China and India: Prospects for Peace

CHINA AND INDIA

CONTEMPORARY ASIA IN THE WORLD SERIES

CONTEMPORARY ASIA IN THE WORLD

David C. Kang and Victor D. Cha | Editors

This series aims to address a gap in the public-policy and scholarly discussion of Asia. It seeks to promote books and studies that are on the cutting edge of their respective disciplines or in the promotion of multidisciplinary or interdisciplinary research but that are also accessible to a wider readership. The editors seek to showcase the best scholarly and public-policy arguments on Asia from any field, including politics, history, economics, and cultural studies.

Beyond the Final Score: The Politics of Sport in Asia | Victor D. Cha, 2008

The Power of the Internet in China: Citizen Activism Online | Guobin Yang, 2009

Living with the Dragon: How the American Public Views the Rise of China | Benjamin I. Page and Tao Xie, 2010

Jonathan Holslag

COLUMBIA UNIVERSITY PRESS | NEW YORK

COLUMBIA UNIVERSITY PRESS

Publishers Since 1893

New York   Chichester, West Sussex

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Copyright © 2010 Columbia University Press

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E-ISBN 978-0-231-52097-3

Library of Congress Cataloging-in-Publication Data

Holslag, Jonathan.

China and India: prospects for peace / Jonathan Holslag.

p. cm — (Contemporary Asia in the world)

Includes bibliographical references and index.

ISBN 978-0-231-15042-2 (cloth : alk. paper) — ISBN 978-0-231-52097-3 (ebook)

1. China—Relations—India. 2. India—Relations—China    I. Title.

JZ1734.A5714   2010

327.51054—DC22   2009030127

A Columbia University Press E-book.

CUP would be pleased to hear about your reading experience with this e-book at cup-ebook@columbia.edu.

References to Internet Web sites (URLs) were accurate at the time of writing. Neither the author nor Columbia University Press is responsible for URLs that may have expired or changed since the manuscript was prepared.

DESIGN BY VIN DANG

TO ANNEKE

CONTENTS

ACKNOWLEDGMENTS

INTRO   Sino-Indian Rivalry in an Era of Globalization

ONE   Emerging Trading States

TWO   The Evolution of Sino-Indian Relations

THREE   Ricardo’s Reality

FOUR   Shifting Perceptions

FIVE   The Military Security Dilemma

SIX   Regional Security Cooperation

Conclusion

NOTES

BIBLIOGRAPHY

INDEX

ACKNOWLEDGMENTS

IT TAKES A WHOLE COMMUNITY TO WRITE A BOOK. When preparing this work, I received generous support from the Flanders Research Foundation (FWO) and from the Vrije Universiteit Brussel, which facilitated my many field trips to East and South Asia. During these visits, I had the opportunity to interview numerous experts and officials. While most of them have been kept anonymous, I thank them all for their most valuable insights. Many academic institutions offered me the chance to exchange views with colleagues, to verify arguments, and to approach the relations between China and India from various angles. In China, they included the China Academy of Social Sciences (CASS), the China Institutes of Contemporary International Relations (CICIR), the China Institute of International Studies (CIIS), Fudan University, and the Shanghai Institutes for International Studies. In India, I benefited from seminars at the Institute for Defence Studies and Analyses (IDSA), the Centre for Policy Research (CPR), and the Institute of Peace and Conflict Studies (IPCS). Discussion sessions were also organized at the East Asian Institute and the Institute of Southeast Asian Studies (ISEAS), in Singapore, and at the Bangladesh Institute of International and Strategic Studies.

For constructive comments and suggestions at different stages of this book’s development, and for encouraging me to uphold best practices of academic research, I am indebted to Bates Gill, François Godement, Gudrun Wacker, Gustaaf Geeraerts, Ma Jiali, Pan Zhongqi, Sujit Dutta, Zhang Yunling, Zhao Gancheng, and the anonymous reviewers of Columbia University Press. I would like to thank particularly Andrew Nathan and Gustaaf Geeraerts for inspiring and encouraging me, and Anne Routon for helping me through the publishing process. I am also grateful to a large group of friends and family for being so patient and supportive during the solitary work of writing and the many stays abroad.

