Sikkim border dispute: Another war with India will be an economic blunder for China

China isn't an indomitable economic force of the world anymore. Its growth is slowing. There are troubles brewing with the economy. The dragon is certainly vulnerable to global shocks, the evidence of which has emerged time to time in the past. Finally, China's position as the world’s manufacturing hub and a major exporter to the world is inseparably linked to maintaining its image internationally. These are reasons enough for China not to escalate tensions with India, its neighbour and a hard-to-ignore emerging economic powerhouse.

Going on a full-fledged war with India, over a small piece of land that doesn’t offer any long-term tactical or economic advantage to China, will be its big mistake.

For China, India is no longer a vulnerable, debt-laden neighbour that it was back in the 1990s. India has grown over years, has repaired its domestic fundamentals and now possesses capabilities in the areas of exports, manufacturing like any major country in the world. India has significantly strengthened its relevance among the regional groupings.

True, the Indian economy has its share of economic problems — a weak banking sector, complex land and labour laws and still shaping modern tax structure. But, despite these inadequacies, India is gaining the world’s attention for its future growth prospects. As against China's ageing population, India has a younger demography and the country is slowly laying the framework through a series of economic reforms to prepare itself for future growth path.

A recent Harvard study, testifies this. According to the study, India has emerged as the economic pole of global growth by surpassing China and is expected to maintain its lead over the coming decade citing that it is particularly well-positioned to continue diversifying into new areas, given the capabilities accumulated to date. Further, according to the Harvard University’s Center for International Development (CID) growth projections, India will feature on top of the list of the fastest growing economies till 2025 with an average annual growth of 7.7 percent.

Representative image. Reuters

Representative image. Reuters

"The economic pole of global growth has moved over the past few years from China to neighbouring India, where it is likely to stay over the coming decade," the CID research suggested, adding that India’s growth prospects are now better to also due to the economy diversifying its export base to include more complex sectors, such as chemicals, vehicles, and certain electronics,” the growth projection pointed out.

There are three specific reasons why China's economy managers should think twice before nodding in agreement with military for another war with India.

One, there is a high cost involved for the Chinese economy, particularly its manufacturing sector. It will face major setbacks on the trade front should it choose war with India. Right now, China has a positive trade balance with India. Total volume of bilateral trade stands at about $71 billion. In the last year, China exported goods worth $ 58.33 billion while Indian entities shipped out only over $ 11.76 billion. Clearly, China has an advantageous position in trade with India, which it wouldn’t want to spoil.

Second, India’s growing dominance in the world economy and its strengthening diplomatic relations with world powers makes it a bad idea for China to confront India attracting international attention. As the above mentioned Harvard study points out, the world has begun to take a strong note on India’s growth prospects and want to engage in a mutually benefitting relation with Indians. If the Sikkim standoff escalates to a war situation, China will certainly suffer on the trade relations with India’s ‘friends’ and ‘partners’ in trade. The question China should ask itself is whether winning the Doklam plateau where India and Bhutan have clear geographic dominance is worth risking its ambitions to grow as a major economic power in the east and hurting own economy.

Third, China is in the midst of expanding its economic reach in South Asia through its much-hyped China-Pakistan Economic Corridor (CPEC), which is critical to its One Belt, One Road (OBOR) initiative. A significant chunk of investments (at least $ 50 billion so far) have already gone to this project by Chinese companies. India has already expressed its displeasure to China on CPEC plan lay out since it crosses through the contentious part of Kashmir, which is occupied by Pakistan and claimed by India. One of India’s neighbor, Sri Lanka too has spoken in favour of India on this issue saying it is difficult for India to accept the CPEC since it passes through the 'heart of Indian interests'. China will further risk the fate of CPEC and OBOR in the event of a war with India.

In the event of a war, China's gains vis-à-vis the cost it will have to pay economically will be far too lower. Needless to say, India too will face a jolt in the economy. The point here is Chinese economy managers have a good reason to sit across the table with the warmongers in that country to think over the economic consequences of a war in a matured fashion. A war won’t benefit any side.

Updated Date: Jul 10, 2017 15:53 PM

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