Wednesday, 13 March 2013

‘Globalisation and the ‘Emerging Giants’ - China and India - Challenging the World: a Note’

‘Globalisation and the ‘Emerging Giants - China and India - Challenging the World: a Note  

By Dr. Sumit Roy* 

originally appearing in the EIAS Newsletter, November 2010 

Dr Sumit Roy is Visiting Senior Research Fellow, School of International Relations and Strategic 
Studies, Jadavpur University, Kolkata, India. This ‘Note’ is based on his Occasional Paper, 
‘Globalisation and the ‘Emerging Giants’-China and India,’ May 2010, published by the School of 
International Relations and Strategic Studies, Jadavpur University, Kolkata, India. Available on The author can be contacted at 

Globalisation, an historical process of interlocking nations, encapsulates a vision of a ‘world without 
borders.’ A key challenge is the political economy of the relationship between globalisation and the 
‘Emerging Giants’, China and India, underscored by structural transformation and their capacity to 
reshape national and global destinies. This approach captures their mounting power, pursuit of 
economic liberalisation and strategic ties. 

The Emerging Giants (EG) have been intensifying their hold on the world political economy. They 
account for about 40% of the worlds population and show high growth rates in recent years (China 
over 9% per annum and India over 8% per annum) set within a „centralised and a „mixed structure. 
Their strong position is underlined by the growth of their share of global GDP over time (from 16.4% 
in 1913, falling to 8.7% in 1950 and then rising to 12.59% average between 1985 and 1995 and 16.88% 
between 1995 and 2003 and forecast to surpass 40% by 2025-30). Stemming from the opening up of 
the EG through trade and Foreign Direct Investment (FDI) linkages, which are expected to be 
intensified, this is more marked in China than in India. EG trade, seen as a proportion of global GDP, 
rose from 1.1% (1990) to 3.6% (2004). China revealed a rise from 1% in 1990 to 2.8% in 2004 while 
Indias trade rose from 0.1% in 1990 to 0.8% in 2004.  

The importance of EG-world economic exchange is seen in the relative share of trade in domestic 
GDP. In 2008, China (40%) and India (30%) mirrored eachother in their sharply increasing demand for 
commodities, raw materials and manufactured goods. FDI, too, as a ratio of their domestic GDP, 
though more modest than trade, is expected to rise quickly, especially in China. The recent financial 

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crisis (2008) has adversely hit most countries, including the EG, but the latter, unlike developed 
countries, had positive rates of growth during this phase. There has been a gradual return in 2010 to 
their pre-crisis growth rates. Indeed, the EG, and especially China, are seen as a major force in lifting 
the world economy out of the recession. 

Forecasts see China as the second largest economy in the world by 2016 and India as the third largest 
by 2035. However, low per capita income, inequality and poverty in the EG are likely to persist over 
this time frame. By 2050, the total production in China is expected to be 60% larger than in the USA, 
with Indias being about equal with the latter. 

The EG have also been enhancing their political prowess through bilateral, regional and multilateral 
policies. Chinas foreign relations have been motivated by its desire for national sovereignty and 
territorial security, accompanied by a defensive military stance. Indias was circumscribed by Cold 
War priorities but, in the post Cold War era, it has been building strategic political and economic 
alliances at all levels. Intra China-India rivalries pose new tensions over regional and global security 
but they could pave the way, along with the existing powers (eg.USA), to re-order world order and 
peace. This has been accompanied by a call for more EG influence over policies on finance, 
development, trade and peace through the Bretton Woods institutions, i.e. the IMF, the World Bank, 
the WTO and the United Nations, as well as the G20 (which includes membership of developed (G8) 
and major developing nations). The urgency to overcome the recent financial crisis has reinforced the 
need to accommodate the EG more fully in such institutions. 

The future of the world, therefore, is irrefutably tied to that of China and India. Structural 
transformation has underpinned the integration of the EG into the world economy. This has been 
galvanised through market based domestic and external liberalisation, unfolding a shift from a „closed 
agricultural to an „open industrial and technological economy. 

Pre-liberalisation measures provided the context for liberalisation thrusts and enhanced or thwarted the 
latter. Chinese pre-reform measures created a strong basis for subsequent restructuring of the economy, 
resulting in high savings with significant capital formation, investment in infrastructure, health care, 
literacy and primary health care, and the virtual elimination of landlessness. In contrast, the pre-reform 
phase in India was marked by landlessness, poverty and inequality and relatively low rates of growth 
(4-5% per annum). 

