Rethinking China's might by Minxin Pei my Comments

Minxin Pei’s article in the Washington Post was carried by the Hindustan Times on January 29, 2012. “Rethinking China’s Might” makes interesting reading. The thrust of his article is that the rise of China is exaggerated in relation to the rise of China as a threat to the US. He argues that instead of marginalising American influence Chinese attitudes are pushing Asian countries closer to Washington, elevating America’s status. Spoken in the US-China context and keeping in mind limitations of Chinese financial and military power in relation to the US this may be acceptable. It is true that China is still far behind the US in many aspects and its financial and economic clout are double edged swords. The two are locked in a Double Nelson.

In India we should weigh this in our context and how China’s continued rise economically and militarily at a time we seem to floundering or its recent attitude towards some of its neighbours, will affect us. First we should be realistic about catching up with China. Statistics and calculations about economic performance and other aspects of human development do not give that hope. Unless of course we believe in the theme that one day China will collapse under its own weight.
The reference that China’s flexing of muscles has made the US more relevant in Asia is partially valid. Countries of the Asia Pacific are merely seeking an insurance knowing that they cannot change geography and knowing that the US has not been a thumping success in Vietnam, Iraq and Afghanistan. Ultimately, all states realise that they cannot ignore China. Nor can we.

It is nice to look good in the neighbourhood. This is what we believe in. Not o with the Chinese. They are more inclined to put their belief in the dictum that in international politics it is better to be respected, even feared rather that loved.

The Great Walmart of China !

Foreign investment is generally beneficial as it creates jobs, adds value, and contributes to the GDP. Companies like Hyundai, Ford and Honda have built a giant automobile industry in India now producing over 2 million cars and tens of thousands of new jobs. By 2017 India will emerge as the third largest car making country in the world producing over 7 million automobiles. This would not be possible without foreign investment, technology and leadership. In sector after sector foreign investment has created huge new capacities catering to domestic and foreign markets. The level of foreign ownership makes little difference to the contribution foreign companies make to the economy. The desirability of foreign investment must never be questioned as long as it creates jobs, adds value and contributes to development. And these are just the factors that go against foreign direct investment in retail.

Study after study in developed and developing countries alike have shown that big box retail rather than creating jobs, destroy jobs. In fact their utility in developed economies is due to the labor savings they achieve. Classical economics was wary of the monopolistic producer who would charge ‘too much’ from the poor working classes while producing the much-needed ‘bread’. The single producer was the dread from which economists sought ‘perfect competition’, meaning many producers catering to many consumers resulting in fair competition in a perfect market. Adam Smith could never have conceived of a global operator with a huge hoard of cash and instant information becoming a ‘sole’ consumer. To the economists ‘monopsony’ was a theoretical concept – to be defined as a construct before belaboring the dangers of a monopoly. The danger of monopsony, seldom thought of by economists as a threat, is now upon us. In the last three decades the advents of giant retailers like Walmart (turnover $422 billion in year ended January 2011) and producers like Nestle (turnover 60.9 billion Euros year on year October 2011) have made monopsony a reality.

The bulk buying and the recourse to monopsonic practices result in pushing down producer prices, undoubtedly with resultant benefits to the consumer. Thus, the more of a commodity large retailers purchase in bulk, the lower the prices growers of agricultural commodities obtain! Studies by FAO and Oxfam attest to this. For instance, a decade ago coffee growers earned $10 billion from a global market of over $30 billion but now they receive less than $6 billion out of a global market $60 billion. The cocoa farmers of Ghana now receive only 3.9% of the price of a typical milk chocolate bar but the retail margin hovers around 34.1%. A banana farmer in South America gets 5% of the retail price of the banana while 34% accrues to distribution and retail.

The table below from “Oxfam: International Commodity Research – Coffee” clearly indicates the price of coffee during the period 1980-2000 plunging as production scales new heights. Analyzing the reason for this the study explains that the major cause for it as follows: “The high level concentration along the coffee supply chain is clearly not to the advantage of producers, who are price takers. Multinationals involved in the coffee sector control an ever- increasing percentage of processing, marketing and retailing. Because they are facing a multitude of small producers in 80 poor countries, multinationals can set the rules of the game. This buyer-driven supply chain means that multinationals capture most of the value-added linked with the production of coffee. Multinationals can put a downward pressure on producer prices by playing one producer against the other or by encouraging new countries or regions to start producing coffee via foreign direct investment.”

The average size of a Walmart is about 100,000 sq.ft and the average turnover of a store is about $ 53.2mn, each employing about 300 workers. The turnover per employee averages $ 175,000. Wal-Mart has a 9% return on assets, a 21% return on equity, and its CEO Michael Duke's $35 million salary, when converted to an hourly wage, worked out to $16,826.92. In comparison to this new employees are paid $8.75 an hour that would gross $13,650 a year. By contrast the average Indian retailer had an annual turnover of Rs. 330,000. Only 4% of the 12 million retail outlets were larger than 500 sq.ft in size. India has 53 towns each with a population over 1 million. If Wal-Mart were to open an average Walmart store in each of these cities and they reached the average Walmart performance per store – we are looking at a total turnover of over Rs. 141,000 million with the employment merely of about 16,000 persons. Extrapolating this with the average trend in India, it would mean displacing about 758,000 persons. Quite clearly Walmart is not going to create more jobs in India. On the contrary it will cause a massive loss of jobs in direct retail. This is the experience in the USA also. A 2004 study by the Pennsylvania State University concludes that counties with Walmart stores suffered increased poverty than those, and suggested that it was the displacement of higher paid workers in small family owned retailers. Another 2007 study has shown that towns in Nebraska with and without Walmart fared similarly different in terms of joblessness and poverty. A study of Wal-Mart’s expansion in Iowa found that 84 percent of all sales at the new Wal-Mart stores came at the expense of existing businesses within the same county. Business Industry analyst, Retail Forward, predicted that for every new Super center that Wal-Mart opens, two local supermarkets will close.

It will appropriate at this stage to consider the sizes of these giant retailers. Walmart’s turnover exceeds the GDP of Norway, which ranks 20 in the list of GDP’s. It’s almost four times the next largest retailer Carrefour. This is indicative of the power of the corporation. Typifying this power was the less than a day visit to India by the Chairman of Walmart Stores Inc, Mr. S. Robson Walters on November 6, 2009, described as a by Walmart as a private visit, and when the only person he called on was the Prime Minister, Dr. Manmohan Singh. After he departed Commerce Minister Anand Sharma said: “This is not the time for us to revisit the policy. Single-brand retail is good enough. Those who have commenced operation are happily doing business and so we cannot tweak the policy as of now.” The persuasive powers of such a large corporation can never be underestimated. Despite the unequivocal position of the government, as stated by its Commerce Minister, this very same government on November 24 announced that it was opening up the retail sector to up to 51% foreign ownership. Now one may ask if any of the other stakeholders in India’s retail business would have had such easy access to the higher echelons of government?


The major argument in favor of the benefits a Walmart or Carrefour will bring centers around the perceived benefits to agriculture and better prices to the farmer. Surprising all, Congress general secretary and MP, Rahul Gandhi, told election gatherings across Farrukhabad and Kannauj in UP that FDI would solve the puzzle of a kilogram of potato fetching Rs 2 or less to the farmer and a packet of potato chips costing Rs 10. "A packet of chips is made from just half a potato," he added, virtually turning the opposition to FDI into a conspiracy against farmers. One might suggest to him that PepsiCo has been buying potato and tomato for sometime now without making a dent on farmer prices.

