MASTERARBEIT Titel der Masterarbeit „The evolution of the Sino-Indian relations since the 1970s between conflict and cooperation“ Verfasserin Juliane Seumel angestrebter akademischer Grad Master (MA) Wien, 2014 Studienkennzahl lt. Studienblatt: A 067 805 Studienrichtung lt. Studienblatt: Individuelles Masterstudium: Global Studies – a European Perspective Betreuerin / Betreuer: Mag. Dr. Alfred Gerstl, MIR MASTERARBEIT / MASTER THESIS Titel der Masterarbeit /Title of the master thesis The evolution of the Sino-Indian relations since the 1970s between conflict and cooperation Verfasserin /Author Juliane Seumel angestrebter akademischer Grad / acadamic degree aspired Master (MA) Wien, 2014 Studienkennzahl : A 067 805 Studienrichtung: Individuelles Masterstudium: Global Studies – a European Perspective Betreuer/Supervisor: Mag. Dr. Alfred Gerstl, MIR i Abstract The relations between the People’s Republic of China and the Republic of India have been fluidly moving between hostility over their persisting border conflicts and coopera- tion through growing trade and engagement in a range of bilateral and multilateral fora. Today they are the emerging economies with the biggest consumer markets in the world, after China began their economic liberalization in the late 1970s followed by India in the early 1990s. The aim of this master’s thesis is to discuss the developments of the Sino- Indian relations and to identify issues and trends that will shape the future of their rela- tions. The analysis is based on the contradictions of Kenneth Waltz’ theory of structural realism with Robert Keohane and Joseph Nye’s concept of complex interdependence. Whereas India and China are involved in a classic security dilemma over the disputed border and increasingly compete over resources and markets, their bilateral relations are characterized by pragmatism and the awareness that they both are progressively engaged far beyond Asia within the world economy and global governance networks. The case studies on the Tibet factor and the access to the Indian Ocean are exemplary for their diverse bilateral relations. In conclusion, this thesis argues that China has garnered much more economic and political power than India because their reforms have been much more thorough. Nonetheless India remains an important counterweight to China’s grow- ing power in Asia and worldwide because of its expanding diplomatic and economic net- works. Kurzfassung The Beziehungen zwischen der Volksrepublik China und der Republik Indien bewegen sich fließend zwischen Feindseligkeit wegen der andauernden Grenzkonflikte und Ko- operation durch wachsenden Handel und Teilhabe in einer Reihe bilateraler und multila- teraler Foren. Indien und China sind heute die beiden Schwellenländer mit den größten Verbrauchermärkten weltweit, nachdem Chinas wirtschaftliche Liberalisierung in den späten 1970ern begann und Indien in den frühen 1990ern folgte. Das Ziel dieser Master- arbeit ist die Entwicklungen der chinesisch-indischen Beziehungen zu diskutieren und zukünftige Probleme und Trends zu identifizieren. Die Analyse basiert auf den Wider- sprüchen zwischen Kenneth Waltz Theorie des strukturellen Realismus und Robert Ke- ohanes und Joseph Nyes Konzept der komplexen Interdependenz. Obwohl Indien und China in einem klassischen Sicherheitsdilemma verwickelt sind wegen ihrer strittigen Grenze und der wachsenden Konkurrenz über Ressourcen und Märkte, sind ihre bilate- ralen Beziehungen gezeichnet von Pragmatismus und dem Bewusstsein, dass beide weit über Asien hinaus immer intensiver in der Weltwirtschaft und Global Governance Netz- werken involviert sind. Die Fallstudien zum Faktor Tibet und dem Zugang zum indischen Ozean sind exemplarisch für ihre vielfältigen bilateralen Beziehungen. Abschließend lässt sich sagen, dass China deutlich mehr wirtschaftliche und politische Macht als Indien er- langt hat, da seine Reformen wesentlich tiefgreifender waren. Nichtsdestotrotz bleibt In- dien ein wichtiges Gegengewicht zu Chinas wachsender Macht in Asien und der Welt wegen seiner wachsenden diplomatischen und wirtschaftlichen Netzwerke. ii iii TABLE OF CONTENTS LIST OF ILLUSTRATIONS .................................................................................. 1 LIST OF ABBREVIATIONS ................................................................................. 2 INTRODUCTION ................................................................................................. 3 CHAPTER ONE - THEORETICAL FRAMEWORK .......................................... 6 1.1 The Groundwork: Structural Realism ...................................................................... 6 1.2 Neoliberal Objection: Complex Interdependence ................................................ 