Thursday, 22 December 2016

A Chinese prediction: What will Trump's China Policy Be?

       Reading the Chinese press these days the one issue that re-occurs with increasing frequency is; what would Trump's China policy be like? Most commentators profess bewilderment, partly because there is so little material, published or otherwise, to base judgment on and partly because some also subscribe to the view that Trump is both mercurial and impulsive. Therefore making a prediction becomes problematical. Nevertheless, based on what ever material is available, some Chinese commentators have been willing to stick their neck out and hazard a guess. If these views are amalgamated, the following would seem to be the current thinking on what Trump's policy towards China might eventually pan out to be. Since the Chinese press is "controlled" it would be fair to assume that it invariably reflects official thinking.
     The Chinese seem to have placed great reliance on the views expounded by Kissinger on Trump on his last visit to China, where he also met with President Xi Jinping. The Chinese have noted that Kissinger arrived in China, after he had met Trump and therefore his views on what Trump's policy is likely to be is assumed to carry Trump's imprimatur. Kissinger is reported to have told the Chinese that Trump was not an isolationist and that isolationism was not an option for US policy. Based on this assumption the Chinese are convinced that no matter how much the situation changes, the two countries need each other and therefore they do not expect "too much turbulence" in Sino-US relations.
    This assumption is further fortified by the belief that Sino-US economic relations are far too vast and varied and inter-dependent and that any unilateral action, such as trade sanctions, would lead to a trade "war" that would be totally ruinous for both countries. Sino-US bilateral trade last year touched US$ 558 billion, with direct US investment into China touching nearly US$ 70b. Similarly Chinese investment into the US has touched US$ 46b. The Chinese market is also the main source of income of several important US companies. On the other hand, if Trump does levy anti-dumping or countervailing duties on Chinese goods imported into the US, then China is prepared to go to the WTO to challenge Trump's impositions. The Chinese feel that they now have developed sufficient competence to handle such trade disputes in WTO and "win" them.
    The Chinese are convinced that Trump will not fundamentally change the US alliance system in the Asia-Pacific as that has been the fulcrum of US policy. It is far too important a strategic asset for the US. It is conceded that the US would "demand" greater coverage of "costs" of military deployment and probably both Japan and South Korea would oblige. It is also conceded that Trump, in line with his statements that he would prefer a "strong US military", may indulge in a Naval expansion that would see the US Navy expand from its present strength of 274 ships to 350 ships. This would also be in line with Trump's rhetoric that the US military should be so strong that "no one would make trouble for us". 
    The real trouble and exasperation for the Chinese is in discerning what Trump might do with regards to Taiwan. No Chinese commentator seems to be sure and apart from saying that the subject was very "sensitive"; there is no one unified view emerging. But all seem to urge Trump not to be "hasty", whatever that might mean! It is for this reason that the Chinese reaction to Trump's telephone call to the Taiwanese leader Tsai, was rather very mild and seemed to pin the blame more on the Taiwanese leader than on Trump. Chinese rhetoric on the subject, on the other hand is quite clear, that the "one China" policy must be maintained by the US. The Chinese see no allowance for any dithering on the question of Taiwan. All Chinese commentators maintain that US commitment to a "one China" policy is the bedrock of Sino-US relations and that this must not be disturbed under any circumstances.
    There is no doubt that the Chinese leadership is faced with an acute dilemma. Should they adopt a hardline policy towards Trump at the very beginning? Or should they wait to see how Trump's policies develop? The fact that the incoming Trump Administration has been filled with persons like Peter Navarro, who have written and expressed extreme hardline views on China, cannot but be a  cause for concern for the Chinese leadership. Like most countries the Chinese too wait patiently to see what happens next!

Friday, 16 December 2016

China Slams India on HH Dalai Lama's Meeting With President Mukherjee

       Ever since His Holiness the Dalai Lama [HHDL] took refuge in India in 1959, the Chinese authorities have lost no opportunity to slam the government of India for allowing HHDL to meet high dignitaries in India. Not only that even on his visits abroad, the Chinese authorities have taken deep umbrage if any foreign leader met with HHDL. The Chinese have even gone to the extent of threatening economic and political consequences. As the Chinese economic and military strength grew exponentially, most states began to defer to the wishes of the Chinese authorities. It was therefore a very pleasant surprise when little Mongolia, on China’s northern doorstep, refused to bow to a Chinese dictate and received HHDL and was even prepared to face the consequences of defying China. The Chinese were livid and demonstrated their ire when they unilaterally blockaded the Sino-Mongolian border and refused to allow any trans- shipment of goods. Mongolia being land locked is heavily dependent on China; just as Nepal is on India.

