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IDSA Monograph Series No. 24 September 2013 BRICS and the China-India Construct A New World Or der In Making? JAGANNATH P. PANDA BRICS AND THE CHINA-INDIA CONSTRUCT | 1 IDSA Monograph Series No. 24 September 2013 BRICS AND THE CHINA-INDIA CONSTRUCT A New World Order in Making? JAGANNATH P. P ANDA 2 | JAGANNATH P. P ANDA Institute for Defence Studies and Analyses, New Delhi. All rights reserved. No part of this publication may be reproduced, sorted in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photo-copying, recording or otherwise, without the prior permission of the Institute for Defence Studies and Analyses (IDSA). ISBN: 978-93-82169-24-6 Disclaimer: The views expressed in this Monograph are those of the author and do not necessarily reflect those of the Institute or the Government of India. First Published: September 2013 Price: Rs. 270/- Published by: Institute for Defence Studies and Analyses No.1, Development Enclave, Rao Tula Ram Marg, Delhi Cantt., New Delhi - 110 010 Tel. (91-11) 2671-7983 Fax.(91-11) 2615 4191 E-mail: [email protected] Website: http://www.idsa.in Layout & Cover by: Vaijayanti Patankar Printed at: M/S A. M. Offsetters A-57, Sector-10, Noida-201 301 (U.P.) Mob: 09810888667 E-mail: [email protected] BRICS AND THE CHINA-INDIA CONSTRUCT | 3 CONTENTS Acknowledgements .............................................................................................. 5 Key Abbreviations .............................................................................................. 7 Introduction ......................................................................... 9 y The Premise ............................................................................................. 9 y Contextualising BRICS: Multipolarism and Multilateralism ....... 10 y The Crux of the Study ..........................................................................11 I BRICS and the Shifting Global Order ............................. 13 y A Conceptual Perspective .................................................................... 13 y BRICS and the Emerging Powers Dialogue .................................. 14 y BRICS Summits: Institutionalising the Politics ................................ 19 y A Point of Inquiry: Is BRICS a Possible Agent in Shaping the Global Political and Security Mandate? ..................................... 26 y Beijing’s Prominence and Intra-BRICS Dynamics ........................ 32 y A Shift in Order or Balancing the North-South Divide? ............ 39 II China’s Multilateral Drive and BRICS ............................ 49 y The Prevailing Dialogue ........................................................................49 y Changing Course of China’s Foreign Policy and BRICS ............ 52 y How BRICS is a Medium for China’s Multilateral Statements ..54 y The Roots of Beijing’s Policy Objectives in BRICS ......................57 y Promotion of RMB as a Global Currency .....................................60 y China, the Politics of Global Financial Institutions and BRICS .67 y The Dialogue of ‘Developing Country’ and BRICS ................... 70 y Beijing, BRICS and Climate Politics .................................................. 77 y China and the Politics of BRICS: The Discourse ..........................80 III India’s Multilateral Drive and BRICS ............................. 86 y India and BRICS: The Perspective .................................................... 86 y Interpreting the Indian Dialogue in BRICS .................................... 87 y India and BRICS Members ................................................................. 95 y The China-India Construct and BRICS ........................................... 99 4 | JAGANNATH P. P ANDA y A Democratic Divide? The Politics of BRICS, IBSA and the China-India Divide ............................................................... 103 y The prevailing Indian Dialogue ........................................................ 107 y Policy Imperatives for India .............................................................. 112 Summing Up ....................................................................... 117 Select Bibliography ............................................................. 119 Map, Tables & Graphs MAP I: BRICS at a Glance ....................................................................... 15 Table I: BRICS Summits and Major Issues Discussed ..................... 20 Table II: China’s RMB Swap Deals ........................................................ 64 Table III: BRICS and other Developed Economies, Quota and Votes in the IMF ................................................................................. 