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Both countries are eyeing the world for trade, raw materials and the export of goods and services. Each will have to carve out its own sphere of influence. Wherever their markets are the same, each will have to strive not to get in the way of the other.
Also, other understandings should follow. For example, China should not play proxy games against India vis-a-vis Pakistan and Myanmar, and India must reciprocate in kind in Vietnam, Tibet and Taiwan. Their relationships with a resurgent Russia and with the United States will have to be managed individually by both China and India.
In the 18th and 19th centuries France and England were perpetually at war, partly because each wished to carve out a colonial empire bigger than the other and partly to settle their old political differences. Peace returned only when each secured a trade sphere of influence and stopped bothering the other.
India and China are at a similar juncture now. They have to develop means independent of each other. Still better, they should make an effort not to cut into each other's areas of expertise and influence.
These two resurgent powers of Asia are just about equal -- although China has an advantage today it is not going to last long. In a matter of 10 to 20 years India's infrastructure will be newer, and cleverly placed high-value and high-margin exports will neutralize China's current merchandize advantage.
In the long run, both countries need trade to sustain their prosperity. Unfortunately the market for exports for both is the same -- the United States and Europe, including Russia. Africa is a long way away from becoming a profitable market. Hence, if both are competing for the same market then norms for good behavior have to be established today.
If there are no norms and if there is an ongoing trade rivalry, then the West will cleverly exploit both. It would be better for both not to get into a situation where the West dictates terms. Rather, terms should always be mutually beneficial.
In the next 50 years, trade is what will lift India and China out of an economic morass. Trade in manufactured goods and services in return for technology, finance, food and advanced goods from the West will continue for a long time.
In the last 15 years, China has moved to become the world's factory for cheap goods. India slowly and steadily has moved to become the brain trust of the world with a host of information technology, knowledge process outsourcing and business process outsourcing services. In the next three years, these services alone will earn India about US$80 billion per year.
Exporting these services fetches a margin three times more than Chinese merchandize exports. Other Indian exports such as fine cotton textiles, gems and jewelry, pharmaceuticals and motor parts can outperform China and neutralize its advantage.
The irony is that the Chinese are trying to muscle into India's areas of advantage. This presents a potential for much greater conflict than the present border row.
Aware of India's advantage in software, China first tried to build its software design network from the ground up. They were marginally successful. Now Chinese officials are trying to sell India the idea of marrying Chinese hardware with Indian software -- one does not operate without the other. This is a clever move by the Chinese to learn and acquire Indian software expertise without giving away their manufacturing advantage.
Luckily, India has understood these moves and has stayed away from China's lucrative offers. Only recently have Indian companies opened low-key workshops in China to develop software. China has not returned the favor by opening up hardware manufacture shops in India, however.
Geographically, if the Tibet and India-China border issues are resolved, India will worry less about a looming Chinese military threat. In order to keep U.S. and Russian influences at bay, China and India need to keep the peace with each other. That will eliminate either the United States and Europe or Russia exploiting the situation to their advantage.
One integral part of this equation is that China must drop the belligerent attitude it developed in the 1950s under the leadership of Mao Zedong. At that time, China vowed to recover all lands he believed its neighbors had grabbed from China in the last 500 years. Luckily, in the past 20 years China has dropped this aggressive policy with all its neighbors, except India. Why is India an exception? The only reason for this is that China considers India more of a rival than a friend.
China's Pakistan-friendly attitude is born out of one strategic consideration -- the need to keep India busy on its western borders. The Chinese think that as long as Pakistan keeps India busy, they have a strategic advantage.
But the way things are moving toward fundamentalism in Pakistan, China may worry a lot more than it has done in the past. Any nuclear missile in fundamentalist hands is as much a threat to China as to India or others. Chinese Muslim fundamentalists are undergoing training in Pakistani camps. When they return home, they will become a serious threat to China's internal security.
This all leads to a simple conclusion -- that India and China should become friends and neutralize the fundamentalists' advantage, including in Pakistan.
The United States and Russia once again are beginning their Cold War-style rivalry in Europe. The United States will soon be looking for allies in Russia's backyard. China is a natural choice. Not to be left behind, Russia will covet friendship with India, not withstanding all current pricing and delivery issues on military hardware supplies. Russia has a trump card in hand -- it can offer India much-needed oil supplies in return for Indian neutrality.
This time around India and China should stay out of the upcoming Cold War, even if tempting offers are made. There is room for the two to cooperate.
China should withdraw its influence peddling in Pakistan in return for India withdrawing permanent stay status for Tibetans, which is a sore point in India-China relations. If concurrently China winds up all its strategic, political and military influence in Pakistan, it will go a long way toward the ultimate settlement of all China-India rows.
The first and foremost point of cooperation is ensuring security in the region. Muslim jihadi insurgents are active from India to the Philippines, and Pakistan is the epicenter of this activity. To contain this destructive activity, it is important not to arm or encourage Pakistan. Chinese cooperation in this endeavor will go a long way.
Second, China and India should cooperate instead of competing over energy supplies. Third, China should leave the Indian Ocean alone as India's sphere of influence, in return for India guaranteeing safe passage of trade and movement of goods and services.
Fourth, India should not oppose any moves by China to enforce discipline in nations around the South China Sea and other areas of Chinese influence. Fifth, trade, the chief instrument of peace and prosperity, should be encouraged in all areas from the Suez Canal to Japan.
If relations between China and India could be worked out on the basis of these suggestions, much higher progress would be achieved in Asia. Peace would return and the strategic exploitation of smaller nations by outside powers would cease.
Putting out jihadi fires is a different matter, however. Their epicenter in Pakistan and their funding by Saudi Arabian interests has to be contained first.
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(Hari Sud is a retired vice president of C-I-L Inc., a former investment strategies analyst and international relations manager. A graduate of Punjab University and the University of Missouri, he has lived in Canada for the past 34 years. ©Copyright Hari Sud.)
