07 December 2011

What if India and China Collaborate?

"India, China bhai bhai," a slogan that we hardly consider and think about acutely. How many of us have even thought of the two Asian giants coming together? If one is a hare, the other is a tortoise. The only thing that can unite them would be their common challenges. Otherwise the two fast-growing nations are often the topic of discussion for competition, comparisons and contrast. The amazing race between the two has always made us curious- what if the two economic power houses come together?

India and China
For centuries India and China maintained peace and were brotherly neighbors. But the intrusion of the colonial powers in 1914 drew the McMahon Line ruptured their peace and destroyed their tranquility. Both Nations were dragged to the battle field. Leaders of both nations declared war in 1962 which ended up India getting thrashed by China leaving behind deep psychological scars. As time passed, both countries had to repair themselves from war which got them busy fixing their crippled economies. But nothing was forgotten or forgiven. The line of McMahon still separates them as the fastest and second fastest economy but has not stopped them from resting their daggers.

A United Nations intelligence report titled Mapping the Global Future by 2020 mentions that the likely emergence of China and India as new global players is similar to that of the rise of Germany in 19th century and United States in the 20th century. The rising powers will be great catalytic factors for the transformation of geopolitical landscape with impacts as powerful as the previous two centuries.

Large population, expanding military capabilities, promotion of high technologies and sustained high economic growth will be the foremost root reasons for rapid rise in economic and political power for both countries. China stands as a giant with an economy of $5 trillion whereas India stands at $1.25 trillion. India currently lags behind China on most economic measures but most economists believe India will also sustain high levels of economic growth.

Bottom line, what will happen when Asian giants collaborate?

 1. The Melting Water towers:

Yellow River
The Himalayas, home and birth place of Ganga, Indus and Brahmaputra. For China, it is the mother of Mekong, Yellow and Yangtze rivers. Amazingly these high altitude glaciers take care of nearly 3 billion people or half of world's population. The Earth Policy Institute has declared that the melting of these glaciers would be a massive threat to food security. China and India are co-victims of a life-threatening ecological crisis. "In 2050 we will have 9 billion people and average income will be four times what it is today," he said. "India and China have been able to feed their populations because they use water in an unsustainable way. That is no longer possible," according to Jeffrey Sachs, director of the UN's Millennium Project. Since Asia's agricultural revolution, the amount of land under irrigation has tripled. But many parts of the continent have reached the limits of water supplies. "The Ganges [in India] and the Yellow river [in China] no longer flow. There is so much silting up and water extraction upstream they are pretty stagnant," as quoted by The Guardian. So will they co-operate to solve the problem, or go to war over food and water?
 2. The binding of energy assets:

Oil and Gas
Both of Asia's rising powers desperately need energy. China today imports roughly half its oil. Consumption rose by 15 percent last year and is forecast to jump by an additional 9 percent this year. By 2025, China will burn through 14.2 million barrels a day, double this year's level, the U.S. Energy Dept. predicts. India's oil imports are expected to rise to some 5 million barrels a day by 2020, from around 1.4 million barrels at present reports Bloomberg BusinessWeek. See the way China outwitted India in Myanmar's Shwe gas project. In 2004, India's gas authority won the bid; but China leaned hard on the military junta to change the parameters, and wrested the deal. But of late, both countries are seeing plenty of merit in cartelising their purchases. China did not bid against India for Britain's Imperial Energy, and India returned the favour by staying away from Syria's Tanganyika Oil. Since China and India import 40 percent and 70 percent of their oil, respectively, the next step could be to pool their bids to maximise bargaining clout. Both would also like to join hands to kill the extra charge of $1-2 per barrel of oil, called the 'Asian Premium'.

 3. The Hardware and Software Coming together:

Hardware and Software
When Chinese Premier Wen Jiabao visited India last year, his first stop was not the political capital New Delhi but the IT hub Bangalore. Addressing a crowd of 4,000 IT professionals, Zhu delighted those present by promoting a new era in Sino-Indian cooperation. "You are No 1 in software. We are No 3 in hardware," he said. "If we put these together, we are the world's No 1." It is no surprise that Asia's giant neighbors would seek to combine each other's reciprocal strengths in IT. According to a recent Forrester report, "How India, China Redefine the Tech World Order", over the next five years markets in India and China will account for nearly 40 personal of all personal computers (PCs) and a significant share of all mobile telephones sold worldwide. Production sectors in both countries stand to gain enormously from this potential growth. China's booming hardware sector - now among the strongest in the world. Chinese businesses have been slower to establish bases in India. The most significant investment so far comes from Huawei, a Chinese electronics manufacturer that, seeking to take advantage of India's software talent, has established a research-and-development (R&D) institute in Bangalore. While in India both the production and consumption of consumer electronics are still relatively low, the country's vast population and rising middle class make it a hugely important potential market.