Liberalisation in China was initiated in 1978, in the post-Mao era, with market-based thrusts in 
agriculture, industry and services, state-owned sectors and de-regulation of product prices. India
liberalisation, in the early 1990s, set out to restructure the economy selectively, initially the domestic 
and then the external sector, through intensifying the market. Essentially, liberalisation has been much 
more prominent in China, compared with India, through export-led growth and foreign direct 
investment in the framework of „strategic liberalisation. However, in both, debates on an undue 
curbing of the state and the prevalence of poverty, inequality and exclusion of specific groups (rural 
and urban poor, the marginalised, etc), due to liberalisation, have stressed that these problems have to 
be overcome. In the aftermath of the financial crisis, there is a global onslaught on the market and re-

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emphasis on the state, while being more cautious of ‘opening up’ economies. This is exemplified by the 
EG, which boosted state fiscal and monetary expenditure with reliance on the domestic sector to re- 
stimulate growth. 

Strategic ties of the EG with each other and with other regions are major drivers in boosting their long- 
term growth and political influence. This unfolds mutual cooperation to enhance their goals in spite of 
‘old’and „new economic, political and military tensions, while intensifying trade and investment links 
with developing regions, exemplified by Africa, as a source of raw materials (especially of energy) and 
markets, underscored by a shift from Cold War ideology and politics to Post-Cold War economic 

There is hope that the EG will usher in a more balanced and a more equal world. This, however, is 
fraught with new challenges. 

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China and India and Security: New Tensions by Sumit Roy

Global Policy Essay, March 2012                                                            

China and India and Security:  
New Tensions                                 

Dr. Sumit Roy 
Jadavpur University 

China and India – coined as the ‘Emerging Giants’ - face security challenges - ‘old’ and ‘new’ tensions; the former stemming from historical territorial disputes and the latter from mounting economic, military and political rivalries. This essay captures the nature of the ‘new’ tensions,   embedded in ties with nations in Asia and beyond, and the scope of inducing cooperation between both. This is underpinned by diplomacy to foster their relationship. The prospects of improving  understanding between the two nations and ushering in peace and development are posed. 

Policy Implications 
 Policy makers, in  China and India, should firmly emphasise 'economic' cooperation in the areas of 
trade and investment while confronting but diminishing the'political' issues stemming from border 
disputes through periodic ' Mini Summits'. 
 Policy makers in China and India should devise regular jointly conducted first hand studies of specific 
sectors (eg. agriculture, IT, services) to complement each other's short and long term economic 
development alongside periodic reports on any  border tensions and disputes. 
 Policy makers in China and India should stimulate the bonding of their relationship by pursuing mutual 
goals of bolstering their global influence through an 'Agenda of  Reform of international Institutions' via 
existing institutions (Bretton Woods) as well as 'newer' institutions (G 20 and BRICS (Brazil, Russia, 
India and China and South Africa) to revitalize controversial trade, finance, environment and security 
 International policy makers and developed country leaders should be allowed, when possible, to 
participate in the dialogues between China and India and lend support through concrete measures in 
the frame of global peace and development.  

Essay (first appearing in Global Policy)
The nations, which account for 40% of the world’s population, are seen as the ‘Emerging Giants’ (EG), destined to reshape future destinies in the frame of globalisation - a process underscored by compression, a ‘blurring of national borders,’ and transnational relations. In fact the two are ‘re- emerging’ powers. They had a major hold on the international economy in the 18th and the 19th 
century with 40% of global GDP. However, their share of global GDP  started declining in the 20th 
century from 16.4% in 1913 to 8.7% in 1950, rising to 12.59% (average between 1985 and 1995), and 
16.88% (between 1995 and 2003). Forecasts suggest that this trend will continue and the EG will 
regain their historical status with their share of global GDP exceeding 40% by 2025-30. Their 
recent economic prowess is seen in high growth rates - China 10.6 % and India 8.2 % over 2006-11 
(compound annual growth rate). Indeed, China will be the second largest economy in the world by 2016 and India the third largest by 2035. However, they will face key challenges such as poverty, low 
per capita income, and inequality.   

The relationship between China and India can be traced to the early years of the first millennium AD 
when contact along the emerging Silk Road led to an exchange of goods and ideas between South 
Asia and China. Anxieties, suspicions and conflicts between the two nations are of recent origin (i.e. 

