Both China and India are Asian giants and have begun to exercise immense influence in international political and economic affairs. Political and economic relations between India and China are much better now than these have ever been since the 1962 border war between the two countries. Mutual economic dependence is growing rapidly and bilateral trade is expected to cross US $40 billion this year. However, the strategic and security relationship has failed to keep pace. Despite prolonged negotiations at the political level to resolve the outstanding territorial and boundary dispute between the two countries, there has been little progress on this sensitive issue, a reality made much more stark by China’s settlement of its border row with Russia earlier this year.
 
On April 11, 2005, China and India announced a new ‘strategic partnership” after a summit-level meeting between Prime Ministers Manmohan Singh and Wen Jiabao. International analysts were quick to note that the prospects of a more cooperative relationship between these two growing economies had significant global implications.

The rapidly growing appetite of both the countries for energy and their high dependence on oil and gas imports is forcing both to secure oil equity abroad and Chinese and Indian oil and gas companies have often been in competition with each other to invest in overseas fields. A strategy based on cooperation rather than competition will help both the countries to secure better terms and will enable them to share their risks. They could follow a consortium or joint venture approach for bidding and invest in sharing infrastructure costs such as building joint pipelines.

China and India’s coordinated approach in international negotiations is proving to be mutually beneficial to both. When two countries that represent more than a third of the global population speak in unison, as has been seen in their coordinated approach in WTO negotiations and on environmental issues, the world has no option but to sit up and take note. China and India have played a calming role in the ongoing global financial meltdown. They must together seek the long-pending reform of the international financial architecture. As both the countries hold substantial foreign exchange reserves, they can and should play a greater role in decision-making in the Bretton Woods organisations.

Reform of the UN Security Council (UNSC) is yet another area for cooperation. Just as India had played a very positive role in China’s membership of the UN and its subsequent inclusion in the UNSC, China should support India’s aspiration for a seat in an expanded UNSC. This will quite naturally increase Asia’s clout in world affairs. Counter-terrorism is another area in which China and India can cooperate for mutual benefit as both countries are victims of pan-Islamic fundamentalist terrorism emanating from across their borders. Both also need to work together to counter the menace of narcotics trafficking from the Golden Crescent on one side and the Golden Triangle on the other.

In the Indian perception, there are several areas of lingering concern. The foremost among these is the “all-weather” friendship between China and Pakistan that is said to be “higher than the mountains and deeper than the oceans”. The Indian government and analysts are convinced that China has given nuclear warhead designs and missile technology as well as fully assembled, crated M-9 and M-11 missiles to Pakistan, as has been widely reported in the international media. China and Pakistan are also known to have a joint weapons and equipment development programme that includes Al Khalid tanks and FC-1/JF-17 fighter aircraft. China’s military aid has considerably strengthened Pakistan’s war waging potential and enabled it to launch and sustain a proxy war in Jammu and Kashmir and in other parts of India.

Other contentious issues include China’s continuing opposition to India’s nuclear weapons programme; its deep inroads into Myanmar and support to its military regime; its covert assistance to the LTTE (Liberation Tigers of Tamil Eelam) in Sri Lanka and increasing activities in the Bay of Bengal; its attempts to isolate India in the ASEAN Regional Forum (ARF); and, its relentless efforts to increase its influence in Nepal, Bhutan and Bangladesh. China’s efforts to develop port facilities in Myanmar (Hangyi), Sri Lanka (Hambantota), Maldives and at Gwadar in Pakistan are seen by many Indian analysts as forming part of a “string of pearls” strategy to India the ability to dominate the northern Indian Ocean region. Hence, these moves are seen to be part of a carefully orchestrated plan aimed at the strategic encirclement of India in the long-term to counter-balance India’s growing power and influence in Asia, even as China engages India on the political and economic fronts in the short-term.

As both China and India are nuclear-armed states, it is in the interest of both to ensure that strategic stability is maintained and that the risk of accidental or unauthorised nuclear exchanges is minimised. This is possible only if negotiators from both the sides sit down together and discuss nuclear confidence building measures (CBMs) and nuclear risk reduction measures (NRRMs). However, China’s insistence that it cannot discuss nuclear CBMs and NRRMs with India as India is not a nuclear weapons state recognised by the NPT is proving to be a stumbling block. China’s official position is that India should roll back and eliminate its nuclear weapons in terms of UNSC Resolution No 1172.

That is unlikely to happen, especially when India has now been given a backdoor entry into the NPT through the NSG waiver and the IAEA safeguards agreement as it has been recognised as a responsible state with advanced nuclear technology. India has also signed civil nuclear cooperation agreements with France and the US and is likely sign one with Russia in December 2008. It would be in the interest of both the countries to discuss nuclear CBMs and NRRMs so as to enhance strategic stability in Southern Asia. It is also in China’s interest to enter into a nuclear trade agreement with India as India is rapidly emerging as a large market for nuclear fuel and nuclear technology.

India is conscious of the fact that India’s growing external relations with its new trading and strategic partners are causing some concern in China. China has viewed with some suspicion India’s willingness to join Australia, Japan and the US in a “quadrilateral” engagement to promote shared common interests. China also wishes to reduce what it perceives as the steadily increasing influence of the US over New Delhi. China knows that the US is several years ahead of Beijing in recognising India's potential as a military and economic power and has greatly increased its cooperation with India in both spheres. However, India has always pursued an independent foreign policy and cherishes its strategic autonomy. It will be recalled that India steadfastly supported the Non-aligned Movement (NAM) for several decades during the Cold War and has never entered into a military alliance with any country.

Hence, India’s newfound strategic relationship with the US need not come in the way of China-India relations, which have their own strategic significance for India. Of all the areas of concern between the two countries, it is the long-standing territorial and boundary dispute that is the most disconcerting. The poor security relationship has the potential to act as a spoiler in the larger relationship and will ultimately determine whether the two Asian giants will clash or cooperate for mutual gains.