Empirical evidence from many countries where big retail chains dominated show that on the contrary farm realizations actually decline. A recent joint study in Finland by Agrifood Research Finland and Pellervo Economic Research Institute reveals that for each kilo of rye bread purchased in 2010, for which the consumer paid 3.52 Euros, 1.24 went to the seller, while the grower received only 14 cents. A further 1.74 Euros were shared by the milling company and logistics, while the rest went to the state as taxes. The study also revealed that while the trade got 19% of the takings on food, it went up to 29% in 2009. Finally, the study showed that food prices rose faster than other consumer goods between 2000 and 2010. Big business and MNC’s like PepsiCo, Cargill, ConAgra and even ITC and Reliance have been procuring food grains and farm produce for several years now and there is no evidence that general prices have increased. Even where better prices were paid to contract farmers, data available suggests that input costs have been higher. Simple economic logic tells us that nobody pays more for a commodity that can be obtained for less. Business is about extracting profits and not about charity.
Protagonists of FDI in retail talk a lot about modernizing the supply chain. Consider this. The National Sample Survey relating to household expenditures reveals that fruits and vegetables only account for 9.88% of urban household expenditure9. It is widely agreed that the supply chain that links the Indian producer to the domestic consumer is primitive, outmoded and wasteful. Many studies exist that detail the extent of wastage. One will readily concede that large format retailing with its capacity for bulk procurement and capital investment, even if it accounts for a fraction of the retail trade in the sector, might be able to make some headway in modernizing the supply chain.

But before we get into the 'for and against' argument vis-à-vis FDI, we must also ponder over the fact that a modern and nationwide supply chain has been created, indigenously, for milk and milk products which account for 8.11% of household expenditure. Similarly we have an effective supply chain for food items such as cereals, pulses, and sugar and edible oils, which together account for 24.16% of household expenditure. All other non-food goods purchased by our households such as tobacco products and alcohol, processed foods and snacks, toiletries, detergents, garments etc which together account for 52.57% of all urban household expenditure are made available for consumption by modern and efficient supply chains. Thus, what the average household does not get from a modern supply chain is a very small part of its purchase. So the argument that the pro-FDI lobby extends vis-à-vis of FDI in Retail of modernizing the entire supply chain is a bit exaggerated. The supply chain as it is now is mostly modernized and efficient, and what is yet to be modernized covers only a very small part of urban household consumption. The argument then that we need the merchants of the western world like Walmart to modernize just 9.88% of the supply chain is a bit bogus and self-serving.

More than anything else it is Walmart's Chinese connection that should cause us to worry. While Walmart has 352 stores in 130 Chinese cities with a total turnover of $7.5 billion, Walmart directly buys via its procurement centers at Shenzhen and Dalian over $ 290 billion worth of goods from more than 20,000 Chinese suppliers, 70% of its 2010 turnover of $420 billion. Of this over $60 billion of goods are exported to the USA alone, making Walmart the fifth largest exporter to the USA, and also suggesting that Walmart’s procurement from China is the major source of its profits.

With its huge monopsonic power, Walmart actually depresses wages, by forcing suppliers to cut costs. A good example to demonstrate the low wages in the Chinese labour market is contained in a report by Thomas Fuller in The International Herald Tribune of August 3, 2006, which investigated the percentage split in profit in the shoe industry between the Chinese factories and those who market and sell the finished products in the US and Europe. The factory owners after the laborious process of manufacturing makes a profit margin of 65 cents per pair of shoes, which are sold ex-factory for $15.30. “A major U.S. retailer, after factoring in shipping, store rent and salaries, sells the boots for $49.99. Assuming a pretax profit margin of about 7 percent, an average among large U.S. retailers, it earns $3.46 on the same pair of boots.” However the story doesn’t end with the unfair profit margins. The Chinese laborers, who make the shoes, box them and even affix the price tag, are the ones who get the worst deal. The International Herald Tribune says “Yet for all the sweat that goes into making shoes in Tianjin, the factory payroll is equivalent to $1.30 a pair, 2.6 percent of the U.S. retail price.” Should the salary of every worker in the Chinese shoe factory be doubled, the retail price in the US would merely go up from $49.99 to $5.29.

Even if one were to ignore the manipulated value of the Yuan to make Chinese made goods export competitive, it is clear that by keeping wages low and without the protections afforded to labor by trade unions, collective bargaining, overtime and assurance of good working conditions, China is in effect subsidizing exports. What the flow of cheap Chinese goods through the Walmart direct pipeline from China into India will do to Indian companies, particularly the SME’s can well be imagined. Even without Walmart, Indian SME’s are being driven out in sector after sector by cheap Chinese imports. For instance there is no light fittings industry left in India. Same for toys. One can well imagine what a Walmart pipeline will do to the hosiery and woolen goods manufacturers in Ludhiana and Tiruppur. The once prosperous clock making industry around Rajkot has almost entirely fled to China. Millions of jobs in the semi-organized sector now stand threatened. In 1985 Sam Walton, the founder of Walmart was forced to say: “Something must be done by all of us in the retailing and manufacturing areas to reverse this serious threat of overseas imports to our free enterprise system… Our company is firmly committed to the philosophy by buying everything possible from suppliers who manufacture their products in the United States.”

We should also be worried about our fast growing trade deficit with China. The trade deficit with China is now likely to exceed last year's record $20 billion figure. India's trade deficit with China widened to $14 billion after seven months this year, as China's overall trade surplus soared to the highest in two-and-a-half years amid an unexpected surge in exports to the European Union. With bilateral trade reaching $41.5 billion in July, by rising 17 per cent and on track to surpass last year's record $61.7 billion figure, the Indian government should be concerned by this latest import data. Burgeoning trade deficits have contributed significantly to the recent steep devaluation of the rupee. But is the government worried enough to seek to narrow the deficit?

Having said all this, one must concede that change is remorseless. The constant displacement of workers by machines and methods is the story of the future. Textile mills made most weavers redundant, just as robots in automobile manufacturing have rendered many workers as surplus. This is the story in all sectors of manufacturing. While the future cannot be avoided there is no need to hasten the pain. Big box retail will bring benefits to many stakeholders; not the least being the state, which will see improved realization of taxes and the construction industry, which will be called to build the new retail centers. Better quality control and good management methods will spread into other sectors and down the supply chain manufacturers will demand from their suppliers what is demanded of them by their buyers.

Given our pressing need to absorb growing numbers from the hinterland into our labor pool, should we exacerbate our problems by facilitating foreign procurement coupled with efficient local distribution, thereby suffocating our own manufacturing industry?

This at a time when we still have not got around to facilitating lower cost and more efficient manufacturing in India through enabling legislation and regulation. The contribution of industry to GDP in 1992-96 and 1997-2003 was 30.9% and 23.7% for India, while for China over roughly the same period it was 62.2% and 58.5%15. We need to address issues at home before we unthinkingly or unintentionally invite problems from abroad. The Government would be better advised to address this issue first, rather than devoting itself entirely to the cause of foreign retailers.

Different countries have dealt with the problem of the sudden onset of giant foreign retailers differently. In Thailand no large markets are permitted within 15 km of the city center. It might be better to follow the Chinese model of caution and hurrying slowly. China just allowed FDI in retail in 1992 and the cap was at 26%. After ten years the cap was raised to 49% when local chains had sufficiently entrenched themselves. 100% FDI in retail was permitted only in 2004, after the infant retailing industry had acquired some muscle. Walmart in China however is a very different company to what it is in then USA or elsewhere. 15000 suppliers serve its China operations alone, and Walmart China claims that over 95% of its goods sold in china are sourced locally.

Even in as liberal an economy as Japan, large-scale retail location law of 2000 stringently regulates factors such as garbage removal, parking, noise and traffic. Recently Carrefour decided to exit Japan by selling off its eight struggling outlets after four years to the Japanese Aeon Co as the extremely cumbersome Japanese regulations blatantly favor its own homegrown retail firms. . Malaysia’s Bumiputra clause insists that 30% of equity is held by indigenous Malayans. Philippines insist that 30% of inventory by value be grown within the country.

