By Dr. Jingdong Yuan
Map Attribute: BCIM Map / Source : Centre for Policy Dialogue, Bangladesh
(Not part of the original publication)
Beijing and New Delhi are exploring new avenues for economic cooperation through regional and subregional arrangements. China has been an observer member of the South Asian Association Regional Cooperation (SAARC) since 2005, while India was granted observer status in the Shanghai Cooperation Organisation (SCO) in the same year. Both organizations seek to strengthen regional economic cooperation although neither has made significant progress so far. It is at the subregional and transregional levels, however, that Beijing in recent years has taken the initiative to push for greater connectivity to enable future infrastructural developments and economic cooperation.
In Indonesia in 2013, President Xi Jinping proposed the concept of a “Twenty-First Century Maritime Silk Road” that would start from Fujian’s Quanzhou, run through the Strait of Malacca, continue to Kolkata and across the northern Indian Ocean, then go on to connect Nairobi all the way to Europe. Together with the “Silk Road Economic Belt” (which Xi proposed during his visit to Kazakhstan), the concept of “One Belt, One Road” represents the ambition of the Xi–Li government to expand economic cooperation with the relevant countries, which combined have a total population of 4.4 billion and a GDP of USD 21 trillion – respectively, 63 per cent and 29 per cent of the global total. In 2013 China’s trade with these countries amounted to more than USD 1 trillion, approximately a quarter of China’s total foreign trade (Global Asia 2015; Zhu 2014: 13). Beijing has committed USD 40 billion for the Silk Road Fund and has invited India to join the undertaking. New Delhi has yet to decide whether it should join. Part of the hesitance is concern over Chinese intentions, as some in India suspect the “Maritime Silk Road” of being an economic version of the “String of Pearls” scheme. Nevertheless, Indian participation in the project would potentially help it draw much-needed investment (Nataraj 2015).
The BCIM (Bangladesh–China–India–Myanmar) Forum for Regional Cooperation has evolved from the Kunming Initiative, a Track-II activity that originated from a conference on regional cooperation and development between China, India, Myanmar, and Bangladesh that was held in in Kunming, the capital city of Yunnan Province, in 1999. The idea was to re-establish the old overland connection between China and India through Myanmar and Bangladesh by developing road, rail, and air transport link to facilitate flows of goods, investment, and people (Hussain 2014). The BCIM represents 9 per cent of the world’s landmass and 40 percent of its population. Due to various reasons, the initiative moved slowly. In 2012 the combined foreign trade of the four countries was USD 4.73 trillion, about 13 percent of the global total, while intraregional trade between the four countries accounted for about 5 percent, in comparison to the 35 per cent accounted for by intra-ASEAN trade. There are more than 440 million people living in the subregion covered by the BCIM: India’s Northeast, China’s Yunnan, Bangladesh, and Myanmar (Chen and Liu 2013). The idea behind the BCIM is to fully exploit the comparative advantages of the four countries, focus on the three types of connectivity – transport, trade, and people – through infrastructure development, resource exploration, market access, and reduction of non-tariff barriers – so that all would benefit from and work toward subregional economic integration (Rahman 2014). Writing in The Daily Star, a Bangladeshi newspaper, the Chinese ambassador pointed out the BCIM’s important location at the intersection of the “Economic Belt along the Silk Road” and the “Maritime Silk Road,” with the potential of combining the China–ASEAN FTA, India–ASEAN FTA, and the intra-ASEAN FTA into the world’s largest free trade area (Li 2014).
In 2012 the BCIM Business Council was established by the four countries’ most eminent national trade associations. During Chinese premier Li Keqiang’s visit to India in May 2013, the two countries noted -
the progress made in promoting cooperation under the BCIM (Bangladesh, China, India, Myanmar) Regional Forum. Encouraged by the successful BCIM Car Rally of February 2013 between Kolkata and Kunming, the two sides agreed to consult the other parties with a view to establishing a Joint Study Group on strengthening connectivity in the BCIM region for closer economic, trade, and people-to-people linkages and on initiating the development of a BCIM Economic Corridor. (Ministry of External Affairs 2013)
The BCIM Economic Corridor would allow the four countries to exploit and benefit from the existing complementarity in their respective natural endowments, especially in energy, transport, and trade (Sahoo and Bhunia 2014). Already, China’s Yunnan Province is teaming up with India’s West Bengal in promoting business opportunities, and seeking to be the engine of the BCIM-EC. This follows a similar partnership between Guizhou Province and Andhra Pradesh in a USD 3.5 billion projects in the Kakinada Special Economic Zone located in Andhra Pradesh (Aneja 2015b). To a great extent, India’s Northeast, as a landlocked, isolated, and less developed area, would benefit from infrastructural development, greater exposure to trade, and the development of its rich natural resources. However, for decades, chronic insurgency, corruption, and political instability, along with security considerations, have basically meant that economic development in this region has never been given sufficient attention by New Delhi. The BCIM offers the prospect of changing that, but significant obstacles still need to be overcome (Bhattacharjee 2015).
