ISAS Special Report
22 November 2012
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KEYNOTE SPEECH BY EMERITUS SENIOR MINISTER GOH CHOK TONG AT THE INSTITUTE OF SOUTH ASIAN STUDIES (ISAS) EIGHTH INTERNATIONAL CONFERENCE ON SOUTH ASIA HELD ON THURSDAY, 22 NOVEMBER 2012, AT 10.05 AM AT THE GRAND COPTHORNE WATERFRONT HOTEL
INDIA-CHINA COOPERATION FOR GLOBAL GOOD
Mr S R Nathan
Former President of Singapore Ambassador Gopinath Pillai
Chairman, Institute of South Asian Studies National University of Singapore
Excellencies
Distinguished Guests Ladies and Gentlemen
1 The Institute of South Asian Studies has chosen a very timely and pertinent theme for this year’s conference: “India-China Cooperation for Global Good”.
2 China and India have awoken from their long economic slumber to become the growth stories of this century. Their relationship will affect all of us in Asia, and indeed the world. I hope that over the next two days, you will throw up some strategic and practical ideas for India and China to cooperate for the global good.
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3 Let me start by posing some questions: at a time when the world is experiencing strong headwinds - the US fiscal cliff, the Eurozone crisis, and tensions in the Middle East to name a few, - what should we realistically expect from China and India?
4 How do we see their future? Is it one of great promise and abundant opportunities? Or one fraught with insurmountable domestic challenges and the risk of conflict with other countries as they grow in power?
5 I am inclined to believe that China and India would want to focus on economic growth to lift the living standards of their peoples, rather than pursue external forays which will distract them from this goal. In China, the legitimacy of the Chinese Communist Party will depend largely on its ability to deliver a better economic livelihood for its people; in India, the ruling parties will be voted out if they fail to do likewise.
The Transformation of China and India
6 The transformation of China from the late 1970s, and India from the early 1990s, has been driven by a confluence of powerful forces: those of geopolitics, globalisation, and socio-economic change in both nations.
7 Both are great civilisations that have withstood the ebbs and flows of history. In more recent times, the end of the Cold War and the advent of what American author Thomas Friedman describes as “a flat world” have catalysed their resurgence.
8 Both governments made the tough decision to open up their economies and embrace globalisation to dramatically transform their countries.
9 However, the results we see today are the product of two very different models of growth. The China model features a socialist market system that promotes strong public spending, state-owned enterprises, massive infrastructural investment and an export-oriented global manufacturing base. The India model features a democratic federal system and an economy powered by domestic consumption, private companies, high-tech manufacturing and a strong services sector.
10 Each model has its own strengths and weaknesses. But the goals are roughly the same, and the outcomes largely similar – vast improvements in standards of living, greater social mobility and better infrastructures.
11 China and India’s transformation is still very much work in progress. In that sense, their best years are still ahead of them.
3 The Internationalisation of China and India
12 The opening up or “internationalisation” of China and India has already benefitted the world. It has expanded the global economic pie and increased international trade. In the wake of the 2007-8 financial crisis, the world looked to China and India to provide economic ballast. Today, together they account for more than half of global economic growth. And their soft power is felt internationally.
13 China and India’s growth is a boon for many countries around the globe. A wider choice of everyday products manufactured in these countries fills our shelves. They are buying commodities, minerals and manufactured products from all over. And air travel has brought more Chinese and Indian tourists to our shores.
14 China and India’s rapid growth has also resulted in a rebalancing of the global economy in favour of Asia. Companies and jobs have migrated to Asia where goods and services can be produced most competitively. China has become known as the “factory of the world” and India the “back office of the world”. But they will not stop at that. As both economies become more developed, we can expect to see more types of jobs move into China and India, while the less competitive ones in these countries may move out to elsewhere.
15 I suspect most of us worry more when China’s and India’s growth starts to slow than when they are expanding annually at rates of 7.5 to 10.5 percent on average1, thereby posing a competitive threat. The downstream impact on other regional economies, in trade, investments, equity markets and ultimately employment prospects, is far-reaching as our economies are now more linked to these two countries. Indeed, the effects of slowing growth in China and India are already being felt in Singapore.
16 The question is: will China and India continue to grow strongly? My opinion is that they will, at least over the next 20 years, the many grave challenges notwithstanding.
17 They will grow by continuing to move up the value chain. There is still slack in their economies. They are performing nowhere near their full potential. They have a huge talent pool that can make the technological leap. There will be more mega-cities besides Mumbai and Shanghai. Villages are fast becoming sub-urban centres of economic growth;
and many rural areas are still waiting to be developed.
