Saturday, January 9, 2010
New Year: A look at China (and India)
Indians are good people, but this can sometimes become a problem, especially in the fields of defense and foreign policy. Why so?
Too often they believe that others are like them. The best example has been the first Indian Prime Minister’s Hindi-Chini bhai-bhai policy. Nehru believed in the fraternity of nations, he believed in peaceful co-existence, mutual non-interference in each other's internal affairs, mutual respect for each other's territorial integrity and sovereignty; he tried hard to impose these lofty principles on India’s neighbours and particularly on China.
A clever Zhou Enlai pretended to agree with the Principles, but his mind functioned differently. Zhou, like his mentor Mao Zedong, was a hard core revolutionary who believed in the omnipotence of war. Is it not the Great Helmsman who wrote, “Some people have ridiculed us as the advocates of omnipotence of war. Yes, we are: we are the advocates of the omnipotence of the revolutionary war, which is not bad at all, but good and is Marxist”.
There is nothing wrong in believing in the omnipotence of peace, as long one does not forget that others may think (and act) differently.
In the case of Nehru, the result was not long to come; eight years after signing the Panchsheel Agreement, China treacherously attacked India in NEFA and in Ladakh. The nation paid a heavy price for not being able to understand the Chinese way of thinking.
The tragedy is that 50 years later, many in India still believe that the priority No 1 of India’s foreign policy should be to make friends with China. Once again, there is nothing wrong to be China’s ‘friend’ or even ‘brother’, but it should not be at the cost of India’s interests or by bending backward over each whim and fancy of a single-party regime in Beijing.
In India, you will find different types of apologists. Some could be called ‘lackeys’ (to use Mao’s parlance): they usually have business or academic interests in China and love the reception they get when they travel to the Middle Kingdom. Let us not waste time over them.
Many sincerely believe that India and China are two emerging economies, for a long time under the political and economic thumb of the West, (in particular the United States), therefore their destiny is intimately linked. Their ‘logical’ conclusion is that Beijing and Delhi should work in tandem. They give a recent example: the common position at Copenhagen Summit on Climate Change.
I will not go into details but I totally disagree. Although there is one common denominator (the fast development rate), India’s case is totally different from China’s.
Even the Indian Prime Minister recently stated in Washington: “Well, I have no hesitation in saying that I think development in India cannot be a carbon copy of what happens in China. And the Chinese system is very different.”
Speaking to CCN, he reiterated his Government’s stand: “there is enough economic space for both our countries to realize the growth ambitions of our respective countries”. He however made it clear: “We are a functioning democracy. …Democracy is slow-moving. …I always believed that it may be slow-moving in the short term, but in the long run, an arrangement which has the backing of the people at large will prove to be more durable.”
If one analyses the future of the two countries, this should be kept in mind. India and China are different and their destinies may go in opposite directions.
Wei Jingsheng, the most famous Chinese dissident who spent 18 years in jail for proposing in the 70’s ‘democracy’ as the fifth ‘modernization’ (Deng Xiaoping had spoken of the Four Modernizations) recently wrote an article in The Christian Science Monitor. He opposed the sentence of 11 years in prison for the mild dissident Liu Xiaobo.
Wei noted that because China “now sits prominently at the tables of global governance”, its leaders think thus: “Since you made a fuss about releasing Liu after his arrest, we will punish him even more severely. In no uncertain terms, that will let you know that not only don’t we care what you think, but we don’t have to.”
Wei adds: “We Chinese are intimately acquainted with this authoritarian arrogance”, before concluding: “Now that China’s leaders believe their prospering nation has emerged as a player in world history just as America’s prestige has been weakened by the Iraq war and the recent financial meltdown, the hardliners have been able to wrest the upper hand once again.”
No goody-goody Indian analyst will view things like this, though Indian ‘experts’ would better grasp China if they could understand the centrality of the survival of the Party in the preoccupation of ALL Chinese leaders.
