India and China: Friend, Enemy, Rival, Investor
DEALINGS between India and China are stunted in many ways. Rich cultural links once existed long ago, from the study of eclipses to Buddhist chanting, but hardly anyone remembers that today, laments Amartya Sen, a Nobel-prize-winning economist. After a love-in during the 1950s, China thumped India in a border war in 1962, and the two have continued to growl over their high-altitude frontier since. Indians envy China’s economic rise, but console themselves by pointing out that it is no democracy. Aside from stiff displays of fraternity at summits, most recently the G20 bash in Mexico on June 18th-19th, China seems not to think much about India at all. Investment flows are negligible. There are still no direct flights between Beijing or Shanghai and Mumbai, India’s commercial hub.
And yet a huge shift has taken place in the make-up of Indian trade. When India began to liberalise its economy in 1991, the West still dominated the world economy, and it was to the West that India turned for trade. China’s rise has now changed everything—for India, too. China is now its third-largest trading partner in goods, and the biggest if you include Hong Kong. For China’s East Asian neighbours a dominant trade with China is a given, but Indians are still trying to digest the development.
Rising trade with China has been good for India. It mainly imports Chinese capital goods, with firms benefiting from cheap and decent gear. The giant Reliance Group has bought kit for power stations and telecoms networks—partly paid for with competitive Chinese loans. Chinese firms have often strived to win such business. Pan Song of Shanghai Electric, which makes power equipment for Reliance, among others, recounts years of hard slog in India.