China-US relations face turbulence in Chinese year of the Rooster

It will also impact New Delhi’s trade, security and infrastructure development relations with Beijing

POLITICS | 6-minute read | 30-01-2017

COLONEL R HARIHARAN @colhari2

With Donald Trump becoming the 45th US President, the US-China relations may enter turbulent times, though the Chinese year of the rooster – which began on January 28 - according to tradition signifies confidence. 

True to belief, the just ended year of the monkey has proved to be troublesome and chaotic for Beijing’s relations with Washington DC. 

Trump’s noisy entry at the helm of American power, living up to the GOP’s symbol of the elephant trampling the orderly ways of the US government is sure to disturb China’s “harmonious world”.  

President Trump has started the year of the Rooster with aggressive confidence on all fronts to fulfil his promise to make “America great again”.

In his inaugural address, he said “from this day forward, it’s going to be only America first, America first. Every decision on trade, on taxes, on immigration, on foreign affairs will be made to benefit American workers and American families….We will follow two simple rules: Buy American and hire American.”

His speeches and actions have caused unease across the globe and more so in China and its trading community as the contours of emerging US policy are not clear.

Jack Ma, the founder of e-commerce giant Alibaba, who had met Trump earlier this month found him “open-minded.” 

Speaking at Davos 2017, Ma said they had discussed about small business, agriculture and trade between China and the US, with specific focus on how to create a million jobs in small business over the next five years.  

Ma said “we should give Trump some more time…He’s willing to listen.”

However, Jack Ma address at Beijing on January 27, seemed to be more realistic on China-US relations. He said despite an “overall optimistic” outlook on trade between the two economic giants, conflicts “will definitely be there.”

He warned of a big trade war between China and the US, if conflicts between them were not dealt with properly.

China’s uncertainty about Trump’s moves on strategic front was reflected in a recent comment of a PLA official quoted in the South China Morning Post. He said that the US re-balancing its deployments in the Asia-Pacific region, and its push to arm South Korea with THAAD missile defence systems were provocative “hot spots getting closer to ignition.” 

He had good reasons to be worried because during former US president Obama’s watch, China had successfully managed to flex its military muscles to buttress its territorial claims in the South China in the face of the US naval power in the Asia-Pacific. 

China also managed to threaten the durability of the US’ powerful strategic and trade alliances built over the years with key Asia-Pacific powers like Japan, South Korea, Australia and ASEAN. 

China has successfully lured even traditional US ally like the Philippines to avoid confrontation over territorial dispute, pacified regional challengers like Vietnam wooed by the US as well as imposed caution on ASEAN countries.

This had frustrated the US under Obama’s watch as it had struggled to come to terms with China’s unimpeded progress on other fronts of the power game.

China was already disturbed with Trump’s actions such as taking a congratulatory phone call from the Taiwan president soon after his election as well as comments of his defence secretary General “Mad dog” Mattis on the need for the US to reaffirm its commitment to Taiwan as they threaten China’s core interests on Taiwan.

On the other hand, Trump’s call to rework US’ strategic defence agreements with traditional allies like Japan and the NATO powers, has introduced a a lot of uncertainty not only in the minds of US’ Pacific allies like Japan, but also China.  

Under President Xi’s leadership China’s ambitious westward bound One Belt, One Road (OBOR) infrastructure initiative has continued to make progress, despite concerns about economic viability and opaqueness.

The OBOR project supported by 64 nations across three continents is helping China to shape new strategic paradigms and alignments in Central Asia and South Asia.

These are increasingly threatening to marginalise American influence in these regions.

In contrast, the Trans Pacific Partnership (TPP), the US’ ambitious but controversial trade initiative to challenge China’s growth as global economic giant has ended in limbo after the US was unable to ratify it.

China should be happy that President Trump has withdrawn from the TPP on January 23 as it could end American plans to sign an agreement with the TPP partners on the lines of the Transatlantic Trade and Investment Partnership (TTIP) agreement between the US and the European Union.

But Trump’s initiative to protect American industries by slapping on new tariffs and taxes on goods from China and Mexico have also added to China’s unease as it stands to lose the advantages it had gained from globalization.  For the time being, President Xi appears to be awaiting the  US president’s next move  as indicated by his speech at the World Economic Forum, at Davos 2017.

He spoke in vigorous defence of globalization and free trade. Though he did not name Trump or his bid for protectionist policies, Xi compared protectionism to “locking oneself in a dark room” while depriving light and air.

He cautioned countries pursuing their own interests at the expense of others.

“No one will emerge as a winner in a trade war,” he added.

President Xi said that economic globalization had become a Pandora’s Box for many, but it was not the cause of many global problems. 

For more than a decade the US and China have built strong, multifaceted relations in many fields which bind them together.  

Over the years, the two countries have mutually reinforced investments and trade between them.

So any radical change in the US trade policy with China could affect American business at home and abroad - as much as China.

President Xi is perhaps confident of evolving pragmatic working relations with the US, just as many American and Chinese businessmen also seem to think.  