Tensions - ‘old’ and ‘new’ - between China and India are embedded in ties with nations in Asia and 

China has more clout than India in south-east Asia. However, India is gradually making its presence felt 
in this sub-region. This surfaced in the intensification of China’s ties with Myanmar (formerly Burma). To enhance its influence, India launched in the 1990’s its ‘Look East’ policy. It is no longer marginal to either the regional politics of south-east Asia or the greater power system that shapes it. Indeed, it is increasingly focusing on security issues in south-east Asia in spite of China’s prominence. In South Asia, India has wielded more influence than China. However, the latter has been making inroads into countries such as Nepal and Bangladesh. This is exemplified by China’s role as the major supplier of arms to Bangladesh. Implicit and explicit suspicions in South Asia between India and Pakistan persist. 
Both are nuclear powers. This, understandably, arouses anxieties among nations within and beyond Asia. Of course, India has been somewhat uneasy about China’s military links with Pakistan. 
However, India and Pakistan are keen to initiate trade and cultural exchange to offset military and 
political rifts.  Beyond Asia, the relationship between China, India and the US is critical. Alongside, China and India are gradually building strong economic ties with 
Africa. This unfolds mounting competition  between the two Asian powers over markets and resources.  
The US could usher in convergence or divergence of interests in Asia. Washington and New Delhi 
share normative values - democracy and strategic interests - seen in their firm stand against terrorism. 
The US seeks to align with a major democracy - India, close to its global strategic interests, and a 
rising China. India, in response, seeks to bolster its links with the US to enhance its prestige and 
legitimacy as a nuclear power. At the same time India does not want to appear as challenging or 
threatening China. In the past, the US  has tried to pursue good relationship with both nations on trade 
and multilateral issues. It should be stressed that India’s desire to minimize tensions with China  may 
be thwarted by deep-rooted border disputes - China’s strategic interests with Pakistan. The 
anxiety of the US over Sino-Indian relations was expressed recently when James Clapper, a ‘US top 
intelligence official,’ reported in a testimony to the US Senate that the Indian army may be preparing 
for a limited conflict with China. The capacity  of  the US to balance geopolitics in the region requires 
careful and deft diplomacy.  

The China-India-Africa relationship suggests intense future competition over resources and markets, though China is ahead in the race.  

‘Old’ tensions are rooted in territorial disputes. These reveal conflict over Tibet in the 1950’s and 
deep suspicion over rival claims - India’s over Aksai Chin and China’s over Arunachal  Pradesh 
climaxing in the October 1962  war between the two nations. This has been the crux of mutual 
suspicions and anxieties. Despite the rhetoric of friendship, this can frustrate their long term 
relationship. Alongside, surprises and doubts arise from India’s relationship with Pakistan, and China’s 
support for the latter along India’s Kashmir and China’s Xinjiang province and Arunachal Pradesh, 
along India’s North East and Tibet’s South. Sadly, the war between China and India in 1962 and the 
breakdown of relations between the two nations  shattered Jawaharlal Nehru’s ‘Asian dream.’ This 
was based on his vision of both nations facilitating the rediscovery of Asia’s pride of place after years 
of living in the shadow of the West. After the 1962 war  India moved close to the Soviet Union while 
China reinforced its ties with Pakistan.     ‘New’ tensions stem from mounting economic, 
military and political rivalries. This, however, has been mingled with the desire to co-operate. This 
was intensified from the early 1990’s onwards with the onset of ‘liberalisation’, marked by a move from state to market-led policies and more exposure to the world economy. This approach was initiated in 
China in 1978 and in India in 1990.  

Trade relations have aroused much anxiety. Over the last decade, trade has been growing but the 
balance has been in China’s favour. The only direct trade link between the two nations was reopened 
after 44 years in July 2006 along the Nathu La Pass on the border between India’s Sikkim state 
and China’s Tibet autonomous region.  Bilateral trade has surged by 30% since 1990, when it was $ 
260 million; by 2006 it was $ 25 billion; by 2010 it went over $ 40 billion, and in 2011, it reached $ 
73.9 billion. It should be emphasised that China is India’s second largest trading partner. In textiles, 
for instance, it may soon overtake the US as India’s key partner. China accounts for 5% of India’s trade 
(volume). However, India accounts for only 0.8% of China’s trade (volume). Trade imbalance is 
certainly a major challenge. China has a trade surplus with India of over $ 4 billion but it has 
pledged to reduce the imbalance. The composition, too, reveals that India’s exports to China are 
primarily natural resources, such as iron ore and other minerals. In contrast, China’s exports to India 
are electronic goods, pharmaceutical products, and processed metals but the latter plans in the long 
term to shift towards higher value added exports. In this context, their ambitious trade target is laudable 
-$100 billion by April 2015. 

Despite the unequal exchange, the relationship could be enriched through satisfying mutual economic needs and sharing experiences.   