The US or European experience shows that retail giants destroyed the livelihood of small shopkeepers, who became employees of such giants for paltry salaries. A retail supermarket encompasses the entire chain and shrinks the intermediaries – lowering costs and removing jobs. In a country with no social security net – the replacement of thousands of retailers by a single large intermediary will shrink jobs by the millions in distribution industry. What option will these millions have then except to take to the street? Many talk of the revolution in retail, but governments must be more concerned with revolutions forming on the streets.

There are ways of achieving the former while avoiding the latter. Two simple suggestions to tweak the policy on the anvil are:

1. Insist that big box retailer’s be foreign exchange neutral. That is, they export as much as they import.

2. Restrict big box retailers to outside municipal limits and to satellite towns instead of restricting them to within the 53 cities with more than a million people each. This will ease the urban chaos and encourage people to move into less expensive housing outside the big cities.

3. And finally, why put limits on foreign equity holdings? Allow companies like Walmart to own 100% of their business in India. At the same time the government must insist that they bring in foreign loans to finance their entire capital investments in India. This will enable Indian financial institutions and banks to remain within sectoral limits and to extend financial assistance to Indian retailers.

Above all the policy maker must realize that while it is an American corporation earning profits for its US shareholders, Walmart is mainly a retailer of Chinese goods. Its business model is quite unique. As Nick Robbins wrote in the context of the East India Company, “By controlling both ends of the chain, the company could buy cheap and sell dear” In this case it means profits for the Americans, jobs for the Chinese.

Article written by Mohan Guruswamy who is Chairman Centre for Policy Analysis, New Delhi and Distinguished Fellow at Observer Research Foundation New Delhi. 26th December 2011

China does some chest thumping

China’s rulers have a problem. They are not sure if they can continue to portray the image of a country interested in a peaceful rise without this coming into direct conflict with a desire to reassert newly defined core interests. All of 2010 saw a more assertive Chinese foreign policy activity in its periphery, including India, reflecting possibly a tussle of some sorts in Beijing between an assertive People’s Liberation Army (PLA) which may want a bigger role in foreign policy in the decade ahead, and a political leadership that is now going to be in transition as Mr Hu Jintao prepares to hand over power to his selected successor, Xi Jinping, by 2012? And therefore this exercise of display of assertiveness with each power centre, notably the PLA and the Party hierarchy, positioning themselves inside China and positioning themselves against the US where there will be presidential elections in end-2012.

China’s assertiveness and the recent reactions in the Chinese media to the visit of the Indian ship INS Airavat is only a reassertion of its position. China had taken umbrage at US secretary of state Hillary Clinton’s July 2010 remarks in Hanoi on creating an international mechanism to resolve this issue, has been particularly visible in the past few weeks. Earlier Dai Bingguo conveyed to Ms Clinton in May 2010 that China regarded its claims to the South China Sea as a core national interest.

The Chinese carried out a live ammunition PLA Navy exercise in the South China Sea on July 26, 2010 followed by another exercise on August 3 along the Yellow Sea coast — the other area of contention. The Chinese conducted exercises there in April and June this year, and were now asserting that China opposed any foreign ships entering the sea or adjacent waters; they even vehemently opposed joint US-South Korean exercises there.

The message in these demarches to the US was in keeping with protecting China’s core interests in the adjacent seas and telling the US that the western Pacific was China’s sphere of interest and influence. It suggested a division of zones of influence between the Eastern and Western Pacific. The US and China have their own geostrategic rivalries to settle, and the Chinese may have assessed that their moment has come.

Its reaction to the visit of the Indian ship has to be seen in this context – it is part belief in its history, part knee jerk, part bullying, part worry about energy resources, and part suspicion about growing India-Vietnamese-US triangular relationship in the South China Sea. The influential Communist Party-managed newspaper the Global Times was somewhat hysterical when, in its editorial of September 16, it warned India that any deal with Vietnam would be ‘serious political provocation’ which could ‘push China to the limit’ and described the ONGC Vietnam deal as a reflection of Indian ambitions. The newspaper went on to say that while China was sincere about its peaceful rise it will not give up its right to use other means to protect its interest. China cherished its friendship with India but this did not mean that China valued this above all else. It referred to India’s intervention in the Dalai Lama issue and ends with the warning that ‘we should not leave the world with the impression that China is only focused on economic development nor should we pursue the reputation of being a peaceful power,’... Clearly, there is a debate inside the sanctum sanctorum of the Chinese Communist Party.

China’s reaction is also a reflection of its concern for energy resources. China has only 1.1% of the world’s known energy reserves but consumes 10.4 % of the world’s oil production and 20.1 % of the total energy consumption in the world. The mismatch is obvious and will grow more in the years ahead. Naturally, China views the disputed South China Sea zone with its energy reserves with special interest. Some estimates state that the known reserves of the South China Sea are twice as much as China’s reserves of oil and there is plenty of gas too.

The Indian reaction to this charge by Beijing has been firm pointing out that India’s cooperation with Vietnam or with any other country ‘is always as per international laws, norms and conventions...’ India has also pointed out China’s role in the disputed part of POK under Pakistan occupation where China may be on the verge of using the territory for developing communication links with Afghanistan. Obviously, China is planning for a post-US phase in Afghanistan, access to its mineral resources, ultimately linking to Iran and the Gulf; it would not want the region to be solely India’s sphere of influence. India has also to keep its own vulnerabilities in Arunachal Pradesh in mind; even though outright war is unlikely we should expect economic cooperation and periodic tensions. China-India relations will not be determined by strict bilateral terms. As both countries rise, there will be competition in other spheres - for markets, resources and influence.

Yet China remains concerned with its intricate trade and financial links with the US, and also with the security of its trade and supply routes that transit the Malacca Straits. It has endeavoured to develop extensive land routes through Central Asia, but these are inadequate. It is a matter of time before China will make its presence more visible in the Indian Ocean. It has port facilities in Kyaukpyu, Hambantota and Gwadar, and a presence in the Arabian Sea as it battles Somali pirates. China has expanded its contacts with Iran and has developed strong ties with Burma.

It is of course entirely feasible that China would have reacted in this manner even if there were not the question of energy reserves of South China Sea. It would have had more to do with its own perception as zhongguo – the “Middle Kingdom” or the “Central Country” where the neighbouring countries were considered to be vassal states and who accepted the Emperor in Beijing as the supreme power in the region.

Thus while New Delhi agonises over challenges across land frontiers, ignoring the new challenge in the Indian Ocean would be extremely hurt Indian interests. There is need to plan counter measures in China's periphery from now. Perpetual whining about China's grand designs will not help.

Source : Written for ANI, New Delhi on September 21, 2011

Diplomatic tai chi

When Lang Lang, a resident of New York, was invited by the White House for a piano recital at the banquet for Chinese President Hu Jintao in Washington DC on January 19, no one really bothered to check the music he would play. The score he played had Mr Hu beaming and the Chinese Internet users delighted.

According to commentators like Matthew Robertson, early morning TV viewers in China knew about an hour or so in advance that Lang Lang would play the song My Motherland. The melody selected by the pianist was the theme song from the 1956 Chinese propaganda film of Korean War days — Battle on Shangganling Mountain (Triangle Hill). The song refers to the Americans as “jackals” (some say it is “wolves”) and the victory at Triangle Hill was meant to depict victory over imperialists.
Quite obviously, Mr Hu’s hosts did not know the significance of the song. Apparently they were quite satisfied after the mandatory reprimand the US President had delivered to his guest when he spoke of the need for China to observe human rights so long as Mr Hu bought $45 billion worth of American goods. Whatever spin the Americans and the White House might put on this incident now, it is being seen as a great propaganda victory in China.