Today there is one issue which preoccupies the apparatchiks in Beijing more than anything else: the rate of the yuan. Indeed the fate of the regime depends on the continuation of the growth rate which itself largely depends on the low rate of the Chinese currency.
In 2009, the Obama administration tried the bhai-bhai way with Beijing, accepting to drop a proposed meeting between the Dalai Lama and later forgetting all contentious issues during the November presidential visit to Beijing. But it did not pay off; Beijing hardened its stance in all fronts.
In 2010, Barak Obama seems decided to show the Mandarins in Beijing that the US remains a power to reckon with. He will meet the Dalai Lama and sell Black Hawk helicopters and anti-missile batteries to Taiwan.
The Washington Post pointed out that many American analysts today believe that “the Obama administration — with its intensive outreach to Beijing — tried too hard in its first year to cultivate ties with China. Playing hard to get might have helped smooth out China's swagger.”
Another US expert explained: "We're in the role of the supplicant” while a senior U.S. trade official mildly threatened: “If [Beijing] continue on this particular path in a strong and inflexible way, there will be a significant political backlash not just in the United States. China needs to be aware of that.”
For these reasons, Beijing will have to reevaluate its currency, sooner or later. Even in China many agree that China has no choice. Zhang Bing, a researcher at the Institute of World Economics and Politics under the Chinese Academy of Social Sciences, stated in a research paper that the government's current yuan policy of gradual reform is wrong. Zhang admitted: "There's a very urgent need for pushing forward the reform plan on the yuan and now is the best timing.” He concluded that: "a 10% appreciation in the yuan against the dollar should have a limited impact on the Chinese economy’. It would reduce speculative fund inflows by effectively eliminating expectations of a yuan appreciation.”
Whether Beijing decides to reevaluate the yuan in 2010 or not, ultimately the decision is inescapable and this will have incalculable consequences for the Middle Kingdom.
On January 1, Swaminathan Aiyar in The Economic Times predicted that during the next decade: “India will overtake China as the fastest-growing economy in the world. China will start ageing and suffering from a declining workforce, and will be forced to revalue its currency. So its growth will decelerate, just as Japan decelerated in the 1990s after looking unstoppable in the 1980s. Having become the world's second-biggest economy, China's export-oriented model will erode sharply — the world will no longer be able to absorb its exports at the earlier pace.”
Well, the future will tell us if the prediction was true. But in the meantime, Chinese supremacy may continue for some time. According to deal tracking firm Dealogic: “Global property sector M&A [merger & acquisitions] reached just $151.8 billion in 2009, the lowest level since 2003”. However China witnessed an increase of 41% in its M&A levels from its previous year: “China attracted deals amounting to $29.3 billion or 19 per cent of the global volume - the highest total on record," commented Dealogic.
The only certainty is that the situation of the Middle Kingdom is far more unstable than in India. A scenario found on The Financial Times’ website makes interesting studying. The author projects himself to 2019 when shortage of water in China heralds the end of an epoch: “By 2015, it was [already] obvious: China was seriously parched. The Great Wall of Credit of 2009-2012 had unleashed too much industrial capacity consuming too much water. That exacerbated a nationwide shortage – China had more than a fifth of the world’s population, but only 6 per cent of its fresh water. Four years later and the crisis has taken on ruinous dimensions. Crop failure and famine in the deserted interiors; emergency rationing in the teeming coastal cities. …Ten years ago  China had it all: a well-nourished workforce, vast reserves of paper money, a new swagger on the international stage. The sharp currency revaluation of 2010 unleashed a global mergers and acquisitions spree the likes of which the world had never seen… That president Xi Jinping is considering beseeching poorer neighbours for food aid is a measure of how far the mighty have fallen.”
One can envisage several other scenarios, but one point is certain, China will have to face far more serious problems than India in the years to come. For sure, there is no need for India to club its future with that of the Middle Kingdom.
One of the possible future scenarios is certainly a conflict with India for water which will be triggered by the nervousness of the declining empire.
India can continue to believe in the omnipotence of peace, but should be ready for any eventuality.