India could meet China’s growing appetite for raw materials (iron ore, steel and plastics) to feed its 
massive manufacturing sector. China in return, could furnish its manufacturing expertise and 
investment for Indian infrastructure. This has been welcomed as the sector needs overhauling. 
However, critics in India emphasise the lack of transparency (eg.high level of subsidies) and their 
anxiety over the sharply rising imports of clothes, electronic goods and even fireworks from China. It 
responded by citing India’s blocking of investments in ports and telecommunications due to alleged 
security concerns.  However, both have a genuine desire to co-operate. As the Chinese President  Hu 
Jintao emphasised, the relationship between the two was “an opportunity and not a threat”.  
Sharing experience, in an era of liberalisation, could usher in long term socio-economic 
development in both. They have to drastically improve the livelihoods of their poor. China’s 
industrialisation has been impressive: high domestic savings rate (43%), marked progress in 
building infrastructure, surging foreign investment, a vast reservoir of hardworking low cost labour, and 
meeting basic needs of its citizens. It is more attractive than India for most manufacturing but is 
weak in some fields - retailing, distribution, and professional services (eg. accountancy, medicine, 
consulting). India, in contrast, has been ahead in the services sector due to its highly skilled 
workforce in the scientific, technical, managerial, and professional areas, information technology, 
supported by its English language proficiency. It’s private sector, too, has been more positive about 
economic reform and globalisation. Indeed, it could support China’s expansion of ICT skills and 
participation in the global knowledge economy. Alongside, the hardware sector in India could be 
strengthened through collaboration with China. Such interaction could establish them as major 
players in global information technology. 

Overall, however, China is the new ‘Flying Geese’ in Asia the nation which takes the lead in trade 
and investment to stimulate regional growth - a status previously occupied by Japan.  

Military ambitions, however, heighten suspicions between China and India. This has been fuelled by 
differences in the level of expenditure on defence. For instance, in early 2011, China spent $ 95 billion 
on this critical sector in contrast to India’s $ 32.8 billion. This has intensified anxiety among 
neighbouring nations. At the same time, the expenditure of the major world power - the US - on 
defence was a much higher $ 700 billion. But it may still be feasible for China and India to increase their spending unlike developed nations, who are 
slashing public expenditure including military budgets in the aftermath of the 2008 financial crisis. 
Hence, they are concerned about the military plans of both nations and its impact on peace in Asia. 
Frictions have also arisen due to India’s apprehension about China building dams close to the Brahmaputra river. This, understandably, has military implications. However, both nations are 
keen to continue discussions over their tensions. This was firmly voiced at their Delhi summit in 
January 2012, when the wish to curb border disputes was explicitly emphasised. There have also been moves to advance military ties through joint action in international waters. Thus, China, 
India and Japan, the three independent patrollers against piracy, have started to coordinate their 
vigilance in the piracy infested waters off the Horn of Africa.  

Beyond regional rivalries, China and India are keen on bolstering their economic and political prowess 
on the international front. This is bound to be competitive but there is much scope of joining 
forces to confront major shared concerns. This rests on their vision of a ‘new world order’ by 
reshaping the nature of ‘global governance’ which centres on collective international policies. China 
could support India’s desire to get a seat on the Security Council. This could enable both to assert 
more influence on world peace and security. This gesture could also serve to improve mutual 
goodwill. Essentially, they have the capacity to inject realism into major trade, finance and 
developmental challenges - exemplified by trade negotiations - through the World Trade 
Organization. Wen Jiabao, who took over as the Chinese Premier in 2003,  called for more coordination between Beijing and New Delhi on multilateral trade to ensure a “fair, just and rational 
global trade regime”.  The financial crisis of 2008 and its aftermath, too, have given rise to their role, 
and especially that of China, in reviving the world economy. According to Wen, the governments and 
enterprises of both should intensify exchange, promote mutual understanding, and encourage 
beneficial cooperation. For instance, at the January 2012 Delhi meeting, they espoused such hopes 
agreeing to pursue dialogues on international affairs and safeguard the interests of poor nations.  
Optimism is aroused by China’s pledge to support and coordinate with India the hosting of the next 
BRICS (Brazil, Russia, India, China and South Africa) summit in India in 2012. 
Diplomacy has galvanised the exchange between China and India. This unfolds shifting phases - friendship, withdrawal, and renewal. In 1954, Nehru, India’s Prime Minister, visited China and put 
forward his doctrine of  ‘Panchsheel’ based on five principles of co-operation. He sealed a bond of 
friendship in 1954. However, this was abandoned after the border clashes in 1959. Chou Enlai visited 
India in 1960 and suggested that China would relinquish Aksai Chin if India gave up Arunachal 
Pradesh. This was rejected by India. The stalemate over the border issue has been a major hurdle. 
Relations languished in the 1970’s. Ambassadorial ties were restored in 1976. There was a thaw in 
relations over 1981-87. Rajiv Gandhi tried to resuscitate links in 1988. He was the first Indian 
Prime Minister since 1954 to visit China. The Panchsheel Declaration was revived. The Chinese 
Premier Li Ping visited India in May 1992 and he was followed by President Jiang Zemin’s in 1996. 
Such exchanges unfolded over the subsequent years. But relations were not normalised till 2008 
with more emphasis on economic co-operation.  The visit of the Indian Prime Minister, Manmohan 
Singh, to Beijing in January 2008, marked a major success in diplomacy.  A crucial document - ‘A 
Shared Vision for the 20th Century of the Republic of India and the People’s Republic of China’ - was 
signed by Wen Jiabao, the Prime Minister of China, and the Indian Prime Minister. They reaffirmed their resolve to confront ‘new’ and ‘old’ tensions.  The desire of both to tackle sensitive issues such as the perennial border dispute keeps re-surfacing during diplomatic dialogues such as the recent Delhi 2012 summit. This, however, is framed by their strategic and pragmatic priorities.  
Looking ahead, in an age of globalisation, cooperation on shared goals between China and 
India could gradually diminish suspicions and anxieties. This could enhance the prospects of 
peace and development and revive their historical ties. 