18 Their middle class is expanding and becoming more affluent, and this will augment their already huge markets. Forbes2
1 Source: World Bank. Average GDP growth from 2007 to 2011 for China and India.
predicts – perhaps a little optimistically in my view – that there could be as many as 2.5 billion Chinese and Indians in the middle class bracket by 2030, compared to 780 million in the US and Western Europe combined.
2 Source: Forbes, 9 May 2011.
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19 This is not to say that China and India will rise and rise without interruption.
They face considerable domestic challenges. Some are already on the horizon and will be common to both. Ensuring inclusive and sustainable growth will be a major preoccupation for many years to come, and eradicating corruption will be an uphill task for both.
20 India is at an inflexion point. The weight of its problems recently compelled Prime Minister Manmohan Singh to re-set India’s path with bold, new economic reforms. I hope he will not lift his foot off the accelerator.
21 China, on its part, is also aware of the limitations of its current export-driven model of development. Transitioning to a model that emphasises sustainable growth and increased domestic consumption will be a key responsibility of the incoming leadership helmed by President-elect Xi Jinping.
22 I am nonetheless confident that both countries will continue with their economic reforms – not dramatically but steadily. I have visited China and India many times, and have met many of their leaders, senior government officials and industry captains. They are clear about the scale and degree of difficulty in the challenges that are before them.
23 I remember clearly how Premier Wen Jiabao once explained to me the magnitude of China’s problems through the concept of ‘division and multiplication’. China’s wealth and resources, he told me, become very small when divided by 1.3 billion people, while a small problem becomes huge when multiplied by 1.3 billion.
24 Prime Minister Singh also demonstrated a similarly astute understanding of his country’s manifold challenges. He has wisely observed that “the world is not kind to those who do not tackle their own problems”.
25 I don’t wish to leave you with the idea that the near-simultaneous rise of China and India will continue to progress in a linear fashion, or is without any risks or surprises. In fact, their continued rise may even, at times, be discomforting for us. Let me elaborate.
26 The most obvious risk is that as they continue to forge ahead, the rivalry between the two giants could intensify. Both countries are nuclear weapon states that are rapidly modernising their armies and air forces. Both are also building up blue water naval fleets.
The historical baggage and deep rifts over longstanding border issues remain.
27 The 1962 Sino-India War still casts a long shadow and continues to bedevil their relationship 50 years on. Thankfully, there has been no major confrontation since.
28 There are those, perhaps even some in this audience, who would argue that despite numerous cooperative elements and similarities in their approach to international issues, China and India are bound or even destined to be strategic adversaries. Such determinism is, I think, misplaced.
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29 Competition between rising powers is unavoidable; conflict is not. Of course, neither side would want to cede any strategic advantage to the other. They will “keep the powder dry” for all eventualities. But I think we should give due credit to China and India for having co-existed peacefully, while trying to bridge their differences over the last few decades.
30 Today, a war across the land borders is much less likely compared to 50 years ago.
But there will be occasional blips for sure.
31 The gap between China and India is widening in some respects, narrowing in others. It is a fact that China had a decade-long head start on its economic reforms. But it is equally true that change in China tends to happen more quickly than in India. The Indian system, with its decentralisation of power, means that change is uneven, far less swift and that political consensus is difficult to muster.
32 But this is not a race with a finishing line and India will find its own way to keep pace with China.
33 There is also an element of irony here in that the tandem rise of China and India could unnerve their neighbours. Countries don’t say it openly, but giants naturally inspire wariness. States know there is often a price to generosity; largesse from a titan is never unconditional. Interdependence yields benefits and is certainly preferred to conflict. But there are also attendant costs and strings attached to cross-border collaboration. Put simply, there is no free lunch in inter-state relations.
34 Countries routinely hedge to maximise their political or economic space. But they know that when there is a quarrel or skirmish or conflict between two “big brothers”, they can easily be dragged into the fray or forced to choose sides. Very few governments would want to be in that sort of dilemma.
The Cooperation of China and India
35 This is why no country in this part of the world wants to see India and China at loggerheads. A peaceful and collaborative relationship between a powerful China and a strong India is ultimately in everyone’s interests and to everyone’s benefit. And I believe Chinese and Indian leaders know this to be true too.
36 Decades of conscious and careful efforts to maintain cordial ties are already bearing fruit, particularly in the economic sphere. From 1988 to date, trade between China and India jumped from US$200 million to more than US$55 billion in the first ten months of this year. Both sides have targeted US$100 billion in bilateral trade by 2015.