The question is, was this a carefully-choreographed plan by the Chinese who knew that they would receive the par-for-the-course lecture on human rights and values of democracy even as the two countries remain locked in a economic-trade-currency embrace, and the Americans had to be given an immediate response on their home ground? Or does this reflect a tussle of some sorts in Beijing between an assertive People’s Liberation Army (PLA), which may want a bigger role in foreign policy in the decade ahead, and a political leadership that is now going to be in transition as Mr Hu prepares to hand over power to his selected successor, Xi Jinping, by 2012? And therefore this exercise of display of assertiveness with each power centre positioning itself inside China and positioning themselves against the US where there will be presidential elections in 2012.

All of 2010 saw a more assertive Chinese foreign policy activity in its periphery, including India. The New Year began similarly when the Chinese arranged the leak about their new J-20 stealth fighter just hours ahead of US defence secretary Robert Gates’ meeting with President Hu on January 11 in Beijing. The word is that this fighter is based on US technology having got some of the technology from an American F-117 that was shot down in the Balkans in 1999. Apart from this, the Chinese also revealed that Shi Lang, the first of six Chinese aircraft carriers, will sail later this year; and the Dong Feng 21D missile, which is capable of sinking a US aircraft carrier, is now a part of the Chinese Second Artillery Corps arsenal. The message is that the western Pacific is more and more a Chinese domain. The gauntlet has been thrown by a China that has hubris as the other superpower on its way to attaining its pre-ordained position in the world.

If China’s military assertiveness is the new factor that worries the Pentagon, it is the Chinese quest for technology that has in many ways made this assertiveness possible today. China’s economic rise is not merely export driven. It is based on the principle and practice that to be competitive in the global economy, China would need to innovate and indigenise. Above all factors today, it is innovation that will drive growth and competitiveness, and this is only possible through a well-integrated education, research and infrastructure. Three years ago, the Chinese were the fourth-highest spenders on research and development at $66 billion. The concentration has been on hybrid electric vehicles, high-speed rail and solar power systems — the future for transport, energy and communications (American Progress, January 14, 2011, report). This is something we lack and a mere Nano and an LCA (Light Combat Aircraft, Tejas) are far too inadequate. They do not qualify as 21st century innovations.

Inevitably, a major event like the Hu visit evoked comments from the old cold warriors of the previous century, Henry Kissinger and Zbigniew Brzezinski. The former had broken the ice between Beijing and Washington and the latter had arranged the establishment of diplomatic relations between the two. Kissinger took the first step towards the creation of a rising China against the Soviets and now speaks of the need for the two countries to interact globally and avoid another Cold War. Mr Kissinger sees the need to build an emerging world order as a joint enterprise. Mr Brzezinski gave us the Afghan jihad that thrives today, and the few “Islamic hotheads” that he scorned at then have become a global menace. He too stressed on the need for the US and China to collaborate on global issues like North Korea and West Asia. This one supposes is a continuation of the G2 principle that US President Barack Obama first enunciated when he visited China in November 2009.

At first, seemingly lukewarm and reacting to President Obama’s meeting with the Dalai Lama and arms sales to Taiwan, China now assesses that its moment has come and demands that it be heard as an equal partner.

The Hu-Obama joint statement spoke of close cooperation on climate and energy problems and “deeper bilateral engagement and coordination” on “a wide range of security, economic, social, energy and environmental issues”. Platitudes apart, the two countries, despite their differences on economic issues, are expected to work together on many others. China may have risen for its neighbourhood but not enough to take on the US frontally.

The internal debate in the US whether China needs to be contained or engaged and co-opted will continue. Whichever way we look at it, China will engage the US attentions far more than India. Also, neither of these global powers will jeopardise their bilateral relations for India’s sake. In the final analysis, India is going to be fairly alone.

Source : Asian Age , 25th January 2011, Vikram Sood, Former Head of the Research and Analysis Wing, India’s external intelligence agency

Chinese chequers in PoK

In the context of China’s protestations on Arunachal Pradesh, its hardening attitude on Jammu & Kashmir is reflected in the continuing visa row. This is to remind us that both the western and eastern portions of the India-China border remain disputed. Also, China is making its presence felt in the sub-continent as the next power to reckon with

Farooq Abdullah spoke with the usual fervour and passion when Parliament discussed Jammu & Kashmir on August 26. He pointed out that most Kashmiris wanted to solve their problems within India and not in Pakistan, China or America. This should not surprise anyone because Pakistan today looks a hopeless proposition to many Pakistanis too.

The former Chief Minister of Jammu & Kashmir made another very valid and important observation when he referred to parts of Kashmir under Pakistan’s occupation. He reminded the House of the Resolution passed several years ago saying that the entire State including Pakistan-occupied Kashmir and Gilgit-Baltistan were an integral part of India. He demanded that India should seek the return of these territories, including that which Pakistan had illegally handed over to China.

It was, however, disturbing to find that the Treasury benches and even other stalwarts from the Opposition were eloquent in their silence, something that has become part of an ominous trend in the last few years. In February 2007, the US Congressional Research Service put out a thoroughly incongruous map of India which showed Gilgit-Baltistan and Pakistan-occupied Kashmir as parts of Pakistan and Aksai Chin as merely an Indian claim, but we did not protest. When Baroness Emma Nicholson, the EU Rapporteur to Jammu & Kashmir in her report to the EU confirmed from historical evidence dating from 1909 that Gilgit-Baltistan were parts of the Riyasat of Maharaja Hari Singh, we only murmured modestly. It was perhaps awkward for us to assert our right lest Gen Pervez Musharraf, with whom we were working out some unknown deal, got upset. Clearly, we had put aside long term geostrategic interests or simply not read them.

Since the 1970s Pakistan has been nibbling away at Gilgit-Baltistan in an effort to detach it from Pakistan-occupied Kashmir to make the region an integral part of the rest of Pakistan. The Karakoram highway is a strategic life line for both China and Pakistan. Ruthless suppression of the Shia Ismaili minority and demographic changes by sending in Sunni Pushtoon was the favoured tactic of the various dictators to tame this remote region that borders Afghanistan and China. Not satisfied with access to Xinjiang through the Khunjerab Pass on the Karakoram Highway, Gen Zia-ul Haq tried to enhance Pakistani and Chinese positions when he moved towards the Karakoram Pass across the Siachen glacier. Had this move succeeded, China would have had an alternative access to Pakistan through Tibet with immense permanent consequences for our security and geostrategic interests.

China has always been interested that Pakistan retains control over Gilgit-Baltistan. This not only ensured its own vital interests in Gwadar overlooking the Persian Gulf and its vital resources but also was another brick in the wall against India’s access to Central Asia. About three years ago, there were reports that China was incorporating the Gilgit-Baltistan area into Xinjiang’s logistic grid by widening the highway and exploring the possibilities of a Pakistan-China rail link, with the ultimate aim of securing a land route for its energy supplies.

Recent reports of the presence of 7,000 to 11,000 PLA troops in the region and a simmering revolt there would suggest that Pakistan has sought Chinese assistance to tackle this crisis. This is an addition to other no-go areas for the Pakistani administration, which include Balochistan and FATA. Besides we must not overlook that there are US bases west of Indus and more than 1,000 US Marines have landed in Pakistan, ostensibly for flood relief.

