On his way to India to attend the eighth Brics summit in the tourist paradise of Goa on the Arabian coast, the Chinese President, Xi Jinping, showered Yuans worth $24 bn in the Philippines, and made a stopover in Bangladesh capital, Dhaka where he signed agreements and MOUs worth another $21 billion in loans and grants. This amount is ten times more than the $2 billion Prime Minister Narendra Modi had pledged to India’s eastern neighbour.
Does this enable China knock out India in the Bangladesh arena?
Chinese munificence to Pakistan has been much bigger: $46 plus billion for building infrastructure along the China Pakistan Economic Corridor. A ‘dramatic’ announcement of generous Chinese assistance may also come from Nepal, to further raise the alarm level in India. Already China has emerged as the largest investor in the Himalayan country, which is slowly coming to grips with its new democratic moorings
So, is this cause for concern for India?
This question pops up an equally important question: Why should the Chinese money flowing into its neighbourhood cause undue worry in India?
Despite an occasional soothing word spoken by Chinese leadership about relations with India, there has been no change at all in Beijing’s India policy. A main feature of this policy is to ‘surround’ India by establishing strong economic and political ties with India’s neighbours and continued support to Pakistan, India’s hostile neighbour.
Beijing has used its prosperity to present itself as a world power, bullying and threatening those who question the Chinese conduct of their relations with foreign countries. India is not the only victim of Chinese arrogance. Most of its neighbours in south-east and far-east Asia feel the same. China has mocked international arbitration for rejecting its claim of sovereignty over the South China Sea.
The root cause of India’s uneasy relationship with China is its claim over several thousand kilmetres of Indian territory including the whole of Arunachal Pradesh. China has made it abundantly clear that it will not stop demanding the ‘return’ of these territories.
It is as clear as daylight that as long as China demands that India redraw the country’s map chances of good bilateral relations, based on mutual trust, are minimal. Yet, both countries have agreed that their differences will not spill into clashes between two armies.
Crude and politically incorrect though it may sound, the only way in which a militarily strong country like China can compel India to accept its territorial demand is by use of force. That will be easier said than done.
China surely knows the harm it will bring to the country should it decide to attack the world’s largest democracy for the sake of territorial gains.
China bringing Bangladesh or, for that matter, any other country after Pakistan under its influence is rightly watched keenly in India. But we can lower our alarm level if we concede that bigger and stronger countries do tend to seek increased area of influence. Doesn’t India? But what matters is the extent to which countries with deep pockets and strong muscles can displace the lesser countries.
INDIA-B’DESH: NO OUT OF FAVOUR
China getting closer to Bangladesh does not mean that India will be out of favour in Dhaka; certainly not as long as secular forces remain strong there.
Bangladesh does have a strong radical undercurrent which receives its guidance from the Mullahs and Pakistan and, therefore, such sections hate India. But Shaikh Hasina, the Prime Minister, can keep under control the radicalisation of her country. She is not perceived as India-baiter, unlike her rival, Begum Zia, who now apparently finds herself banished into political wilderness despite attracting support of the anti-Hasina forces during the trial and execution of 1971 war criminals.
Moreover, as Hu Weijia wrote in Global Times, “India will not need to be jealous of an increasingly close relationship between Beijing and Dhaka” because any improvement of local infrastructure and the overall economic ecology in Bangladesh will create favorable external conditions for connecting India with its own Northeast and the Southeast Asia.
China with all its money cannot be as closely entwined with Bangladesh as India is, for reasons of language, culture and history. China will remain an ‘alien’ country for the people of Bangladesh. And no matter how strong Begum Zia becomes India will not be totally out of favour in Bangladesh.
Of course, things can go wrong for India if the government takes some foolish steps and, what is more important, fails to redeem its aid pledges. Indeed, that possibility cannot be ruled out. But then the blame would go to us, Indians, not China.
YUAN IN DISTRESS
Despite all its tall claims, the Yuan is no longer glittering. It reached a six-year low vis-à-vis the American dollar by the third week of October. Depreciation of currency anywhere translates into a surge in export. This has not happened to the dismay of China’s economy managers.
Several domestic cross-border traders interviewed by the Global Times said that jump in their export volumes is almost “negligible”. Reason? China’s trade situation is mired in sluggishness, says Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology.
Compounding these concerns is rising costs for labour, financing, land and other factors of production, Xinhua reported quoting an official survey covering more than 6000 companies.
This September industrial profit growth decelerated to 7.7 percent compared to 19.5 per cent increase registered in August, according to the National Bureau of Statistics (NBS).
OBOR ON SLIPPERY PATH
If there is no turnaround in the scene, the first victim will be China’s most ambitious ‘One Belt and One Road’ (OBOR) initiative’ that is designed to connect more than four billion people in 65 countries. It is the lynchpin of President Xi Jinping’s plan to win new friends, and make China the new white knight in shining armour.