Trump’s emerging China policy will also impact India’s trade, security and infrastructure development relations with China. Trump’s positive pronouncements on the future of US-India strategic cooperation, strengthened during the Obama days, would also be carefully watched by China.  

It will also be keenly observing developments on the changes in the US Afghanistan policy, as they have the potential to cramp China's strategic initiative with Russia and Pakistan to bring the Taliban and Afghanistan to the discussion table.   

The plate is full for both nations to develop a working equation on trade policies, strategic issues and other multilateral issues affecting the fortunes of not only China and the US, but many other nations, including India.

#Taiwan, #Donald Trump, #US-China Relations

The writer is a retired Military Intelligence specialist on South Asia with rich experience in terrorism and insurgency operations.

Courtesy: India Today Opinion portal DailO.in   http://www.dailyo.in/politics/china-us-relations-donal-trump-foreign-policy-taiwan/story/1/15384.html

Event report: C3S Round Table Discussions – Led by Prof. John Garver

C3S Report No: 0149/2016  dated December 1, 2016

Compiled by Asma Masood, Research officer, C3S http://www.c3sindia.org/economyandtrade/5854

The Chennai Centre for China Studies (C3S) and National Maritime Foundation- Chennai Chapter (NMF) held two Round Table Discussions (RTDs) from October 15-16 2016. They were led by Prof. John Garver, Professor Emeritus , Sam Nunn School of International Affairs , Georgia Institute of Technology. Col. R. Hariharan, Member, C3S moderated the sessions. Prof. John Garver’s profile can be seen at this link.

The sessions focused on ‘Implication of Rise of China’ and ‘Changing Strategic Landscape in South Asia – In the Backdrop of Chinese Initiatives’.

Prof. Garver expressed an interest in learning what Chennai’s strategic community perceived about India-China relations. According to him, China-Pakistan relations are mainly driven by the Indian angle. However China-Pakistan relations can be scarred by threat to CPEC from increasing insurgency in Pakistan and Afghanistan.

The speaker added that India is a regional power, hence China engages with Bangladesh, Sri Lanka, Myanmar and Maldives. India is not at the same level as China when it comes to linkages with these countries. China believes that India “belongs” in South Asia, on the same plane as Pakistan. China perceives U.S.A as its main rival. It is obvious as seen in China’s launch of a space lab and its Anti-Satellite (ASAT) capabilities. However China also views India and Japan as rivals.

Prof. John believes that India will attempt to block China’s relations with countries like  Maldives and Sri Lanka. Yet, India is not to blame for this ‘bad blood’. The concept of blame is not applicable in such scenarios.

On Russia-India-China relations, Prof. John studies China’s perspective as one which has common dissatisfaction with unipolarity of U.S.A. There is a joint opposition from Russia and China against U.S.A’s global influence. 

Nevertheless, China is not going to ally with Russia against the US. This is because China-US relations are vital, and Beijing will avoid any confrontation that can derail these ties. On the other hand, China will not challenge Russia in Central Asia, as Moscow’s economic and soft powers are very high in the region. Interestingly China fears a scenario where Russia will defect from Beijing and join Western democracies, leading to China being surrounded. It is similar for the Chinese view in case of Pakistan. In fact, China feared U.S- Russia relations would enhance under Yeltsin, whereby Moscow could have even joined NATO.

The subject of U.S.A’s strategic partnership with India was raised. In Prof. Garver’s view, these strategic partnerships are for U.S.A’s gain, in order to prevent China from growing the way of erstwhile militaristic Germany and Japan. Thus Washington D.C is supporting the growth of countries like India, Indonesia, etc. India is a multicultural and multiethnic democracy. The Indian diaspora in U.S.A is also a vital factor in Indo-US relations.

Prof. John Garver opined that there are Chinese who believe that U.S.A is in decline and China is ascendant. Eventually other countries may accommodate China. It will gain status of a pre-eminent power. China will seek friendly cooperation via multidimensional relations with all countries in the Indian Ocean, including India. However India will take umbrage at China’s friendship with Sri Lanka, Mauritius, etc. Nevertheless India will realize at a certain time that it cannot compete with China and will hence cooperate with Beijing. This is not a policy statement but an inherent belief. The question remains on whether India wants to accommodate a Sino-centric world order.

Prof. Garver added that India has “too weak a hand”. China does not need to resolve the border dispute, because according to Beijing, it is ‘Chinese territory seized by India’.

A query was raised on whether China’s government is capable of propelling the country to pre-eminent power status, given its domestic governance policies. Prof. Garver replied that the Communist Party of China (CPC) enjoys a high level of support domestically. This is so as performance is delivered. 1.36 billion people populate the economy of China and the government is able to extract power from these (human) resources. China also has a blue water navy. It has a permanent ongoing presence in the Indian Ocean since 2009. Its navy is primarily designed to defeat U.S.A in Taiwan. China is not seeking bases in the Indian Ocean yet, except for Djibouti. This is because Beijing needs the capability to defend them. It involves ammunition, fuel, aircraft carriers, etc. Someday, step-by-step, China will achieve these requirements. It is in China’s DNA to desire the status of an elite power.

