China, India and the land between
By Michael Vatikiotis

SINGAPORE - Strategic analysts often regard China's extraordinary rise as a direct challenge to the primacy of the United States as the sole global superpower. But sometimes lost in the debate about the pros and cons of China's emergence is the political and economic significance of India's concomitant rise onto the global scene.

A Pentagon strategy report issued in January clearly identified China as the greatest potential threat to the US military. Certainly a new Cold War revolving around US-China strategic rivalry would be bad news for the rest of Asia, let alone the world. But it is just



as likely that China will pursue its regional interests peacefully, as it has over the past decade, and that a warming trend between China and India will pay huge dividends for Asian security and economic development.

For Southeast Asia, long under the United States' political and economic influence, the future of India-China relations will arguably have a bigger future impact on the region's stability and prosperity. In the historical long view, India and China were the two most important influences on the commercial, cultural and political development of early Southeast Asia. Hinduism and Buddhism came from India and helped forge the early state systems; people and goods came from China, helping to establish a vibrant network of commerce that made Southeast Asia an attractive prize for European colonizers.

Lying between India and China has therefore always been Southeast Asia's principal geostrategic asset. Colonial intervention obscured this natural geographic advantage, distorting local trade patterns and aligning the region economically with Europe. The restoration of China's and India's power makes this historical synergy relevant again. For all the distortion of time and space that globalization and technology would have us imagine, there's no stronger influence on human behavior than hard geographic facts.

China and India are often cast as antagonists because of a short war they fought in 1962 over the contested territory of Ladakh, with China initiating the military action. However the legacy of mistrust was less about the month-long military campaign that ended in a stalemate, and more about India's sense of betrayal at the hands of China.

India's first prime minister, Jawaharlal Nehru, had lent crucial support to the isolated new revolutionary regime in Beijing after 1949. He saw the communists as an important bulwark against resurgent Western imperialism. This past notion of China and India supporting each other as emerging Asian powers lies very much at the core of new strategic thinking in New Delhi and Beijing that transcends the 1962 war and envisages the former rivals building a broad political and economic partnership.

China and India have recently laid down clear markers signaling a closer relationship. Prime Minister Wen Jiabao made an official visit to India last year, the first by a senior Chinese leader in a decade. This year President Hu Jintao will visit Delhi, possibly in May, and Prime Minister Manmohan Singh will make a reciprocal visit to Beijing later this year. Indian President A P J Abdul Kalam told a Singapore audience in February that the wounds of 1962 had healed. Indeed, the two countries have formally declared 2006 Sino-Indian Friendship year.

Trade and investment are skyrocketing. Bilateral trade in 2005 was up almost 40% from the previous year at US$18.7 billion, and China is soon expected to overtake the US as India's largest trading partner. India's high-tech companies, such as Infosys and Satyam Computer Services, are flocking to China, where there are opportunities for applying research and innovation in cost-effective ways. Infosys recently established a new software development center in Shanghai, employing more than 200 local engineers.

China's manufacturers, meanwhile, increasingly view India as a potentially vast market for its manufactures, particularly appliances and cars, as well as the steel that is used in their production. Political leaders are cheering the trend. Speaking in Shanghai in early January, Indian Foreign Secretary Shyam Saran said India and China "are too big to contain each other or be contained by any other country". He spoke of both countries fashioning a "strategic and cooperative partnership for peace and prosperity".

Peaceful rivals
Diplomatic niceties aside, India and China appear to have put their bitter past behind. But the world's two most populous countries will no doubt continue to regard each other as competitors in terms of power and influence, and neighboring Southeast Asia with its mature and increasingly lucrative consumer markets will be the arena where they compete head to head.

China has always had a strategic interest in Southeast Asia, where it supported communist insurgencies and governments across the region during the Cold War. More recently China has arguably taken a more diplomatic approach in pursuit of its strategic interests, although it is widely criticized for propping Myanmar's autocratic regime, where it maintains strategic listening posts aimed at India. Now with India's "look east" policy initiated in the 1990s, India is beginning to assert its influence and interest in Southeast Asia in more forceful ways.

Militarily, India and China both go to great lengths to avoid the forward-basing of military assets in Southeast Asia that would threaten each other's boundaries or develop a coercive advantage. Both countries maintain they only aim to develop their economic and political clout in pursuit of building regional alliances and partnerships, rather than forging competitive spheres of influence.

Consider, for instance, the diplomatic way in which India successfully inserted itself into the East Asian Community unveiled last year in Kuala Lumpur, which China had originally envisaged as its own exclusive preserve. China has been busy in recent years sewing up strategic partnerships with Association of Southeast Asian Nations (ASEAN) members that include elements of security cooperation and agreements that ensure they do not take sides in any conflict with China. For its part India has started flexing its military muscle and offered to help patrol the Malacca Strait, ostensibly to ward of terrorist and pirate attacks.

China in turn has rather neatly entered into the South Asian power equation. At last November's South Asian Association for Regional Cooperation summit, China enlisted help from Nepal, Bangladesh and Pakistan to force India to accept China as an observer and dialogue partner in the regional body.

