economic Growth

by Bian Xiaochun

China’s GDP reached 74.4 trillion yuan, representing 6.7% growth in 2016. More than 30% of global growth was contributed by China. Meanwhile, China continues maintaining its strong competitiveness in recent years. According to the Asian Competitiveness Annual Report 2017 released during the annual meeting of BOAO Forum for Asia last month, China ranked 9th in the comprehensive competitiveness rankings for the fourth consecutive year. Continued advances were made in reforms and opening up. Economic structural adjustment was stepped up too. In particular, initial success was achieved in supply-side structural reform. Both high-tech industries and equipment manufacturing grew rapidly. At the same time, the opening up was also deepening; rapid progress has been made in pursuing the Belt and Road Initiative (BRI). Further progress was made in pursuing the innovation-driven development strategy. Total R&D expenditure represented 2.1% of GDP. Consumption became the main driver of economic growth. The value created by the service sector rose to 51.6% of GDP.

India has surpassed the UK in 2016 and became the fifth largest economy after the US, China, Japan and Germany. The Indian media announced this with a pride: “This is the first time for India to surpass its former suzerain during the colonial period, the United Kingdom, in the last 150 years.” In March 29, 2017, the Indian parliament passed the Goods and Services Tax Bill (GST), after completing the complex legislative work. This was a landmark decision which will provide unified tax laws all over India and help build a unified domestic market. Not only does this mean that India could optimize and simplify its complicated tax system, but more important, it is the first time India is taking a big step on the road of economic unity of its own free will rather than under any external pressure.

China and India are two of the fastest growing economies around the world. Both of them are expected to be leaders in the field of sustainable economic growth in the Asia-Pacific region and globally. Emerging Market economies (EMs) are still a vital force in promoting the growth of the world economy. The economic position of the EMs is being enhanced gradually. Meanwhile, they further improved their voice in global governance. Contributions made by emerging market and developing countries to global economic growth rate has reached 80% after the global financial crisis. The overall economic growth rate of the E11[1], which contains 11 major emerging economies, was 4.4% in 2016. In contrast, the world economic growth rate was 3.1% during the same period, and the growth rate of EU and G7 was 1.9% and 1.4% respectively, which is far lower than that of the E11.

In recent years, suspicion of and opposition to globalization has increased. The trend of anti-globalization is rising, and globalization has suffered setbacks. But the voices in support of globalization are still very strong in both India and China. Both countries should therefore play a leading role actively in promoting the deepening of economic integration. Asian economic integration should be boosted by countries within rather than outside the region. As the two biggest developing countries in the world, mutually-beneficial and win-win cooperation between China and India will make these two countries twin engines for regional and global economic growth. The deepening of comprehensive economic cooperation between China and India is of great significance not only to maintain stable bilateral relations, but also to promote regional economic integration. 

In August 19, 2016, the 8th China-India high-level Financial and Economic Dialogue was held in Beijing. Both sides agreed to strengthen communication and coordination in the fields of macroeconomic policy, the structural reform process, major international economic and financial issues, and bilateral financial cooperation. Only two months later, the 4th China-India Strategic Economic Dialogue was held in New Delhi, on October 7, 2016. Both countries reaffirmed their commitment to continue strengthening cooperation in policy coordination, infrastructure, high technology, energy saving and environmental protection, energy production, and some other fields.

A report released by the Department of Industrial Policy and Promotion (DIPP) and Ministry of Commerce and Industry showed that accumulative FDI towards India was $265.2 billion from 2000 to September 2015. Investment from China into India amounted to $1.25 billion, ranked 17th in the list of foreign investors and accounted for only 0.47% of total FDI in India. Due to the joint efforts of both sides, China’s investment grew to $1.063 billion in 2016, which is more than 6 times the amount it invested in 2015. As a result, China’s ODI towards India has accumulated to more than $4.8 billion before the end of 2016. Thus, India has become a popular choice for Chinese enterprises to invest.

