"India's response to fear of encirclement is evident in recent summit talks with the Chinese. First, it is boosting economic ties with China. Second, it is emphasising relations with the US. Third, it is stepping up ties with other east Asian countries to counter China's growing commercial reach. New Delhi is in talks with Thailand and Singapore to create free-trade agreements. It is also seeking to counter China's close military relations with Burma by pushing its own construction projects there. For many years China has run rings around India diplomatically. Now India is learning how to play Mahjong."
http://scotlandonsunday.scotsman.com/index.cfm?id=1740862005 China and India bury hatchet DAN MCDOUGALL IN NEW DELHI THE Nathu La pass pierces the heart of the Himalayas following the precipitous path of the ancient silk route that for a millennium has linked the two most populous nations on earth. It was here in 1962, in the province of Sikkim, that a two-month war broke out between India and China over their vast 3,500km border. A subsequent ceasefire failed to resolve the conflict, and for the past 43 years both nations have bitterly contested their territories on the roof of the world - until now. In a significant gesture of cartographic diplomacy, the Chinese premier, Wen Jiaboa, recently visited New Delhi and presented the Indian prime minister, Manmohan Singh, with a beautifully crafted map of the Himalayas that finally acknowledged Sikkim as a state of India. New Delhi in turn, in a rehearsed display of compromise, reiterated respect for China's sovereignty over Tibet and promised to prevent anti-Chinese political activities by the community of Tibetan exiles in India. Further border resolutions are in the pipeline. The true symbolism of the accord was made clear by the public signing of a groundbreaking Sino-Indian pact between the two nations which are home to one-third of the world's total population. The 11 agreements envisaged a galloping growth in bilateral trade, joint petroleum, gas and space exploration, and additional agreements for co-operation between China's 2.5-million-man People's Liberation Army and the 1.3-million-strong Indian Defence Force. In short, Asia's oldest and most important relationship has undergone a tectonic shift. Today the Nathu La pass is once again open for business. But the re-establishment of meagre trade along the route is merely symbolic, representing nothing more than yak butter, woollen shawls and, most likely in these modern times, pirate DVDs. On a global scale, of all the significant economies in the world, China and India have been the fastest growing for the past decade, yet barely a few years ago, trade between both nations was under $1bn per year. According to statistics released by the Indian government last week, China has now come from nowhere to be New Delhi's second-biggest trade partner after the US - trade between both countries in 2005 is expected to exceed $13.6bn with both aiming for a trade turnover of $20bn by 2008 and $30bn by 2010. India-US trade is currently worth $19.8bn. Premier Wen has declared that China and India will be the "two pagodas" of economic power in the 21st century. He said: "Co-operation is just like two pagodas - one hardware and one software," he said, referring to India's computer software skills and China's growing dominance in computer hardware. "Combined, we can take the leadership position in the world. When that particular day comes, it will signify the coming of the Asian Century of the IT industry." Emulating China's economic success is obviously the aim among reformists in India. Manmohan Singh has challenged Mumbai to "transform" over the next five years so that "people will forget about Shanghai". While recent economic interest in the West has focused on the blossoming relationship between Washington and New Delhi, according to a recent study almost 2.5 million Indians visited China in 2004, and although the majority were tourists, vast numbers of Indian businessmen are also travelling to China to outsource contracts and attract trade and inward investment from Shanghai and Beijing. The world, and in particular America, is watching. A futuristic report published last December by the US National Intelligence Council even compared the parallel emergence of China and India to the rise of Germany in the 19th century and America itself in the 20th century, with potentially just as dramatic impacts on regional and world affairs. "It's been about as good as it gets for India's foreign policy. This is reflected in the growing economic ties with China and the US," said Kalim Bahadur, head of Central Asian Studies at New Delhi's Jawaharlal Nehru University. So what exactly has changed? For a start the perception within the Indian business community about China has undergone a dramatic transformation over the past three to four years. The fears about the Chinese dragon invading India with cheap manufactured goods are not only fast receding, more and more Indian companies have been venturing on to Chinese turf. Pharmaceutical giant Ranbaxy was the first Indian company to enter into a joint venture in China as far back