The quest for oil is a strategic priority for India and China, both of which rely on crude-il imports for 70% and 40% of their needs, respectively. Competition for overseas supplies has already seen some ferocious bidding wars, most of which China has won. This year CNOOC Ltd - of the state-owned China National Offshore Oil Corp - beat out India's Oil and Natural Gas Corp to buy a 45% stake in a Nigerian oil and gas field for $2.3 billion. In the past two years, China has trumped India in Kazakhstan, Ecuador, Angola and, most recently, Myanmar.

With stakes so high, the two countries have agreed to cooperate rather than compete. In January, Indian Oil Minister Mani Shankar Aiyer signed an agreement to cooperate with China in securing crude oil resources overseas. The landmark deal is aimed at preventing fierce competition for oil driving up the price of assets.

"It is clear to me that any imitation of the 'Great Game' between India and China is a danger to peace," Aiyer said. "We cannot endanger each other's security in our quest for energy security."

Perhaps this agreement reveals something of how Asia's new emerging superpowers intend to behave.

Comfortably in the middle
What can, and should, Southeast Asia do to influence the competing agendas of these two Asian leviathans? Probably very little, but the region's leaders would serve their interests well by seeking to balance the new yin and yang of Asian power. Over China's initial objections, India was accommodated in the East Asian Community last year, helping to offset concerns in some ASEAN countries that the arrangement was too China-centric.

Apart from regional talk shops, India and China are expected to avoid any head-on confrontation. Both countries' leaderships arguably share a new sense of pragmatism, which understands the risk confrontation poses to economic progress. The best demonstration of this has been with regard to Pakistan. China has long backed Pakistan, using significant military and financial aid, to prevent India's northward and westward hegemonic extension. Yet Beijing's ties with Islamabad have, perhaps surprisingly, not proved a big obstacle to the recent improvement of India-China relations.

China stays out of the Kashmir quagmire, in return for which India doesn't play games in Tibet - although the Dalai Lama still maintains his headquarters-in-exile in the northern Indian town of Dharamsala. Beijing is notably backing India's candidacy for permanent membership of the United Nations Security Council, although partially as a ploy to scupper Japan's bid for permanent membership.

Southeast Asia stands to gain in a number of ways from growing Sino-Indian cooperation. For one, geography conspires to make Southeast Asia the easiest access route between the two powers. In the next few decades, bankers and businessmen expect to see burgeoning infrastructure development paving the way for more China and India trade.

China has already started to build a network of roads and pipelines running south through mainland Southeast Asia to help connect Western China to the sea. Along the East-West axis there is a strong strategic desire to build pipelines so that oil and gas can be piped into China and avoid passage through the Malacca Strait. China's leaders have said this is less a question of cost and more about enhancing the security of China's energy supplies, notably from a possible US naval blockade.

Southeast Asia is in a prime position to play the middleman. With large communities of overseas Chinese as well as overseas Indians, the region is a natural meeting point for corporations from both powers. And although direct foreign investment from China and India into the region may still be relatively small, all indications point to rapid future growth.

There are few cultural obstacles for both countries, and if anything Southeast Asia represents neutral ground. Both New Delhi and Beijing have recently laid stress on exploiting their respective ethnic diasporas in more developed societies such as Europe and the US, driven mainly by their mutual desire to acquire technology. At the same time, Indian and Chinese companies are starting to tap business and investment opportunities in Southeast Asia's comparatively more developed markets, particularly in manufacturing and banking. And there already is a growing market for Indian and Chinese entertainment, which will soon rival Hollywood for command over the eyes and ears of young Southeast Asians.

Western jealousies
What could go wrong? There is always the risk that China and India will allow pretensions to power and national pride overcome their current tendency toward engagement and cooperation. More worrying is the potential for the US or Europe to drive a wedge between the two historic rivals, playing one off the other to achieve their own political and economic interests. Both are nuclear powers and both have a history of flexing their nuclear weaponry as a bargaining chip with both allies and foes.

There are plenty of potential hotspots. What's to stop India, for instance, from using its membership on the UN Security Council - if it transpires - to block China's interests? Both powers, in hot pursuit of new energy sources, could be enlisted by Russia as a contiguous and potentially disruptive ally as part of any energy deal

US President George W Bush's current four-day visit to New Delhi underscores Washington's recognition of India's growing strategic importance, politically and economically. The United States could just as likely complicate the move toward a new regional balance of power by pressuring India to forge a China containment strategy. That's already happening in Japan, with Tokyo hastily attempting to shore up ties with India as a hedge against what it regards as a more aggressive China.

Such superpower scenarios are all reasonable and historically borne out, but they are grounded in Western-oriented assumptions about the behavior of large powers. The 21st century could just as likely see the rise of two Asian powers drawing as much on their historical traditions of diplomacy and engagement as on the past century's Western antecedents of competition and conflict

The Asian tradition has arguably placed greater emphasis on trade and diplomacy, with war conducted only on a limited scale and in extreme circumstances. Nandan Nilekani, chief executive officer, president and managing director of Indian software giant Infosys, told global leaders at this year's World Economic Forum in Davos that it was time to "change the perception about India and China being a zero-sum game" and instead presented them as economies that offer complementary opportunities.

The United States, Japan and Southeast Asia would do well to support Sino-Indian rapprochement, which will produce economic benefits for the wider region and ideally promote a more peaceful 21st century.

Michael Vatikiotis is former editor of the Far Eastern Economic Review. He is currently a visiting research fellow at Singapore's Institute of Southeast Asian Studies.

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