EAI-ISAS Inaugural Workshop (November 14)

The East Asian Institute (EAI) and the Institute of South Asian Studies (ISAS) at the National University of Singapore co-organized the inaugural workshop, ‘China and India: Two Giants Shaping the Global Economy’, on 14 November 2024. 

This timely event followed significant global and regional developments, including China’s recent policy measures, India’s new government, and the United States presidential elections. A select group of academics, business leaders and policy experts gathered to examine China and India’s growth strategies and their broader impact on the global economy from a policy perspective. 

Looking ahead, EAI and ISAS plan to continue this dialogue through a series of workshops and public events, addressing key issues such as climate change and the digital economy, with a focus on the evolving roles of China and India in shaping the global economic landscape. 

Programme

Session 1 – China and India: Strategies for Growth and Development

Session 2 – Global Developments: Implications for China and India

About the Chairpersons and Speakers (In Order of Presentation)

Main Topics of Discussion

India-China Relations

Historical Context: India and China share a long history of cultural exchanges, but the relationship post-independence has been complex due to border disputes. Following the Sino-Indian War in 1962, agreements in 1993, 1996, and 2005 have been put in place to maintain peace along the Line of Actual Control (LAC). Tensions escalated in 2020 with a military buildup and the deadly Galwan Valley clash, marking the first fatalities in decades.

Recent Developments: Subsequent negotiations led to phased disengagement at several conflict points by 2022, with further progress reported in 2023 at remaining contested zones. The meeting between Indian Prime Minister Narendra Modi and Chinese President Xi Jinping meeting in October 2024 on the sidelines of the 16th BRICS Summit in Kazan (Russia) where both leaders welcomed a recent agreement that marked a significant step in resolving the border issues was seen as in important step, however, there was consensus among participants that trust-building will be critical and take time. The discussions highlighted the importance of continued steps towards de-escalation and normalization following directives by both leaders to pursue further de-escalation, including reducing troop deployments and removing heavy military equipment from border areas.

Economic Relations and Future Prospects: Economic interdependence presents opportunities for mutual interaction and collaboration, and discussants emphasized the importance of pragmatism in business investments and collaborations in the service and green technology sectors.

The relationship between China and India is characterized by both interdependence and competition, with both countries are poised for leadership roles in the Global South amidst shifting global power dynamics. This competition is marked by differing strategies: China leverages its Belt and Road Initiative (BRI) and extensive infrastructure investments, while India focuses on partnerships through forums like the G20 and South-South cooperation.

Structural Reforms and Economic Growth

India’s Progress in Structural Reform and Challenges: The key question for India is how to effectively leverage its demographic dividend over the next decade or two while working toward the vision of transforming India into an advanced nation by 2047. Achieving this requires annual growth rates of 10% for a decade, supported by investments in infrastructure, exports, and industrial development​.

Several critical areas—manufacturing, agriculture, and labor capacity development—have been identified as essential for sustaining economic growth and achieving global competitiveness. Initiatives such as the Production-Linked Incentive (PLI) scheme are used to strengthen manufacturing capabilities in key sectors like electronics, semiconductors, and renewable energy, supported by substantial infrastructure investments to drive industrial expansion. In agriculture, reforms emphasize boosting productivity through agri-technology, enhanced mechanization, and more efficient supply chains to minimize waste.

Efforts to modernize labor laws and upskill the workforce were emphasized, as well as the importance of aligning India’s demographic advantage with industry needs. Vocational training and initiatives aimed at increasing workforce participation play a pivotal role in this transformation.

China’s Economic Policy and Growth Challenges: China’s recent economic policies aim to stabilize the economy, with a focus on addressing challenges in the real estate and stock markets. A $12 trillion stimulus package has been introduced to tackle local government debt and avoid spillovers into the financial system. However, direct fiscal support to enhance consumption and social security has been more limited. China’s structural reforms aim to transition from investment and real estate-led model to one that is more consumption-driven. This requires addressing imbalances like high savings rates and strengthening social protection systems to boost domestic spending; both remain untapped potential for improving living standards.

Structural reforms are progressing slowly, impacting medium-term growth, with greater emphasis needed on market reforms to allocate resources efficiently. The challenges of overstimulation following the 2009 economic measures, especially in real estate, have led to current debt issues and housing market imbalances, limiting the scope for aggressive stimulus. Its long-term prospects hinge on structural reforms and productivity growth.

Enhancing total factor productivity (TFP) through innovation and technological advancement is a core component of China’s structural reforms. Investments in frontier technologies, including AI, green energy, and semiconductors, were highlighted as critical areas to driving long-term competitiveness and economic diversification.

Knowledge Sharing and Development Support: India’s focus on boosting manufacturing through initiatives like the Production-Linked Incentive (PLI) scheme aligns with China’s expertise in industrial production.

Sharing best practices, transferring knowledge, and co-developing supply chains could enhance efficiency and reduce reliance on global markets. India’s need for skilled labor to meet its manufacturing goals aligns with China’s challenge of managing surplus workforce in specific sectors. Streamlining visa policies and enabling labor mobility especially for engineers and specialized workers could address skill shortages while boosting employment opportunities for both countries​.

Trade and Global Integration

India’s Trade Strategy and Autonomy: India’s trade strategy emphasizes a balanced approach to integration, focusing on selective trade liberalization to protect domestic industries while engaging in bilateral free trade agreements with key partners like the UAE, Australia, and the EU.