   However the recent Chinese outburst against the “Indian side” for allowing HHDL to meet with President Mukherjee during a children’s conference shows just how touchy the Chinese authorities have become. A Chinese Foreign Ministry spokesman, Geng Shuang had the following to say: “The Chinese side is strongly dis-satisfied with and firmly opposed to the meeting. We urge the Indian side to see through the anti-China separatist nature of the Dalai-clique, fully respect China’s core interests and major concerns, and take effective means to remove the negative impact caused by the incident to avoid any disturbance to the China-India relationship”. Of particular point to note in this statement is the reference to China’s “core interests”, as also to “major concerns” when referring to HHDL. What has not been clarified is whether HHDL is a “major concern” or whether the reference to “core interests” is a reference to Tibet. If HHDL has now become a “major concern”, it obviously means that the Chinese authorities are sufficiently rattled to go to the extent that they did with Mongolia to order a blockade. What made the Chinese even more irate was the appeal of the Mongolian Ambassador to India, Gonchig Ganhold that India should help Mongolia to deal with “China’s counter-measures against Ulan Batore”.

    It was not very long ago that the Chinese authorities were proclaiming a “new peripheral” policy that was designed to bring states on its borders closer together and to attempt to encourage them to take advantage of the rise of China as an economic power. The “One Belt, One Road [OBOR]” was one such major initiative of President Xi Jinping. The Chinese authorities were never tired of proclaiming a “win-win” situation, if states accepted the OBOR concept. As President Xi said “China should promote neighborhood diplomacy that turned its neighboring areas into a community of shared destiny”. But at the same time, President Xi emphasized that while China would adhere to the path of “peaceful” development; it would not abandon its legitimate rights and interests, or the nation’s “core interests”. Therefore the message was quite clear. If the circumstances so required, the Chinese leadership was prepared to play rough as well.

   In view of recent Chinese belligerence, I requested Prof John Garver, who is the Professor Emeritus in the Sam Nunn School of International Affairs at Georgia Tech and who has done seminal work on Chinese foreign policy, as to what he thought about recent developments in China’s peripheral policy. Prof Garver’s views are as follows:


 China under Xi Jinping has abandoned Deng Xiaoping's wise directive of 1990: "keep a low profile, hide your brilliance under a basket, and never claim the lead." Now, under Xi Jinping, China's interests and ambitions will grow as China's power grows. Chinese analysts expect "China's rise" to produce some initial resistance.  But eventually other countries [first and foremost China's neighbors] will recognize the wisdom of coming to terms with a rising China. The dream of many Chinese is for China to become the leading Asian power and a co-equal of the United States as a global leader. Demonstrable progress toward that "Dream" of the "great rejuvenation of the Chinese nation" justifies and legitimizes the absolutist rule of Xi Jinping and the CCP party-state.

    China will expect its neighbors to "respect China's core interests” as the quid pro quo for China's "friendship."  Abstaining from activities facilitating the efforts of "splitists" [as Beijing dubs the Dalai Lama to be] is, from Beijing's perspective, an essential part of this requirement. I don't think China's leaders fully understand how China's neighbors perceive China and its policies. I think the most likely course over the next decade or so will be a steady growth of Chinese assertiveness and, contrary to China's expectations, slow formation of a coalition of China's neighbors increasingly apprehensive of China's power.