SINO-INDIAN RIVALRY IN AN ERA OF GLOBALIZATION

IN THE LAST SIX DECADES the Sino-Indian relationship has been driven by an ambivalent mixture of common yearning for respect as prominent international actors and the mutual rivalry that their quests for power created in overlapping spheres of influence. It fell once into an open war, tottered at least five times on the verge of war, and on numerous occasions slid into a diplomatic war of nerves. This book demonstrates why the two Asian giants are still trapped in their protracted contest. Despite the impressive number of confidence-building measures, agreements, dialogues, and growing trade, the causes of conflict have not been tackled. Distrust of each other’s intentions remains alarming, both sides keep all military options open, and no serious progress has been made on the final settlement of the border dispute. Moreover, while trade is often expected to weave states into a web of interdependence, economic ambitions seem to have added new impetus to the rivalry between China and India. The enormous pressure to make swift progress in domestic economic development makes competition inevitable and will lead to fiercer diplomatic wrestling for regional influence, at the expense of stability. This book explains why China and India will not grow without conflict with each another, and why there is such conflict in spite of their interdependence.

Piloting a third of the world’s population into the global economy—that is the challenge that binds China and India. Despite euphoric reporting on their industrial growth and booming services sector, the reality is that half their labor forces, good for approximately 660 citizens, has to survive on the unpredictable yields of their farmland.¹ According to UN figures the average annual income of a Chindian in 2007 was only U.S.$5,105, not much more than the earnings of an inhabitant of, say, Botswana or Morocco.² Up to 54 percent of Chindians lived on less than U.S.$2 a day.³ Despite the IT success in India and the higher education boom in China, less than 8 percent of their citizens have access to the Internet. Domestic consumption does not suffice to defuse challenges like jobless growth, rapid urbanization, and inefficient agricultural production. Consequently, there is a strong need to attract investment in labor-intensive sectors like manufacturing to boost exports and to obtain access to foreign reserves of raw materials.⁴ The world is clearly in need of a second Chinese miracle to pull India out of its economic swamp, but China, too, still has a long way to go to become the well-off society Deng Xiaoping dreamed of.

Literature on Sino-Indian relations falls broadly in two main camps. On the one hand a large number of scholars focus on the security relationship. In his influential work John Garver elaborates meticulously on the evolving interaction of China and India regarding their border dispute, nuclear armament, and their overlapping zones of influence.⁵ Garver’s conclusion is that shifting power balances and geopolitical rivalry are not likely to abate.⁶ This manifestation of realpolitik is extended and concretized to several specific cases. Gulshan Sachdeva, for instance, argues that India will work with Russia and Iran to balance China in central Asia.⁷ Authors like J. N. Dixit and T. V. Paul emphasize China’s bonds with Pakistan and the impact of this alliance on India’s military power in South Asia.⁸ Manish Dabhade and Harsh Pant argue that China and India are entangled in a contest for influence in Nepal.⁹ Marie Lall sees a similar pattern emerging in Myanmar.¹⁰ Chinese realists have been concentrating increasingly on the American attempts to pull India into its strategic orbit and are not confident about the motives behind India’s improving relations with Japan and Russia.¹¹ In the past few years, scholars have also been viewing with suspicion India’s military muscle flexing in the Indian Ocean.¹²

