When
President Xi Jinping welcomes Indian Prime Minister Narendra Modi to
China on Thursday, both leaders will be well aware that, by 2025, their
nations will be two of the three largest economies in the world.
Geopolitical
tensions notwithstanding, economic imperatives demand that
collaboration between the two giants help mitigate historical mistrust
and future rivalry.
As immediate neighbors and old civilizations, China and India have long enjoyed mutual harmony spanning almost two millennia.
Yet,
the half century since India's independence in 1947 and Chairman Mao
Zedong's establishment of the People's Republic in 1949 has been
anything but harmonious.
Deep freeze
Unresolved
border disagreements led to a brief war in 1962, which India lost. Over
the next four decades, relations between the two neighbors went into
deep freeze.
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Since
2000, however, there has been a rapid thawing of the relationship
between China and India -- centered largely around trade.
Since
then, bilateral trade between the two has grown at an average annual
rate of 29%, faster than the growth rate in either country's trade with
any other region of the world.
Nonetheless,
the China-India relationship is beset with serious tensions over two
issues: India runs a large trade deficit vis-à-vis China; and, the
border disagreements remain unresolved.
Strong leaders
The confluence of recent developments make this an opportune time for a fundamental transformation.
On
both sides, the new leaders -- Xi and Modi -- are politically secure
and likely to rule their nations for the next ten years.
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Their
domestic strength coupled with a shared willingness to chart new paths
makes it more likely than at any time in the last 50 years that Xi and
Modi will find a mutually satisfactory resolution to the border
disagreements.
Both leaders have
publicly reiterated their shared belief that peace along the border is
critical to help them stay focused on their number one priority --
economic development.
Given recent
developments in both India and China, the next ten years will also see a
complete transformation in the China-India economic relationship --
from just trade to trade topped with large scale investments.
Modi
appears determined to permanently fix India's weakness in
infrastructure and manufacturing, the way he did in the state of
Gujarat, where he served as chief minister for ten years.
And China is the world's grandmaster at infrastructure.
Given
the ongoing slowdown in the domestic economy, Chinese infrastructure
companies are eager to pursue opportunities abroad. Importantly, they
also have access to a large pool of relatively low cost capital.
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