Cities as the new engine for Sino-Indian cooperation.

• Author: Ni, Pengfei
• Position: Sino-Indian Relations - Report

Despite close geographical proximity and centuries-old ties, the relationship between China and India has been filled with obstacles and stumbling blocks. The majority of academic research and media reports tend to examine relations at the national level, yet cities have become increasingly important due to urbanization and globalization. This paper argues that, through the city platform, India and China can turn potential cooperation into reality. The differences between Chinese and Indian cities beget complementarity that provides great potential for cooperation. Local governments in both China and India have high levels of administrative power in decisionmaking. Cooperation between cities can avoid many obstacles that prevail in national-level cooperation. Local governments will not only be motivated to cooperate, but also can accomplish a great deal in promoting cooperation between the two countries. The conditions for city cooperation are improving. Cities can and should become a key path and a new engine for Sino-Indian cooperation.

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Geopolitics, boundary disputes, mutual distrust and trade imbalances make China-India cooperation difficult at the national level. China and India's boundary disputes, for example, are unlikely to be resolved in the short term. Out of consideration for mutual security interests, both central governments will likely restrict cooperation in locations where territorial control is contested. The Indian National Security Council has called for the legislative body to pass "Security Restricted Area" legislation aimed at limiting or even forbidding countries like China from investing in these sensitive regions. (1) In economics, the increasing bilateral trade imbalance between China and India has become an obstacle for cooperation at the state level. A certain level of imbalance is inevitable, but a large imbalance is not beneficial for either party. These concerns primarily manifest themselves in relations at the national level. Local governments outside disputed regions and areas of strategic importance have more freedom to consider mutual cooperative benefits and are less concerned with contentious interstate relations or the national trade imbalance.

At the same time, the rapid pace of scientific and technological development and the increasingly globalized economy have reduced the significance of borders between countries and increased the importance of cities as a focal point of international affairs. Indeed, cities are becoming independent economic units participating in global competition, cooperation, division of work and development. With an increasing number of people and economic activity concentrated in cities, the role of the city is more and more significant.

Home to several of the world's largest cities and with a long-standing border dispute between them, China and India can benefit from cooperation at the city level. This paper argues that enterprises and civil society at the city level can overcome barriers to Sino-Indian cooperation at the national level and encourage cooperation and exchanges in many fields, including trade, investment, tourism, culture, education, technology and municipal construction. Under certain conditions, cities can become the engine of cooperation between the two countries.

GREAT POTENTIAL IN CITY-LEVEL COOPERATION

While China and India are experiencing different rates and levels of urbanization, cities have been a common platform for the bulk of social and economic activities in both countries. The differences between Chinese and Indian cities beget complementarity and great potential for cooperation. This potential merits further exploration.

Urban populations play an important role in both countries, though China is more urban than India. In 2009, 46.6 percent of China's population, or more than 585.8 million people, lived in cities. (2) China's more than 280 cities (those over prefecture level and the prefectures) accounted for 62 percent of GDP and 59 percent of national fiscal income in 2008. (3) In India, 344.5 million people--29.82 percent--lived in cities in 2010, accounting for 60 percent of GDP and 70 percent of national fiscal income. (4) According to the most recent Indian census, there were 384 cities and counties in India and over 4,000 towns in 2001. (5) The latest statistics show that there are over 600 cities and over 20,000 towns in China. (6) According to McKinsey Global Institute, the urban population will account for 64 percent of the total population of China by 2025. (7) In both countries, these urban centers consist of international metropolises (more than 10 million people), regional cities (more than one million people), medium- and small-sized cities (more than 100,000 people) and towns (more than one thousand people). Today, cooperation and exchanges in investment, trade, technology, culture and education between the two countries take place mainly in cities. Levels of development as well as standards of living among and within these cities vary widely. This suggests opportunities for each side to further benefit from cooperation. (8)

When comparing their natural resource endowments, both Chinese and Indian cities are abundant in labor. The overall wages and quality of labor are higher in China than in India; however, the total number of high-end talent in some sectors, such as software, is greater in India than in China. Thus, cities in the two countries can exchange human resources in a mutually beneficial way. Indeed, because of their large number of cities, vast territories, long histories, and the availability of diverse natural and human resources, India and China can achieve complementary cooperation in arenas such as energy, raw materials, tourism, culture, education and technology.

Industrially, China has an advantage, especially in the manufacturing of electronic communication equipment and electrical appliances, while India has a stronger service sector, especially in computers and information technology, cultural and creative industries, and finance and insurance businesses. (9) In 2009, services in China made up 43 percent of GDP, manufacturing was 33.9 percent of GDP, and manufacture exports were 93.6 percent of merchandise exports. Computer, communications and other service exports were 42.7 percent of commercial service exports in 2008. (10) In India, services made up 55 percent of GDP, manufacture was 15.9 percent of GDP and manufacture exports formed 62.8 percent of merchandise exports in 2009. Computer, communications and other services constituted 72 percent of commercial service exports in 2008. (11) Most economic activity related to the manufacture and service sectors happens in cities, thus cities in both countries can conduct investment and trade in these sectors.

In terms of consumption demand, the increasing size and speed of urbanization, rising per capita income and a growing number of middle-class households will surely create new markets in transportation, real estate, utility services, medical insurance, entertainment, education, personal products and...