On the other hand, there is the extensive literature on economic relations. Whereas skepticism on cooperation prevails in the former, this category is more optimistic and emphasizes the intensifying economic cooperation on which the emergence of Chindia thrives. Rediscovering Prime Minister Nehru’s initial esteem for China’s swift growth in the 1950s, Indian politician and media commentator Jairam Ramesh was the first to revive Jawaharlal Nehru’s Hindi Chini Bai Bai motto into Chindia, similarly hinting at the opportunities for cooperation and harmonious growth. In his 2005 book Ramesh advocates developing the great trade route to China and derides potential anti-Chinese hedging.¹³ The Congress Party minister has also concluded that working together with China will be India’s only chance to reach Chinese-like economic growth rates. Emulation through cooperation characterizes the Indian interpretation of Chindia. In Chinese publications, too, economic motives figure prominently. China-India relations occupy a very important position in the diplomatic strategy of each country, claims ambassador-scholar Cheng Ruisheng, the continuous strengthening of the trade and economic exchanges is conducive to the development of both countries.¹⁴ Ren Jia and Wang Jiqiong highlight mutual economic expectations as the fundaments of the bilateral strategic partnership.¹⁵ Both Chinese and Indian experts have come to the conclusion that the economic division of labor between the two states should be tapped to gain further profits. Authors like Mukul Asher, Rahul Sen, Biswa Bhattacharyay, Prabir De, T. N. Srinivasan, Yanrui Wu, and Zhanyue Zhou all emphasize the economic complementarities at the basis of a new, strong interdependence.¹⁶ Several Chinese and Indian scholars elaborated on the various layers of this economic interdependence in a volume edited by Jayanta Ray and Prabir De, focusing on aspects such as bilateral investments, border trade, tourism, frontier development, and transport integration.¹⁷

Seldom are such economic studies of Sino-Indian relations merged with analyses that focus on the strategic and security dimension. There seems to be an analytical cleavage between realist skepticism and liberal optimism, resembling much what David Kang has called paradigm wars, pitting the different theoretical and disciplinary schools against one another and then attempting to prove one right while dismissing the others.¹⁸ This book aims at bridging the two different theoretical approaches, analyzing the Sino-Indian relationship in a holistic way. It assesses to what extent deepening economic integration also fosters cooperation in other areas, such as security, and vice versa, and how far realist considerations allow commercial ties to develop. My aim is to examine whether growing bilateral trade and the increasing interest in a stable neighborhood will mitigate the protracted contest, as scholars like Garver describe it. I also consider how much the security dilemma between both countries is preventing them from reaping the potential benefits that enhanced economic and diplomatic cooperation might generate. My analysis centers on a dialogue between theory and evidence. In the following chapters external relations are studied from the perspective of political economy and foreign policy analysis. This implies an assumption of states as the key actors in international society, but its particularity lies in the question of how this policy is formulated.¹⁹ States are not considered as homogeneous billiard balls but as a complex amalgamation of actors, interests, and expectations. To a large extent, foreign policy is still a public policy. The state as a metaphysical abstraction is discarded, but the nation-state is still adhered to as the fundamental level of analysis.²⁰ Tracing strategies to various domestic interest groups and different public perceptions permits formulating more reliable conclusions with regard to future policy choices.

In addition, this book adds new empirical material to the debate on Sino-Indian relations. The largest part of this study starts at the point where the detailed analysis of Garver’s Protracted Contest ends. Several of Garver’s findings are tested against the changes in the Sino-Indian relationship between 2001 and 2007. For this purpose, intensive field research was carried out in Bangladesh, Cambodia, China, India, Indonesia, Thailand, and Singapore. Interviews with nearly a hundred officials, experts, journalists, and politicians provided new insights into the evolution of mutual perceptions and the formulation of policy objectives. Statistical reviews were carried out to study economic issues and public attitudes. Although for several reasons Indian policy making turned out to be easier to document, I tried to maintain a balance between Indian and Chinese sources.

The expectation to develop into a wealthy trading state can lead to opposite policy outcomes. On the one hand, there is the idea that rivalry can be tempered when states replace their fixation with relative gains with policies that focus on domestic welfare and stability, and that countries that engage in international trade will have more incentive for cooperation. The natural effect of commerce is to bring about peace, Montesquieu wrote in 1748, because two nations which trade together render themselves reciprocally dependent.²¹ In a contemporary version, this argument has been mentioned several times by Indian and Chinese politicians. In effectively addressing challenges, Manmohan Singh has stressed, we [China and India] should avoid divisive policies and actions driven by the outmoded mindset of balance of power and instead strive for a more meaningful and inclusive cooperative framework in the region across a range of issues from security to trade and investment.²² Chinese president Hu Jintao has added that the development of China and India is not competition or rivalry and that working hand-in-hand, China and India will deliver enormous benefits to the 2.4 billion people in both countries.²³