In the context of Chinese protestations on Arunachal Pradesh, their hardening attitude on Jammu & Kashmir is reflected in the continuing visa issue now that a serving Lt General of the Indian Army has been denied this. China has chosen this period in time to remind us that both the western and eastern portions of the India-China border remain disputed. This is as much a reflection of its unease about growing India-US relations as India’s opposition to the China-Pakistan nuclear deal. China has raised its profile in the Jammu & Kashmir region even though its relations with the US are tense in the South China Sea. All things considered, China is making its presence felt in the sub-continent as the next power to reckon with.

Now, more than any other time, and given the evolving situation to our disadvantage, it is necessary that we address our own problem in the Valley and get out of this endless cycle of protests, sops and promises. Winning hearts and minds does not begin or end with elections. Jammu & Kashmir has far better socio-economic indicators than many other parts of India. Its literacy rate is on par with the rest of the country; the State Government employs more than 35,0000 people while Rajasthan, which is five times the size of Jammu & Kashmir, employs only 60,0000 people; for the Tenth Five-Year-Plan, Jammu & Kashmir got a per capita allocation of Rs 14,399 compared to States like Bihar (Rs 2,536) and Odisha (Rs 5,177); the State’s per capita income of Rs 12,399 a few years ago was lower than the national average but considerably higher than States like Bihar (Rs 5,108) or Odisha (Rs 8,547).

Appeasement is not the answer nor does the route lie via Pakistan. Additional economic or financial sops are not required; what is needed is a sense of fair play and justice seen to be delivered. If we need the Armed Forces Special Powers Act to remain then we must also ensure that the perpetrators of the Machhil monstrosity are brought to public trial soon. Leaders in jammu & Kashmir, across the political spectrum, must learn to accept that the practice of incessant political mismanagement and then blaming New Delhi, when the streets erupt, has to cease.

Jammu & Kashmir has a population of a little more than 10 million; only a section of the population in the Valley talks of self-determination. Surely this cannot hold a billion of us to ransom. As for this constant refrain of political problems, Jammu & Kashmir has its own Constitution, Article 370 and bounty for being troublesome. There is no ‘good boy bonus’ for the other States. When the US floods Pakistan with money and goodies, we complain that this is aiding terrorism. Are we not doing the same thing in Kashmir then?

A state has to be just, not soft; it has to be sympathetic, not indulgent. Jammu & Kashmir needs good governance in all its manifestations; so do we all. For those who talk of azadi, let it be said that we attained our independence in 1947. There is no greater independence than that.



Source : The Pioneer , 31st August 2010 ( Vikram Sood ,Former Secretary, Research & Analysis Wing.)

China asserts itself

For decades China pretended to be modest and Deng Xiaoping’s successors followed him as they couched their ambitions in soft idioms. The “sons of heaven”, as the Chinese traditionally consider themselves, also consider those on their periphery as rebellious barbarians who had to be tamed or conquered. So the discourse was: “Tao guang yang hui” — variously translated, but which essentially means “hide brightness, nourish obscurity”. The exhortation was to keep a low profile when in an adverse situation and wait for a suitable opportunity to reverse fortunes. The other advice was “yield on small issues with the long term in mind”. All this has begun to change as China’s influence began to rise and the United States was perceived to be in decline. The US policy predicaments in Afghanistan, Pakistan and Iran and Western economic crises in contrast to China’s steady growth is probably the reason for this change in attitude. There is an exuberance and global self-confidence accompanied by a global outreach that was not visible earlier.

It is useful to go back to January 20, 2009 — the day Barack Obama was sworn in as US President. This was also the day that the Chinese released their White Paper on National Defence (2008). Perhaps a coincidence, perhaps not. The White Paper covers issues like Taiwan, Tibet, the defence budget, diplomatic outreach and gives some details about how China would use its nuclear force. It is important to refer to some portions of the paper which underline the new philosophy. The preface mentions that historic changes were taking place between contemporary China and the rest of the world, and the Chinese had become an important part of the international system. China, it said, “could not develop in isolation from the rest of the world, nor can the world enjoy prosperity and stability without China.” The intention was to portray China as a participatory nation with huge responsibilities and its own indispensability in the new global order.

China’s international behaviour has been a mix of defiance — such as at the Copenhagen climate summit, when it sent junior functionaries to discussions with heads of state, or its dealings on the Iran nuclear issue or the nuclear deal with Pakistan. China has been assertive with India on Arunachal Pradesh by blocking the ADB loan, has been provocative by issuing “plain paper” visas to Indians born in Jammu and Kashmir and routinely shrill about the Dalai Lama, while increased border violations have been noticed in Arunachal Pradesh — which Chinese commentators call “Southern Tibet”. Chinese activities in our neighbourhood, its plans to dam the Brahmaputra and extend the Tibet rail link into Nepal are other aspects of continuing Chinese assertiveness. The Chinese PLA had recently transported combat readiness material to PLA and Air Force units in Tibet by rail for the first time. This would further enhance the military transportation capacity, apart from the construction of more airports in Tibet.

While some American experts like Prof. David Shambaugh describe this Chinese attitude as a sign of defensive nationalism — assertive in form but reactive in essence, the fact is that since about the middle of 2009 the Chinese have talking more and more about their “core interests”. As D.S. Rajan, director of the Centre for China Studies, Chennai, points out, Chinese leader Dai Bingguo said in July 2009 that “the PRC’s first core interest is maintaining its fundamental system and state security, the second is state sovereignty and territorial integrity, and the third is the continued stable development of the economy and society”. Translated into specifics, it means protection of its interests in Tibet, Taiwan, Xinjiang, the South China Sea and its strategic resources and sea trade routes.

China’s assertiveness about the South China Sea, its umbrage at US secretary of state Hillary Clinton’s July 2010 remarks in Hanoi on creating an international mechanism to resolve this issue, has been particularly visible in the past few weeks. Dai Bingguo conveyed to Ms Clinton in May 2010 that China regarded its claims to the South China Sea as a core national interest. The Chinese have closely watched the growing US-Vietnamese ties, which includes an American offer of a civil nuclear deal to Vietnam on lines similar to the India deal. A triangular acrimony between the US, China and Vietnam has been growing for some time.

The Chinese carried out a live ammunition PLA Navy exercise in the South China Sea on July 26, followed by another exercise on August 3 along the Yellow Sea coast — the other area of contention. The Chinese conducted exercises there in April and June this year, and were now asserting that China opposed any foreign ships entering the sea or adjacent waters; they even vehemently opposed joint US-South Korean exercises there.

The message in these demarches to the US was in keeping with protecting China’s core interests in the adjacent seas and telling the US that the western Pacific was China’s sphere of interest and influence. It suggested a division of zones of influence between the Eastern and Western Pacific. The US and China have their own geostrategic rivalries to settle, and the Chinese may have assessed that their moment has come.

Yet China remains concerned with its intricate trade and financial links with the US, and also with the security of its trade and supply routes that transit the Malacca Straits. It has endeavoured to develop extensive land routes through Central Asia, but these are inadequate. It is a matter of time before China will make its presence more visible in the Indian Ocean. It has port facilities in Hambantota and Gwadar, and a presence in the Arabian Sea as it battles Somali pirates. China has expanded its contacts with Iran, more in competition with Russia than the US, it seeks mineral wealth in Afghanistan, its relations with Pakistan need no elucidation and it has developed strong ties with Burma. Thus while we may agonise over challenges across our land frontiers, we would be ignoring the new challenge in the Indian Ocean unless we plan countermeasures now.

Source : Asian Age , 25th August 2010

Hindi-chini bhai bhai: not quite, not yet

Good fences make good neighbours or as the Economist of London once put it in the context of US-Mexico border, "good neighbours make fences". Yet India and China, the two most populous countries of the world, with the largest standing armies, growing economies in competition, and, with two nuclear weapon powers aligned against us in a higher-than-the-Himalayas friendship, we do not even have the 4,057-kilometre land frontier delineated. Demarcation is a long way off.