A question was raised, asking if U.S.A should continue to advise Delhi on how to tackle the rise of China, and be more proactive in international relations. The answer according to Prof. Garver was that U.S.A wants multiple strong powers in Asia in order to deter China against war. U.S.A fears that China will engage in conflict like militaristic Germany had in the world wars. Washington D.C would like to encourage growth of India’s power to balance China’s power. There are commonalities between India and U.S.A: they are both multicultural and democratic.

Regarding geopolitics, it is not Japan, Britain, or France, but India which acts a great power. This is a significant factor to be considered. U.S.A is not prepared to ‘ally’ with India. America views India more as a friendly power. This is unlike France, which is seen by U.S.A as one if its oldest allies. U.S.A had once rejected India’s unique Iran stance, but pulled back because it is very understanding. It comprehends that India has its own interests, even with reference to China. It is significant that China is growing as a very powerful country. It population of 1.36 billion people has immense potential. They are well educated and the number of Chinese engineers is also high. China’s investments in science and technology are also increasing. While China is committed to a peaceful rise, there is a danger that a vacuum of power may come up which China can seize. The American view is that India should step up to fill the power vacuum if any, as it is a democratic country.

China views India as a geopolitical rival, since the inception of the Tibet issue. India also aligns with U.S.A and Japan, and has maritime partnerships with these countries. Prof. Garver believes that China wants to balance India because it thinks that Delhi has a tendency towards hegemony and recklessness, and thus must be kept in check. Besides, China thinks that India wants to check China in South Asia and in the Indian Ocean. This could lead to India blocking China’s friendly relations with states such as Sri Lanka.

One way China can keep India under check is a strong Pakistan. In fact, China does not manage alliances well, except with Pakistan. India explains the stability of China-Pakistan relations.  Sundeep Kumar S., Research Officer, C3S pointed out that Pakistan is a bridge to West Asia, thus explaining the true intent of China-Pakistan relations. Col. Hariharan, Member, C3S held the view that China engages with Pakistan to protect its overseas interests. Mr. L. V. Krishnan, Member, C3S expressed Beijing has ties with Islamabad mainly in order to counter global terrorism and terror rooted in Pakistan.

Prof. Garver recommended the following for India: That Delhi should cooperate with China on important issues such as climate change, WTO talks, etc. India should not interfere in the foreign policy of China. India should also accommodate China in the Indian Ocean region.

Prof. Garver’s talk was interspersed with insightful inputs from the members of the RTDs, in response to Prof. Garver’s queries. His question on the members’ views about China’s strategic interactions in the Indian Ocean was met with a prism of diverse responses. According to Admiral Mohan Raman (Retd.), until some years ago, China was looking at the Indian Ocean only to avoid possible problems in the Straits of Malacca. The second advantage is to enhance the economy of Western China which is not as developed as Eastern China. China is buttressing its communication channels, like it did in Africa (Djibouti). Beijing has made even Austalia an ‘economic slave’. If China’s SLOCs are choked, then even countries like Australia will fell the pinch. China’s activities depict a resurgence of the Chinese empire as in the 15th century. Now, countries like Myanmar and Bangladesh are not only under the military thumb but economic thumb of China.

Prof. Garver asked the forum whether it is easy to envision China as a pre-eminent economic power in the region and the status of India’s role in this context. Admiral Mohan Raman’s take is that despite India not being in China’s ballpark, either financially or militarily, India is on the right path to slowly becoming powerful in the economic, social and military domains. The GST Bill is one example of this progress. Other countries in the region will find that following a ‘slowcoach’ Indian model is more acceptable than an unpredictable China.

Col. Hariharan, Member, C3S, explained that the rise of China must be understood from the country’s deep sense of shame post the Opium wars. It was not a naval power until recently. There is a deep sense of nationalism in China. It wants to exit its navy’s domination [by the US] in the South China Sea and become a trans-oceanic power. This has led to its military modernization. The entry of China into Indian Ocean must be seen from an overall context. 

China wants to protect its interests abroad, as via the Djibouti base. Hambantota (Sri Lanka) is an economic example. However this does not imply the ‘string of pearls’ theory is valid, as China considers India to be of low competency. India has a narrower perspective. It is still a very powerful naval force in the Indian Ocean. This is not only to contain China. In reality India wants to be a more assertive in the region just as China wants to be a more responsible power. China is ambitious as it is ruled by a monolith party. However it fears insecurity. On the other hand India is a democracy which can defuse internal pressures with elections. 

Col. Hariharan added that we should not view China’s entry into the Indian Ocean as anti-Indian or anti-US moves. The concept of Maritime Silk Road is connected to that of the One Belt one Road, a project which was conceived in mid 20^th century, when the warlord of Xinjiang was made a general in the PLA and the province was integrated into China.

