ABSTRACT
The 2008 global financial crisis has led to scepticism around globalisation. As a result, the West is increasingly adopting protectionist policies, leading to global trade becoming more challenging than ever. While China’s economic growth over the last 30 years was primarily driven by investment and exports, it currently faces challenges to rebalance its economy. From an investment and export-oriented growth model, the transformation is underway to become an industrialised and domestic consumption-led economy. With increasing labour costs, investments in China have started to become less attractive for multinationals. This is reflected by the slowing growth rates of China which have recently come down to a 25-year low of 6.7%.
On the other hand, India, with an envious service sector, aims to increase the contribution of its manufacturing sector to GDP. Major reforms and campaigns such as Goods and Services Tax (GST) and ‘Make in India’ are formulated to attract investments in the manufacturing sector.
Despite India’s growing trade deficit with China which summed up to a whopping US$52 billion in 2016, there is huge potential for deepening economic cooperation between the two Asian giants. India membership in China-initiated Asian Infrastructure Investment Bank (AIIB) and the Regional Comprehensive Economic Partnership (RCEP) indicates the willingness from both sides to cooperate on the economic front. The two countries have also shown a common interest in driving global trade which is backed by investments. This potentially stands counter to the current Western protectionist rhetoric.
In this context, this chapter will analyse the possibilities of future trade cooperation between India and China in an environment of protectionist attitudes of the Western countries in general and the US with Donald Trump as the president in particular.