12 1.3 Conclusions ................................................................................................................ 18 CHAPTER TWO - TWO ASIAN GIANTS BETWEEN INTERNAL STRUGGLES AND ECONOMIC GROWTH .................................................... 20 2.1 People's Republic of China ...................................................................................... 20 2.1.1 China’s Transformation and Economic Reforms ............................................ 22 2.1.2 Development of the Population.......................................................................... 25 2.1.3 Chinese Foreign Policy ......................................................................................... 26 2.2 Republic of India ....................................................................................................... 28 2.2.1 India’s Economic Crisis and Economic Reforms ............................................ 30 2.2.2 Development of the Population.......................................................................... 32 2.2.3 Indian Foreign Policy ............................................................................................ 34 CHAPTER THREE - HISTORICAL BACKGROUND: SINO-INDIAN RELATIONS BEFORE THE 1970S .................................................................... 37 3.1 The McMahon Line and its Legacy ........................................................................ 37 3.2 The Sino-Indian War of 1962 .................................................................................. 44 CHAPTER FOUR - DIMENSIONS OF THE SINO-INDIAN RELATIONS SINCE THE 1970S ................................................................................................ 48 4.1 Military Dimension ................................................................................................... 48 4.2 Economic Dimension .............................................................................................. 55 4.2.1 Common Employment and Social Challenges.................................................. 61 4.3 Energy Dimension .................................................................................................... 61 iv CHAPTER FIVE - CASE STUDY 1: TIBET AND THE SINO-INDIAN TERRITORIAL CONFLICTS ............................................................................. 69 5.1 Historical Background .............................................................................................. 69 5.2 The Tibet Question and its Political Dimensions ................................................. 71 5.3 'Xi Zang' - The Western Treasure House .............................................................. 74 5.4 Conclusions & Outlook ............................................................................................ 75 CHAPTER SIX - CASE STUDY 2: THE INDIAN OCEAN & MODERN NAVAL SECURITY ISSUES ............................................................................... 77 6.1 Topography & Obstacles of a Region .................................................................... 77 6.2 Matters of Energy Security ....................................................................................... 81 6.3 Conclusions & Outlook ............................................................................................ 83 CONCLUSIONS ................................................................................................... 85 BIBLIOGRAPHY ................................................................................................. 90 APPENDIX ........................................................................................................... 98 CURRICULUM VITAE ...................................................................................... 101 v LIST OF ILLUSTRATIONS Tables Table 1 GDP growth (annual %) Table 2 Foreign direct investment, net inflows (% of GDP), 1992 - 2012 Table 3 Economic indicators, 2005 - 2012 Figures Figure 1 OECD Economic Outlook Graphics Graphic 1 Border conflicts along the Himalaya Mountains Graphic 2 The Indian Ocean in greater Asia 1 LIST OF ABBREVIATIONS ASEAN Association of Southeast Asian Nations BBC British Broadcasting Corporation BJP Bharatiya Janata Party BRICS Association of Brazil, Russia, India, China and South Africa CCP Chinese Communist Party CIA US-American Central Intelligence Agency EAS East Asia Summit FDI Foreign Direct Investment FP foreign policy FTA Free Trade Agreement GATT General Agreement on Trade and Tariffs GDP Gross Domestic Product IMF International Monetary Fund INC Indian National Congress IO Indian Ocean IONS Indian Ocean Naval Symposium IOR Indian Ocean region IORA Indian-Ocean Rim Association IR International Relations LAC Line of Actual Control NAM Non-Aligned Movement NEFA North-East