However, for all intents and purposes, the BCIM remained on the drawing board for 14 years after it was conceived, until very recently, when it finally got recognition from New Delhi as a potentially critical part of its Look East Policy. It has now moved from the by-and-large Track-II format to an official forum endorsed by all four governments (although China and Myanmar have from the very beginning had more official involvement in the undertaking than have India and Bangladesh). The Singh–Li Joint Statement of May 2013 and the first intergovernmental study group meeting held in Kunming in December 2013 may have signaled the beginning of the next phase, but there remain considerable hesitance and reluctance on India’s part regarding this subregional cooperation initiative, for a number of reasons. It is concerned that opening up its Northeastern states to border transportation routes and trade may have security implications. Indeed, while infrastructural development in India’s Northeast could benefit from Chinese funds, New Delhi has so far been rather reticent on this and is not in favor of reviving the old Burma/Stilwell Road for security reasons. Updating the 312-kilometre portion of the Burma Road linking India’s Northeast and China’s Yunnan Province through northern Myanmar could cut transportation costs between China and India by 30 per cent. At the same time, the sheer power of China’s economy means any such subregional arrangement could be dominated by China and it is less clear what, if any, benefits will be gained by India’s less developed Northeast (Sahoo and Bhunia 2014; Anand 2014; Uberoi 2013; Basu Pratnashree 2013).
Meanwhile, New Delhi is also part of and has great stakes in the Bay of Bengal Initiative for Multi-Sectoral and Technical Cooperation (BIMSTEC) that connects India’s Northeast region (NER) to Myanmar, Bangladesh, Nepal, Bhutan, Thailand, and Sri Lanka. BIMSTEC was established in June 1997 and aims to promote cooperation among members in various sectors such as trade, energy, technology, transport, among others, and serves as a bridge between South and Southeast Asia. From a geopolitical standpoint, and given the economic complementarity, New Delhi would prefer the BIMSTEC over the BCIM, with the former also serving important interests of India’s “Look East” policy. Over the past five years, BIMSTEC trade with India has sustained a faster growth rate than that between the BCIM and India, although the BCIM’s share of trade with India remains larger than BIMSTEC’s. It is because of the slow progress in the BIMSTEC that the Indian government has begun attaching more importance to the BCIM (Sharma and Rathore 2015; Juergens 2014). With two intergovernmental JSG meetings already having been held, the four countries have agreed to focus on the following seven areas: connectivity; energy; trade; finance and investment; human development and poverty alleviation; sustainable developments; and people-to-people contacts. Initial estimates put the total costs of BCIM projects at USD 22 billion (Vaid and Maini 2015).
Recent reports suggest that New Delhi may have finally decided it is time to overcome and manage some of the strategic concerns that had kept India from fully embracing the BCIM. With Modi now pushing an “Act East” policy as a replacement for the previous “Look East” policy, the potential benefits that the BCIM-EC can bring to India’s NER in economic development, peace, and stability seem increasingly promising. The 2,800-kilometre Kunming–Kolkata four-lane highway is nearly ready, with only 200 kilometers on the Indian side of the border left to be completed. Once open, this will greatly enhance the connectivity between the four countries, facilitating trade, investment, and the development of resources in this landlocked subregion (Hariharan 2015; Aneja 2015a). However, whether this will be realized is predicated on India’s assessments of the overall benefits and potential risks. China is likely to dominate whatever final economic arrangement agreed upon should the BCIM-EC move forward. At the same time, allowing Chinese inroads into India’s NER and access to the Bay of Bengal might enhance only Beijing’s geostrategic interests, potentially at the cost of India’s security interests. Indeed, New Delhi remains wary of China’s growing economic presence in South Asia as Beijing actively pursues its “Maritime Silk Road” strategy (Uberoi 2014; Anderson and Ayres 2015).
About the Author:
Dr. Jingdong Yuan is an associate professor and acting director of the Centre for International Security Studies at the University of Sydney, where he is also an academic member of the China Studies Centre. Professor Yuan specialises in Asia-Pacific security, Chinese defence and foreign policy, Sino–Indian relations, and global and regional arms control and non-proliferation issues.
Cite this Article:
Yuan, Jingdong (2016), Sino–Indian Economic Ties since 1988: Progress, Problems, and Prospects for Future Development, in: Journal of Current Chinese Affairs, 45, 3, 48–52.
Published by GIGA German Institute of Global and Area Studies, Institute of Asian Studies and Hamburg University Press in The Journal of Current Chinese Affairs which is an Open Access publication under the conditions of the Creative Commons Attribution-No Derivative Works 3.0 License.
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