Acharya, A, ‘India-China relations.Beyond the bilateral,’ Economic and Political Weekly, April 2, 
BBC News, ‘India PM visits China for summit,’  February  14, 2008 
Cha, V.D, ‘Power play. Origins of the US alliance system in Asia,’ International Security,vol.34, No.3, 
Winter 2009/10 
Ghosh,  D.N, ‘India and China. Partnership or rivalry in a globalizing world,’ Economic and 
Political Weekly, December 25, 2004 
Lynn, G.G.H, ‘China and India: towards greater cooperation and exchange,’ China, An International 
Journal, 4,  September  2, 2006 
Mitchell, D.J and C.Bajpaee, ‘ China and India,’ Centre for Strategic and International Studies, Peterson Institute, USA, 2007 
Mohan,C.R, ‘India’s geopolitics and South East Asian security,’ Southeast Asian Affairs,2008 
Roy, S, ‘India and China: security challenges,’ paper presented at Chatham House, London,  
September  28, 2011  
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International l Relations and Strategic Studies, Jadavpur  University, Kolkata, India, May 2010. 
Available at 
Sen, A, ‘India versus China, The Telegraph,  Kolkata, India, May 26,  2011. Reprinted from The  
New York Review of Books 
Srinivasan, T.N, ‘China, India and the world economy,’ Economic and Political Weekly, August 
26, 2006  
The Times of India, ‘India bracing for China conflict: US intel head,’ Kolkata, India, February 2, 2012 
The Times of India, ‘Joint India-China op to nix piracy,’ The Times of India, Kolkata, India, 
February 2, 2012 
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Washington Quarterly, Summer 2007 

Globalisation and the 'Emerging Giants' - China and India and a New World Order? Lecture by Sumit Roy

ed: We are delighted to host some wonderful papers by Sumit Roy on our website, with his permission!   

This research acknowledges the support of the FP7 large-scale integrated research 
project GR:EEN - Global Re-ordering: Evolution through European Networks  
European Commission Project Number: 266809 

 Lectures & Seminars Series 


Globalisation is an historical process. Its contemporary phase is marked by 
compression of the world, a blurring of national borders, and interlocking of 
states driven by new information and communication technology and rapid 
transportation. This is underscored by a shift in emphasis from state to non 
state market led policies and the creation of a ‘new space’ which coexists with 
the nation state. A major challenge is grappling with the relationship between 
nations and globalization and its outcome for the domestic and the 
international economy. In this context the focus of this seminar is on the 
nature of integration of two major developing nations-China and India-coined 
the ‘Emerging Giants’-into a changing world. This unfolds their mounting 
economic prowess and their strategic ties- with each other, with nations in 
Asia and  beyond, and with international institutions. This is underpinned by 
measures in both to induce structural transformation. Insights emerge into 
their ushering in a new world order. 

Full Lecture 

Globalisation is an historical process. It envisages ‘a world without borders.’ 
This is underscored by removal of economic barriers (trade, finance and 
migration), interlocking of  nations, and compression of the world through 
information and communication technology and rapid transportation. It unfolds 
a shift from the state to the market with the emergence of ‘a new space’ which 
coexists with nation states desiring to integrate into the process while 
pursuing national sovereignty. The emphasis in the future is expected to be on 
the global level and on global institutions.    

In this frame this paper explores a major challenge-the political economy of 
the relationship between globalisation and China and India-coined the 
‘Emerging Giants’ (EG)-and their strategic vision to reshape national and 
global destinies underscored by structural transformation. This marks a 
resurgence of their historical powers through bolstering strategic ties with 
nations and institutions. This could pave the way for a new world order. 