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37 Apart from commerce, the Chinese and Indians share common interests in traditional challenges such as piracy and energy security; non-traditional challenges like cybercrime, food security and climate change; and safeguarding of global public goods like freedom of navigation.
38 However, the competitive dynamics between China and India will not go away.
So the real issue for policymakers is how they can forge cooperation - with each other and with others - for their mutual benefit and for the global good. Is there scope for them to be engaged in healthy competition, preferably within institutionalised frameworks, so that they can pursue their legitimate interests, without destabilising the international system?
Strategic Leadership
39 There are no easy answers to such questions. But it is clear to me that one of the keys lies with both sides exercising strategic leadership.
40 A new generation is assuming the mantle of leadership in Beijing and New Delhi.
Last week, China underwent a once-in-a-decade leadership transition. President-elect Xi Jinping and Premier-elect Li Keqiang are taking over the helm. All eyes will be on who will lead India following the next general elections in 2014, if not earlier. Expectations are for a leader from the younger generation to do so.
41 The new generation of leaders in China and India will face tremendous pressures from all directions – their political supporters, Opposition voices, the grassroots, interest groups, NGOs, media, and foreign governments. The trade-offs will be even more difficult to make than those their predecessors faced. To deal with these pressures, leaders will need to transcend national and even local politics. They must not succumb to populist, nationalistic or xenophobic and even protectionist compulsions.
42 Here again, let me cite Sino-India relations as a case in point. There are many emotive issues involved, and the wounds of the past have not fully healed. But I believe the leaders on both sides are rational. Neither side wants war, nor to be forced into it, because war will set back development and bring their peoples more harm than good.
43 The next generation of leaders in Beijing and New Delhi need therefore to respond creatively and bravely to the imperatives of the changing times. They will have to devise a modus vivendi to deal with the new and complicated problems that will inevitably arise.
Otherwise, any miscalculation by either side could have serious or unintended consequences.
44 For example, Chinese reliance on Middle East oil is rising. About half of China’s total crude oil imports come from the Arab world. China will thus continue to develop its blue water capabilities to safeguard its resource supply lines, which will pass through the Indian Ocean. India will naturally not be comfortable with this.
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45 As I said earlier, conflict is not inevitable. It can even be pre-empted. But this will require China and India to discuss sensitive issues in a candid and constructive manner, and to find a way to work together, as well as with other countries. This is because the challenges of our times are often transboundary in nature, and concern more than just two parties. China and India will, therefore, need to partner each other and other countries to shape an international system that can accommodate their own interests as well as those of other countries. This requires strategic leadership on both sides.
Active Partnerships
46 The reality is that in today’s world, China and India cannot afford to be isolationist or unilateralist. Neither is yet a superpower.
47 For the foreseeable future, the US will remain as the only superpower. Even if China or India were to become a superpower one day, they would need to collaborate with other countries to solve global problems.
48 The triangular relationship between the US, China and India is therefore of paramount importance to our region. All parties want to be friends, not enemies. Some observers have warned that China could be uneasy with the current upswing in US-India relations, and that India may be part of a so-called US strategy to “contain” or “encircle”
China.
49 Any rhetoric of “containment” is, in my opinion, misleading, untenable and even dangerous as it fuels mutual suspicion between big powers. It does not reflect the complexities of the world that we live or operate in, or how leaders and governments see things.
50 Personally, I would be very surprised if a big country like India allowed itself to be used by the US to contain China. The US knows that it is not feasible to contain China’s rise. India knows that too and, in fact, also aspires to rise. India will act according to its own interests, and on some issues, for example climate change, India’s interests will dovetail with China’s, not the US’.
51 A close and enduring partnership between China and India at one level and, at another level, between China, India and other major players like the US, Japan, Europe, Russia, is the best guarantee for global stability.
52 China and India must be an integral part of the broader collective efforts to ensure global security and manage the international economy. They have the wherewithal, and should contribute more actively to the United Nations (UN), World Trade Organisation (WTO) and G20, to name a few.
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53 As their economies and international stature grow, we can expect China and India to play bigger roles in international financial institutions like the International Monetary Fund (IMF), World Bank and Asian Development Bank (ADB). They will complete the transition from being aid recipients to aid donors, assisting developing countries and LDCs (least developing countries) to level up just as they themselves have done so well these past few decades.