68 Table IV: WTO cases against China ....................................................... 71 Table V: WTO cases against India .......................................................... 92 Graph I: BRICS and other Major Economies ................................... 17 Graph II: Contribution to WTO Budget ............................................. 34 Graph III: Share in World Commercial Trade, 2011 ........................ 34 Graph IV: Share in World Merchandise Trade, 2011 ........................ 35 Graph V: Comparative Trade Figures of China and India with BRICS Countries ......................................................................................... 35 Graph VI: US Goods Export and Import to BRICS Countries ......................................................................................... 45 Graph VII: BRICS in EU Total Trade, 2011 ...................................... 45 Graph VIII: The Rise of the Yuan against US$ ................................. 62 Graph IX: China’s Trade Figures with Individual BRICS Countries (2000-2012) ............................................................................... 74 Graph X: Major Countries of CO2 Emissions (kt.) ........................ 78 Graph XI: Indian Rupees vs. US Dollar ............................................... 88 Graph XII: India’s Trade Figures with Individual BRICS Countries (2000-2012) ............................................................................... 95 BRICS AND THE CHINA-INDIA CONSTRUCT | 5 ACKNOWLEDGEMENTS I am thankful to IDSA for encouraging the pursuit and preparation of this monograph. Foremost, I am grateful to the Director General, Dr. Arvind Gupta, for encouraging the conduct of research on a topic of this importance. Dr. Gupta has taken a special interest in the topic and has encouraged this research in Indian context. I am also sincerely appreciative of the encouragement provided by IDSA Deputy Director General, Brig. (Retd.) Rumel Dahiya. This study is an academic enterprise to study and explore the China- India dynamics within BRICS. Its course is primarily based on previous publications in open academic forums. Certain sections and write-ups herein were originally presented, debated and reviewed in open academic forums and have been published in various forms, both in the IDSA (Institute for Defence Studies and Analyses) stable and outside IDSA. The relevant IDSA publications comprise Strategic Analysis (Routledge), Asian Strategic Review (IDSA/Pentagon), and IDSA Comments (website) etc. Non-IDSA publications comprise the Indian Foreign Affairs Journal, Asia Paper (ISDP, Stockholm), ISDP Policy Brief, Diplomatist Plus, Russia & India Report (Moscow), The Economic Times and as chapters in book published by Enrich Professional Publishing (Singapore) and Strategic Yearbook 2013 (NDC, Sweden) etc. I owe much gratitude to a number of international scholars whom I met and interacted with. In particular, I am grateful to the anonymous reviewers, whose comments and suggestions have been helpful in improving this study. I sincerely thank Mr. Vivek Kaushik for editorial processing of this study. Mr. Kaushik has been helpful for copy-editing and finalization of the project. Last but not least, I thank Mr. Vivek Dhankar of the GIS Lab of IDSA for preparing the map and few graphics for this study. 6 | JAGANNATH P. P ANDA BRICS AND THE CHINA-INDIA CONSTRUCT | 7 KEY ABBREVIATIONS People's Republic of China (PRC) Brazil-Russia-India-China-South Africa (BRICS) Brazil-South Africa-India-China (BASIC) India-Brazil-South Africa (IBSA) International Monetary Fund (IMF) United Nations Security Council (UNSC) World Trade Organization (WTO) Gross Domestic Product (GDP) Group of Twenty (G-20) Russia-India-China (RIC) Chinese Communist Party (CCP) Trans-Pacific Partnership (TPP) Outward Foreign Direct Investment (OFDI) Renminbi (RMB) European Union (EU) China Development Bank (CDB) Shanghai Cooperation Organization (SCO) Asia-Pacific Economic Cooperation (APEC) ASEAN Regional Forum (ARF) South Asian Association for Regional Cooperation (SAARC) United Nation Framework Convention on Climate Change (UNFCCC) International Thermonuclear Experimental Reactor (ITER) Free Trade Agreement (FTA) UN Convention on the Law of the Sea (UNCLOS) 8 | JAGANNATH P. P ANDA BRICS AND THE CHINA-INDIA CONSTRUCT | 9 INTRODUCTION The Premise According to a broad consensus, the twenty-first century world order has arrived as a multipolar one. Within this milieu, the world’s economic centre of gravity has been shifting rapidly eastward and southward, with the BRICS (Brazil, Russia, India, China and South Africa) grouping emerging as the new centre of power factors in global politics.1 Addressing the global governance issues has been the core concern in the politics of developed and developing countries.