The EG dominate the world’s population (about 40%). It exercised major hold 
on the world economy in the 18th and  the 19th century. Indeed, in 1700 their 
share of world income was 45.7 %: China’s being 23.1%  and India’s being  
22.6%. However, this started declining in  the 20th century: from 16.4% in 
1913 to 8.7% in 1950 but then rose to 12.59%  (average between 1985 and 
1995)  and 16.88% (between 1995 and 2003). Forecasts suggest that the EG 
will once again regain their grip and control over 40% of world GDP by 2025- 
30. Hence, the two nations can be seen as the ‘re-emerging’ powers. This 
arouses expectations of their reshaping the nature of development and 
security though this may be mingled with new anxieties and uncertainties. 

The mounting significance of the EG is mirrored in their high growth rate in 
recent years. This is underscored by their ‘opening up’  in the frame of  
different ‘models’ of development-‘centralized’ (China) and ‘mixed’ (India) 
economy. This is encapsulated in China’s recent rate of growth of over 9% 
and India’s of over 8% and EG trade as a % of global GDP rising from 1.1%  
in 1990 to 3.6% in 2004. The exposure of their domestic economy to external 
forces  is  marked by trade as a % of  domestic GDP  being about 40% in 
China and about 30% in India and  the hope that  FDI, though currently 
modest, will rise fast in the near future.  On this basis,  including FDI, China 
has been more dynamic than India. However, both need to confront a major 
challenge-poverty. China has made major strides compared with India. 
Approximately 8%  of  its population are under ‘the poverty line’ in contrast to 
India’s 28%. Indeed, China has been ahead of India in terms of meeting basic 
needs-nutrition, health, and education, but both face mounting inter-sectoral, 
inter-regional and inter-group inequalities. Amartya Sen, the Nobel economist, 
recently emphasized  that growth is necessary but it is critical to lift poverty on 
all fronts. Certainly, India and China can learn from each other’s experience. 
‘Public policy,’ according to Sen, has to support the goal of poverty alleviation 
(New York Review of Books, 2011).  This, however, requires uncovering the 
nature of  ‘public policy.’ This is intrinsically tied to the character of the state 
and its capacity to cater for diverse and often conflicting interests. eg. the rural 
and the urban poor, including the landless and small peasants and the urban 
marginal, as well as the middle and the large landowners, small, middle and 
large industrialists (domestic and foreign), and  bureaucrats and professionals. 
Hence, the struggle between different socio-economic groups to influence the 
state is inseparable from  ‘public policy’ and  its  implications for growth and  

The EG, moreover, were able to withstand the financial crisis (2008), coined 
the ‘Great Recession’ which adversely hit most nations. The EG could revive 
their pre-crisis rate of growth with optimism on pursuing this in the future. 
However, more recently, from early 2011 onwards, there is anxiety of a 
‘second recession’  stemming from a financial crisis re-surfacing  in US and 
Europe –exemplified by a rise in their debts, a fall in the rate of growth, and a 
rise in unemployment. This in turn could adversely affect the world economy. 
In this respect, despite their  aspirations the EG  need to tackle poverty and 
inequality. China is forecast to be the second largest economy in the world by 
2016 and India the third largest by 2035.  By 2050  total production in China is 
expected to be 60% larger than in USA with India matching the latter. But low 
per capita income, poverty and inequality in the EG are likely to bedevil the 
Asian nations. 

The crisis (2008) highlighted the critical role of the EG in not only being able to 
sustain their growth but also being pivotal in supporting recovery of the world. 
Indeed, they are seen as the engines of growth in the future. China, with 
reserves of about $ 3 trillion, has been under pressure, especially from the 
USA, to curb imbalances between debtors (developed countries) and creditors 
in the world. The need to revalue the Yuan has been emphasized on the 
premise that it is overvalued. This has enabled China to boost its exports 
while curbing imports from developed countries. There has been a call for her 
to re-focus on stimulating domestic demand compared to the previous 
emphasis on exports. This could lead to an increase in her imports and hence 
the exports of developed countries. Indeed, China is seen as a possible 
‘saviour’ of the recent (2011) financial crisis in Europe and US. But it has 
challenged such notions. Its politicians have firmly asserted that as these 
regions are responsible for the problems they should  resolve them.   

The crisis (2008) made it abundantly clear that the mounting economic 
prowess of the EG has to be accompanied by matching political influence. 
This should mirror the gradual shift in the balance of world power. This has to 
go beyond simple technical reform such as marginally increasing the quota of 
the EG in the Bretton Woods institutions.  This is likely to create new 
opportunities and challenges. The existing powers are unlikely to voluntarily 
curb their own hold over world affairs.      