China and India, as the world’s 2nd and 5th largest economies, have great potential and broad prospects for bilateral cooperation. Both sides should establish a future-oriented economic cooperation relationship, one with Chinese and Indian characteristics. In the case of the “sharing economy” (which refers to the volume of online transactions), China and India have a similar situation. In recent years, China’s sharing economy has been developing very fast and has formed a market of $62.5 billion. It has maintained a high growth rate of 54% per year and is expected to reach $230 billion in 2018. The total size of the sharing economy will be approximately $520 billion globally at that time and China’s proportion of it will increase from 33% to 44%.[2] Besides, the project of smart city development proposed by the Government of India is being implemented in good order and seems well arranged. The bio-pharmaceutical, information technology and related service outsourcing industry of India are very competitive, all of which could be the highlight of future cooperation between China and India.


[1] E11 refers to 11 major emerging market economies in the G20 Group, namely, Argentina, Brazil, China, India, Indonesia, South Korea, Mexico, Russia, Saudi Arabia, South Africa and Turkey.

[2] Roland Begg strategy consulting firms, Travel market analysis and forecast report , March 2017


 

Bian Xiaochun is Executive Deputy Director, Institute of World Development, Development Research Center, the State Council, People’s Republic of China.

 

The views expressed in the article(s) are solely those of the author and do not necessarily reflect the position or policy of the Lee Kuan Yew School of Public Policy or the National University of Singapore.


 

News Reports

Bilateral relations

China challenges India to explain ‘meaningful dialogue’ on Belt and Road Initiative
Hindustan Times, May 16
China on Tuesday challenged India to clarify its call for a “meaningful dialogue” on the Belt and Road Initiative (BRI) despite Beijing saying that the China-Pakistan Economic Corridor (CPEC) is an economic project with no implications for the Kashmir issue. China’s foreign ministry also said the “doors” for India to join the BRI would always be open. Explaining the reasons behind India’s decision to skip the two-day Belt and Road Forum (BRF) that ended in Beijing on Monday, external affairs ministry spokesperson Gopal Baglay had said: “Guided by our principled position on the matter, we have been urging China to engage in a meaningful dialogue on its connectivity initiative…We are awaiting a response from the Chinese side.”

India welcome to join BRI: China
The Hindu, May 16
Chinese Foreign Ministry spokesperson Hua Chunying said in her daily press briefing: “China has welcomed the participation of India in the Belt and Road project. Our answer is clear. Doors will always remain open. We will always welcome the participation from the Indian side.” However, Ms. Hua took exception to the statement made on Saturday by the spokesperson of India’s Ministry of External Affairs, seeking a “meaningful dialogue” with Beijing on the BRI. “Over the past four years since the project was initiated, we have been holding the principle of extensive consultation, joint contribution and shared benefits,” she observed.

China won’t support India’s NSG bid without ‘two-step approach’
Hindustan Times, May 23
China indicated on Monday it will not support India’s entry to the Nuclear Suppliers Group (NSG) at the elite bloc’s plenary meeting in June unless a universal formula is evolved for accepting applications from countries that have not signed the Non-Proliferation Treaty (NPT). The inclusion of non-NPT countries, such as India and Pakistan, in the NSG should follow a two-step approach – evolving a universal formula for all such nations and then taking up each country‘s application, China said. “China’s position on the non-NPT members’ participation in the NSG has not changed,” foreign ministry spokesperson Hua Chunying told a regular news briefing.

 

News Reports

China and India in the Regions

India acts on China ‘threat’ with joint drills: analysts
Global Times, May 21
India’s recent joint naval military drills with Singapore in the South China Sea and infrastructure projects with Japan could be New Delhi’s response to China’s military streamlining and its burgeoning Belt and Road initiative, Chinese analysts said on Sunday. India and Singapore conducted a major seven-day naval exercise, code-named “SIMBEX” (Singapore-India Maritime Bilateral Exercise), where four Indian Navy warships and long range anti-submarine aircraft P-81 took part, to enhance interoperability between the two navies, Press Trust of India reported on Friday. “India had promised not to take sides and provoke China on the South China Sea disputes. But the country is reneging on its promise by conducting such major drills in the area,” Song Zhongping, a military expert who used to serve in the PLA Rocket Force, told the Global Times on Sunday.

India reneging on promise by conducting naval drills in South China Sea: China
The Economic Times, May 22
India which is conducting major naval drills with Singapore in the disputed South China Sea has “reneged” on its promise not to provoke China on the sensitive issue, a Chinese military expert said today. Judging from the deployment of anti-submarine weapons, the purpose of the drills is clearly aimed at impacting China’s submarines in the India Ocean, which India regards as a “threat” to its influence in the area, Song Zhongping, a military expert who used to serve in the People’s Liberation Army Rocket Force was quoted as saying by the state-run Global Times. “India had promised not to take sides and provoke China on the South China Sea disputes. But the country is reneging on its promise by conducting such major drills in the area,” Song said.

