We have witnessed the world moving away from unipolarity to bipolarity and, since the end of the Cold War, to multipolarity and mutilaterism in the age of global interdependence. This posed a challenge to the international governance system, which was dominated by the Westphalian and Bretton Woods systems in which the developed countries led by the United States remained at the center, with developing countries at the periphery of governance. The international financial crisis perhaps for the first time challenged the existing global governance structure when emerging economies like China and India not only overcame the crisis but helped other developing countries to tide over it.
As rightly remarked by former U.S. secretary of state Henry Kissinger, “The [global] order established and proclaimed by the West stands at a turning point.” The shift was confirmed as the economic output proportion of the emerging economies in the global economy rose to 30 percent, whereas the ratio of the developed G7 economies registered a substantial decline, touching 47 percent. The power shift as well as power diffusion led to a crisis of the legitimacy and effectiveness of the current global governance institutions with emerging economies asking for more representation and voice.
This paradigm shift resulted in structural adjustments to global governance mechanisms. The G20 demonstrated that developed and developing countries could sit together at the high table, while the birth of various new mechanisms such as BRICS, the Shanghai Cooperation Organization (SCO), BRICS New Development Bank (NDB), Asian Infrastructure Investment Bank (AIIB), Silk Road Fund, etc. indicated that the emerging economies were capable of reshaping or supplementing the existing governance mechanisms with new ones. Being founding members of many of these mechanisms, both India and China are playing a leading role and building bridges between the developed and developing countries, while adding a multitude of wealth to the global economy. China’s role in particular is extremely important, as the country is contributing over 30 percent to the G20’s overall economic output. Remember as well that emerging economies are contributing around 50 percent of the world’s GDP growth.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
Both India and China need to deepen and broaden the roles they are playing in global governance mechanisms. At the outset, the economic and political clout they will exert in these mechanisms hinges upon their respective domestic drivers. Therefore, the greatest contribution they can make to the G20 or other new mechanisms is to maintain robust domestic growth and regional peace and stability. It is precisely because of these factors that the emerging economies have been able to inject billions of dollars into the existing institutions of global governance even while pushing for reform and asking for greater representation.
It is owing to these strong domestic drivers that emerging economies would be able to support ideas such as a global infrastructure hub and global infrastructure fund, mooted by the 2014 G20 Brisbane summit and the World Bank. President Xi Jinping of China has supported such moves and had rendered support for the same through the “Belt and Road” initiative, the AIIB, and the Silk Road Fund.
Domestic growth could be stimulated in various ways, as both India and China have unfolded ambitious projects that could be docked together by way of consultation and coordination at the provincial as well as national level. For example, Prime Minister Narendra Modi has unveiled the National Perspective Plan of the Sagarmala Program, which aims to modernize India’s ports and integrate them with Special Economic Zones, port-based smart cities, industrial parks, warehouses, logistics parks and transport corridors. This plan could be linked to Xi’s pet project, the Belt and Road initiative, on land as well as sea.
As far as regional connectivity is concerned, India’s “Bharatmala” (by way of which India plans to connect the entire Himalayan belt of Indian states through a network of rail and roads) could be linked to China’s Northwest and Southwest regional plans. In eastern India, the Bangladesh-China-India-Myanmar (BCIM) economic corridor could revolutionize overland connectivity and facilitate not only domestic but also regional growth, with ASEAN benefiting as well. Similarly, India and China could negotiate a larger economic corridor running through northwest China and northern India, which could easily be connected through a network of roads, railways, and oil and gas pipelines.
In order to push the transformation of the global governance structure, both India and China need to become partners in each other development. There have been positive changes in the bilateral security as well as business environments; however, given the potential of both there is still huge scope for cooperation. In order to tap this potential, both need to innovative developmental plans, policies, and initiate structural reforms in areas such as taxation, investment, finance, and labor. Macroeconomic policies should be in sync with social policies, which will ensure stability in society and public acceptance of government planning.
Some argue that emerging economies, with China playing a leading role, have challenged the post World War II order by establishing their own institutions such as NDB and AIIB. The fact remains, however, that the establishment of these institutions is an outcome of the limits of the Bretton Woods system, which has been on shaky ground since the 2008-09 financial crisis as well as the Euro crisis. The growth of new platforms is a reminder that if institutions like IMF, the World Bank, and Asian Development Bank continue to attach strings to developmental aids and loans, there is going to be a serious demand for alternative institutions. Especially when the global economic recovery is weak, the establishment of such institutions will promote infrastructural as well as social and economic development. Even if AIIB does not challenge the existing financial institutions, it would be seen as complementing the existing order.
Even though the paradigm shift in global governance has given India and China a bigger say as well as more responsibility in the evolving global system, there remains huge asymmetries in their power and economic structures vis-à-vis the developed economies. Rather than challenging the existing system, they need to bide their time, innovate new institutions, and become partners in each other’s development by docking their developmental strategies. It is natural to have differences between two big neighbors; nevertheless, these could be mitigated if a holistic view of the relationship is taken. Therefore, the momentum of high level visits and people-to-people exchanges needs to be heightened. Foreign Minister Wang Yi’s India visit in June, Modi’s participation in the G20 Summit in Hangzhou, China in September, and President Xi Jinping’s participation in the 6th BRICS Summit in Goa, India in October this year all set the stage for a building a greater partnership between the two.
B. R. Deepak is Professor of Chinese and China Studies at the Center of Chinese and Southeast Asian Studies, Jawaharlal Nehru University, New Delhi, India. He has also been the Nehru and Asia Fellow at the Chinese Academy of Social Sciences, Beijing.