Prof. Garver’s posed a question on how India’s interests are impinged upon by a nationalistic China which has a modernized military. Captain Avtar Singh felt that India is going to contain China. Admiral Mohan Raman added that this containment could be done in the military sense, with an adversarial posture between India and China. India’s military capabilities are being enhanced to counter China’s design on India, not just on the border issue. The opinion of Mr. K. Subramanian, Member, C3S was that if U.S.A has a right to protect its own interests, so does China.

Prof. John Garver asked the RTD members what they thought of India’s role in China’s relations vis-à-vis Japan. Col. Hariharan quoted the Chinese media report on Prime Minister Modi’s recent Japan trip, that “India will never be a pawn of Japan.” Vithiyapathy P., Research Officer, C3S, took a stand that China is not pleased due to good relations between Japan and India. Sundeep Kumar S., Research Officer, C3S, expressed that China and Japan do have high economic linkages, yet there is disconnect between Tokyo and Beijing.

With regard to Indo-Chinese relations, Mr. Medrik Minassian, M.Phil Scholar, Madras Christian College highlighted that we should not forget the common player, the United States. The interests of the United States play an influencing role in shaping the actions of the countries of the region. This is mainly because of the U.S.A’s international position of strength in diplomatic, economic and military fields. India and China are the largest players in the region and see their interests clash with regard to this. They are trying to safeguard what is their own interest and also are filling up a vacuum that the recent decline of the United States influence has left in the geopolitical region common to India and China.

The issue of China’s claims on Arunachal Pradesh was discussed. Ms. Asma Masood, Research Officer, C3S, stated that India believes in a pragmatic, peaceful approach to the problem. India should continue its current stance of allowing dignitaries to visit Tawang. It has already been observed in the case of Richard Verma, US Ambassador to India and the Dalai Lama. India believes in sending such signals to China, rather than showing a provocative or offensive force.

The RTDS were concluded with Col. Hariharan giving the vote of thanks.

7 takeaways from Tamil Nadu’s Jallikattu protests

It shows how social media can be used as a vehicle to trigger social consciousness among people

POLITICS | 4-minute read | 22-01-2017

COLONEL R HARIHARAN @colhari2

The nine-day long youth upsurge against the ban on Jallikattu – a traditional form of bull running during the Pongal celebrations – is expected to peter out after the ruling AIADMK’s stop-gap chief minister O Panneerselvam managed to defuse the situation, at least partially, with the cooperation of Prime Minister Narendra Modi to promulgate an ordinance to lift the ban.

The government may be able to handle it  even if it is continued as sections of the agitators would seek a permanent solution through an enactment.

The whole episode has seven takeaways for the governments at the Centre and states, civil society organizations and youth leaders all over the country. These are:

1. It is much more than a lot of bull: Though Jallikattu ban remained the core issue of the agitation, it became a vehicle for assertion of Tamil identity which attracted mass participation.

Tamil identity, perhaps an amorphous phrase, describes the feeling that comes through one’s upbringing with distinct language and traditions in Tamil socio-cultural of environment. It transcends religious, caste and community affiliations.

2. Non-violent mass movement possible: It is possible conduct a non-violent mass movement without political leadership and patronage provided the cause relates to the identity and pride of the people.

It requires a cause that appeals to all people to gather mass support. Support of political leaders, popular film stars and media will automatically come to the mass movement if its voice is strident.

3. Credibility: Mass movements will gain credibility only if the demand appeals to popular beliefs and can be related to other socio-cultural grievances of the people.

4. Peaceful conduct: It will gain massive participation and clout, only if lumpen elements often goaded by political netas, are kept out to prevent them taking over the agitation. Peaceful conduct will neutralize the government option to treat it as a law and order problem and crush it by using force.

5. Limitations of judiciary and governments: If the public feel any action of government, civil society or judiciary is a threat to their way of life, as they understand it, they will fight relentlessly. Thus there are limits to government actions to check or eradicate traditional cultural practices as the people perceive them. 

6. Keeping the cool: While handling a mass movement the government should not lose its cool, but find a democratic way of resolving the core grievance.

Even a half-way solution that would prevent an explosive turn of events is better than no solution. The Tamil Nadu government as much as the loose body organizers of the agitation should be congratulated for avoiding major law and order confrontation resulting in loss of life and property. It shows a rare maturity of people at all levels in the state.

7. Social media: The agitation turned into a mass movement as word spread through social media – Face book, Twitter, Whats App, You Tube et al. This only confirms the enormous power of social media even among rural masses.

It shows how social media can be used a vehicle to trigger social consciousness among the people; of course Tamil Nadu has the advantage of having nearly half the people living  in towns and cities who are already using social media actively; a similar trend is visible in rural areas too.

It is to the credit of the chief minister O Panneerselvam that he managed to keep his cool all along. This is, perhaps, an achievement considering his built-in leadership limitations and internal party squabbles with “Chinnamma” Ms Sashikala (styled by her loyalists as heir-apparent to the late “Amma” J Jayalalithaa) threatening to pull the rug from under the feet.

However, in a state that worships charismatic political leaders, it is doubtful whether he would be able to turn it to his advantage in the power struggle within the party.   

