In the 1700s, Indian textile workers had a similar standard of living as their British counterparts. In the 1750s, India was producing 25 percent of the world’s manufactured goods; China as much as one-third. From the year 1AD until the year 1820, China and India were the world’s largest economies.

Unsurprisingly, in the year 1800, six of the world’s top 10 cities were in Asia. And Beijing was the only city in the world with more than a million inhabitants.

Then the scale began to tilt against the Asian giants. By the end of the 19th century, India would be responsible for less than 2 percent of global manufacturing and China contributed only 6 percent to it. By this time, fuelled by competition, commerce and great technological innovations, Britain produced more than 18 percent and the United States 24 percent of the world’s manufactured goods.

By the year 1900, it was clear the tables had turned. New York, Chicago and Philadelphia were now counted among the world’s greatest cities, joining such Western citadels as London and Paris. Beijing, however, had slipped out of the elite club and Tokyo survived as the lone eastern star.

Chinese, Indian rejuvenation

With China and India now again on a sustained high growth track, there is talk that the two economies that dominated the world until the last 200 years are bound to regain their preeminence on the global stage. The Chinese aptly like to call it ‘rejuvenation’.  

One school of thought prescribes that the Asian giants deepen their trade relations further to expedite the process. Already, China sits on top of the largest foreign exchange reserve in the world and is set to surpass America in purchasing power parity (PPP) by the end of the year, according to some estimates.

In a recent article, Kishore Mahbubani, a noted Singaporean scholar, argues that it will be in the natural order of things for China and India to resume their preeminent positions by 2050, or even earlier. He calls the Western domination of the last 200 years “a major historical aberration.”

In his book, The New Asian Hemisphere, Mabhubani argues that the past 200 years of Western domination of world history have been a major historical aberration because from year one to year 1820, the two largest economies of the world were consistently China and India.

Of course, the big question is: will the Asian giants, Japan being the third one, come close to forming the Eastern axis, given their respective strategic interests and history of mutual hostilities?

This might seem less likely in the case of Japan and China, at least in the foreseeable future. However, there are some interesting signs and imperatives that are likely to push India and China closer, not least their mutual economic interests.

Despite their unsettled border, the longest disputed border in the world, the Line of Actual Control (LAC) has seen no major flare-up since 1962. “India and China are now more politically and economically engaged than at any time in their recent history,” writes Jeff M Smith in National Interest magazine. Bilateral trade has expanded exponentially, and their armies have even held joint military exercises in recent years.

The two countries have also periodically found a common voice on issues of mutual interest, like world trade talks and climate change, and the need to reform global-governance institutions. In the BRICS summit in Brazil this summer, Chinese President Xi Jinping and newly elected Indian Prime Minister Narendra Modi were finally able to put together the architecture of a BRICS development bank. Shanghai will host the BRICS bank headquarters while India will hold its first presidency.

More importantly, it is the first tangible sign that the emerging economies are now willing to challenge the old world order dominated by the Bretton Woods institutions.   

The whole world is following Xi’s visit to India later this month, from September 17-19. From the Nepali perspective, it will be interesting to see how the visit plays out in terms of both New Delhi’s and Beijing’s pronouncements in giving primacy in their foreign policy conduct to the immediate neighbourhood.  

View from Nepal

We in Nepal are much encouraged by both Prime Minister Modi’s and President Xi Jinping’s emphasis on improving ties with their neighbours. This opens up vast new avenues, not just for bilateral cooperation but also trilateral collaboration.

Perhaps one set of blueprint for regional cooperation was offered by Prime Minister Modi during his Nepal visit, which he cleverly summed up as HIT—Highways, Information-ways and Transways, the last one in reference to transmission lines, power generation and distribution, which could cut across national borders.

This should fit in neatly with China’s neighbourhood policy, the so-called ‘Peripheral Diplomacy’, which puts heavy emphasis on deepening ties with the neighbours.

Nepal needs a massive injection of capital in its infrastructure to achieve sustained levels of growth. These development projects will also tap our greatest resource—the youth—which no one likes to talk about. From Kuala Lumpur to Qatar, tens of thousands of Nepalis, in their most productive age, toil to build someone else’s bridges, highways and high-rises.

Modi on mutuality

We could do with Indian and Chinese capital and expertise to engage our vast resources and unleash new energy to realise peace dividends, which we have failed to harvest despite the end of the civil conflict in 2006.

Modi, in his visit to Kathmandu, the first by an Indian prime minister in 17 years, tried to set the ground for the establishment of bilateral relations on a new footing. He was not only the first visiting leader to address our Parliament since the restoration of democracy in 1990, he also tried to set a broader tone and content in his speech. Modi, for example, emphasised mutuality—that India would export power to Nepal to fight its rolling blackouts in the near term while Nepal had the abundance of power potential to assist India’s massive power needs in the years ahead.

If India agrees to sign a power trade agreement that respects Nepal’s right to also involve non-Indian developers, this would go a long way in putting bilateral ties on a firmer economic footing. India could also consider expediting the Pancheswar multipurpose project and come good on its promises made decades earlier.

Once these framework agreements are put in place, Nepal, India and China could explore complementarities in developing the huge infrastructure projects we so badly need—highways, railways, and a host of investments to take our underperforming tourism sector to a whole new level.

Modi’s ‘pragmatic diplomacy’ has an eye on greater regional integration. A trans-Himalayan regionalism fuelled by stronger connectivity can be a positive game for Nepal, India and China.   

Railway to Kathmandu

Already, Xi and Modi, both relative newcomers on the world stage, have demonstrated imagination and flair as  leaders. Their regionalism seems more enduring for the simple reason that it is based on mutual economic benefits and not merely on vague rhetoric of good neighbourliness. There is a chance that Nepal will finally be able to leverage its strategic location between the world’s two fastest growing big economies to its benefit.

China’s new Silk Road Economic Belt initiative and its emphasis on connectivity have the potential to revive Nepal’s glory days as the transit hub between India and China. Only last month, the Qinghai-Lhasa railway arrived in Shigatse, the second city in Tibet. Now there is talk of expanding the high-elevation railway to Kerung, the nearest Chinese town to the Nepali highway, and ultimately to Kathmandu.

During his visit to Kathmandu in 2012, then Chinese Premier Wen Jiabao had said that the rail link, when complete, will alter the geostrategic balance in the region.