India-China: Most Consequential Relations at Crossroads

The critical question for Asia in the 21st century is if these two countries can restore the historically peaceful ties and achieve mutual prosperity. A

An Asian Century means the end of the American Century; ergo, the US will deploy every imperialist playbook – including divide et impera – to maintain its hegemony. Can India and China, two ancient civilizations, avoid the trap of a young American empire? The next decade will answer that question as the two most populous nations navigate perilous geopolitical waters.

There have been myriad of positive developments in the bilateral relations, which rapidly deteriorated three years ago due to a border clash. Thankfully, there have been no such conflicts since then. Both sides have held eighteen military talks since 2020; and the defense ministers, Rajnath and Shangfu, met for the first time earlier this year during the SCO meeting in Delhi.

Indian Prime Minister Narendra Modi and Chinese President Xi Jinping also briefly met during the G20 meeting in Bali last November. That was sort of momentous for two reasons: one, it was the first handshake captured on camera since the Galwan conflict; second, there are claims that the two leaders reached an “important consensus” about restoring bilateral ties.

This rather astonishing revelation about the consensus came out months later when India’s National Security Advisor Ajit Doval met with China’s top foreign diplomat Wang Yi during a BRICS meeting in South Africa last month. While the details have not been spelled out, both parties agreed that good India-China relationship is vital not only for the two countries but also for the region and the world.

There is hope that Modi and Xi Jinping will meet again during the BRICS Summit later this month.

On the economic front, the border disputes have not put a dent on bilateral trade, which hit a record $136 billion in 2022. There has also been a renewal of corporate ties, albeit in cautious ways. For example, Chinese unicorn and fast-fashion giant Shein is negotiating deals with India’s Reliance to make a comeback into the Indian market.

Every good news in India-China relations also comes with bad news – the yin and yang of geopolitics. As I have detailed in my articles about Modi’s trips to the US and to France, India is being dragged into the US-led Indo-Pacific strategy, which is aimed at containment of China.

Most Indian elites are now China hawks, as is obvious by looking at the inflammatory narratives of Indian mainstream media and think tanks. On India’s social media, one can never be wrong by being anti-China. Not surprisingly, no Indian politician dares to speak of cordial ties, let alone a long-term strategic partnership, with China.

Remember the Doval-Yi meeting discussed earlier? While the Chinese team came out of the meeting with a glowing review, the Indian readout had a distinct negative tone. The Chinese talked about how the two countries are willing to “find a fundamental solution to the situation on the China-India border, promote the improvement and development of bilateral ties.”

On the other hand, the Indian team claimed that situation along the borders’ Line of Control had “eroded strategic trust and the public and political basis of the relationship.”

As for the borders, while there has been relative peace for the last three years, more than 50,000 Indian troops are being stationed in Ladakh — a historic shift towards an offensive military posture. Of course, the US is relishing the dark clouds of confrontation and gladly selling more weapons such as Apache and Chinook helicopters, howitzers, and surveillance drones to Indian military.

These adverse foreign policies are exacerbated by harsh obstacles to Chinese investments and corporations in India since 2020. In the name of national security, numerous Chinese tech firms (such as Huawei) and even social media apps (TikTok, WeChat etc.) are banned in India. Chinese investments in Indian startups are now virtually non-existent; and many Chinese investors have been forced to relinquish their shares. Chinese smartphone giant Xiaomi, the #1 brand in India, has been subjected to extreme scrutiny and its assets – worth staggering $700 million – have been seized. When BYD, the world’s #1 electric car company, wanted to establish a joint venture to manufacture EV and batteries in India, the proposal faced so many hurdles from the Indian government that BYD withdrew its offer.

India has even expelled all Chinese journalists; and the people-to-people exchanges are at a low ebb.

The British called India the “Jewel in the Crown” because of the strategic location and the trillions of dollars they were able to extract from the colony. If India is not prudent, it faces the tragic future of getting colonized by the successor to the British Empire – the American Empire.

India has smartly resisted becoming an official American “ally,” a euphemism for a vassal. However, India – one of the founding members of the non-alignment movement during the cold war – has now allowed excessive American influence in every pivotal Indian institution.

In modern times, technology has become a matter of sovereignty and national security. Thus, it’s very concerning that the US and allies enjoy virtual monopoly in Indian markets. For example, India’s e-commerce is dominated by Amazon and Walmart (“Flipkart”); and India’s mobile payment is controlled by the duopoly of Google Pay and Paytm (Walmart). India’s 5G is comprised of virtually 100% Western products from Nokia, Ericsson, Samsung, Oracle etc. Furthermore, vast amounts of sensitive data in India are stored in Amazon AWS clouds. If data is the new oil, then India has handed over its most strategic resource to the US.

The US and allies are also the most prominent shareholders of all the tech startups in India. India’s flagship unicorns like Byju’s, Swiggy, and Ola are owned by foreign venture capital firms.

These trends bring up many inconvenient questions. What percentage of India’s GDP is going to foreign corporations? How much spying is the US doing in India? How easy will it be for the US to destroy the Indian economy with sanctions? How much influence do US oligarchs and corporations have over Indian elites and politicians? How much of India’s foreign policy is formulated in Washington DC?

India’s embrace of US-style neoliberalism and financial capitalism has been detrimental, to say the least. Thirty years ago, India and China were identical in all the metrics. Now, the differences are stark. Here are some examples:

The list goes on. The moral of the story is that India needs to embrace a path that’s optimal for developing nations. There’s a lot for India to learn from the “China model.” India cannot blindly emulate the US, which runs perpetual trade and fiscal deficits, thanks to the dollar’s exorbitant privilege. In 2023, the US federal government will spend $1 trillion on just interest payments for its colossal and unsustainable debt.

The US employs a strategy known as “offshore balancing,” a term used by the realpolitik experts like Prof. Mearsheimer. In essence, the #1 power (USA) won’t directly fight #2, as imagined in the Thucydides Trap. Instead, the US will get the #3 power to wage a war against the #2. Later on, if need be, the US will have no problem switching sides!

Sadly, Europeans are experiencing amnesia and repeating the same grave error now by waging proxy war on Russia and destroying themselves on behalf of the US.

The more catastrophic the Asian war, the easier it will be to prolong the American Century.

When China opened up in 1978, it wooed everyone, including its former geopolitical enemies like the US and Japan. The Chinese government was pragmatic and understood the need for external capital and knowledge in order to catch up. Even amidst the current trade and tech wars waged by the US, the Chinese government is open for cooperation. Last year, foreign direct investment (FDI) in China was record $190 billion. In foreign policy, China tries to be friendly to all nations – Russia and the EU, North and South Korea, USA and Cuba, Iran and Saudi Arabia, and so on.

India needs to adopt a similar philosophy. India is #1 in population but ranks #142 in GDP-per-capita in the world. Thus, war should not be an option any time soon – especially not a proxy war on behalf of the US empire. India needs an “all-alignment” strategic autonomy. Friends with everyone, enemies with none. Comprehensive and long-term partnerships with Russia and China will be indispensable for India’s transformation as an economic and geopolitical power.

India is at a critical juncture in its modern history. Geopolitical and economic decisions made over the next decade will be highly consequential. And the choice is clear: India must adopt unwavering emphasis on development. This means holistic growth that focuses on infrastructure, manufacturing, FDI, exports, technology, education, patents, scientific papers and so on.