[Belt&Road]Cooperation in Prosperity: What China and India Should Do

China and India are now the fastest- growing economies in the world, a situation that has inspired journalists around the globe to speculate about competition between the two. Some have likened China to the Hare and India to the Tortoise in the classic fable. Indeed, Chinese speed could give way to Indian steadiness, given the latter’s much younger population and its smoother growth trajectory. But ultimately, such comparisons only serve to divert attention from the opportunity the two countries now have to contribute to each other’s prosperity and mitigate threats to world peace brought about by prolonged global economic stagnation.

The competitive angle to the bilateral relationship has been overtaken by a growing complementary capacity. China has become an industrial giant, but its uncoordinated growth has caused extreme overcapacity, especially in heavy industry. Today, China has an estimated 200 million tons of surplus steel production capacity and has pledged to retire 150 million tons of it in the coming years.

The situation is similar for China’s coal mining and thermal power generation. A total of 300,000 MW of generating capacity has been added since 2013, more than India’s entire power generation capacity, but demand for power has barely increased. As a result, existing plants are working at just over 50% of capacity. Cement, non-ferrous metals, plate glass, oil refineries, and even the garments industry are in a similar plight. But the problems these industries face pale in comparison to those of the heavy engineering and construction industries. With so much excess capacity, new plants will not be needed for some time, leading to fears for the labor force.

India, on the other hand, has been suffering for decades from an infrastructure famine. Its road network is in terrible condition; it experiences frequent power shortages (especially at peak load times), its railway system is antiquated, and its ports get jammed with cargo they cannot handle. The Hyundai automobile plant in Chennai, for instance, ships vehicles all the way around the Indian peninsula instead of taking the much shorter land route by road or rail.

The complementary characteristics of the two economies are clear. China needs to keep its machinists and heavy industry working while it rebalances its economy. India needs to attract foreign investors and to persuade Indian corporations to invest in India. To do this, India must improve the ease of doing business, for which first-class infrastructure is paramount.

In 2011, then-Prime Minister Manmohan Singh estimated that India would need to invest one trillion dollars in infrastructure between 2012 and 2017, almost three times the amount spent between 2006 and 2011, to maintain its growth rate. Barely half of that investment has been achieved. In order for India to build infrastructure comparable even to that of Southeast Asian countries, it needs considerably greater investment in the coming five years.

China has the resources to make major contributions to meeting Indian demand. It can work with India not only at a lower cost, but at a much faster speed than Western companies. Proof of China’s capabilities includes the completion of the colossal Three Gorges project on the Yangtze River in less than 12 years and the 19,000 km network of tracks traveled by 2,000 bullet trains in only 11 years. Chinese companies could give Indian enterprises unique insights into China’s methods of executing mass-production infrastructure projects on a national scale, something no other developing country has yet been able to do.

The framework for the two countries to cooperate already exists in China’s Belt and Road Initiative, which will mostly be financed by the Asian Infrastructure Investment Bank. Although India was the second largest contributor of seed money to the AIIB, it has so far shied away from joining the Initiative, despite several hints by Chinese leaders that they would welcome India’s participation.

India’s wariness is born of uncertainty about China’s intentions. Indian analysts emphasize the security and strategic challenges the Belt and Road Initiative could pose to India’s pre-eminence in South Asia. Viewed on a map, its two strands, the Silk Road Economic Belt and the Maritime Silk Road, appear intended to loop around India to its north, east and south, isolating it from its neighbors and severely restricting its sphere of influence.

But this interpretation of China’s intentions is too India-centric, and is almost certainly residue of the trauma inflicted on the Indian psyche by the border war of 1962. There is little appreciation in India of the challenges Beijing has faced from the economic slowdown since its fiscal stimulus program ended in 2011.

Through the Belt and Road Initiative, Beijing will gain alternate routes to many countries. New overland routes will cross through central Asia and Russia to Europe; the China-Pakistan Economic Corridor will link to the Arabian Sea, Africa and the Middle East, bringing benefits for all the nations along these routes.

New Delhi was aware of this development during the Singh administration, so it steadily promoted bilateral economic and political relations with Beijing. That administration regarded the Belt and Road Initiative as an opportunity, and did not consider the passage of China’s economic corridor through Gilgit a challenge to India’s national sovereignty over Pakistan-administered Kashmir. That position, regrettably, has been reversed by the Modi administration. What was a potential win-win situation for both China and India has become a potential conflict in which both countries could lose. People in both nations should hope that the reversal is temporary, and that better sense will soon prevail.

The author is a senior journalist and author of Twilight of the Nation State: Globalisation, Chaos and War and Crouching Dragon, Hidden Tiger, Can China and India Dominate the West?