     Thus the Chinese authorities probably expect that India would desist from permitting HHDL from playing any public role, other than living quietly in Dharamsala. But the reality is that Chinese peripheral policy is not making much progress, for with the notable exception of Pakistan, the Chinese are having issues with almost all their important neighbors. While relations with North Korea remain unequivocal, those with South Korea have recently soured. With Japan the dispute over the Senkaku [Diaoyu] islands remains as tense as ever. And with Trump rattling the Taiwan issue and US Admiral Harris raking up South China Sea dispute; China’s periphery is suddenly alive. Having successfully stoked the fire of nationalism and having made it synonymous with the Chinese “dream”, it remains to be seen how President Xi Jinping handles these delicate foreign policy issues. A deemed failure could also have domestic political repercussions, considering that the next party Congress is only a year away.

Tuesday, 13 December 2016

Increasingly Flustered and Alarmed China Cautions Trump on Taiwan

         President- Elect Trump's tweets and his recent interview with Fox News on Taiwan has made the Chinese leadership not only anxious, nervy but increasingly uneasy. The Chinese leadership responded to Trump's rhetoric by a People's Daily Commentary [less serious than an editorial or a signed article] that for China the "one-China" principle was the foremost pre-condition for building formal ties with other countries. The People's Daily reiterated that "no country is willing to bargain over core national interests and that China is no exception.... that there was no room for compromise". On the other hand, the Chinese leaders also did not wish to jeopardize relations with Trump and therefore quickly sent State Councilor Yang Jiechi to meet with Trump officials, notably NSA-designate Flynn.
      The question that therefore assumes importance is: Will Trump, after he assumes the US presidency in January 2017, persist with his present stance on Taiwan and Sino-US relations; or will he significantly modify his views? Should Trump persist, under what circumstances might this lead to a conflict situation arising between China and the US in the Asia-Pacific region? To answer this very important question, I put this across to Prof. John Garver, who is the Professor Emeritus at the Sam Nunn School of International Relations at Georgia Tech[Atlanta]. Prof John Garver is the author of eleven books and over a hundred articles dealing with China's foreign relations. His book entitled "The Protracted Contest: India-China Rivalry in the 20th Century" is considered a seminal work on Sino-Indian relations. Prof John Garver, is one of the most renowned scholars in the US on China and on Chinese foreign policy.
    This is what Prof John Garver had to say:
   [Begins] :
    I don't think this is very likely.   Both Beijing and Washington
    know a full scale war between them would be immensely costly,
    dangerous and very difficult to "win."  A war with the United States
    would undermine China's currently highly successful "rise" (still
    enjoying U.S. support).  For the Beijing regime a perceived "defeat"
    also carries the danger of regime collapse.  Beijing might threaten war
    over Taiwan, scaring a lot of people, but that is likely that this
    will be psychological, not bloody warfare.   
    The most likely scenario would be some provocative action by North
    Korea that triggered a South Korean response leading to renewal of
    the war suspended since July 1953.     If South Korea and the US
    moved to preempt (via conventional air and missile strikes) North
    Korea's nuclear capabilities, a war could result.   Seoul and
    Washington would do everything possible to secure Chinese acceptance
    of North Korea's forceful de-nuclearization and possibly the
    demise of the North Korean regime along with Korean unification
    under Seoul's leadership. But if China faced the prospect of a
    US-South Korean unification of the Korean peninsula under the
    Republic of Korea framework (i.e. alliance with the United States
    and the prospect of US troops on China's northeastern borders),
    China might intervene militarily, primarily to have a strong voice in
    the terms of the post-war settlement regarding the future of the
    Korean peninsula. I suspect that Beijing and Washington would
    maintain close contact during a second Korean war to avert
    miscalculations as occurred in 1950. 
    Accidental collision of Japanese and Chinese airplanes or ships in
    the East China Sea would lead to eruptions of anti-Japanese
    nationalism in China which, in turn, could compel the regime to
    "teach the dwarf pirates" (China's affectionate name for Japan) a
    lesson." The U.S. would intervene to end this Sino-Japanese
    confrontation, and I suspect that Beijing would be willing to go
    along. Beijing understands that bloodshed could prompt Japan to
    more quickly and more completely rearm --- to China's disadvantage.
    Of course, Beijing could also calculate that bloodshed in the East
    China Sea would mobilize Japan's pacifist forces and sentiment,
    helping to thwart Shinzo Abe's efforts to make Japan a "normal"
    (military) country.  [Ends].
         Quite clearly therefore the shrill words being exchanged between the US and China over Taiwan are more psychological in content than confrontational. As the People's Daily sermonized, the US needs to be "rational, respectful rather than impulsive". Is Trump listening?