It is wishful thinking that the burgeoning trade between the two countries will compensate for any lack of political depth in our relationship despite all the talk of strategic partnerships, a joint mechanism on counter-terror and joint military exercises. The hope held out is that improving trade and economic ties will pave the way for future reconciliation. If it were that simple then the China-Japan political relationship would have been qualitatively different today. Despite the massive bilateral trade and despite massive Japanese investments in China, the underlying political suspicions and age-old animosities have not disappeared.


So also with India and China. We do not seem to have recovered from our 1962 trauma and China is determined to keep us that way, psychologically and strategically handicapped. Even before India began to grow economically, China was intent on keeping India boxed in within its national boundaries. And now with growing competition for markets and resources, there is greater Chinese need to restrict India's reach and influence as a possible alternative and successful model of growth and governance. For long, Pakistan has been a low cost hedge for Chinese policymakers and the recent US-India warmth may worry Beijing even though it will continue to pretend public disdain.


China can be expected to maintain this posture so long as the Dalai Lama and the Tibet issue is not firmly solved in their favour. There are India China differences on Chinese nuclear, missile and military assistance to Pakistan. China will not give India the space it needs neither in the search for energy resources, markets or what India deems its rightful place on the High Table. Given the Chinese global position, its economic might and the US-Chinese interdependent relationship which neither will jeopardise for India's sake, the Chinese will not be in a hurry to resolve the boundary dispute.


It is India, therefore, that will have to set the pace. But this can only be done once there is a clear and honest appraisal of the nature of the problem, the issues involved and then think of possible solutions. This continued ambivalence sets in a lethargy that can be strategically self-defeating and India, therefore, needs a lasting solution. This is what Mohan Guruswamy and Zorawar Daulet Singh set out to do in their book India China Relations: the Border Issue and Beyond. The book is the result of a joint venture between the Centre for Policy Alternatives and the Observer Research Foundation, and its main advantage is that it is lucid, objective and well-argued; and the authors succinctly state their argument in about 140 pages apart from the appendices.
Quite early in the book, the authors make the point that the crux of the problem is the Aksai Chin which the British eventually left un-demarcated after following various boundary delineations that were largely dependent on how they saw the advance of the Russian threat into Tibet and Asia. Arunachal Pradesh was a later add-on following Indian reluctance to discuss Aksai Chin with the Chinese. The Chinese inability to handle the Tibet issue and the effects of the Cold War in South Asia had heightened Chinese fears. Further, India forward policy without thinking this through militarily and strategically aroused Chinese suspicions. Nevertheless, the Chinese have accepted the McMohan Line with Burma and have reached agreements on land frontiers with its other neighbours except India and Bhutan.


Having laid out the Legacy of the Great Game where the authors show how 19th and 20th century London viewed problems differently from how New Delhi saw, much like Washington and New Delhi see things differently today, the discussion then revolves around Tibet, China and India, how India inherited fuzzy frontiers leading on to the debacle of 1962. But it is time to move on and follow what Zhou Enlai had said in 1960 and later Deng Xiao Ping had suggested in 1981 - a package proposal calling for concessions on both sides. The authors have a way forward, which includes Indianising Tawang much more systematically than at present.


A great deal would depend on Indian self-confidence and the authors recommend that India is making too much out of the so called string of pearls strategy of the Chinese. They argue that "New Delhi's assessments should critically evaluate the economic and military rationales behind such moves. Imputing solely the latter and assuming it to be directed primarily against India, is too narrow an interpretation, stimulating equally insular policy options." India needs to take advantage of the geo-economic options by gaining connectivity to new economic and resource centres. There is realisation in New Delhi that the Chinese have now begun to rely on "its non-coercive and 'remunerative power' to advance its influence'' and recommend that it would be good policy for India to integrate the South Asian periphery with the Indian economic system and simultaneously to increase its economic interaction with Beijing. If only that this was so simple. There is no exclusive non-coercive infrastructure. China has improved its strategic position with the development of Gwadar and all the rail road linkages into Xinjiang that will follow, the Gormu Lhasa rail link that would be developed into Kathmandu and Chinese infrastructure linkages from Yunnan into Burma. India has nothing remotely comparable to this, inside Indian territory or in our neighbourhood.


It is more than just economics of course and Chinese scholars say that China sees India as what they call four in one with India falling into all four categories - of developing countries, neighbouring countries, rising powers and influential actors on the international stage. That being so there should be reason enough to settle the boundary problem. The 1914 Mcmahon Line is the natural non-negotiable Indian interest in the east just as the Aksai Chin is a similar non-negotiable Chinese interest in the western sector. The authors assert that the usual zero sum game is debilitating and counter-productive and recommend the broad acceptance of a de facto position as the de jure settlement is eminently doable. They have, therefore, suggested a way out of the logjam by accepting historical truths, ground realities and strategic requirements so that India does not miss the technological and economic revolution of the 21st century.

The main thrust of the book is that it is set in the present reality and prescribes a future course without letting the past be a burden. The book is forward-looking in its recommendations and it would be to our collective advantage to debate the issues they have raised.


Source : Asian Age , 30th March 2009 ( Book Review of the book titled " India-China Relations : The Border issues and Beyond , by Mohan Guruswamy & Zorawar Daulet Singh )

Caught in the middle

China is encircling India by reaching out to our neighbours

At the last G-8 Summit, Prime Minister Manmohan Singh referred to China as India’s greatest neighbour. There is no disputing this observation but if any one expected the Chinese to reciprocate this with something remotely similar they were disappointed. The Chinese media did not even refer to the meeting between the two leaders. In keeping with the Chinese view of their position in the world they accepted this statement as a factual narration.

An insight of how the Chinese let slip their view of India in their scheme of things is given by the official China handouts (China 2006) that are available in New Delhi. While describing their relations with major powers, the Chinese handout mentions China’s relations with the US, Russia, the EU and Japan. India is listed, en passant, in the portion "Other Asian countries".

We heaved a national sigh of relief when China stopped showing Sikkim as a separate entity on its maps. Yet, we say nothing when China mentions in its handouts that China has a boundary with India, Kashmir. In 1963 China and Pakistan ceded Shaksgam, a portion of Jammu and Kashmir territory in Pakistan’s occupation, to China. The agreement at that time said that this would be finally settled once the question of the status of Jammu and Kashmir is decided. Yet nowadays Chinese officials refer to this, sotto voce, as being a part of the Northern Areas. The implication is that the Northern Areas are a part of Pakistan and not part of Jammu and Kashmir. And, periodically the issues of Arunachal Pradesh and settled areas, figure in the China-India discourse while the boundary talks drag on.

Meanwhile, the two leaderships speak of cooperation not confrontation. India speaks of there being enough space for the two to grow, China speaks of its harmonious rise while seeking containment through engagement. In search of an assured energy supply and safe routes so essential for its 10 per cent annual economic growth and regime stability, China has been working on securing its interests around the Indian Ocean littoral. Strategists have begun to refer to this as a ‘string of pearls’ which has an air of innocence and desirable about it. Indian strategists, however, have woken up to the realisation that an iron necklace was being cast around the Indian neck.