Probably Panneerselvam managed to get through the critical days with some smart thinking from top bureaucracy of the state and hand-holding from a sympathetic Centre.

Prime Minister Narendra Modi also probably chipped in. He probably prefers the dour Panneerselvam, who has years of experience as a minister, to Ms Sashikala, whose only credentials come from the reflected glory as a companion to the late charismatic leader Ms Jayalalithaa, who dominated the state’s political scene as a colossus.

But Ms Sashikala’s powerful siblings, having created a strong support network within the party, appear to be determined to have a piece of the cake. It matters little now that they were shooed out of the scene during Ms Jayalalitha’s last few years.

So far the AIADMK and Tamil Nadu political scene is still hazy, as the party is yet to fully recover from the death of their Amma.

Col R Hariharan, a retired Military Intelligence specialist on South Asia, has rich experience in  terrorism and insurgency operations. 

Courtesy: India Today opinion portal Daily O             

http://www.dailyo.in/politics/jallikattu-tamil-nadu-youth-protest-jayalalithaa-sasikala-aiadmk-o-panneerselvam/story/1/15243.html

C3S Discussion: Perspectives on emerging India-China strategic Dynamics

 C3S Article no: 0003/2017  http://www.c3sindia.org/india/5920

[The following is text of a dialogue held among C3S members on the article:  Perspectives on Emerging India-China Strategic Dynamics: Understanding OBOR; By Col. R. Hariharan VSM ]

B.S. Raghavan IAS (Retd),
Former Policy Advisor to UN (FAO), Chief Secretary, State Governments of West Bengal and Tripura, Secretary to the Ministry of Food and Agriculture, Government of India.

Col R. Hariharan’s paper provides a welcome and timely stimulus for revisiting India-China relations in the current context. Most pieces of the jigsaw puzzle are there, except the most important one: The rocking of the US-China boat by the new bull(y) in the China shop. Already, Donald Trump has ruffled the Chinese feathers by directly communicating with the Taiwanese President, and has responded with the equivalent of “Mind your own business” when China protested. Trump is a person with a short fuse, and will not brook any blocks in the course he sets for himself. And when the chips are down, all the countries which kowtowed to China will desert it and herd with the US. There is a latent, unspoken undercurrent of angst against China among the countries of the rest of the world, especially the industrial democracies, and they will love to see China being given a few jolts by the US under Donald Trump.

India need not lose sleep over OBOR or CPEC. OBOR will collapse under its own weight, and Pakistan will drag its feet until Trump’s future approach is clear. China dangles a concept, but the US dangles the carrot which is vital for Pakistan’s survival. One has personally always maintained that China’s dalliance with Pakistan is a dispensable short-term tactic: China, with its millennia old wisdom, knows that tying up with Pakistan in a zero-sum manner will be extremely foolhardy, if not foolish, given Pakistan’s unstable politics, feckless governance, untrustworthiness in keeping its word – all tantamount to a failing, if not failed, state.

China knows that as between India and Pakistan, the former is always the better bet in the long run. India should take in its stride the imbroglio created by the NSG and Azhar episodes and bide its time. By seeming to get agitated, it will only make Pakistan happy. One somehow has a firm conviction, which at the moment is only based on intuition that eventually relations between India and China will emerge into the “broad, sunlit uplands” of mutually reinforcing, creative “competition”, a blend of harmonious cooperation and healthy competition. That is where their ultimate, lasting interests lie.

Col Hariharan may see whether his paper needs any revision in the light of the latest white paper titled “China’s Policies on Asia-Pacific Security Cooperation” brought out by China. It is unbelievably upbeat.

A few quotes: “Since 2015, the China-India strategic and cooperative partnership for peace and prosperity has been further deepened. The two countries have set the goal of forging a closer development partnership, made new progress in exchanges and cooperation in various areas and stayed in close communication and coordination on regional and international issues……..the two countries have maintained communication and coordination on international affairs and enhanced collaboration in the UN, BRICS, G20, China-India-Russia and other mechanisms….They have cooperated on climate change, the WTO Doha Round of negotiations, energy and food security, reform of international financial and monetary institutions, and global governance. Such cooperation has helped safeguard the common interests of China, India and other developing countries”.

As regards the military, it says: “The relations between the Chinese and Indian militaries remain healthy and stable in general, with increasingly close communication and exchanges, and pragmatic cooperation in greater breadth and depth…..Sound cooperation in personnel training, professional exchanges and other fields is being carried out….The two sides have also conducted border defence cooperation which plays a positive role in maintaining peace and tranquility in the border areas between China and India”.

Referring to the eight rounds of defence and security consultation and six joint military anti-terrorism training exercises have been held so far and the visits of military officials of both sides in 2015 and 2016, it talks of the “important consensus” reached “on strengthening pragmatic cooperation between the two militaries and working together to maintain peace and stability in the border areas”. This document is worth a deep study.

Mr.Sivaraman IAS (Retd.)

Former Revenue Secretary, Ministry of Finance, Government of India.