Friday, 9 December 2016

India's Trade Deficit With China Skyrockets to US$52.69 billion.

      India’s trade deficit with China in 2015-16 stands at US$52.69 billion. And it is expected that this will go up even further this year. This by itself should not be a cause for worry, as India runs deficits with sixteen out of its top twenty five trade partners. The fact is that India buys more than it sells world- wide. But the real problem is that there is no obvious solution in sight as yet and therefore the question that arises is for how long can this huge deficit with China be maintained?

    India’s trade relations with China have had a checkered history and unfortunately continue to remain hostage to political developments between the two countries; albeit much less now than earlier. It is to the enormous credit of Rajiv Gandhi that he was the first Indian leader to realize that a solution to the vexed issue of the boundary dispute was not going to be forthcoming in the near future and therefore to delay normalization and development of trade and economic relations with China would only be counter-productive. It was Rajiv Gandhi who took the decision to de-link the two issues. It was also during his visit to China in December 1988, that for the first time a ‘Joint Economic Group’ was established. However it must be pointed out that no one in the Indian leadership at that time paid much attention to this aspect of the relationship, for no one anticipated that bilateral trade volumes would develop so fast. And develop they did with bilateral trade in 1991 jumping from a paltry US$ 265m to mushroom to a healthy US$ 70.73 billion in 2015-16. Of interest is the fact that India’s current bilateral trade with China is larger than its combined bilateral trade with Britain, Germany and Japan.

   Almost everyone recognizes what the real problem behind this massive trade deficit is. India’s trade basket consists of cotton, gems and precious metals, copper and iron ore. All are commodities. China on the other hand, exports manufactured capital goods mainly for the power and telecom sectors. The fact is that India just does not produce enough high quality manufactured goods for exports, let alone for its own billion plus consumers and therefore has to rely on quality imports from the outside world. There are many experts who feel that the inordinately high trade deficit between India and China of US$ 52.73b is not a very serious issue, for a country such as India that is on its way to establishing an industrial base and seeks high growth rates; a larger import profile is but unavoidable. Since China is the major source of technology intensive products that are cost effective, running a high deficit with China is but inevitable.

    However running trade deficits with China may not be necessarily inevitable as presumed. According to the Chinese, the problems faced by India are elsewhere and essentially relate to restrictive labor practices, land and tax laws, rickety infrastructure and inadequate power supply. In addition while China is a part of the global supply chain, being the last stop of the manufacturing chain in East Asia; India is no- where near being a part of this global chain. Both India and China are likely to be among the four largest economies in the world by 2020 and yet India still does not have a full time trade negotiator on the lines of the US Trade Representative [USTR]. Trade negotiations with China are therefore only but episodic.

   So what can be done? Two things stand out for immediate consideration.   

      The Chinese say that in the next few years they will import goods worth US$10 trillion and invest abroad about US$ 500 billion. We need to tap into this urgently. At present Chinese FDI into India is rather abysmal, with the total reaching a mere US$ 396m for the period 2000 to 2014. This figure is about 1 per cent of the total received by India and of this US$251m came in the last two years. During the visit of the Chinese President Xi Jinping to India in September 2014, he promised a further Chinese investment of about US$20b. The Chinese also proposed to set-up Industrial parks in India and every effort should be made to speedily execute these projects. Take the example of the manufacture of the iPhone in China. Most of its parts are imported into China from South Korea and Japan and China is the last stop in the manufacturing chain in East Asia. China only value adds a small proportion to the full product, but the important point is that it is a part of the Asian value chain. India needs to join this chain.    

   The second point for consideration is that there is a general lack of awareness in India about tapping the highly lucrative Chinese foreign tourist market. About 150m Chinese travel abroad annually and are estimated to spend about US$229b abroad. The number of Chinese tourists visiting India is abysmally low, but this may also be due to the visa regime being rather strict due to perceived security reasons. PM Modi during his last visit to China took a decisive step and introduced the concept of e-visas for facilitating travel by Chinese tourists, but much more needs to be done to attract Chinese visitors. The Buddhist circuit based on Gaya and Nalanda in Bihar needs to be directly air linked to Asian cities such as Bangkok, Singapore and Shanghai to facilitate travel. It is time for India to play the Buddhist tourist card.