But with the exports in slump, and more countries resisting Chinese dumping, OBOR runs the risk of failure. It may become unsustainable in the short to medium term.
China has been forced to cut its overcapacity in steel and coal. The steel capacity will be down by 100 million to 150 million tons by 2020, including 45 million tons this year; the coal target will be cut to 250 million tons, also this year. Both these sectors have become a major drag on China’s growth, and made Beijing face the charge of dumping.
DOUBLE COLD TRAP
China’s relations with Japan, and South Korea have hit “a nadir” of late because of the “double cold” trap – cold politics and cold economics. Both countries are “irreplaceable economic and trade partners” for China in Asia, accounting for almost 14 percent of its foreign trade.
The Sino-Japan trade exceeded $300 billion in 2015 while China-South Korea bilateral trade peaked to $270 billion though Chinese trade with and investments in Japan and South Korea appear to have lost some momentum during the past five years. Moreover South Korea, even Japan for that matter, can always look for new market opportunities, a luxury that is deserting China slowly but steadily.
As He Jun, senior analyst with Anbound (Beijing-based strategic think- tank) says, China suffers from another big handicap.
China’s transitional economy is less resilient to economic swings. It will be hurt badly if cold politics and consequent cold economics persist, say for another two years. Well, this is going to be “an unprecedented geopolitical deadlock” by all means.
Even Thailand is posing a problem. At Chiang Saen Port in northern Thailand, Chinese ships have been stuck for several months due to lack of business, Chinese online financial magazine, Caixin, reported on Oct 26.
After the Kunming-Bangkok Road was completed in December 2013, and linked China with countries in the Mekong River region, land transportation became the preferred mode for moving perishable goods. This added to the shipping depression that already faces shrinking regional trade due to the economic slowdown.
Now water transport is in danger of further decline with the implementation of the China-Thailand railway cooperation, an important OBOR project, according to Global Times. All this will add to a spurt in unemployment at home. Close to 8000 people have applied early October for the post of a receptionist!
Sri Lanka is a classic case of failure of Chinese OBOR, which led to regime change in Colombo in 2014. The Sirisena government, which succeeded Rajapaksa regime has not initiated any new OBOR projects in the past two years; it is struggling with financial woos of past OBOR projects.
The short point is that all the Yuans going to Bangladesh, Philippines and Pakistan may end up as bad debts, if China fails to push its exports to these countries. Instead of a win-win situation, China may see “lose-lose” situation.
This narrative brings up front India market’s relevance to China even if we concede that it is an uphill task to woo Chinese component manufacturers to become part of ‘Made in India’ project. On its part the government of President Xi has not stopped Chinese enterprises from going to India. A pragmatic decision it is; it is for nothing China has become the Bamboo Capitalist of the world.
“Currently, India is on track to hold on to its spot as one of the world’s fastest growing emerging countries”, Ge Cheng wrote in Global Times on Oct 28and declared “Chinese manufacturers are salivating over this fast-growing consumer market”. His case is simple: Chinese investment can capitalize on India’s growth. “The Chinese economy will likely gain momentum from the formation of a new cross-nation industry chain between the two neighbours”.
“Considering the above factors, China’s government is unlikely to deter India’s effort to woo Chinese component companies, despite the possibility that this could cause job cuts in the manufacturing sector at home, the Chinese economist avers.
Ge is an assistant research fellow at the National Institute of International Strategy of the Chinese Academy of Social Sciences. So he knows his onions.
No surprise, his assessment has received wide appreciation at home and abroad since it came against the backdrop of calls in the Indian social media for a boycott of Chinese crackers in particular because of its pronounced tilt towards Pakistan- the mothership of terrorism in the region.
“Supporting Pakistan is lethal for Chinese business. And it will work as a boon for our local industry to grow with the speed of photons”, said a reader joining the growing chorus that Ge Cheng’s article is “the first the first non-biased writing by any Chinese think tank”.
There is no gain saying that India and China are locked in a “no-win” situation.
Chinese actions whether these are on the border or at the UN have frustrated India in recent weeks and months.
The blocking of India’s entry into Nuclear Suppliers Group, NSG, and standing in the UN way of declaring a global ban on Pakistani Islamist terrorist Maulana Masood Azhar have the potential of derailing any normal bilateral relations. But did not.
India has learnt to live with negative attitudes of China on certain matters. Because it is ‘no-loss situation’ in the near to medium term.
The Dragon too appears to be saying the same thing if we go by the spate commentaries in Global Times in the run-upto and after the Brics summit.
If this indeed is a signal that it is a “no-win” situation, it sets the stage for a deep and broad-based economic orientation to the relations between the two countries who have shown to the world how not to allow a border dispute that has left behind deep scars to come in the way of civilized, interactive and mutually rewarding relations.
In today’s world, the only political issue and diplomatic gridlock worth discussing is the economy.
“It’s the economy, stupid,” said Governor of Arkansas, Bill Clinton, in his race to the White House during the recession years of Bush Senior’s Presidency. Any doubt?