Unable to protect sea-lanes because of an inadequate navy, the Chinese needed alternative routes for energy supplies. Chinese assistance for the development of Gwadar, close to the vital Straits of Hormuz and located on Pakistan’s Balochistan coast, began at a feverish pace in 2002. The port will have an exclusive SEZ for China and will eventually be linked through Khunjerab Pass to Kashgar with a network of roads, rail links and gas pipelines. Kashgar is linked to Xigatse, which will soon have a rail link with Lhasa. The road continues to run parallel to the Sino-Indian border and then south to Kunming from where a network of river, rail and road links lead to Sittwe in Western Myanmar and Thilawa near Rangoon on the Bay of Bengal. These will be the entry points for energy supplies to China avoiding the Straits of Malacca. In the 20th century, Xinjiang was the New Territory and Tibet was the New Treasure. In the 21st century, Pakistan is the New Territory and Myanmar is the New Treasure. In addition, China has offered assistance for development of Hambantota harbour in southern Sri Lanka. None of this is India specific by design but India’s encirclement will be complete and India’s influence restricted to its national boundaries. In recent years, Chinese leaders have made several statements in their internal deliberations that indicate their worries. Commenting on China’s periphery after September 11, 2001, Hu Jintao said that the US had strengthened its military positions in the Asia-Pacific region, strengthened its alliance with Japan and strategic cooperation with India, improved relations with Vietnam and established a pro-American regime in Afghanistan. He also referred to the extended outposts — possibly referring to the 737 (some calculate this may be 1,000) military bases around the globe — and that America had placed pressure points on China’s east, west and south. Premier Wen Jiabao also predicted that US military focus would shift from Europe to Asia-Pacific.

China has other ambitions although but will not challenge the US directly in the foreseeable future. It sees the US stuck in a strategic stalemate in Iraq which, for a superpower is really a strategic defeat, and sees this as an opportunity to move in to a perceived vacuum in the Eurasian region. Apart from the various energy tie-ups that Beijing has worked out with Kazakhstan, Russia and other Central Asian states, it will now build 12 new highways connecting Xinjiang to major Central Asian cities. When completed by 2010, these roads will connect Urumqi with Tashkent, Mashad in Iran and Istanbul to reach Europe eventually. China would like to position itself, not as a successor but possibly as an eventual competitor just as it has endeavoured to ease out the US from various arrangements in South East Asia.

It is in this context that the association of the six-nation Shanghai Cooperation Organisation led by China with the Collective Security Treaty Organisation led by Russia assumes significance. Both Russia and China participated in week long joint military exercises in Siberia that ended on August 17 and were watched by leaders of all the participating SCO countries. Peace Mission-I would bring SCO and CSTO closer. Many view this as the Russian and Chinese response to the eastward expansion of Nato into Asia. Paradoxically, while the two powers worry about the presence of the US in Eurasia and West Asia, they also fear that should the Americans go away from Afghanistan, instability may spread to Russia’s periphery in Central Asia and China.

The high-voltage stability of the bipolar world has now been replaced by the uncertainty of evolving multi-linear multi-polarities with the US still the primary power. Inter-state relations are now going to be more carefully calibrated and sophisticated with no clearly demarcated power blocs operating. Various triangulations are being configured, many of which exclude the US. Russia, India and China have been talking to each other trilaterally and Hu Jintao and Vladimir Putin referred to India during their recent meeting in Moscow. There could even be an Iran, Russia and China arrangement that effectively bottles up the energy rich Eurasian region or there could be a Russia, Iran and India arrangement.

At the same time, no country, including India, China and Russia would want to jeopardise its relationship with the US for the sake of its new partners. Indians surely understand that China and the US will not sacrifice their relationship with each other for India’s sake.

India’s relationship with the US is still evolving with several agreements having been worked out. A strategic partnership between the two will mostly be one-sided with the US far too powerful and India somewhat wary of being either overwhelmed or becoming an appendage. Since common ideals do not necessarily assure common adversaries, India will continue to look at Iran and Myanmar from its own geo-strategic perspective, just as the US has its perspective on Pakistan. India did not have to make a choice during the Cold War but in this age of multi-polarity, it might have to do so as the battle ground shifts from Europe to closer home.

Source : Hindustan Times, 5th Sep 2007

Hands of Clay

China is America’s strategic competitor, not partner

A 72-PAGE study conducted by the Royal Institute of International Affairs, London, in 1995 had predicted that if India and China, two of the most heavily populated countries in the world, were to achieve a rapid level of development, it would have a significant impact on world economy. At the time, the Indian economy was barely waking up from its socialist slumber and not quite aware of its potential. But the rest of the world had begun to take notice. Often today, the question asked is whether or not India will catch up with China. But the more important question is whether China will catch up with the US. Since 1978, China has averaged 9.4 per cent annual GDP growth and today holds $ 252 billion in US Treasury Bonds (plus $ 48 billion held by Hong Kong). If the predictions made by Goldman Sachs that China will surpass the US economy by 2041 prove to be accurate, then this will happen in the lifetime of most Indians under the age of 25 today. This would obviously mean that India would be lagging behind unless China runs aground or India shows an unbelievably magnificent late spurt. The Chinese may not want to admit it but competition and rivalry for markets and resources in Asia are inevitable in the years ahead. But all this assumes that the world has factored in peak oil and declining production, which should be starting any time now, and global warming which scientists predict may hit us even by 2010. Should there be no cures, then all bets about global pre-eminence are off.
Today, in search of its pre-eminent role at least in Asia, as worked out by Bill Clinton and Jiang Zemin in 1996, China is far more aggressively active in trying to shore up its position for the future. Alarmed at the post-9/11 moves by the Bush administration, the Chinese have begun to move into energy rich areas around the globe, reorganise the navy and strengthen relations in its periphery.
In recent months, they have repeatedly outmanoeuvred the Indians in their quest for oil and gas in Kazakhstan, Ecuador, Angola, Nigeria and even in India’s neighbourhood — Myanmar and Bangladesh. Myanmar announced last January that its gas would be flowing east to China and not to India. China has upgraded its relations with Bangladesh and is today the largest supplier of military hardware to that country. It has access to Chittagong port. A road link from Bangladesh through Myanmar will help carry goods. It hopes to acquire gas. China would want to secure overland routes rather than be dependent only on sea routes for its energy supplies. China’s role in developing the Gwadar port on the Baloch coast has been described as its biggest harvest. Its consistent and clandestine assistance to Pakistan’s nuclear and missile projects, over the last 20 years and more, must never be forgotten by Indian strategic thinkers when they work on India-Chinese amity. Despite occasional cooperation and joint investments, China is unlikely to give India space, out of magnanimity, to secure strategic supplies. India will have to create suitable incentives and interests through trade, aid and military support accompanied by strenuous and fleet-footed diplomatic efforts that could create economic and security dependencies in the supplier States. The Chinese say that they have to continue to grow at 10 per cent annually in order to be able to provide jobs for the 25 million people who ‘enter’ the market every year. China needs American markets for an economic growth that is essentially export-driven. Therefore, Beijing must maintain acceptable standards of political relations with its trading partners and has near-perfected this art.
Politically, China challenges Japan, reserves its venom for Japanese actions and opposes it, yet receives its maximum imports from that country. With the US, while the vitriol is substituted with histrionics, China does not hesitate to bring down a US reconnaissance aircraft — and then buys Boeing aircraft. China’s quest for energ y in areas that the Americans have long assumed to be their private preserve is most certainly viewed as a provocation in Washington. Beijing has aggressively and systematically pursued its search for oil and gas all across the globe into Latin America and Africa as well. In addition, Beijing’s support to Tehran in the recent uranium enrichment controversy and admission of Iran into the Shanghai Cooperation Organisation (SCO) as a full member, coupled with what US leaders describe as China’s excessive militarisation, fuels suspicions in an atmosphere already surcharged because of North Korea and Taiwan. This is bound to put the two on a collision course.
American long-term strategy to prevent the rise of another centre of power is now back at the forefront for Pentagon planners after a four-year hiatus during which the Americans were fighting their Global War on Terror. China is back to being a strategic competitor and not the strategic partner of the Clinton era. The Americans have their annual National Security Strate g y and their Quadrennial Defence Reviews premised on a unipolar world of total dominance and unchallenged military power.
The Chinese too explained their national security strategy in a white paper ‘China’s National Defence in 2004’ released in December, which speaks of multi polarity and a bumpy road to globalisation. The posture of active defence implies that the Chinese are willing to be patient, peaceful and accommodating so long as world events turn out according to their expectations. If they do not, then they will change their attitude. And what China desires is total dominance in East Asia which means that the US must withdraw. President Hu may have come away from his recent US visit wondering if the wrong anthem at the welcome ceremony and the Falung Gong protest inside the Rose Garden, were typical US maladroitness or a sinister message.
China seeks a close strategic partner in Russia through purchase of state-of-the-art weaponry and energy from the Russians. Joint military exercises and their together ness in the SCO is designed to checkmate Americans and the Nato in Central Asia. There was a time when there was talk of a trilateral arrangement between Russia, China and India but this has not taken off yet. The Indo-US nuclear deal is likely to dampen forward movement of this tripartite arrangement as Beijing could view this as an attempt to use India to counterbalance it.
The Chinese economic miracle has some flaws. The development has taken place through wholly owned foreign enterprises and joint ventures; private Chinese fir ms have not played any significant role — with a maximum of 5 per cent in electronics and telecommunications and as low as 1 per cent in computers and peripherals. In India, the private sector is playing a much larger role. If there is disenchantment and impatience in India with the fallout of the development, it’s impossible to accept that there is none in China. Only, the rest of the world does not get to know. Unless political reform is attempted, political turmoil later is more or less inevitable. This reform is all the more necessary because China must now continue to seek economic prosperity at a rapid rate to keep rising expectations from blowing out of control. This would require it to seek, even more aggressively, markets and resources.
At the same time, China will strive to keep its image of a peaceful nation, speak the language of moderation till it feels that the Americans have begun to pull out, and then move in to fill the vacuum. Meanwhile, it will seek to strengthen its military muscle.

