Article 2: India–China Relations in a Changing Global Order
Why in News: American economist Jeffrey Sachs recently argued that India and China must develop mature, stable superpower relations to prevent strategic manipulation by external powers amid global economic and geopolitical churn.
Key Details
- Jeffrey Sachs highlighted the risks of US unilateralism, tariff wars, and dollar weaponisation under President Donald Trump.
- He emphasised that India and China will be the world’s top two economies by mid-21st century, sharing an unstable border.
- Sachs criticised excessive US influence through trade sanctions, SWIFT, and global surveillance systems.
- He called for India–China cooperation, especially in BRICS, non-dollar trade, and global governance reforms.
Strategic Context: Shifting Global Power Structure
- End of Western Unipolarity: The post-Cold War unipolar moment led by the US is weakening, with power shifting towards Asia, particularly India and China.
- Rise of Executive Unilateralism in the US: Frequent use of executive orders, tariffs, and sanctions has increased global uncertainty and weakened multilateral institutions like WTO.
- Weaponisation of the Dollar: The US uses its control over the dollar and SWIFT system to impose financial coercion, affecting countries like Russia, Iran, and potentially India.
- Implication for India: Over-dependence on any single power limits strategic autonomy, a core principle of India’s foreign policy.
India–China Economic Interdependence
- Trade Volume Reality: Despite tensions, India–China trade crossed USD 118 billion (2024), with China being India’s largest trading partner.
- Manufacturing & Supply Chains: China dominates global manufacturing, while India is emerging as an alternative hub under China+1 strategy, creating both competition and opportunity.
- Future Economic Trajectory: Projections indicate India and China will be No.1 and No.2 global economies by 2050, making economic coexistence unavoidable.
- Lesson from Sachs’ Argument: Economic rivalry must be managed through rules, diversification, and dialogue, not isolation.
Border Dispute and Security Dimension
- Unresolved Boundary Issue: The Line of Actual Control (LAC) remains undefined, leading to incidents like Doklam (2017) and Galwan clashes (2020).
- Colonial Legacy: The boundary dispute is rooted in colonial-era cartography, particularly the McMahon Line, which Sachs calls an unresolved imperial legacy.
- Military De-escalation Efforts: Ongoing Corps Commander-level talks and disengagement in some friction points show scope for diplomatic solutions.
- Strategic Imperative: Long-term peace on the border is essential for economic growth, regional stability, and Asian leadership.
Geopolitics, Alliances and Mutual Mistrust
- China–Pakistan Axis: China’s strategic support to Pakistan, including CPEC, remains a major Indian concern.
- Counter-View Highlighted by Sachs: Sachs argues that US engagement with Pakistan has historically emboldened its military establishment more than China.
- India’s Strategic Partnerships: India’s participation in Quad raises Chinese apprehensions of containment.
- Need for Strategic Clarity: India and China must prevent third powers from “divide and rule” strategies in Asia.
Technology, Surveillance and the New Power Complex
- Military–Industrial–Digital Complex: Sachs highlights a new power axis combining Silicon Valley, Pentagon, and AI firms like SpaceX and Palantir.
- AI and Warfare: AI-driven surveillance, drones, and autonomous weapons are reshaping modern conflict, as seen in Ukraine and Gaza.
- Data and Sovereignty: Global surveillance and data monopolies raise concerns about privacy, national security, and digital sovereignty.
- Relevance for India: India must balance technology cooperation and self-reliance under initiatives like Digital Public Infrastructure.
Currency, BRICS and Global Financial Architecture
- Declining Dollar Monopoly: Sachs predicts the Renminbi may account for 15–30% of global transactions in the coming decade.
- Non-Dollar Trade Mechanisms: Platforms like China’s CIPS and BRICS payment systems aim to reduce dependence on SWIFT.
- India’s Interest: Diversifying trade settlements protects India from arbitrary sanctions and financial coercion.
- BRICS as a Platform: India’s BRICS engagement supports a multipolar financial order, not alignment with any single power.
Multilateralism and Global Governance Reform
- UNSC Reform: Sachs explicitly supports India’s permanent membership in the UNSC, backed by China’s cooperation.
- Voice of Global South: India and China share interests in reforming IMF, World Bank, and WTO.
- Climate and Development: Cooperation is essential in areas like climate finance, sustainable development, and poverty reduction.
- From Rivalry to Responsibility: As rising powers, India and China must act as system stabilisers, not disruptors.
Way Forward
- Institutionalised Strategic Dialogue: India and China must revive and strengthen high-level political and military communication mechanisms to prevent border incidents from escalating and to ensure predictability in relations.
- Border Stability as First Priority: Sustainable relations require complete disengagement, de-escalation, and restoration of peace along the LAC, followed by long-term confidence-building measures to manage the unresolved boundary dispute.
- Economic De-risking, Not Decoupling: India should reduce critical dependencies on China in sensitive sectors while continuing selective trade, investment screening, and supply-chain diversification, avoiding economic isolationism.
- Strategic Autonomy in Global Finance: India must support non-dollar trade settlements and diversified payment mechanisms through BRICS and bilateral arrangements, while safeguarding macroeconomic stability and RBI autonomy.
- Issue-based Multilateral Cooperation: India and China should cooperate in climate action, global health, development finance, and Global South advocacy, even while competing in other domains.
- Prevent External Power Manipulation: A stable India–China equation will reduce the scope for “divide and rule” strategies by external powers, enabling Asia to shape a multipolar, rules-based world order.
- Responsible Great-Power Conduct: As emerging superpowers, both countries must move from zero-sum rivalry to managed competition with mutual respect, recognising their shared responsibility for regional and global stability.
Conclusion
India–China relations must move from reactive rivalry to managed coexistence. Stable borders, economic pragmatism, financial diversification, and institutional dialogue are essential. As two civilisational states and future economic giants, India and China must shape a multipolar, rule-based global order, resisting external manipulation and ensuring Asian stability.
EXPECTED QUESTIONS FOR UPSC CSE
Prelims MCQ
Q. With reference to the “weaponisation of the US dollar”, consider the following statements:
- It involves the use of the SWIFT system to enforce financial sanctions.
- It increases the vulnerability of countries heavily dependent on dollar-based trade.
- It is administered by the World Trade Organization (WTO).
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 only
(c) 1 and 3 only
(d) 1, 2 and 3
Answer: (a)
Descriptive Question
Q. India and China need grown-up superpower relations to prevent external powers from exploiting their differences. Discuss in the context of contemporary global geopolitics. (150 Words, 10 Marks)