Are China and India BFFs now?

0:00NPR

0:12June 2020. Dozens of Indian soldiers in winter jackets wade through a murky river, holding guns, poles and riot shields. They're in the depths of the Gulwan Valley in the Himalayas on a disputed border between India and China. Once the soldiers reach the other side of the river, there's some pushing and shoving with members of the Chinese army. Not a single shot is fired. There is a long-standing agreement not to shoot along the border. But at least 20 Indian soldiers are killed. A senior Indian military official told the BBC that Chinese soldiers used iron rods studded with nails to beat Indian soldiers.

0:53And Beijing said that four from its side were killed that day. Around this time, other skirmishes at the India-China border flare up. In response, the Indian government banned several Chinese apps, including TikTok. China blocked Indian news websites. Chinese imports into India were heavily scrutinized. Flights between the two countries stayed suspended for years. And despite all this, this summer, India's Prime Minister Narendra Modi was snapped grinning at an event in China, chatting with Chinese President Xi Jinping. This is right as the Trump administration plays hardball in trade talks with both countries.

1:32So this raises one big question, which is, are the U.S.'s steep tariffs pushing India and China together? This is The Indicator from Planet Money. I'm Adrian Ma. And I'm Darian Woods. Today on the show, can India and China be friends? We look at what could happen if two of the world's largest countries started collaborating more.

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2:51Terms and more at AppleCard.com. China is the world's second largest economy. It's the factory of the world. And it makes not all, but basically all of the world's refined rare earth minerals. Beijing made the world very aware of that recently when it put restrictions on their export. And India has the world's biggest population and a rapidly growing economy over the last few decades. It's a democracy that has a lot of economic potential if it were to follow in China's industrialization footsteps. And right now, the U.S. is trying to bend both of these countries to its will. And so if we have learned anything from Survivor, it's that alliances matter.

3:30And the relationship between China and India is of intense interest to the U.S. So we called up a China expert and an India expert. Both have a lot on right now. I'm so sorry. So sorry. I got a little delayed. I'm sorry about that, Darian. I was just finishing a call. Yeah, there's no lack of people wanting to know what is happening with these two countries. Yunsun is director of the China program at a think tank called the Stimson Center. And Milen Vaishniv is director of the South Asia program at the Carnegie Endowment for International Peace. We asked Milen what would happen if China and India were to become allies.

4:05You have to start out with population, right? I mean, this is essentially one-third of humanity that we're talking about, that if they were able to let bygones be bygones and work together, I mean, this is just an extremely powerful economic bloc. That could mean having more of a say in how international rules are set, or it could mean joining forces militarily. And our China expert, Yun Sun, says that more collaboration could help both countries economically. China is aging, and Yun says as China moves away from labor-intensive manufacturing, Chinese businesses could invest in new factories in India, share know-how, and build up a thriving manufacturing sector there.

4:48China could treat India as the destination for China to shift out some of its previous industries or components of the supply chain that is no longer competitive. And in recent months, there does seem to be some signs of warmer relations. Not just the cheery photos of Xi Jinping and Narendra Modi, but real changes, like flights have resumed between the two countries for the first time in five years. Our India expert, Milind Vaishnav, says there's three main reasons for this. First up, American trade policy pressure. India has been slapped with a 50 % tariff, so a 25 % tariff on exports and an additional 25%, ostensibly because India remains a prime importer of Russian oil.

5:37And so at 50%, they are at a huge strategic disadvantage relative to many of their other competitors, right? So I think China, of course, is also in a pretty serious trade standoff with the United States. So both of these countries now are looking for ways of hedging. Second, India's economy has cooled recently. So Millen thinks that the Modi government's rationale here is that, look, China is India's biggest trading partner. So let's do business and try to get out of the slump. And the third factor, easing China and India's relations, relates to that conflict at the start of the show. And it's the reason Millen thinks is actually the most important.

6:18There has been a noticeable easing of tensions in recent months on this disputed border, what we call the line of actual control, because both sides have quietly pulled troops back from the brink at several friction points. And there's been a kind of renewed effort to try and diffuse tension. So I think that really was the green light that policymakers were looking for to say, OK, let's start to talk about other things. Yun Sun, our China expert, says this border dispute has always been the sticking point between China and India. India became independent in 1947. China became independent in 1949.

6:59These two countries from day one has had a significant portion of their territory in dispute between them. The two major sections where there's the most controversy is in the west, where the clash in the Gawon Valley happened. And also in the east at the top of an Indian state where there's a region called Tawang. which is controlled by India. And a key fact about Tawang is that it's where the sixth Dalai Lama was born in the 17th century, which Yunsun says is one big reason why Beijing hasn't said that India has a legitimate claim to Tawang. So I think for China, if they give up Tawang, it will become a question as for whether China's claim of Tibet is legitimate if Dalai Lama historically was born in what is actually Indian territory, right?

7:46And these disputes became so hot that China and India even went to war for a month in 1962 with thousands of casualties. Basically, since then, I would say the China-India relationship had never really been on a collaborative or a friendly footing. That said, after the mid-1970s, there had not been any combat deaths between the two countries until that chaotic day in June 2020. Melin Vashniv says this incident put Indian opinions of China to its lowest point in more than a half century. There was just this real sense that we have a neighbor that is bigger and stronger than us and is essentially acting like a bully to try to get us to submit.

8:30And this is the time when we can't say, OK, we have a strategic dispute, but let's do business together. No, in fact, we have to treat both the economic and strategic as two sides of the same coin. Hence the travel suspension and the chill of Chinese investment into India. So overall assessment, can China and India be friends? I don't think so. I think what we're seeing right now is a kind of temporary marriage of convenience. I think both are responding to shifting global pressures, a change in their own bilateral relations. But I don't think they're on the precipice of somehow discovering for the first time some kind of mutual bonhomie.

9:15Yunsoon agrees. There have been other similar times of warming relations between the two states after all. I would say that we've been here before, but during the last round, it did not last very long. In other words, the ice is thawing, but winter might come again.

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