Source : Hindustan Times 26th April 2006

Empire's new clothes

Believe it or not, US policy is driven by a voracious need for global supremacy

It was a single deft move in the 18th century that secured the British Empire in India so many advantages over the advancing Russians. By sending five English dray horses along with a blue velvet upholstered coach to Maharaja Ranjit Singh in Lahore upstream from Kutch, the British discovered that the Indus was navigable all the way up and were given access to Afghanistan through his territories by a grateful Maharaja. The irony is that the British were only returning a gift Ranjit Singh had sent King William IV! Not a single shot was fired but the Empire had gained.

The opening gambits for empire building at that time were to flatter, cajole, persuade and if this did not work, then coerce and control and finally, occupy. One hundred and seventy years later these tactics and aims – access to markets and resources -- have not changed although the new Empire has shown a greater propensity to violence as a first option. The wooing started a few years ago when opinions began to filter through about a new power rising in the east – democratic India. National Intelligence Estimates predicted a bright future for India. Others predicted that India would challenge China; that maybe India ought to be a member of the UNSC and of so many other exclusive power centres of the world; that India could be trusted with American weaponry and even given American civilian nuclear technology to help it meet its fast growing energy needs. We took the bait.

Nuclear experts and scientists like Matin Zuberi, Dr. A Gopalakrishnan and Bharat Karnad, strategic analysts like Brahma Chellaney and Siddharth Varadarajan have written extensively about their misgivings on the Indo-US agreement of July 18, 2005. Criticism is about what we have signed, how the agreement will be fulfilled and what India has gained. These experts have argued that India has derived no benefits from this deal, and at the same time there are those in the US, like Robert Einhorn, who do not want the deal to go through because this would dilute the NPT regime that is so close to US Foreign Policy beliefs. Having flattered and cajoled India to sign on the dotted line, US coercion was evident at the time of the Iran vote. Control of events is sought through the various steps that are now being spelt out that India must carry out before Americans try to deliver anything they have promised.

India has agreed to identify and separate civilian and military nuclear facilities and programmes in a phased manner; to place all its civilian nuclear sites under IAEA inspections; adhere to the rules of NSG and Missile Control technology regimes without being a member of these groups; adhere to IAEA’s Additional Protocol which will subject India’s entire civil nuclear fuel cycle to international monitoring something which the 5 nuclear weapon states do not allow for themselves. Finally, and this is very crucial also, to promise to continue the self-imposed moratorium on nuclear tests.

As for the process for all this, we say “you first” but Brothers Burns and Joseph, America’s pointsmen have repeatedly made it quite clear that we must jump through the hoop first. The US had to be able to see what was happening, understand what was going on, and, agree with what was going on. So said Nicholas Burns in his testimony to the US Congress. Translated, it means total control. Joseph clarified that the kind of arrangements the Nuclear Five had with IAEA would not be granted to India.

It is only when India, enticed by assistance for commercial nuclear power, has carried out a complete emasculation of its nuclear establishment and given proof of this, will the US Government be able to move the US Congress to amend its 1978 Nuclear Non-Proliferation Act. Convincing other members of control groups like the NSG is another problem because members like China and South Africa have expressed their opposition to allowing India access to the 200-odd hi-tech items.

The two main items on offer in this deal are access to US defence industry and the “permission” as it were to spend US $ 5 billion for this. The other is the offer to sell civilian nuclear technology for India’s energy requirements. GE, which built Tarapur, also a prototype, has not built another reactor in the last 30 years. They tried to sell reactors to China in 2004 but the Chinese baulked at the idea as they were looking for full technology and engineering.

The American writer on development issues, Patrick Doherty, recently made an interesting observation, when he said that as part of America’s new energy policy, nuclear energy was an important component and “the Bush administration has worked out an agreement with the Indian government to share civilian nuclear technology. That agreement, in effect, allows India to be America’s lab rat on which we will test the unproven next generation of nuclear technology.” Thus, it is quite a choice -- either outmoded technology that does not suit Indian conditions or new untested technology.

The argument in favour of closer ties with the US is based on the assumption that only the US can help us become what we want to be. We forget that years of democracy have not saved us from sanctions while dictatorships have been rewarded and strengthened by purveyors of democracy. Some of us are dreamy eyed with illusions of grandeur but without understanding the character of the US Empire.

The US has spent huge sums of money and effort to maintain global primacy. One has to be incredibly naïve to assume that the US will let any alternative pillar of power emerge. Indians must understand what US policies are not what we want them to be or dream they will be. Similarly, why should our policies suit other power interests. What we need to know and understand is that why America, that is so fixated on global dominance, known to be a hard bargainer and has made nuclear non-proliferation an article of faith, is today willing to dilute this 30-year stance. What is the US getting and what is it that we have promised? Surely the people are entitled to know.

As it is, the US worries about the rise of China and another power centre in Asia would create complications. If it were looking for India to challenge China then it would clearly do some of the following things. It would have supported India’s efforts to UNSC membership and India’s desire to join the Generation IV International Forum (to design the next generation commercial nuclear power reactors) or the nuclear-fusion consortium that is to build and run the International Thermonuclear Experimental Reactor (ITER) in France. Instead, it offers India outmoded weaponry and untested civilian nuclear technology in return for circumscribing, forever, India’s nuclear weapons programme through imposed restrictions, safeguards and restrictions of fuel supplies that do not apply to NWS.

There is, however, a problem and a hope. America has moved from the days of “bipartisan age of narcissism and hubris” as Walter Russell Mead describes the decade of euphoria after the Berlin Wall came down. Today, that hubris is leading to nemesis. The Colossus that strode the globe is now more like an angry Samson, maybe on his way to becoming a Goliath. The Presidency is beleaguered. In this situation, the US Congress, belligerent about various issues, may not give the US President what he wants. Therein lies our hope.

Surce : The Hindustan Times, December 7, 2005