as 1993. The company's sales and marketing force now covers more than 2,000 hospitals in 25 provinces in China. It intends to extend this coverage to 4,000 hospitals in 27 provinces by 2007. Over the past 12 months, a large number of Indian companies have set up shop in China. Prominent among these are telecommunications giant Reliance and the Steel Authority of India. China's attitude towards India has also undergone a dramatic change. Chinese businessmen who once only wanted to talk about trade now want to invest in India and explore synergies. They are impressed by the country's strides in the IT sector. But there are undeniable stumbling blocks ahead for both nations. Pakistan, India's bitter rival, may be the key to the future of the region and Sino-Indian relations, according to Ma Jiali of the China Institute of Contemporary International Relations: "Certainly little or no trust exists on this front at the moment. China says it no longer supplies missile or nuclear technology to Pakistan, but the US and India dispute this." According to a widely held belief within the Indian government, China is also continuing to use its military relations with Pakistan to constrain India's emergence as a big regional power. They believe this so-called Chinese strategy of encirclement is also betrayed by other budding alliances. Foremost among these is Myanmar, whose ruling generals depend on China for most of their military hardware, diplomatic support and trade. According to Raja Mohan, a foreign affairs expert in Delhi, India is learning fast: "India's response to fear of encirclement is evident in recent summit talks with the Chinese. First, it is boosting economic ties with China. Second, it is emphasising relations with the US. Third, it is stepping up ties with other east Asian countries to counter China's growing commercial reach. New Delhi is in talks with Thailand and Singapore to create free-trade agreements. It is also seeking to counter China's close military relations with Burma by pushing its own construction projects there. For many years China has run rings around India diplomatically. Now India is learning how to play Mahjong." The one glaring casualty in all of this is, of course, Tibet and the Dalai Lama. In return for its concession on Sikkim, China has won acknowledgement from India that Tibet is part of China. Diplomats fear the pledge could place the Dalai Lama and his government-in-exile under considerable pressure. Yet today, even as the Nathu La pass opens up and multi-billion trade flourishes from Mumbai to Shanghai, it is telling to recall how these two ancient and complex Asian cultures, have traditionally looked at foreign policy. The Indians have a common saying: "A strong neighbour is a natural enemy." Or, as the Chinese proverb sums up: "One mountain cannot accommodate two tigers." How duo have risen to become key players THE colonial period left India with the foundations to grow and operate an effective economy. Property rights, free trade, fixed exchange rates, a uniform currency system, uniform weights and measures, open capital markets and a well developed system of railways and telegraphs, as well as a modern legal system, were all beneficial to growth. But the economic policy was largely based on the social protectionism of the colonial period, which saw a large public sector and over-regulation run by a centralised government. In 1980 the government set out on a series of reforms. In 1991 a further round of liberalisation saw the end of public sector monopoly in many areas, and the automatic approval of foreign direct investment. Since then, the economy has posted an excellent average growth rate of 6%. The country is capitalising on its large numbers of well-educated people skilled in the English language to become a major exporter of software services and software workers. In China, when Mao Zedong's Communist Party clinched power in 1949 the goal was to transform the country from a largely rural economy into an industrial powerhouse. Farms were merged into enormous communes and investment was made in heavy industry. It didn't work. With the death of Mao the communist regime decided to open up to foreign investment and create a more market-based economy. Since then, China has become one of the fastest-growing economies in the world. Gross Domestic Product (GDP) was up 9.5% last year, after rising by 9.1% in 2003. Earlier this year, JP Morgan Fleming said the Chinese economy would outstrip that of the United States by 2050, but would pass others far sooner. The growth has been founded on a highly productive, well educated workforce able to make the goods the West wants at prices that could undercut anywhere in the developed world. This has been married with a plethora of pro-business government reforms, heavy investment in infrastructure and the emergence of a consumer class. All these factors have enabled China to become a trading giant - it is the world's fifth-largest exporter of merchandise after the US, Germany, Japan and France. This article: http://www.scotsman.com/?id=1740862005 ------------------------ Yahoo! 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