 

News Reports

Trade and Economy

Chinese investors betting on South Asian country’s real estate market, despite challenges
Global Times, May 21
After her first few business trips to India, a Tianjin-based businesswoman surnamed Liu recognized something familiar in the South Asian country. “It’s like China in the 1980s,” said Liu, who only gave her surname. “There are a lot of opportunities.” Liu, who works in logistics, sees a place for her business in India, but she has also identified a more enticing opportunity.  “The Indian real estate market is alluring, and I’m confident in its future,” she told the Global Times Thursday. “The property market has great prospects due to the country’s rapidly growing population and the soaring demand for land.” She is hardly the only Chinese investor who sees the potential of the Indian real estate market. Wu Shunhuang, CEO of Inworks, a Hong Kong-based firm that provides shared workspaces, is also optimistic about India’s real estate market.

Indian drama “Dangal” continues to lead Chinese box office
Global Times, May 24
The Indian drama “Dangal” held the top spot for a second week in the Chinese film market, earning 358 million yuan (51.97 million USdollars) in the week ending May 21. The film has earned more than 818 million yuan since its release on May 5, becoming the highest-grossing Indian movie in China. Disney and Marvel’s “Guardians of The Galaxy Vol. 2” landed in second place for the week, taking in 96 million yuan.

 

News Reports

Energy and Environment

China, India dominate coal ownership as some shun climate risks: report
Reuters, May 16
Investors in China and India increasingly dominate ownership of coal reserves amid campaigns for divestment in many rich nations to limit the risks from climate change, a study showed on Tuesday. The report, by British-based research group InfluenceMap, identified thousands of shareholders in 117 listed companies producing 3 billion tons a year of thermal coal with 150 billion tons of reserves. It said that ownership of thermal coal, used in power plants, was dominated by “strategic investors in China and India (governments, individuals, power companies, special purpose companies).” China and India say they will need coal for decades to bolster economic growth even as they try to curb emissions blamed for warming the planet.

China, India on course to surpass climate pledges, making up for U.S. climate action
National Geographic, May 18
Slowing coal use in China and India has put the two most populous countries on a trajectory to beat their carbon emissions goals under the Paris Agreement, making up for rollbacks in U.S. climate action under the Trump administration, according to a new analysis released by Climate Action Tracker (CAT) at intersessional climate talks concluding today in Bonn, Germany. China, which had pledged to peak its carbon emissions no later than 2030 and to sharply reduce them thereafter, has seen a coal consumption decrease over three consecutive years (2013 to 2016), a trend expected to continue. India, which had pledged to slow its emissions growth by expanding its renewables sector, has stated that its planned coal-fired power plants may not be needed. If it fully implements recently announced policies, its emissions growth would significantly slow over the next decade.

 


Analyses

Sino-Indian relations likely to remain complicated
Global Times, May 16
The 8th Heads of Mission Conference was held recently in New Delhi. As the conference lasted for four days and 120 Indian ambassadors and senior diplomats all over the world were called back, it attracted a lot of attention. The meeting is not only a meaningful platform for communication between decision-makers at home and “commanders” at the diplomatic battlefront, but also an important regular meeting to study and deliberate on national foreign policy, as well as being a significant window for the international community to observe India’s diplomacy. Since Indian Prime Minister Narendra Modi came to power, India has won the favor of some Western countries, partly by virtue of its unique geographical position, huge market and strong economic momentum. In this context, its international and regional influence has increased significantly.

India’s boycott of One Belt, One Road summit in China was self-defeating
Scroll, May 17
Last week, China hosted a massive summit to spur one of the most ambitious global trade infrastructure initiatives in history. As leaders from across Asia, Africa, Europe and Latin America gathered in Beijing to work on details of the One Belt, One Road plan, India chose to take its bat and ball and go home. Unfortunately for us, nobody needed India’s bat and ball. Our absence was barely noticed, and our rejection of the initiative will hurt only ourselves. China’s President Xi Jinping used the summit to claim moral and practical leadership of global free trade for the second time in five months. The first was in Davos last winter, soon after the United States’ counter to China, the Trans-Pacific Partnership, had been capsized by the populist tidal wave that brought Donald Trump to power.

