China and India, made for each other

Ten years ago, Mr Jairam Ramesh, an Indian economist and politician, coined a word that captivated pundits and investors: Chindia.

The idea that China and India might join forces to cooperate as much as they compete was both seductive and fleeting. Observers were heartened by promises from then Chinese President Hu Jintao and former Indian Prime Minister Manmohan Singh to enact sweeping internal reforms and embrace regional cooperation — neither of which happened. The leaders of the world’s most populous nations turned inwards. Their domestic problems festered.

Now that Beijing and New Delhi are in the hands of Mr Xi Jinping and Mr Narendra Modi, both self-described reformers, could Chindia finally come to fruition as a force for mutual prosperity? Mr Xi and Mr Modi should certainly try, even if the obstacles standing in the way are formidable.

BUILDING MUTUAL TRUST

No less than Jawaharlal Nehru entertained this same dream 70 years ago, when he predicted that an independent India and China would join the United States and Soviet Union as the dominant post-war world powers. Sheer size seemed to guarantee their global influence. Now, though, the focus for both countries must be on shared interests and economic ties that recognise relative strengths and weaknesses.

Sorting out those shared values is a prickly business, of course. China’s close relations with Pakistan irk New Delhi, while Mr Modi’s budding friendship with Japan’s nationalist-in-chief Shinzo Abe makes Beijing wary. In his election campaign, Mr Modi promised a harder line on protecting India’s borders with China, where troops have clashed in recent years. US President Barack Obama’s Asia pivot could also be a deal-breaker if Washington tries to divide India and China to maintain its sway in Asia.

But Chindia’s vast potential is reason enough for Mr Xi and Mr Modi to make building mutual trust a priority. That process began in earnest over the weekend when Indian Foreign Minister Sushma Swaraj met her Chinese counterpart Wang Yi in New Delhi.

At issue was unleashing the huge untapped trade potential between the countries. With a combined annual gross domestic product of more than US$10 trillion (S$12.5 trillion), their trade of US$49.5 billion in the April-to-December period really is a pittance.

The immediate onus is on Mr Modi. There can be no doubt India’s development model lags behind China’s. Consider that the headlines Mr Ramesh makes these days are not about grand economic unions, but toilets. Until Mr Modi’s victory, Mr Ramesh was Rural Development Minister, a role in which he grappled with the shocking fact that half of India’s 1.2 billion people still defecate in the open. He even once implored women not to marry into families that did not have toilets; Mr Modi pledges to put one in every home. Meanwhile, as New Delhi tends to plumbing, Beijing is signing US$400 billion gas deals with Russia and building new skyscrapers.

MAKING CHINDIA AN ECONOMIC REALITY

However, think of the possibilities. China’s coastal cities may be booming, but its underindustrialised hinterlands could use a serious jolt. How about jointly operated special-enterprise zones that employ a mixture of workers from both nations? Along with cutting red tape, India’s most immediate need is for new roads, ports, bridges and power grids so it can better compete globally. China’s deep pockets could help finance such a building spree, while its companies could help pour the concrete.

This is not about altruism, but complementarity. India wants to raise manufacturing’s share of GDP (which lags far behind that of Thailand and South Korea, never mind China) and Beijing wants to go upmarket. As China moves away from low-end manufacturing (which India covets) and towards a more entrepreneurial economic model (which India has), it could do worse than share notes and strategies with India.

We tend to obsess about the differences between China and India. Beijing’s ability to get things done sets Asia’s No 1 and No 3 economies apart by a wide margin. India’s respect for free speech offers quite a contrast to China’s counterproductive fear of Facebook, Twitter and The New York Times.

However, the two countries also share many challenges: Huge and growing divides between rich and poor; rampant corruption that squanders growth; runaway pollution; insatiable appetites for energy and other commodities; public-debt levels that worry the outside world; a preference for boys that is wreaking havoc with demographic trajectories; religious tensions; a distrust of Western institutions and discredited Washington Consensus policies; and powerful bureaucracies doing their worst to make sure nothing changes.

One important caveat: Both nationalists, Mr Xi and Mr Modi must avoid buying into the hype about what joining forces could achieve. If this ends up being another Xi-Vladimir Putin exercise in nose-thumbing at the West, the enterprise may fail. It is not in democratic India’s best interests, security-wise or financially, to make an enemy of Washington.

But Mr Xi and Mr Modi would be wise to try to make Chindia an economic reality. It would not only benefit their 2.5 billion-plus people, but the entire global economy, too. BLOOMBERG

ABOUT THE AUTHOR:

William Pesek is a Bloomberg View columnist based in Tokyo who writes on economics, markets and politics throughout the Asia-Pacific region.