With the rapid economic growth experienced by both China and India over the last two decades, commentators such as Kishore Mahbubani are confidently proclaiming that the 21st century belongs to Asia (Mahbubani 2008). Consequently, there are also many works predicting the nature and effects, whether benign or belligerent, associated with the concurrent rise of China and India. However, this chapter, unlike existing predicative literature, does not seek to make claims about the consequences of the rise of China and India. This is because the owl of Minerva flies only at dusk; it is only when events are over that we can fully appreciate the significance of what has occurred. However, it does not necessarily mean that it is not possible to make more informed predictions of this development. To this end, this chapter argues that in order to make sense of the impact the Sino-Indian rise will have on international society, it is necessary to observe their interaction in a context in which they possess the luxury to choose, and not in a context where they are compelled to take a particular course of action, thereby ruling out their policies towards countries in East or South Asia – areas of primary strategic importance to China and India, respectively. This is because the act of choosing provides insights into their ‘black boxes’, namely the process involved in the formulation of their foreign policies, a process that is usually obscured. Consequently, this chapter uses prospect theory to analyse Sino-Indian interaction in Burma in order to achieve the aim of understanding the nature and effects on international society as they seek to become major powers. Prospect theory is used because it is able to explain why China and India have been devoting resources to improving relations with states of peripheral importance such as Burma, which should not be the case if they seek to maximize their utility.

Prospect Theory as Analytical Framework

Unlike expected utility theory, prospect theory does not assume actors to be rational entities who seek to maximize utility. Instead, prospect theory, as Daniel Kahneman and Amos Tversky argue, better reflects real-life decision making because it starts off with the premise that how actors perceive gains or losses is not fixed. Consequently, they argue that individuals’ decisions are dependent on whether they believe the resulting outcome is interpreted as a gain or a loss.