Concert of Emerging Giants

First Indo China Strategic Economic Dialogue

| by Rahul K Bhonsle

(December 01, New Delhi, Sri Lanka Guardian) Reflecting the results of superb personal rapport between Indian Prime Minister Dr Man Mohan Singh and Chinese Premier Wen Jiabao, the first Indo China Strategic Economic Dialogue was held on 26 and 27 September in Beijing this year. The seminal event was possible due to an understanding reached between the two leaders during Premier Wen Jiabao’s visit to Delhi in December 2010. That was a path breaking summit which took place against the backdrop of some acrimony but charted out a road map for growth of India China relations. One of the significant markers established was the strategic economic dialogue. Fructification of determination of the two leaders within a few months augurs well for growing strategic relationship between the two Asian giants.

Coinciding with China’s number two status in the global economic order and India’s steady path of economic growth despite financial slow down, the event provided a common platform for Beijing and New Delhi to share their vision of future economic scenarios globally, regionally as well as bilaterally. Given encouraging developments in the financial sector recently with grant of license to The Industrial and Commercial Bank of China (ICBC), Indian economy should benefit from flow of Chinese capital with the enormous resources at the disposal of the ICBC. China on the other hand could seek much needed Indian expertise in the Information Technology and pharma sectors.

Indian prime minister Manmohan Singh (C), holds a bilateral meeting with Chinese president Hu Jintao (Not pictured) on April 13, 2011 in Sanya, Hainan province,China. Leaders from Brazil, Russia, India, China, and South Africa will meet on April 14 for the 2011 BRICS Summit, an annual gathering of the worlds five leading emerging nations.

(April 12, 2011 - Photo by Pool/Getty Images AsiaPac)

That both sides were taking the long view was also evident with selection of two principals who led the dialogue. From the Indian side was Dr Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission and from China Mr Zhang Ping head of the National Development and Reform Commission. Mr Ahluwalia is a respectable figure in global economic circles and was one of the front runners for the post of Chief of the International Monetary Fund (IMF) just a few months ago. While Mr Zhang Ping with a strong banking background is full member of the 17th Central Committee of the Communist Party.

Given backing of the country’s top leadership success of the dialogue was a foregone conclusion however it is important to identify certain key benchmarks achieved to provide possible trajectory of not just Indo China economic relations but the regional and global economies. The aim of the dialogue was not to ruminate over sensitive issues such as trade imbalance but to identify common ground for framing joint macroeconomic policies. "The goal of the dialogue is to further strengthen our mutual trust under the current situation and to expand our strategic partnership of cooperation," Premier Wen was quoted on prime time television in Beijing. Restructuring of the trade basket will therefore be undertaken in other forums such as meeting between the Commerce ministers. 

With lead by planning commission chiefs, exchange of best practices in this field would have no doubt added much value. In addition railways, infrastructure, water resources, energy, trade, Information Technology and Industry were areas of cooperation identified for the first tete a tete. The Dialogue is also likely to act as a stepping stone for joint policy making in international forums as the G 20 as well as WTO since Premier Wen is said to have proposed the same. China and India already have effective coordination in complex global negotiations such as climate change and adding trade will provide a major leverage to the two. 

The presence of India’ Railway Board Chairman Mr Vinay Mittal in the delegation was significant from the Indian point of view. He would have gained first hand impressions of development of China’s high speed railway system. Indian Railways requires modernization and Mr Mittal’s tour of China should denote path for fast track rail corridors in the country. Talks between the water resources and energy groups were also considered fruitful.

Premier Wen Jiabao appropriately touched on scope for greater engagement with India particularly in the field of IT and pharma apart from engineering products this would in some ways reduce the growing trade deficit between the two countries. Summing up Wen is reported to have said, "During the meeting, we discussed our economic situations, macroeconomic policies, and policies and cooperation in areas such as investment, infrastructure construction, high technology, energy conservation and environmental protection." The remarks by Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission, that the Dialogue is an attempt to take the economic relationship to a new level reflected the overall significance of the event.

Global financial capitals have recorded this, “new level,” in relations between Beijing and New Delhi somewhat cautiously. Will this Dialogue go on to emerge as a concert of economic giants of the future to challenge the Brettonwoods Institutions, the World Bank and the IMF presently controlled by the West remains to be seen? There is good reason for worry as the G 20 summit in Cannes has observed with Euro zone crisis being the major focus of debate. Some were even looking towards the Yuan and the Rupee for relief through the IMF. Both India and China’s weightage in the IMF has considerably expanded demonstrating their increase in economic clout.

There is however a long way to go before vision of Prime Minister Singh and Premier Wen of integrated economies operating in tandem in a globalised World can fructify. Basic differences in macro economic perspective including currency and lack of trust and transparency are some of the ills that financial managers of both the countries will have to overcome. More over basic economic structure and approach of the two countries is different. One is based on huge internal savings and driven by export driven growth while the other on internal accruals. These differences are reflected in trade imbalance, market restrictions and opaque investment climate that prevails and which will have to be overcome before India and China can speak in one voice on the global economic stage.

For China and India growing together while growing with the World to expand geo-economic clout amidst geopolitical competition is the challenge. The first step to meet the same has been taken in Beijing in September.

By Rahul K Bhonsle, Strategic Risk Analyst based in New Delhi and can be contacted at rkbhonsle@gmail.com