China's leaders have also announced that they would ask their major corporations to step up investments in India. Mr. Modi has responded by assuring Chinese companies of his "personal attention" to their business operations in India during the India-China Business Forum in Shanghai last Saturday (May 16). Companies such as Alibaba (e-commerce), SANY (heavy machinery), Xiomi (electronics) and Harbin Electric (power plant equipment) have expressed interest in Mr. Modi's "Make in India" and "Digital India" projects.
Trust is also an economic variable
But there are still serious hurdles ahead.
Listening to the two countries' leaders, and reading their comments, I was struck by how much they stressed the need for greater trust and confidence in their dealings. That was also emphasized in a more formal language in their joint communiqué, which says that "the process of the two countries pursuing their respective national developmental goals and security interests must unfold in a mutually supportive manner with both sides showing mutual respect and sensitivity to each other's concerns, interests and aspirations (sic)."
Unsolved frontier problems, and assorted administrative issues, are a major irritant to such an extent that Mr. Modi invited China to work toward an early agreement that would determine "the exact location of their 2,200-mile border." That will be tough because not much progress has been achieved in 18 negotiating rounds over more than a decade.
China's close relationship with Pakistan -- a country India considers a major security threat -- is another matter of great concern to Delhi. Mr. Modi says he raised the issue of China's $46 billion worth of investment programs with Islamabad, and seems to have been reassured by Chinese leaders that these infrastructure projects don't signal any strategic shifts that should worry India.
China, for its part, has problems with India because it perceives Delhi's geopolitical leanings as potentially damaging to its security interests.
I believe that China and India will continue to clear things up in the months and years ahead. Both countries have strong leaders that will probably remain in office for the next ten years. They understand that they have to work together in the interest of their own security and economic development. Their bilateral dealings will be reinforced by multilateral consultations within BRICS, Asian Infrastructure Investment Bank (AIIB), the New Development Bank and, later this summer, within the Shanghai Cooperation Organization. India will also be working with China on the Belt and Road project connecting East Asia with Middle East, Europe and North Africa.
Investment thoughts
China and India will take some time to shake off the heavy burden of their post-WWII history. But they could do that sooner than currently expected. They want to clear the way for their economic development and for their joint project of Asian Century.
Both countries remain attractive investment destinations. You can play them directly, or, if you are particularly risk-averse, through Western companies profitably operating in these rapidly growing developing economies.