The strategic vision of the EG  has galvanized their urge to reshape national 
and global destinies. This has rested on remoulding their economic, political 
and military relationships on several fronts-with each other, with other nations 
in Asia and beyond, and with international institutions.   

First, the  urge to curb ‘old’ (pre-1990) and ‘new’ (post 1990) tensions 
between China and India  –the division based on the era before and after 
economic liberalization measures in India which  intensified such measures 
from 1990 onwards. Essentially, the ‘old’ tensions stemmed from inter China- 
India rivalries and suspicions, rooted in military and territorial disputes while 
the  ‘new’ ones were due to rivalries and competition in the world markets. 
Both nations have been increasing their expenditure on defence in spite of the 
financial crisis ie. China ( $ 95 billion) and India ( $ 32 billion).  This could 
worsen tension and insecurity in Asia with adverse effects on the rest of the 
world. At the same time dialogue and diplomatic exchange between China 
and India have underscored long term targets to boost trade and investment 
while minimizing potential historical threats to security. Indeed, at the bilateral 
meeting between China and India in April 2011, both agreed on a trade target 
of $ 100 billion by 2015, and, China pledged to reduce the trade imbalance 
between the two nations which has been tilted against India.  

Second, the EG have also been actively enhancing their relationships in Asia 
and beyond– with  South East Asia and the Pacific (eg. Thailand, Malaysia, 
Burma, Japan), developing (eg. Africa) and developed (eg. US, Europe) 
regions.  This unfolds the EG building on their past links with developing 
regions through bi-lateral and institutional exchange in Asia (SAARC, ASEAN 
and APEC) and in Africa (AU). This has aroused frictions as China exercises 
more power in S.E. Asia while India has greater influence in South Asia. 
Moreover, the triangular relationship-China, India and US-impinges on such 
exchange. Both China and India have been vying for the support of the US in 
their regional policies in Asia. But at the same time they do not wish US to be 
dominant in the region. The latter may see India as a balancing force in Asia 
in the context of  China’s mounting power. 

The EG relationship with developing regions outside Asia-exemplified by 
those with Africa- are of increasing importance. This has been growing since 
the early 1990’s  driven by the desire to accelerate industrialization through 
access to scarce raw materials (eg. energy) and new markets. This has been 
galvanized by a shift in the EG policies from politics and ideology, reminiscent 
of the Cold War, to economic development in the Post Cold War era. The 
scope of this ushering in economic diversification and development in Africa is 
dependent on the extent to which the relationship is a balanced one. Again, 
rivalries and competition between China and India over access to resources 
(especially energy) and markets have surfaced. African nations and 
institutions have to devise appropriate and timely policy responses to 
maximize their own goals. ‘South-South cooperation’ with the EG could 
enable Africa, and other developing regions, to break away from dependence 
on developed nations.   This is exemplified by BRICS (Brazil, Russia, India, 
China and South Africa) which could form a pressure group to emphasise 
policies which  favour developing regions. Developed regions, of course, may 
respond by re-thinking and reshaping their economic and political strategies 
with developing regions to protect and enhance their  own interests. 

Third, the EG could be pivotal in reshaping global policies through 
international institutions. They could confront the key challenge plaguing 
developing nations-inadequate voice in financial, economic, climate change 
and peace keeping. This impinges on initiating genuine ‘global governance’ 
through drastic reform of the institutions-IMF, World Bank, the WTO and UN, 
and embracing the more recent G 20 ( comprising developed and rising 
developing nations). This should encapsulate the aspirations of nation states 
and non state actors-local and community based institutions and social 
movements. These may work with, against, or beyond the state  through cross 
border cooperation.  India, supported by China and developing nations, could 
enhance its role in this process by satisfying its long cherished desire to get a 
seat on the UN Security Council. The financial crisis, certainly, has intensified 
the urgency of ensuring that policies of international institutions mirror the 
wishes of the EG.  Of course re-configuration of the global political economy 
may arouse new political, military and security anxieties between and within 
the existing (eg. US)  powers and the EG.  Institutions such as BRICS (Brazil, 
Russia, India, China and South Africa) could be supportive in reforming 
international institutions. However, this is questioned by sceptics. The 
separate and often conflicting pursuits of the individual members may reign 

It is essential to unravel the forces driving the mounting power of the EG and 
their capacity to sustain their growth momentum. This rests on structural 
transformation of their economy though based on different political economy 
‘models.’ This uncovers a shift from a ‘closed’ agricultural to an ‘open’ 
industrial and technological society using market forces to usher in domestic 
and external liberalization. This encapsulates curbs on state intervention with 
the price mechanism  guiding production, distribution and consumption.  

