India-China warming pops US pipe dream

[CaptainMaverick]

US envisions India as democratic counterweight to China but Asian powers are moving toward more economic cooperation and less strategic conflict

 

India’s Finance Minister Nirmala Sitharaman on July 25 endorsed her economic advisor’s proposal to open the country to direct investment from China, effectively frozen since the Sino-Indian border clashes of 2020.

Earlier this week, Reuters reported, “India’s Chief Economic Adviser V Anantha Nageswaran said…that to boost its global exports New Delhi can either integrate into China’s supply chain or promote foreign direct investment (FDI) from China.

“Among these choices, focusing on FDI from China seems more promising for boosting India’s exports to the US, similar to how East Asian economies did in the past,’” Nageswaran said according to Reuters.

The proposed opening to China—a rebuke to American diplomacy in the region—followed Russian President Vladimir Putin’s visit to New Delhi earlier this month.

Asia Times’ newsletter Global Risk-Reward Monitor reported exclusively July 11, “Modi asked Putin to help India resolve its longstanding border dispute with China. This is the most important military conflict in Asia, limited as it is, because it puts the region’s two largest countries at odds. Russian mediation, however informal, would entail a diplomatic revolution, and make a mockery of America’s hope of rallying Asian countries against China.”

In 2022, I argued that a demographic imperative—the declining population of non-Muslim parts of Asia versus the growth of Muslim populations—would push India, Russia and China toward a strategic rapprochement.

The Ukraine war has driven these prospective rivals together. India’s bottomless appetite for discounted Russian oil propelled its imports from Russia to US$67 billion in 2023 from only $8.7 billion in 2022. India, moreover, acts as Russia’s distribution agent, re-selling Russian oil and distillates to third countries.

It is noteworthy that although India and China have an ongoing border dispute, India has never joined the US and its allies in condemning China’s treatment of its Uyghur Muslim population. The United States meanwhile has accused India of human rights abuses against its Muslim minority.

US Secretary of State Anthony Blinken declared in 2022, “We regularly engage with our Indian partners on these shared values (of human rights) and, to that end, we are monitoring some recent concerning developments in India including a rise in human rights abuses by some government, police and prison officials.”

India’s Foreign Minister S Jaishankar responded that India could say some things about human rights abuses in the United States.

China’s mushrooming trade with the Global South, notably including India, has advanced the prospects for rapprochement between the world’s two largest countries.

India depends on Chinese supply chains to support its export industry. It imports components and capital goods from China and assembles finished products for developed markets, as do Mexico, Vietnam, Indonesia and other Chinese trading partners.

India’s imports from China have more than doubled since the Covid epidemic, as the bulk of China’s export trade shifted away from the US and Europe toward the Global South.

Source: Asia Times

India’s exports to the US have risen in lockstep with its imports from China, as Nageswaran indicated. The chart below shows the two series in millions of US dollars per month.

Source: Asia Times

India is constrained by physical as well as human capital. Although the two countries’ populations are equal, India’s per capita GDP is about a sixth of China’s in purchasing power parity terms.

Source: Asia Times

China is the world’s expert in infrastructure. India faces a $1.7 trillion deficit in basic infrastructure, including roads, railways, water and broadband.

A 2022 World Bank report reckoned that “India will need to invest $840 billion over the next 15 years—or an average of $55 billion per annum—into urban infrastructure if it is to effectively meet the needs of its fast-growing urban population.” The government spends just $16 billion a year on urban infrastructure.

India’s dilapidated rail system, left over from the British Raj, adds just 4 kilometers of track per day. In China, the world’s first sea-crossing high-speed rail line between Fuzhou and the port city of Xiamen laid 6 kilometers of track per day. Chinese track-laying machines can individually put down 8 kilometers per day.

By way of example: China’s high-speed rail covers the 2,300 kilometers between Beijing and Guangzhou in nine hours. A slightly shorter journey from New Delhi to Bangalore takes four times as long.

China is among the top 20 countries in quality of nutrition, according to the World Hunger Index, while India ranks 111 out of 125 countries.

China and India have roughly the same population size but China’s tertiary education rate reached 72% in 2022, versus 31% in India, according to the World Bank. China’s second-tier universities, moreover, train competent engineers, while India’s engineering education outside the prestigious Technical Institutes is less reliable.

India hasn’t participated in the PISA tests of student competence since 2009, when it ranked number 72 out of 73 countries. China ranks number 2, after Singapore.

Source: Asia Times

What India most requires is investment and technology transfer.

In the fond imaginings of American pundits, India will provide a counterweight to China’s influence in Asia.

Wall Street Journal columnist and author Walter Russell Mead told the National Conservatism Conference on July 9, “The rise of India has the potential to create the kind of Asia Americans have always wanted to see. …China which has developed with enormous rapidity has this illusion that China can dominate all of Asia and impose an order in it. The rise of India – and it will be accompanied by Vietnam, by Indonesia, by many other Asian states – the economic development of India to its full potential will end that illusion in China….As India develops, it demonstrates to China that its road to hegemony is closed.”

Contrary to Mead’s wishful thinking, China’s export prowess is a magnet that realigns all of Asia’s economies around its economic sphere. Contrary to Mead, China does not want to “impose an order” on Asia –it is incurious about the way its neighbors govern themselves – but it does want to incorporate Asia into its broader economic sphere.

But that is not the only reason the Modi government is considering a rapprochement with its northern neighbor.

I wrote in 2022, “America’s humiliating abandonment of Afghanistan left a sink of instability in central Asia. The American invasion sought to destroy the Taliban but ended by restoring it to power, providing at least potentially a base for Islamist radicals in bordering countries including China, Pakistan, as well as Turkmenistan and Uzbekistan…For China, Russia and India, this represents a strategic challenge of the first order. All three countries have significant Muslim minorities.”

What has changed since 2022 is China’s economic footprint in Central Asia. China’s exports to Central Asia and Turkey have tripled in the past four years.

Source: Asia Times

China is cleaning up America’s mess in the region following the collapse of Afghanistan by building railways, roads and broadband, and pouring investment into countries that might represent a future source of instability.

India’s biggest internal problem remains restive pockets in its 14% Muslim population. China, India and Russia have a common interest in stabilizing the Muslim populations of Asia. Only China has the resources to accomplish this through economic development.

Spengler is channeled by David P. Goldman. Follow him on X at @davidpgoldman