The China Factor: Shortcomings of the Policy and Recent Developments, Economic Relationship

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The China Factor

  • In the cold war era, South East Asian nations perceived China as dangerous because of its military expansionist scheme in Asia. While now the ″ peaceful rise of China is being considered more of an opportunity despite the challenges.
  • China is virtually dominating the South East Asian region. The ASEAN-China Free Trade Area created by an accord in 2004 has come into effect from January 2010. This covers nearly 1.9 billion people. In terms of economic value this is the third largest regional agreement, after only the EU and the NAFTA.
  • “A new talking point in East Asia is that of the militarisation or, more precisely, the likely enlargement of the Chiang Mai Initiative (CMI) later this year. The CMI is basically a currency pool of the ASEAN + 3 countries (China, Japan and South Korea) . The move was a direct response to the recent outbreak of the US-induced global and financial economic crisis, which has not fully blown away as now” (P. S. Suryanarayana-Frontline January 29,2010) .
  • China is predicted to overtake Japan as the world՚s second largest economy some time in 2010.
  • India must be aware of the fact that it has not been invited to the EAS because of its rising economic potential alone but more as a balancing force to offset the China factor. Prime Minister Manmohan Singh has repeatedly mentioned that in a global environment, India is not afraid of competition and it can complement rather than compete in the EAS.

Shortcomings of the Policy

  • India still remains outside the Asia Pacific Economic Cooperation (APEC)
  • Though India has entered into a number of pacts with ASEAN countries, the implementation of such accords has been poor. This is because India fears competition from these countries in the agricultural sector
  • India lags behind China and Japan in almost all spheres of Pan East Asian Cooperation
  • East Asian observers reckon that India has so far appeared less proactive than China on some critical issues
  • Some analysts feel that India՚s LEP lacks a strategic vision despite seeking defence cooperation with some ASEAN nations and securing a role for joint patrolling in the Malacca Straits

Recent Developments

India Show 2011 held in Singapore in January 2011.


  • India՚s LEP objectives can be furthered through areas of comparative advantage such as
    • Education, democracy and culture
    • In this respect, Nalanda project is noteworthy
  • India should make use of its lead in IT sector
  • Open education centres in East Asia
  • Emphasise tourism from ASEAN to India
  • India is becoming a stabilizing and balancing force in this region
  • The crux is that this Look East policy should reinforce and demonstrate India՚s commitment to this region which accounts for about one-third of India՚s trade. It should also be made clear that this commitment will not be influenced in any way by the improving relations between India and the US and EU.


  • Before 1990 the relations between ASEAN and India were not strong
  • The signing of the Friendship Treaty with the Soviets, India՚s stand on Afghanistan and India՚s recognition of the Kampucean government led to the estrangement between India and ASEAN
  • Focus on strengthened and multi-faceted relationship with ASEAN an outcome of the significant changes in the world՚s political and economic scenario since the early 1990s and India՚s own march towards economic liberalisation
  • India՚s search for economic space has resulted in our ‘Look East Policy’
  • ASEAN, on its part, seeks access to India՚s professional and technical strengths
  • 1992: sectoral dialogue partner
  • 1996: upgraded to full dialogue partnership
  • 1996: India has been an active participant in the ASEAN Regional Forum
  • Since 2002, annual summits with ASEAN – along with China, Japan, Republic of Korea
  • ASEAN adopted a new charter in 2008

Table 1

Binders/Opportunities and Separators/Challenges
Security. Sea-lanes of the Indian Ocean are important for trade
Economic Ties

Economic Relationship

  • 2003: ASEAN-India Framework Agreement on Comprehensive Economic Cooperation.
  • Trade amounted to USD 43.90 bn in 2009 - 10
    • India՚s exports: USD 18.11 bn
    • Imports: USD 25.79
  • Agreed to work for a target of USD 70 bn by 2012
  • CECA signed in 2005. Components are being negotiated
  • Covers FTA in Goods, Services and investment as well as Economic Cooperation in identified areas
  • FTA for trade in goods signed in 2009. Came into force in 2010.
  • FTA for TiG has come into force with Malaysia, Singapore, Thailand, Indonesia, Vietnam, Myanmar and Brunei
  • The next step is the conclusion of negotiations on Trade in Services and Investment Agreement for which a target date of March 2011 has been agreed
  • ASEAN-India Cooperation fund: Projects are undertaken through this fund, which is managed by the ASEAN Secretariat in Jakarta. Collaborative R&D & Workshop on Thermally Sprayed Ceramic-based Coatings. Establishment of a Digital S&T Library in ASEAN countries. Human Resource Development in Free and Open Source Software. Establishing VSAT based Tele-Education and Tele-medicine network in CLMV countries Training of ASEAN Diplomats in India Establishment of Centres of English Language Training (CELT) and Entrepreneurship Development Centres (EDC) in CLMV countries
  • ASEAN Development Fund: An amount of US $ 1 million was contributed by India to ASEAN Development Fund over a span of three years from 2005 - 07 to support the Vientiane Action Programme of the ASEAN countries
  • ASEAN-India S&T fund: A fund with a US $ 1 million contribution from India has been established in India to promote joint collaborative R&D research projects in Science & Technology sectors
  • India-ASEAN Green Fund: An India-ASEAN Green Fund is proposed to be established with a corpus of US $ 5 million to promote adaptation and mitigation technologies in the area of Climate change in ASEAN countries

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