China's GDP in 2003 was $1.4 trillion. Its about $9 trillion now. China's new leader Xi Jinping signed fresh deals to import modern jets, submarines and other deals flashing its $3 Trillion of forex reserves. The Chinese have been aggressive in their diplomatic efforts across the globe which is backed by the confidence they have in their economy. Compare this with that of Indian foreign policy which has faltered with tiny states in its neighborhood, be it Maldives, Nepal, Bangladesh ,Myanmar or Sri Lanka. In all these countries, India faces only one factor, China. The same holds good for the South East Asian Countries and Africa where the scramble to gather resources is well and truly on. India so far has only its "soft power" to show for but no concrete policy or the money spent to carry any influence with these countries.
Let us first consider the sub continent which is our backyard. China has made heavy inroads in all these countries developing roads, ports, railways and also providing weapons. China has made a new road named friendship road from Tibet to Nepal which undermines India's security. China has made roads, ports and railways in Bangladesh, Sri Lanka, Myanmar. It has invested in the Maldives. China has a head start in the oil and gas resources in Myanmar and set up a surveillance system on the Coco islands that can track India missile tests. No surprises then when China claimed that the Agni V missile had a much longer range than the 5500 kms claimed by India.
Let us consider trade relations with each of the SAARC countries with China and compare it with India.
1) Sri Lanka
The total bi-lateral trade value between Sri Lanka and China topped US $ 3.2 billion, which is the highest in the history. Sri Lanka’s exports to china have increased by 5.9% to $ 162 million in 2012 in comparison to 2011. China’s exports to Sri Lanka reached over US$ 3 billion in 2012.
Investments from China to Sri Lanka were likely to increase this year as against US $ 243 million recorded in 2012. The cooperation in the infrastructure sector also made great strides. Major projects, like Mattala Rajapaksa International Airport in Hambantota, Putlam Power Plant, Colombo-Katunayake Expressway, Colombo Lotus Tower, South Container Terminal of Colombo Port, Extension Lines of South Highway from Pinnaduwa to Godagama and the railway from Matara to Beliatta and some road construction projects like, A9 to Jaffna were all working well.
Compare this with India which has $4 Billion trade and does have other projects, but many of them have been half cocked and plagued with trouble due to the Tamil issue which has not allowed India to fully realize the potential with Sri Lanka. Sri Lanka has come up with many incentives for investment in their county so much so that an official in China said that Sri Lanka was the best investment destination in South Asia and even better than ASEAN!
Bangladesh represents one country which has dramatically fallen out from India's grasp as far as trade goes. China's trade though heavily lopsided in its favor now stands at $7 billion a year while India stands at just $2.5 billion again with trade completely in Indias favor. Almost all of Chinas exports to Bangladesh have come at India's expense which traditionally exported all such items like textiles, machinery etc to Bangladesh. China has been aggressively wooing Bangladesh providing it space for exhibitions in trade fairs. Bangladesh has offered to China a duty free zone to relocate some of its industries that face competition issues due to rising labor prices in China.
Chinas trade with Nepal stands at $2 billion which is again heavily in its favor. This represents a huge jump in trade between the two countries although India still remains the largest trading partner of Nepal at $4 billion. China has been wooing Nepal aggressively, It has made land ports to facilitate trade between the two countries and China is investing in infrastructure development in Nepal.
Maldives has been firmly on the Chinese horizon in recent times. Although India has always been the largest trading partner, China has now the same trade figures as India at about $70 million. More importantly, Chinese tourists now constitute the largest group in Maldives. China has also extended big loans to Maldives. India has done the same but the recent change in the government and the coming in of the Islamist government there has seen India's influence wane in the country.
Looking at the African stage, China has aggressively expanded its influence in the dark continent. Today China has displaced the US and Europe in Africa to become the continents largest trading partner at near $200 billion. The balance of trade is equal as China has heavily invested in the natural resources in Africa and imports oil, copper and other raw materials to feed its huge manufacturing base. There is a Chinese diaspora in Africa which takes care of Chinese investments which includes roads, ports, dams, railways and more recently, manufacturing units which have Chinese managers with African labor. Compare this with Indo-African trade at about $75 billion though India has had historic and traditional ties with the continent and the presence of large Indian origin population in the continent.
South East Asia too shows that China leads India by a long way. China is ASEANs largest trading partner. Trade between the two stands at over $400 billion. Compare this with India' trade of $80 billion. Both India and China now have a free trade agreement with ASEAN but while China's trade has been growing dramatically, India has been quite slow.
From all this, the most common factor is that China runs large trade surplus with each of these countries being largely an export driven economy. The other fact is that the rate of increase of trade is also very high at over 20% generally to over 35% with countries like those of ASEAN. This has allowed it to run up large forex reserves which it is using all over the world in key strategic areas to expand its influence for both trade as well as military and strategic objectives. China has used its large surplus to develop infrastructure in Africa, South Asia and the poorer countries of ASEAN. Contrast this with India which is a net importer and India's $300 billion reserve is not good enough for it to buy influence all over. Add to this India has some issue or the other with its neighbors. These neighbors have now realized that they can play the China card in its relations with India and China has obliged these countries readily and expanded its influence in the region which is of great importance to it for both its energy security as well as trade it ships its goods to Middle East, Europe and Africa.
India has been trying to increase its influence in the South East Asia where many of the countries in the region have territorial disputes with China. But even then, China's trade and investment in these countries far out strips India. With Vietnam, China has a trade of $7 billion while India has $4 billion. China is heavily investing in Cambodia and Laos.
Even after India started economic reforms, it has progressed slowly. Lots of hurdles to trade and investments and regulations has meant that its not easy to do business in India. This has held back faster economic growth in India. China has relentlessly marched on it its economic progress to become the second largest economy in the world and on course to be the largest by the end of the decade. Chinese leaders have shown single minded focus of fast economic growth while Indian leaders lack any foresight or vision to develop the country and are often seen come out with populist, unsound and unwise policies to meet those populist schemes. India herself lacks world class infrastructure and the expertise for it to build infrastructure abroad. Even if India does undertake projects abroad, they are slow to complete. China on the other hand has built world class infrastructure in its own country and has the expertise to execute major projects world over and dwarfs the rest of the wold in infrastructure development. China's willingness to do business with rouge regimes, gives it a major advantage. Just like how the west found it easier to work with dictators while preaching democracy everywhere. Hard cash,weapons for rouge regimes or massive loans and infrastructure development for poor countries is too much for any of such nations to refuse practically.
For India to succeed diplomatically and in geopolitics it is imperative that it grows economically and very rapidly at that. Right now China outspends India in every sphere to "buy" influence which in many cases is detrimental to Indian national security but there is nothing that India can do about it unless it can match China dollar for dollar. India's "good image" will then be an advantage to compete with China.