On the other hand, trade ambitions can also lead to aggressive and even hostile policies, in which states actively back national industries to make larger gains than their foreign competitors. This can imply defensive mercantilism, or, in other words, protectionist measures to fence off the domestic market from alien goods and services. Scholars like Robert Gilpin also distinguish a malevolent variant of trade policies that approaches in the international economy an arena for imperialist expansion and engages in aggressive economic behavior. Commerce here is perceived as a matter of conquest, either by persuasion or by force.²⁴ Such a zero-sum approach would also imply that the economic growth of one party is seen as threatening to the other, not just because of the direct balance of power but also because of former might be able to throw more weight into the scale to secure its economic interests at the expense of the latter.²⁵

The main challenge is thus to discern the character of China and India’s reform policies and their impact on diplomacy. How liberal or mercantilist are both states’ strategies? How have trade interests affected the bilateral agenda? How complementary are both economies, and consequently what do these strategies mean for the intensity of actual and future economic competition? Do mutual interests affect threat perceptions? How are their ambitions interacting in their neighborhood?

The first chapter elucidates how China and India have gradually changed their inward-looking economic policies for the ambition to unleash the productive forces, as Deng Xiaoping formulated it. The Indian and Chinese governments embrace economic openness as a new source of national coherence. Scholars like Chen Zhimin contend that such policy shifts entail a choice for constructive nationalism as a new unifying force for developing societies and as an alternative source of legitimacy for political elites.²⁶ This domestic change can be expected to have a fundamental impact on the foreign policy agenda. Hence the first assumption that will be tested is that constructive nationalism leads to a more constructive and cooperative posture in foreign affairs.

This leads us to the impact of trade on bilateral relations between China and India. Building on thinkers like Montesquieu, students of liberal international relations theory claim that setting commerce as a political priority makes states more reluctant to resort to violence in their interaction with other countries. Contrary to the Weberian state, Robert Cox has stated, governments become intermediaries between internal interests and external opportunities. Richard Rosecrance has argued that the expectation to gain from economic opening up makes states seek to improve their position in the context of interdependence and that, because of specialization, one state’s attempt to improve its access to products and resources does not conflict with another’s.²⁷ Thus, the second assumption implies that trade leads to specialization and complementarity, and that the resulting division of labor creates enough opportunities for multiple states to profit. This assumption is tested in the second and third chapters. Chapter 2 links the economic crises of the 1950s to the Indo-Chinese War of 1962. It explains how the realpolitik in the Cold War era between 1963 and the 1970s was rooted in the attempt of the central political elites to end internal disputes. This same struggle for survival instigated the national elites to embark on a gradual opening up to reap trade revenues and finally, in the 1990s, to create a well-off society that would become a new source of legitimacy. That consequently resulted in improving bilateral ties with economics playing an indirect role in the 1980s, becoming the centerpiece of cooperation in the 1990s, and finally led to the idea of an economically integrated partnership, Chindia. In chapter 3 an assessment is made of the depth of this emerging integration. How much are the two economies complementary? What are the prospects for deepening cooperation? What is the potential for economic disputes?

As a consequence of expanding trade relations it can be assumed that domestic influence will shift from economic conservatives and military cadres to new business elites and reformist politicians. Those persons will form the vanguard of new foreign policies and become the main stakeholders in stable and peaceful bonds with partner states. The more trade, proponents of neofunctionalist liberalism maintain, the more interest groups will lobby for broader and deeper relations with other trading states. Chapter 2 examines how the support for rapprochement has diversified from political actors at the national level to other players like local governments and large companies. Gradually, as domestic development improves and more people become directly or indirectly aware of the economic interdependence with other countries, the demand for cooperation instead of conflict becomes embedded in the broader society. Trade, tourism, information exchange, and people-to-people contacts may lead to what Karl Deutsch has called a security community.²⁸ In such communities historical distrust and aversion make way for confidence and mutual understanding between nations. This process also fits with the constructivist idea that through positive interaction and mutually beneficial relations, societies will reconstruct their own identities through the lens of the other. Positive mutual perceptions can make public opinion recognize its own state as benevolent and cooperative instead of feeling humiliated or threatened. Chapter 4 gives an overview of the changing perceptions. It starts with a concise analysis of public attitudes. Subsequently, a critical assessment is made of the positions in the Indian parliament. Finally, light is shed on the attitudes of Chinese and Indian experts.

