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The Global Financial Crisis: Implications beyond Economics The repercussions of the global financial crisis are not confined to economic impacts. The crisis has far-reaching implications on global and regional strategic and security dimensions. These implications are significant for both China and India. The crisis has forced both countries to review their geo-political and strategic perceptions in the context of a realigning world order. Both countries have to approach the changing dynamics of the new world and regional orders in a responsible and constructive manner. In an exclusive interview, Dr Iftekhar Ahmed Chowdhury, former Foreign Minister of Bangladesh and a renowned expert on regional cooperation, international institutions and strategic affairs, provides key insights on the implications of the crisis in the context of the world’s two most populous nations. A. What are the strategic implications of the global financial crisis from an Asian perspective? Will the balance of power within Asia undergo changes in terms of emergence of new power centres? The current financial crisis appears to have left China and India relatively unaffected. While their resilience may be attributable to a variety of economic factors, politically the fact remains that they are both being globally perceived as emerging power centres. Within Asia the balance of power between China and India, in political, economic and military terms, has always been tilted in favour of China. This is likely to remain so, though the power-gap has in recent times been reduced due to the proximity India has enjoyed with the US since the nuclear deal. This advantage may be somewhat eroded by the efforts of the Obama administration to buttress the Chinese connections. However, both China and India realize that their new status lends both a special responsibility to navigate the waters of bilateral relations with care and circumspection. B. How has the crisis impacted India and China's strategic relevances? (In other words, whether the crisis has enhanced or changed the strategic influences of the two countries?) The crisis per se may not have enhanced or altered the strategic influences of both countries, both of which were already on the rise. This rise has been a process and not an event, whose beginnings have predated the crisis. The crisis may have slowed the pace of the rise of course, which in both cases has been inexorable.


About Dr. Iftekhar Ahmed Chowdhury Dr. Iftekhar Ahmed Chowdhury was the Foreign Minister of Bangladesh during 2007-2009. He has also held several distinguished positions at the United Nations including Ambassador and Permanent Representative to the UN. He was President of the UN Commission on Disarmament and an active participator in the UN reforms process. He is presently a Visiting Senior Research Fellow at the Institute of South Asian Studies in the National University of Singapore (NUS). C. What is the role of China and India in key global forums such as the G-20 and the East Asian Summit (EAS) after the crisis? One immediate result of the crisis has been a diminished role of G8 and an enhanced role of G 20, of which China and India are members. This will enable the two countries to have a greater voice in the creation of any new global financial architecture. Their demands for the new power structure to be reflected in decision-making in the Bretton Woods Institutions will grow. The idea of an Asian Monetary Fund, which was originally floated by the Japanese, may be revived, with the growing clout of China and India as new power centres, and now a government in Japan that is likely to want to forge closer links with Asia. D. Will the crisis encourage greater cooperation between the two countries or will it increase their competition for strategic space? If so, what are the implications of such competition from a South Asian perspective? It will do both, increase greater cooperation between the two countries, as also competition for strategic space. China and India remain two distinct State-models in Asia, with profound philosophical differences as to political and economic organization, and for that reason will remain protagonists, though not necessarily antagonists. Other South Asian States must not try for accretion of power by building linkages with one or the other, though Pakistan’s China connections will remain a constant in this region’s politics for sometime to come. Bangladesh, Sri Lanka and Nepal will continue to try to benefit from linkages with Beijing, but this is unlikely to be at the cost of their relations with New Delhi. Asia must be reconfigured in a way so as to be able to withstand decent and healthy inter-State competition, if not rivalry. 9

E. Does the crisis signal an "Asian renaissance" in the sense of reducing significance of the western economies and greater rise of the Chinese and the Indian economies? The Asian Renaissance or the new Asian Age is independent of the crisis. It signifies an efflorescence of Asian culture in its varied aspects---political, economic, intellectual, scientific and spiritual. It is a rediscovery by Asia of its inner self, a regeneration of the values that had once made Asia great. It is too soon to tell whether the phenomenon can be translated into new ideas and ideals such as an ‘Asian Home’ but one must remember that several centuries intervened between the European Renaissance and European Union. There can be as much greatness in diversity, as in unity.


F. Does the crisis create new policy challenges for two of these world's most populous economies in terms of matters of far-reaching political and social consequences such as internal stability, conflict management, climate change, energy security etc? What creates new policy challenges for these two most populous economies of the world is not just the crisis but a host of other factors that are bringing these two countries to the fore in the global arena. The endeavour must be to try and convert the challenges in all these fields into opportunities by evolving ideas for greater general good than narrow national interests. Leadership entails sacrifices, without which the new role will not find wider acceptance. In today’s world power accrues from perceptions of others, and not its exercise over them.






The Global FinancialCrisisImplications-aug-oct2010