A grasp of the pre-liberalisation era  captures the conditions which either 
eased or thwarted subsequent measures. The Chinese pre-liberalisation era  
saw the establishment of a firm basis for executing reform-a high savings level 
with significant capital formation, investment in infrastructure, health care, 
literacy and primary health care, and the virtual elimination of landlessness. In 
contrast, the Indian pre-reform era was marked by landlessness, high levels of 
poverty and inequality, and relatively low levels of growth (4%-5%). 

The ideology of liberalization to place emphasis on the market was 
propagated by the ‘Washington Consensus.’ This was rooted in reducing the 
role of the state in the economy and emphasizing  the market to allocate 
resources set in the context of ‘opening up’ and removing  barriers to trade 
and investment. This influenced the EG. But they evolved their own versions 
under varying levels of domestic and external political pressures which 
supported or opposed liberalization. It emerged in China in 1978 (in the post 
Mao era) unleashing the use of markets in agriculture, industry and services, 
state owned sectors, and de-regulation of product prices.  

Liberalisation  surfaced much later in India- in the early 1990’s- to selectively 
use markets in the economy. The measures have been much more extensive 
in China than in India based on export led growth and foreign direct 
investment based on ‘strategic liberalisation’ which emphasized domestic 
priorities. However, in both the curbs on the state and reliance on the market 
has aroused controversy. This was due to exclusion of the poor and the 
marginalized and worsening of inter-regional inequality in spite of the 
professed benefits of the new approach.  

Liberalization in China has been applauded due to a marked withdrawal of the 
state in the economy and Maoist ‘centralised planning’ which were seen as 
shackles on development. At the same time it is alleged that political 
liberalization-exemplified by a lack of democracy and ‘human rights’-has yet to 
unfold in China. This requires balancing economic and political rights. India’s 
liberalization has been more gradual and protective set in a more ‘democratic’ 
system with diverse interests moulding policies. However, it too faces 
challenges including dissatisfaction of  groups  in particular regions and 
internal terrorism. Looking into the future it remains to be seen if  both nations 
will be able to retain their growth momentum and whether India will  be able to 
overtake China. 

In the aftermath of the ‘Great Recession’ of 2008 the debate on the role of the 
state versus the market and the extent to which an economy should be ‘open’ 
has re-surfaced in the EG and in the world economy.  There has been an 
onslaught on the limits of the market and the need to re-emphasise the state 
in structuring policies at the national and the international level and the pitfalls 
of rapidly ‘opening up’ economies. In fact state expenditure-fiscal and 
monetary-coupled with stringent regulations over financial transactions have 
been key factors in stimulating growth after the financial crisis.  This is 
illustrated by the use of ‘stimulus packages’  in the EG and developed 
countries to revive the economy, with the former  explicitly focusing on  
domestic rather than external demand. The crisis has led to fresh debates on 
the relevance of the ‘Washington Consensus’ and neo-liberal approaches and 
the scope of evolving a ‘Beijing’ or even a ‘Delhi Consensus.’ This impinges 
on a shift in the balance of power in the world. 

The future of the global political economy is intrinsically tied to the role of the 
rising powers. Hence, they are likely to occupy the centerpiece in the pursuit 
of development and security in the world. This could enable them to have a 
major influence in guiding national and global destinies. This  makes it 
essential to usher in genuine ‘global governance’ by revamping the role of the 
state and the market and  international institutions while encompassing non 
state actors -exemplified by social and community institutions and movements. 
No doubt the rise of the EG will induce opportunities and create tensions 
between themselves and with developed nations. China’s potential, in 
particular, as an economic, political and military power, is likely to be 
challenged by its neighbours and by dominant nations. The US, specially, may 
fear its diminishing role and hegemony in international affairs. This may 
frustrate the ambitions of the rising powers. In essence, the vision of  China 
and India ushering in a new world order  poses major challenges. These may 
unfold in unpredictable ways. 

* The researcher  is a Visiting Senior Research Fellow, School of lnternational 
Relations and Strategic Studies, Jadavpur University, Calcutta, India. This brief paper 
captures the themes he discussed in a seminar in the Department of Politics and 
International Studies, University of  Warwick, UK, on 10th October, 2011.  It draws on 
his ongoing research on China and India including  
seminars  at Chatham House, London (28th September and 27th July 2011) and  the 
Contemporary India  Study Centre, University of Aarhus, Denmark (20th September, 
2011), and lectures (over 2008-2011) at  the universities of Jadavpur and Calcutta  
(India), Manchester (UK), and the Nordic Africa Institute (Sweden). His research 
paper on globalization and China and India is available on His email is 

Juxtapose now supported by Davis Foundation Scholarship Fund!

We are proud to announce that our conference will now be supported by the Davis Foundation Scholarship Fund for Chinese Studies in addition to the Wolfson South Asia Research Cluster!