Expanding trade flows might also result in increasing mutual vulnerability and augment costs of offensive strategies. This thesis is as old as international relations has formed a subject of scholarly research. To name the most important current proponents of this idea, Robert Keohane and Joseph Nye have concluded that in a situation of complex interdependence, a state that threatens another will automatically injure itself, and consequently rational governments have a strong penchant for peace.²⁹ Military power remains relevant, but instead of deterring other states, the aim is now rather to dissuade nontraditional threats like piracy, terrorism, and armed rebellion. A consequence of embracing the market as the incubator of national growth is also that states feel less urged to develop military power and to deploy troops at the border in order to defend sovereignty. The question of maps will become redundant, Indian national security adviser M. K. Narayanan has stated.³⁰ Yet, in a mercantilist scenario growing commercial stakes can also lead to a more robust deployment of power to unilaterally protect economic lifelines and assets abroad, so as to develop the capacity to ward off both traditional and nontraditional threats. Chapter 5 elaborates on the military dimension of Sino-Indian relations. It presents a critical evaluation of the border dispute. It also examines to what extent military deterrence still plays a role, in particular with regard to military deployment at the boundary, naval activity in the Indian Ocean, and nuclear armament.

At the regional level, trading nations can be expected to take more interest in a stable neighborhood to give leeway to traders and to promote a favorable investment climate. Regional economic integration is assumed to diminish the relevance of military deterrence and diplomatic balancing in third states. Growing economic interests abroad might lead to a resecuritization of regional policies, for instance with regard to nontraditional security challenges, but here the desecuritization of bilateral ties should allow China and India to join forces for a stable neighborhood.³¹ Such a cooperative posture, though, cannot be taken for granted. On many occasions in the past, economic pressure has led regional powers to initiate hawkish strategies in which swift economic gains are pursued by playing a diplomatic tit-for-tat game with competitors. In this case, military predominance might not be crucial, but a favorable balance of economic and political power certainly is. In chapter 6 these options are tested against the case of Myanmar, Nepal, and Pakistan, three states in which Sino-Indian rivalry has been fiercest. It studies to what extent China and India cooperate to curb cross-border rebellion, smuggling, and drugs trade. As a key indicator of the quality of such collaboration, it also discusses whether they are able to deal with more comprehensive security issues like the need of good governance and inclusive economic development.³²

In sum, the first two chapters present historical evidence for the convergence of interests that has taken place in the past two decades. After various episodes of war and serious military friction, both countries now aspire to becoming open trading nations and consequently have grasped the benefits of peace and cooperation. The subsequent chapters develop four main arguments for why improving relations and many common interests have not neutralized conflict, that even in an era of globalization the trading states of China and India are still stuck in a persistent security dilemma, and that in the end commerce tends to exacerbate rather than mitigate conflict.

Using these six issues as main variables, this book offers a critical assessment of the impact of trade on the relations between Asia’s largest powers. Will globalization and the growing economic linkages mitigate great-power rivalry? Both liberalist and realist parameters guide us through a rich body of empirical information to down-to-earth conclusions relevant for both scholars and policy makers. In addition, the concluding chapter considers a few scenarios in case India or China does not succeed in persisting with the necessary economic reforms. What can we expect when economic complementarity declines as a consequence of similar economic policies? What will be the results if Chinese public perceptions of India change from the current ambivalence to a new suspiciousness?