   Ever since 1988 it has been India’s policy to limit our differences with China, contain them and  to narrow the strategic deficit, but at the same time to enlarge the scope for co-operation and collaboration. Let not the mushrooming trade deficit become yet another milestone around the neck of Sino-Indian relations. The time for taking decisive steps is there for the asking.

Sunday, 4 December 2016

Trump's Phone Call to Taiwanese President Rattles China

     Trump’s decision to speak to the Taiwanese President Tsai has left almost everyone befuddled. Was it a deliberate decision or was the President-Elect demonstrating his colossal ignorance of international affairs? The Taipei Times recalled that “Trump reportedly agreed to the call, which was arranged by his Taiwan friendly campaign staff after his aides briefed him regarding Taiwan and the situation in the Taiwan Straits”. So if the Taipei Times story is accurate then this wasn’t an impromptu call at all, nor was it done in a fit of absent mindedness. It is reported that John Bolton, the former US representative to the UN, visited Trump the Friday before the call for undisclosed reasons. Bolton is known for his extreme right wing views and his thoughts on China/Taiwan expressed in a Wall Street Journal op-ed published in January 2016, call for the eventual establishment of diplomatic relations with Taiwan. There are also reports that the Trump family is interested in a stake in the lucrative Taoyuan Aerotropolis project. Although this may have been the first time that a US President or a President-Elect has spoken to a Taiwanese leader since the normalization of relations with China since 1979, yet to be fair, even President-Elect Reagan had invited senior Taiwanese leaders to his inaugural in 1981. Then as now the Chinese were livid.

     There were two choices open before the Chinese leadership on how to react. The first was to play down the incident as trivial and of no consequence, or to escalate matters. The Chinese chose the first option. Foreign Minister Wang Yi dismissed the phone call as the “Taiwanese side engaging in petty action”, although his Ministry was rattled enough to lodge “stern representations” with the “relevant US side”. By blaming the Taiwanese exclusively, the Chinese clearly had no intention to rile the new incoming President just yet. The well- known Chinese strategist, Shen Dengli [Fudan University] appeared to absolve the Americans of culpability by saying that the Chinese can hardly object to a “private” citizen [Trump] talking to the Taiwanese leader! But the Chinese leadership is clearly flustered by what Trump has done and watches with increasing trepidation on what he might do after he assumes the presidency. The main fear is that President Trump maybe no different from candidate Trump.  

     One of the most prescient and authoritative observations on the thinking of the Chinese leadership on Trump was recently penned down by Jin Keyu, who teaches at the London School of Economics and is the only child of Jin Liqun, the President of the AIIB. Jin Liqun is a former Vice-Minister of Finance in China, has held a string of important and powerful financial appointments and is considered to be one of President Xi Jinping’s closest economic advisors. According to Jin Keyu, the Chinese leadership’s expectations of Trump are as follows:

    [a] The Chinese leadership is neutral on Trump’s victory. They have noted that Trump posted a video of his grand-daughter reciting a poem in Mandarin. They do not expect Trump to follow through on his campaign rhetoric regarding climate change [“hoax cooked up by China”] or the imposition of 45 percent duty on Chinese goods imported into the US. Thus the Chinese leadership feels that Trump’s campaign rhetoric on economic matters bears little relation to reality.

   [b] But what is the reality? According to the Chinese, if 45 per cent imposts are put on Chinese imports then [1] the non- availability of inexpensive Chinese goods would no longer put down ward pressure on prices which has been a boon for low income American house-holds, thus effectively raising their purchasing power [2] prices in US would rise undermining consumption, impeding economic growth and exacerbating inequality. [3] low- cost manufacturing would in any case not go back to the US, but would gravitate to countries such as Vietnam and Bangladesh that have even lower labor costs than China.

  [c] China is one of the largest purchasers of US Treasury Bonds and continues to finance American consumption and investment. US should not rule out that the Chinese are capable of financing Trump’s proposed large infrastructure projects, thus reducing pressure on the US budget. Thus the anticipation is that there will not be much change in US economic policy.