By maintaining a cautious stance on trade liberalization, India safeguards critical sectors such as agriculture and manufacturing, aligning with its broader strategy of building domestic capacity and enhancing competitiveness. India prioritizes Asia-centric trade, seeking to strengthen regional supply chains and reduce dependence on any single partner.

China’s Trade Liberalization and Geopolitical Risks: China is grappling with economic challenges, particularly in its real estate sector and local government debt. It also faces the risk of global trade disruptions, especially if a second Trump administration raises tariffs, possibly up to 60%.

Despite these pressures, China is advancing in frontier technologies such as AI, semiconductors and green technology to maintain its global integration and competitiveness.

As it navigates the geopolitical climate, China is also exploring alliances with countries like India to keep global trade open. China’s Belt and Road Initiative (BRI) is a significant component of its strategy for global integration, focusing on infrastructure investments to enhance connectivity and economic integration across the Global South.

Opportunities for Trade and Multilateral Platforms: China, facing challenges such as high U.S. tariffs and a slowing property market, is increasingly seeking diverse trading partners, while India is similarly pressured by protectionist U.S. policies, particularly those affecting services exports like H1B visas.

Both nations are focused on maintaining strong global trade ties, advocating jointly for an open global trading system through multilateral platforms such as BRICS and the G20, in an effort to preserve market access amidst growing protectionism. India could benefit from China’s expertise in manufacturing and green technology to enhance its domestic production capabilities.

Technology and Innovation

Digital Infrastructure and Technology Advancement in India: India has launched the “Big Share” initiative, a digital platform providing educational resources from kindergarten to high school, improving accessibility, especially during the COVID-19 pandemic. The country has leapfrogged in technology, transitioning from limited landline infrastructure to widespread mobile use and advancing cashless payment systems.

Key sectors like financial services and manufacturing are growing, with a focus on local value addition and healthcare opportunities. India’s Global Capability Centers (GCCs) are expanding beyond IT into other industries, and AI is being integrated to enhance productivity.

Additionally, advancements in digital public infrastructure, exemplified by Aadhaar and UPI, have enhanced financial inclusion and streamlined public service delivery, serving as catalysts for broader economic innovation. Digital solutions could also continue to help overcome bureaucracy and reduce corruption.

Innovation and Leadership in Frontier Technology: China is making significant strides in frontier technologies like semiconductors, AI, commercial aircraft, and green energy, proving to be competitive or a global leader in these sectors despite trade and tech restrictions. Technological advancement has become a political necessity for China, as it seeks to reduce dependency on foreign tech. Alongside this, China is restructuring its economy to lessen reliance on the property sector and increased the role of consumption shifting to a technology-driven economy.

However, challenges remain in creating a sustainable replacement for the property sector’s role and ensuring a dominant consumption-driven economy.

Clean Technology and AI as Potential Collaboration: India is investing in AI training for its workforce to train its employees, creating potential for collaboration with China, given its advancement in AI and other frontier technologies.

Mutual investment opportunities in sectors like clean technology supply chain and AI could enhance India’s green technology capabilities and green transition, creating possibilities for India-China collaboration.

Green Energy and Climate Action

Green Transition and Environmental Challenges: India is focusing on accelerating its green transition, particularly through clean technology supply chains, and exploring partnerships with Chinese green tech companies.

The country faces environmental challenges like high particulate emissions, water table depletion, and rising temperatures, especially in urban areas such as Delhi, which require urgent action. The Indian government is investing in skill development, particularly in areas like chip design, to support green technology and innovation.

China’s Leading Role in Green Transition and Industry: China is making significant progress in its green energy transition, adding 293 gigawatts of renewable energy capacity in 2023, surpassing the entire U.S. green energy stock. This is part of a broader investment in climate change-related projects aimed at boosting productivity and creating jobs, which are central to China’s long-term economic strategy.

The green transition is seen as crucial for capital formation, enhancing productivity, and addressing challenges like an aging population and a property market crisis. China’s focus on green development positions it as a potential global leader, offering a model for other economies.

Collaboration on Global Green Initiatives: India and China, both large economies with significant populations, share an interest in addressing climate change and could collaborate on clean technology supply chains, with Singapore serving as a potential conduit for the net-zero agenda. China’s substantial investments in green energy and expertise in scaling infrastructure could aid India in expanding its renewable energy capacity, while both countries can benefit from sharing best practices in policy and regulatory frameworks for sustainability. Additionally, labor and skills exchanges could help address India’s skills gap in green technologies. As leaders of the global South, India and China have an opportunity to lead joint initiatives in international forums to promote sustainable development and climate action.

Global Roles and Multilateralism

Leadership in Global Platforms: China and India exercise joint leadership on global platforms like BRICS, the Shanghai Cooperation Organization (SCO), and the G20, where they advocate for trade liberalization, climate action, and reforms in global governance.

With similar interest in these forums, they strengthen their influence on global policy, particularly in supporting the interests of developing countries. They also share a common interest in addressing climate change, with potential for collaboration in clean technology and sustainable practices. Both nations have the opportunity to work on global governance issues related to climate change and sustainable development.

Challenges and Opportunities in Geopolitics: The ongoing U.S.-China rivalry presents both challenges and opportunities for India and China, offering space for both countries to assert their strategic autonomy and influence amid rising geopolitical tensions.

By leveraging their complementary strengths, China’s economic power and infrastructure capabilities, and India’s diplomatic and coalition-building skills, both nations can effectively navigate global challenges, maintaining their aspirations while contributing to global stability and development.