Southeast Asia’s Role
54 The region which stands to benefit most from a collaborative relationship between China and India is arguably Southeast Asia. At the same time, Southeast Asia offers a prime location and multi-sectoral opportunities for China and India to work together, and with others, and to enhance mutual understanding between both countries, and – as Ambassador Gopi said earlier – between North East Asia and South Asia.
55 Southeast Asia is a natural partner for China and India because of our geographical proximity, cultural affinity and historical linkages. China and India are already major investors in and key trading partners of the ten ASEAN countries. They have made a direct and positive contribution to the prosperity of Southeast Asia. Our region is, of course, not a passive beneficiary. ASEAN has also played a big role in integrating China and India into the region over the years, and that has to a certain degree brought about a broader regional stability and sense of community, especially in the past 10 to 15 years.
56 We must not take peace or prosperity for granted. The Indian Ocean, Straits of Malacca and South China Sea are our common lifeline. Ours is an extremely crowded region:
Southeast Asia has a population of about 600 million, while China and India together are 2.6 billion strong. The combined GDP of the ten ASEAN countries is US$2.2 trillion, larger than India’s (US$1.8 trillion) but about one-third that of China’s GDP (US$7.3 trillion)3. The fault-lines and disparities in the region are obvious.
57 China and India know that their fortunes are intrinsically intertwined with that of Southeast Asia. We live in a complex eco-system but fundamentally share the same goal of ensuring that it is in good health and functions properly.
58 To their credit, China and India – and ASEAN’s other dialogue partners – have been supportive of ASEAN’s leading role in the regional architecture. ASEAN is well-suited to play the role of a facilitator and convenor between both countries, and amongst regional powers. If any country tried to set the regional agenda, its intentions would be subjected to scrutiny by the rest.
3 Source: IMF World Economic Outlook, GDP figures for 2011.
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59 Today, ASEAN is in the driver’s seat in a series of regional forums such as ASEAN+1, ASEAN+3, the EAS and ARF. In this way, ASEAN has helped to bring China and India closer together. This has served all of us well.
60 Of course, it would be unrealistic to expect the passengers in a car never to quarrel with the driver on the direction or destination, like where to go and how fast. But as companions on the same journey, they must find a way to resolve their differences or the car can easily swerve off the road and head down a deep ravine.
61 To stay on course, it is important to continually explore and expand beyond existing areas of cooperation.
62 Let me briefly mention two possible areas. One is the Regional Comprehensive Economic Partnership (RCEP), through which ASEAN aims to foster regional economic integration and inclusive growth with our other major trading partners.
63 It is an ambitious endeavour. But it is good that China and India have agreed to join RCEP as it would entrench their linkages to Southeast Asia, and to each other, by embedding them in a regional economic architecture that seeks to promote prosperity and stability. The RCEP and other initiatives such as the Trans-Pacific Partnership (TPP) will pave the way towards a Free Trade Area of the Asia-Pacific (FTAAP).
64 The second possibility is the Master Plan on ASEAN Connectivity, which ASEAN hopes will open new opportunities and concretise our ASEAN community through enhanced physical, institutional, and people-to-people links. China and India are welcome to help ASEAN achieve its vision.
65 A car rally to commemorate the 20th anniversary of ASEAN-India relations will start next week, on 26 November, at Yogyakarta in Indonesia. The entourage of 30 cars will be in Singapore on 28 November and will continue its tour of mainland Southeast Asia before reaching its final destination in New Delhi on 21 December. Such an endeavour would probably have been unimaginable 20 years ago.
66 I believe Southeast Asia will be even more inter-connected with China and India in 20 years’ time. A lot of work needs to be done. There will be obstacles along the way.
But the process itself will draw us closer, buttress our regional integration and open up new collaboration possibilities.
10 Concluding Remarks
Excellencies
Distinguished Guests Ladies and Gentlemen
67 Active collaboration between China and India should not just be an aspiration. It can also be an inspiration for other countries, big and small. What happens between them carries vital stakes for the evolving economic and strategic landscape of Asia and the world.
68 Theirs is an important partnership that not only lays a vital foundation for the continued development of China and India. Their interactions and linkages with each other, and the rest of the world, will also provide the main impetus for continued regional peace and cohesion, as well as global stability and prosperity.
69 Those of us in the ASEAN region have a vested interest in cooperation between the two rising powers. And there is much we can do to promote cooperation between both, and within our region. The bilateral, regional and international frameworks for cooperation are there. Conditions have never been more conducive. I believe that the political will in China and India to cooperate is there. And that, I believe, is also the desire of everyone.
Thank you.
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