Indian PM Hosts Chinese President–Creating A New Global Alliance?

The leaders of the world’s two most populous countries joined forces today for the first of a three day summit designed to improve their troubled, but hugely important relationship. India’s newly elected Prime Minister Narendra Modi is playing host to Chinese President Xi Xinping in Modi’s Indian home state of Gujarat that will last through Friday. 

On behalf of China, Mr. Xi is expected to sign off on deals worth more than the $35 billion that the Chinese leader recently committed to Japan. These investments will be devoted almost entirely to desperately needed Indian infrastructure projects including railways, nuclear power plants, manufacturing facilities and other large capital intensive projects.

But underlying tensions over broader matters ranging from disputed territory to the quest for regional influence are also likely to be addressed by Modi and Xi, who between them represent more than one third of the world’s population. India’s new leader makes no secret of his great admiration of China and his wish to mimic Chinese policies that have spear-headed the dramatic growth of China’s private. Modi is actively seeking Chinese assistance in the form of capital investment to help India transform itself into globally competitive manufacturing economy. Fortuitously, India’s present wish could well be a perfect fit for China’s present needs.

China faces a host of domestic economic problems very different than India’s which could presage a match made in economic heaven. As Chinese labor costs continue to rise and its environmental difficulties mount, China is actively looking to source much of its manufacturing sectors to other countries. China not only sees the economic upsides of outsourcing some of its manufacturing base, but also seeks to enhance its role as the preeminent regional power. Creating strong economic ties with regional players like India will help China do just that.

China was thrilled to receive India’s recent application for membership in the Shanghai Co-operation Organization, a Beijing dominated regional security alliance. Yet not all is smooth sailing for the two Asian behemoths. The two powers still have significant border disputes, with both claiming territories controlled by the other at various points along their 2,100 mile common border. Until and unless these open sores are healed, prospects for true comity in Asia will remain grim.

This week’s visit marks only the third ever trip by a Chinese leader to India.

There are also rough spots on the Sino-Indian economic front as well. India, which exports raw materials to China and imports manufactured goods in return, suffers from a  trade deficit, which India insists can only be improved with China agreeing to open up its heavily protected domestic high tech and IT services sector to Indian competition. 

Despite outward signs of blossoming ties on both sides of the border, recent opinion polls show Indians growing increasingly hostile to China, while the Chinese public remains largely indifferent to India, dismissing prospects that is southern neighbor could ever become an economic or geopolitical equal. As regional ties increase between China and the rest of Asia appear to be deteriorating, especially in the resource rich South China Sea, the prospect of developing strong relations with on its southern and eastern flanks seems an obvious Chinese interest. 

In office only since May, Prime Minister Modi is eager to cement the impression that he is both serious and effective. The closer India grows to China, goes the thinking, the easier time India will have in winning the attention and the dollars of US and EU investors.

The visit of the Chinese President to India just weeks before the Indian Prime Minister’s critical visit to Washington at the end of the month, will hopefully from an Indian perspective, built momentum to Mr. Modi’s global campaign to direct massive foreign investment capital India’s way.