The only take I see in the article of Col Hariharan is that India should join the OBOR. Why and to whose advantage should India join OBOR? What will be the quid pro quo? Will China assure all countries that it will never be used for any military purpose not even for transporting military personnel and military hardware by any country? Will there be a commitment by all the countries joining the OBOR to that effect?

When China is selling billions of dollars of military hardware to Pakistan to be used against India it threatens India when we want to give Vietnam military assistance. China has not made any investments here in India to talk about when compared to the billions of dollars of trade surplus they have with India. They are only assembling third grade phones calling it manufacture.

One was personally one of those who wanted close relations with China. But China showed only its kid gloves as it thought that  Modi was naive with his “Unjal diplomacy” (which was somewhat  out of place but excusable as Modi was new to diplomacy) and they can become a big brother. Now the gloves are off. They are losing ground economically and the reality is that India’s GDP when the unaccounted economy is counted would be closer to three and a half trillion dollars, they are feeling threatened on the economic front also. They were accustomed to the lackadaisical approach of the Congress rule in India with its dynastic fixation.

The decision of Modi to demonetize 80% of the currency in circulation in such a large economy of India with its one billion people using only cash, irrespective of the fact whether there will be rich dividends or not, the clear signal to the world is that here is a man who will dare to take a ruthless decision when he feels that it is right for the country. This is nothing to be mocked at which only decision takers can appreciate not the arm chair critics who find fault with everything, as they know not how and when to decide.

China has realized it. So they are worried.

China asking India to join CPEC defies all logic given that the project itself is already being executed on Indian soil without its approval. India cannot spend on infrastructure that could potentially be utilised by terror outfits to attack India nor can India strengthen its foe – Pakistan’s economy which will enable them to be more aggressive against India.

With Trump asking for return of factories to the US, China is on a slippery ground. They have shut down 45 million tons of their steel capacity according to one report. But they intend to cut a total of 75 million tons capacity with its attendant consequences.

They have been rattled with the successful test of AGNI V and the speed with which the Mountain strike corps is being raised. They are also worried at the speedy indigenization of weapons systems particularly with the Rs 6000 crores order for howitzers given to L&T. The development and successful testing of the Indian Howitzer capable of  launching shells up to 45 kms with all capabilities considered better than world class today and the launch of the India made nuclear submarine with more on line are pointers to a govt. that does not want to have a lay back attitude. With all these the dragon thinks that its fires are getting extinguished.

Col Hariharan

Thank you for your insightful comments. Yes I have seen the latest White Paper you have referred to, because the strategic scene is a work in progress with a lot of issues messing up South Asia. So I have confined to those aspects which I considered relevant to the topic at hand. Of course, mine is no final word.

I did not factor Trump’s arrival on the scene in the paper, because I find the issue has not yet matured; even American brain trusts like Dr Stieglitz are only speculating on the future of US-China relationship after Trump -the elephant in the China shop gets going; they are in fact  waiting for more indications from both White House under Trump and China’s response thereof.

Thank you Mr Sivaraman for raising the very valid issue of quid pro quo for joining OBOR and India under Modi impacting the India-China dynamics particularly with the up-gradating of our all round military capability and international influence.

But I am not so sure that India should join OBOR because it’s opaque and involves complex issues. But one thing is clear: without India’s active involvement in shaping the project its development would be incomplete and lopsided and investments might never become justifiable.

This idea may be Utopian; but I feel China missed a golden opportunity to lodge itself in the Indo-Pak scene by mooting and selling the idea of promoting the section of CPEC through POK as a China-Pak-India joint venture. Of course Pak’s economic vulnerability to Chinese largesse might have enabled China to twist Pak arm, to close down terrorist camps in POK, arrest terrorist leaders inciting the situation in J and K and normalize its trade relations with India. 

Even if it did not succeed China would have made India rethink its China strategy. And though China failed to muster India’s participation it cannot afford to give up so easily. We can expect China to keep India in the loop with its hot and cold comments. At some stage we can expect Putin to get into the act; the indications are there.

It is a command decision for Modi on getting our act further on China. Modi will probably wait and see how Trump shapes up in taking Indo-US security relations further and balances his relations with Putin and Xi.

K.Subramanian

Former Joint Secretary (Retd.) Ministry of Finance, Government of India.

The paper begins by giving a broad idea of the OBOR and how it has evolved over years, especially under Xi. Then it moves on to narrate the recent India-China differences or increasing tensions on some issues. Some of them like India’s membership of NSG or UNSC antedate OBOR as adopted and pursued by Xi. CPEC is indeed a new factor thrown into OBOR even though the growing anti-India China-Pakistan relations are older. Col. Hariharan’s paper seems to lump them together as current factors which militate against India joining OBOR. There is also a kind of unstated confusion between cause and effect.

