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New normal: Like it or not, foe China is India's frenemy now

There's a bit of China in every Indian's life. From smartphones to heavy electric equipment, China feeds Indian consumption in a big way.

, ET Online|
Jul 17, 2017, 01.13 PM IST
Two weeks ago, speaking at St Petersburg International Economic Forum, Prime Minister Narendra Modi pointed out a fact so obvious yet so much ignored: "It is true that we have a border dispute with China. But in the last 40 years, not a single bullet has been fired due to it."

PM Modi's observation remains true even as the standoff between India and China in Sikkim on the Bhutan-India-China border lingers on. Despite its bullying and belligerent ways, China is not likely to fire a single bullet at India, more so in the current situation when India-China relations have grown from just 15 years ago when China meant only one thing for India—a possible war.

Today, it has come to mean trade and investment too. The phrase 'Chindia' gained currency 10 years ago when the world began seeing two Asian countries as engines of global growth. 'Elephant versus dragon' and 'tiger versus dragon' are metaphors used by businesses and economists more than military experts. Economic rivalry between India and China is not always a zero-sum game in a globalised and increasingly interdependent world.

Today, there's a bit of China in every Indian's life. From smartphones to heavy electric equipment, China feeds Indian consumption in a big way. However, this has led to a growing anti-China sentiment. China is seen to be using Indian market as a dumping ground for its cheap, subsidised goods.

But this trade imbalance may not remain the defining element of Sino-India business equation. There are signs India might slowly evolve from being a mere dumping ground for cheap Chinese goods.

A significant number of Chinese companies have set up manufacturing units in India, and more are coming. The nature of the Chinese investment in India is changing. So far, the Chinese investment—be it in Paytm, MakeMyTrip or Flipkart—has been strategic. But now the Chinese are also making purely financial, return-focussed investment.

The Chinese economy is slowing down and manufacturing is becoming more expensive. But India is boosting its manufacturing capacity and is expected to keep growing steadily. Therefore, India can expect more Chinese investment in future.

In a few years, China's stake in India may not be just a consumer market for its cheap goods. It could be dozens of big manufacturing plants and piles of money invested in Indian companies.

As Chinese investment in India deepens, the hostile neighbours will create a new front where they would not be fighting but working together. This will be the biggest turn in Sino-Indian relations.

Investment will create for China a valuable stake in India. It will also bring people together. India's trajectory of growth is similar to China's.

Today, India finds itself where China was 10 years ago when foreign investment was ramping up its manufacturing. Indian businesses may have a lot to learn from the Chinese because both the markets have a lot of similarities. A growth in business-to-business ties will bring the two nations closer.

Already, entrepreneurs from either side have started interacting and exploring opportunities of working together. Since India's growth prospect is steady, more and more Chinese will be doing business with India.

China's rising stake in India, in the form of investment and business, might make both the countries highly averse to permanent military hostility or localised armed conflicts.

Yet, there is little possibility of border disputes resolving or mutual distrust dying down. India's increasing confidence in its abilities and its alliances with the US will always be seen as threatening by China which will keep boosting its military capacity against India.

But China's complex business interest in India will discourage it from open belligerence.

The two neighbours are moving towards a relationship where they remain locked in border disputes and yet need to cooperate in business. The foes are becoming frenemies.

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