India should reassess B&R from a new angle
Global Times, May 17
New Delhi recently refused to join Beijing’s Belt and Road initiative citing sovereignty concerns as the China-Pakistan Economic Corridor (CPEC) will run through Pakistan-controlled Kashmir, a region that New Delhi believes belongs to it. Therefore, India worries the CPEC project will infringe upon its sovereignty. Border disputes, including those between China and India, are often the result of unreasonable colonial orders and many remain unsettled after decades. Military clashes are frequently seen in Kashmir, causing casualties on both sides. India stresses that problems should be solved in accordance with international norms. This is true. But these conflicts and crises were actually generated under an imposed order, and thus cannot be solved within such a framework. This conundrum shows why the original order cannot be kept and must be readjusted.

India’s ‘new Silk Road’ snub highlights gulf with China
Reuters, May 20
China invited Indian Prime Minister Narendra Modi and six cabinet colleagues to its “new Silk Road” summit this month, even offering to rename a flagship Pakistani project running through disputed territory to persuade them to attend, a top official in Modi’s ruling group and diplomats said. But New Delhi rebuffed Beijing’s diplomatic push, incensed that a key project in its massive initiative to open land and sea corridors linking China with the rest of Asia and beyond runs through Pakistani controlled Kashmir. The failure of China’s efforts to bring India on board, details of which have not been previously reported, shows the depths to which relations between the two countries have fallen over territorial disputes and Beijing’s support of Pakistan.

Xi Jinping’s imperialistic ambitions have beaten Modi’s soft-power diplomacy right to India’s doorstep
Quartz, May 21
At his swearing-in three years ago, Indian prime minister Narendra Modi pulled a coup of sorts by featuring an array of heads of states from South Asian countries, including arch-enemy Pakistan, at an event that rarely has a high-profile foreign contingent. Months later, the Indian prime minister’s bromance with former US president Barack Obama—who even wrote a note in praise of Modi in Time magazine—was the subject of much adulation. In the first two years of his term, Modi travelled to as many as 36 countries—and all India’s neighbours—in an attempt to establish the world’s fastest-growing major economy as a regional soft power.

China and India make big strides on Climate Change
The New York Times, May 22
Until recently, China and India have been cast as obstacles, at the very least reluctant conscripts, in the battle against climate change. That reputation looks very much out-of-date now that both countries have greatly accelerated their investments in cost-effective renewable energy sources — and reduced their reliance on fossil fuels. It’s America — Donald Trump’s America — that now looks like the laggard. According to research released last week at a United Nations climate meeting in Germany, China and India should easily exceed the targets they set for themselves in the 2015 Paris Agreement signed by more than 190 countries. China’s emissions of carbon dioxide appear to have peaked more than 10 years sooner than its government had said they would. And India is now expected to obtain 40 percent of its electricity from non-fossil fuel sources by 2022, eight years ahead of schedule.

 


Books and Journals

Land Acquisition, Rural Protests, and the Local State in China and India
Environment and Planning C: Politics and Space, 2017
As China and India urbanize, land acquisition by state and private actors has become highly contentious in both countries. This article, by Xuefei Ren, compares two large-scale anti-land acquisition protests—the Wukan protest in China’s Guangdong province and the Singur protest in the Indian state of West Bengal—to examine how the subnational state partakes in land acquisition and how rural protesters engage with different levels of the state in their resistance. The comparative analysis finds that the different involvement of the subnational state in land speculation has produced different spatiality and dynamics of protests. In China, rural protesters target the bottom-level authority such as village councils, often taking on a cellular form of mobilization geographically confined to their particular villages. By comparison, in India rural protesters target the regional state governments and they engage in associational forms of mobilization by building ad hoc alliances with political parties and NGOs beyond the affected villages. Although the larger context of political regimes should be taken into account, this article shows that the scales at which the subnational state partakes in land acquisition have largely shaped the spatiality and strategies of rural protests.


Compiled and sent to you by Centre on Asia and Globalisation and
the Lee Kuan Yew School of Public Policy, National University of Singapore