To be able to take a view  on whether India should join OBOR, we need to understand what OBOR stands for. Chinese commentators sing hosannas over it and see visions of new hemispherical economic linkages or heavens emerging under the baton of China. The irony is that OBOR is not a program carved in stone. It is a fusion of emotive ideas involving a host of strategic, economic, social ideas relevant only to China. The NDRC statement on OBOR released on March 28, 2015 is a chunky document which bundles up China’s hope and aspirations and draws up far reaching economic linkages for the coming years, both regional and across the frontiers. It includes some projects already completed or in progress. Many analysts take the view that “a mix of strategic and domestic factors drives OBOR.” This will be deliberated on later.

Many analysts agree that by this strategy, China is trying to get over the problem of its slowdown by creating external demand for the excessive capacities created in sectors like steel, minerals, coal, etc due to over investment in a credit driven economy. China has already expanded its wings as a global trader and wants to reduce the costs of transportation. The most important rationale is that China has huge foreign exchange reserves estimated at over $4 trillion in 2014 which it invests in low yielding US treasury bonds and a diversification into high yielding projects visualised in the OBOR is desirable and justified. It is also a fact that China has already taken action to create supporting financial structures like the AIIB, Silk Funds, etc.

Without a well prepared project report listing out the projects and also working out their cost/benefit, China has been able to play on the hopes and aspirations of smaller, friendly neighbouring countries in Asia. China’s offer of huge assistance in terms of loans at concessional rates allures them and gets them on board. Another positive factor is during the last two decades China has extended its economic sphere is a big way in Central Asia. It has invested billions of dollars, expanded trade substantially with them, built road and bridges, laid pipelines to carry gas or crude oil. It is in a dominant position in Central Asia and even Russia has been driven to cooperate with China over its forays in the region. The Central Asian projects triggered the idea to expand them to other areas.

Likewise, China has also secured a dominant position in Asian trade and has become the fulcrum of Asian trade. A major part of Asian exports pass through China and the secret of their success is their ability to create supply chains either by itself or by supporting the programs of big multinational companies like APPLE. MICROSOFT, INTEL, etc. China also dominates in the trade and investment relations in South Asia or the Mekong region. It was assisted by the Asian Development Bank through its program for the development of Upper-Mekong.

It was in more recent times that the Middle East was included in the OBOR. For a power entrenched economically in Central Asia like China, a project like CPEC is a natural addition. Either due to the quirks of geography or by design (Political?), it passes through a territory which is ‘illegally’ occupied by Pakistan. As argued earlier, is it possible for China to negotiate (or renegotiate?) with Pakistan to redraw the alignment?

As we watch the unravelling of the OBOR, it appears that China uses it as s diplomatic ploy to get as many members on board as possible. OBOR is a flexible, evolving and fungible program. It is a program steered by China to subserve its strategic and economic interests. As far as India is concerned, the route of the OBOR does not pass through India. The only interest is in the BCIM Corridor Project.It seeks to link Kolkatta with Kunming in Yunan. Xi has been repeatedly urging our PM to speed up the project. Despite the assurances by our PM in BRICS and elsewhere about our commitment, the progress has been tardy to say the least. (Hariharan’s paper under preparation will throw more light on this.) Does it mean that we are not going along the OBOR as visualised by China?

There are strong grounds why India should not go along with the OBOR in the inchoate manner in which it is offered or being advocated. It is evident that the OBOR on date is set to serve China’s interests; it is steered by China, and terms are set by China. This is not a sound basis for propounding or trying to implement programs which transcend borders and corridors. One would expect a program negotiated by participating member countries both for the coverage, contents, terms of financing and systems for implementation together with accountability. There are already reports on the unsustainable terms set by China for projects financed by it, including the CPEC. One of the severest comments on CPEC has come from one of the Economists of the IMF. 

Even earlier, some of the African NGOs have attacked Chinese projects for similar infirmities.

Though we need not openly attack the OBOR, we may not fail to take note that it works against the interests of India. For instance, we are nearly marginalised in our economic relations with the Central Asian countries. China’s hold on their governments may not promote our interests. In Asia, whether East or South, China is the dominant player and has got integrated in Asian trade through many of its trade agreements leading RECP (Regional Economic Cooperation Partnership). ASEAN is dominated by China and its members can no longer unite to fight against China. India is sitting on the sidelines, not being admitted as a full member!

If the OBOR  progress even in part or fitfully, it will strengthen China’s hand in those countries or region. The growing economic clout of China will have nearer term strategic consequences affecting India.

Though the options on date appear to be limited, we have to work out strategies in cooperation with like-minded members to counter the adverse effects of OBOR such as over trade barriers, creation or diversion. At one state US sponsored TPP seemed an appropriate counter strategy. Unfortunately, TPP itself was badly structured and flawed. In any case President elect Trump has thrown it out. Even so, we may not give up the idea of working out alternatives to OBOR. We have to play for time and a lot will depend on countries who are willing to join.