It is not my aim to test the theoretical assumptions as such, or to evaluate whether either liberalist or realist paradigms hold true at large. Rather, international relations theory has to allow for the construction of a coherent study. Several elementary concepts, such as the security dilemma and interdependence, are applied as benchmarks for assessing the recent progress in the Sino-Indian relationship. As such, this study should be considered in the first place as a fact-based empirical assessment, but as a case study it certainly contributes to the wider scholarly debate on peace and stability and forms an experiment to enrich area studies via a facts-theory dialogue.

EMERGING TRADING STATES

STATES BECOMING A TRANSMISSION BELT from the world market to the domestic economy—it appears to be an unstoppable trend.¹ It is widely assumed that globalization fundamentally affects the raison d’être of states, and that they, if not replace, at least have to complement their traditional focus on rivalry for territory and military supremacy with the need to integrate into the world economy. Conquering states are thus expected to become trading states, focusing on the absolute gains of commerce rather than the relative losses. This chapter presents a concise historical account of how China and India have indeed set their ambitions on becoming such trading nations. The emergence of constructive nationalism, it is argued, has in many ways reduced the zero-sum thinking that was predominant during the Cold War and leads to new opportunities for cooperation.

During the past century, India and China have undoubtedly been the most dramatic examples of states that gave up their economic isolation for interaction with the global market. Not more than five decades ago the first fissures occurred in their fortresses of autarky and anticapitalism. Nowadays, both countries are among the world’s most prominent proponents of a free global economy. No day passes by without affirmations of the commitment to liberalization and of the aspiration to become a prosperous trading state. The long-established pattern in which India and China identified their fate uniquely with the conservative and inward-looking interests of their vast peasant societies thus came to an end. For millennia this particular feature determined their interactions with the outer world. Economic self-sufficiency and social stability constituted the key sources of legitimacy for political elites and emperors. Both countries were reclusive civilizations, and external trade remained a marginal activity. Even though these states’ contributions to the economic, cultural, and scientific cross-pollination between civilizations was substantial, it did not form a purpose by itself. Seldom was this pattern punctuated for a longer period. Traders, discoverers, and cosmopolitan minds were always counterbalanced by the vast interests of inward-looking peasants.

To trace the roots of this transition, one has to go back to the mid-1940s, the period that gave birth to modern China and India. For both states the independence they obtained did not mean more than a victory on an important political and symbolic battlefield. The struggle for the creation of coherent states had yet to start. In 1949 Mao Zedong stated: Our victory is just a first step of a long march. Although we can be proud of this step, it is rather small. What we can be even more proud of lies ahead of us. After decades of violence, Chinese and Indian societies were traumatized. The secession of Pakistan and Taiwan aggravated political exasperation. Feudalism was a prominent characteristic and shattered both countries’ huge territories into uncountable fiefdoms. Neither did the international context permit much optimism. Relations with the two victors of World War II were anything but amicable. With regard to the United States, Beijing came into direct confrontation during the Korean War (1951–1953). Washington’s support for Taiwan was another thorn in China’s flesh. Whereas India did not wage an armed conflict with the United States, it vociferously opposed the alliance with Pakistan in the framework of the Southeast Asia and Central Treaty Organizations (SEATO and CENTO). Even though the relationships with the Soviet Union were less hostile, Beijing and New Delhi remained on their guard. Mao perceived very well that the Kremlin considered China denigratingly as a little communist brother. The demanding conditions Moscow attached to its military and economic aid fostered an uncomfortable dependence. Following the death of Joseph Stalin in 1953, relations deteriorated even further as Mao and Nikita Khrushchev vied for the ideological leadership of communism. Neither let India take itself in tow. Unlike China, India did not experience a direct security threat from the Eurasian empire. Nehru characterized the Soviet Union as harmless, but at the same time he continued promoting the Non-Aligned Movement as a middle road between the West and the Soviet Union.

From an economic perspective as well, there were obvious resemblances. To start with, the two economies were of a comparable size. According to Agnus Maddison, the 1947 gross domestic product (GDP) of the People’s