There is a silver lining to our pessimism. China’s OBOR strategy is based on the assumption that its foreign exchange reserves are abundant and will continue to grow. Events of the last two years have poured cold water over this assumption. In 2014, China had a total reserve of $4 trillion and it was the peak level. Since then, it has come down closer to $3 trillion. Several factors have been at work. China’s central bank -People’s Bank of China- has been under compulsion to hold the value of the Yuan rate against US dollar. It pumped in more than$900 billion to maintain the Yuan value and continues with its struggle even the US dollar hardens. Private capital is fleeing out of China in billions of dollars draining the reserves and adding more misery to the value of the Yuan and to the efforts of the PBOC. Current market trends suggest that China’s reserves will fall further and create a grim scenario for the government and the PBOC. Conventional estimates by monetary economists are that China will need to hold at least $2.8 trillion in reserves to be able to avert a major crisis resulting from an attack on the Yuan or capital flights. 

Current calculations show that China may have only $400 billion as surplus for overseas deployment. The longer term estimates of China’s growth and earning foreign exchange do not suggest more than modest accretions. That may imply that China will have to cut the scope of the OBOR and remain modest. It can no longer afford to create the impression of an economic power which can distribute largess indiscriminately.

The last para may suggest that we need not be in a great hurry to commit ourselves to OBOR. We may do it, if it is globally negotiated and terms are settled to the satisfaction of participating members. If this option is Utopian, we may participate in those sectors/segments which are in our larger interests. One’s own hunch is that China’s own financial constraints will shrink the OBOR in the coming years. If we add to this brew other factors like growing protectionism spearheaded by Donald Trump, growing terrorism and ethnic struggles in many parts of the world and loss of faith in globalisation, the ardour for OBOR will evaporate. China itself may feel happy to rebalance its economy and live happily with its “new normal” growth rates.

Col Hariharan

Thank you KS for your detailed comments which I agree with.

My objective was to examine the dynamics of China-India relations are shaping up under Modi-Xi leadership with special focus on OBOR, Xi’s showcase project to realise the China Dream.

Leaders do not always take strategic decisions by right brain only. They bring a lot of emotion to it. Hitler and Churchill did it. Even Xi and Modi are doing it. That’s why some of Modi’s actions are seen as right wing nationalistic. This is how I analyse strategic situations because guns alone don’t win wars.

The paper was not prescriptive but only trying to understand why Xi is behaving as he does and what are Modi’s dilemmas. China-India relations are poised to undergo course correction more than once as environmental drift pushes them. But I don’t think Xi will give up OBOR so easily because his and nation’s prestige is entangled with it. So we will have to watch and understand as it develops.

K.Subramanian

It is indeed necessary to study the dynamics of Modi/Xi interactions and the  role of OBOR in it. My own guess is that China does not visualise any role in the OBOR for India except to the extent of our involvement in BCIM Corridor.

Unfortunately, our performance on the ground in terms of implementation has been tardy. Though Xi has appealed to India in the meetings of BRICS or G-20 to speed up the OBOR, he has clearly limited our role only to BCIM which has a longer legacy.

OBOR as conceived and pursued by China works against the interests of India. One has narrated how we have been marginalised in trade and economic relations in Central Asia and other parts of Asia such as in South Asia. Even as China gets more and more integrated  with ASEAN, we seem to get less and less, rather wait for the crumbs to fall from the table. One has gone on to examine the options open to us to counter the adverse impact of OBOR  on us. One option is Utopian and others are pragmatic.

One has argued that we have to play for time. This is against one’s personal assessment that China’s financial troubles which seem to be mounting in the last two years and could get worse with the anti-China approaches on Trump’s agenda. These developments will strain the capability of China to go the whole hog with the OBOR. One did not say they will abandon the OBOR, but only turn modest and cut it down to modest levels.

I end this with a reference to our handling of Mongolia with an offer of assistance of $1 billion during Modi’s visit to that country in May last. Sadly, aid did not reach that country. Later, feeling emboldened with India’s offer of aid, when Mongolio sent an invitation to His Holiness Dalai Lama provoking the ire of China and resulting in economic sanctions which began to cripple its economy. China steps in with an offer of $3.2 billion and the Mongolian government cancels its invitation to His Holiness. I am drawing attention to this for two reasons: one is our inability to match our rhetoric with action; and the other is the stranglehold China has on countries in Central Asian region.

Col. R. Hariharan

I had mentioned in the conclusion the Sino-Indian relations are work in progress. But CPEC and BCIM and 21st century maritime silk road are inseparable from the OBOR. That’s how the Chinese are progressing it. So if we accept BCIM we silently endorse OBOR.

Frankly there is no comparison of India and China which respectively have regional and global ambitions and strengths. So Central Asia will continue to be more under Chinese influence than Indian regardless of our aid and investment. To be realistic, Modi cannot perform magic just because the BJP says he is doing. For instance India’s reach and ability to influence Mongolia are much less than China due to its historical, ideological and religious affinities of the past and present. China will find the same in respect of India when it comes to Sri Lanka despite investments aid and sending warships.

I agree that India has no choice but to play for time particularly as a new axis of Russia-Pak-China seems to be emerging. Inevitably this could push India closer to Af and the US with Iran sitting on the fence. New realignment of Russia-Turkey and strangely Russia-Syria-Iran configuration is adding to the confusion. So we are in for Great Game Version.2 and Version 2.1. Let us watch and enjoy.