  [d] It is in the Strategic and political area that the Chinese leadership feels that Trump is far from inconsequential. He is no ordinary American President. Trump should be taken seriously, though not literally to borrow a phrase from the ‘Atlantic’s’ Salina Zito. The fact that Trump wishes to put “America First” means that so far he has shown little interest in the SCS dispute. China would welcome less US involvement in Asia.

   The Chinese have noted that Trump has assured both the South Korean and Japanese leaders that the US commitment to their security would continue and he has not raised the campaign rhetoric of asking both South Korea and Japan to pay “more” for US bases. The Chinese leadership does not want any instability in North-East Asia.

   The Chinese leadership is aware of what Trump has said about Russia and President Putin. If Trump mends fences with Russia, it would mean that there would be “subtle” changes in Sino-Russian relations.

       Finally, Jin Keyu says that the Chinese leadership is focused on what it considers really important. That is the absolute need for a co-operative relationship with the incoming Trump Administration.

Thursday, 1 December 2016

President Xi Jinping planning for a major new geo-political initiative?

     With the decision of the US President- Elect Donald Trump to withdraw from the Trans Pacific Partnership [TPP] on day one of his assumption of power as the next President of the US, the South China Morning Post [SCMP] from Hong Kong reports that the Chinese President Xi Jinping is planning for a major new geo-political initiative. At the heart of the proposal is to hold a summit level meeting of about 30 State leaders in China on the Chinese proposed "One Belt-One Road"[OBOR] initiative and that this summit is slated to surpass and perhaps even eclipse the G-20 summit held at Hangzhou earlier this year. President Xi sees this as an opening to give China's geo-political ambitions a "push" forward to further extend China's influence. The US decision to withdraw from the TPP is seen as the catalyst that has presented the Chinese leadership with an opportunity to fill the gap. The Chinese leadership also realizes that important states are at present beset with domestic problems and therefore the timing of the Chinese initiative is just about right.
    Connected with the OBOR proposal was the Chinese decision to establish the AIIB Bank that is slated to offer finance for infrastructure projects, particularly in Asian countries. Recently the President of the AIIB, Jin Liqun stated that the financing targets of the Bank are on track, with US$ 1.2 billion expected to be disbursed in the first year of operations. So far the Bank has disbursed US$829 million to six projects in Pakistan, Tajikistan, Indonesia and Bangladesh. It would be noted that all six countries are close to the periphery of China, where it has deep strategic interests. Only two major countries are outside the ambit of the AIIB at present--the US and Japan.
    However some significant problems for the Chinese leadership persist. The Chinese leadership is not at all sure which way its relationship with the Trump Administration is slated to go. While they are distinctly relieved that Trump has decided to "dump" the TPP and has not referred to his campaign promises of labelling China as a "currency" manipulator, nor has he mentioned about the imposition of a 45 per cent import duty on all Chinese imports into the US, yet they remain sanguine about whether Trump might push for confrontation on security and trade issues. In that eventuality, the Chinese would have a difficult time in managing their investments planned under the OBOR initiative.
   Secondly the Chinese are aware that with their shrinking foreign exchange reserves, limits to their ambitions would necessarily have to placed with a tightening of controls on the outward flow of the Renmenbi [Yuan]. Chinese investments are bound to slow down, although the Chinese maintain that OBOR projects would not be affected. It is however clear that while the Chinese currency may have depreciated against the US dollar, yet it has actually appreciated against the currencies of the SE Asian countries. The Chinese leadership does not expect that the Yuan's depreciation against the US dollar would seriously impact its proposed infrastructure projects.
    The Chinese are also conscious of the fact that two important states of Asia--India and Japan continue to remain skeptical of the OBOR and it is likely that President Xi Jinping may make one more effort to bring both India and Japan on board to see the merits of the OBOR. Should India begin to show interest, it may even receive an invitation for the proposed OBOR summit conference. Otherwise, in the fast paced evolving geo-strategic events in South and East Asia, India may just be left standing as a mere spectator! 

Sunday, 27 November 2016

China-Philippines: A Case for "New" Type of Relations?

       Soon after the visit of President Duterte to Beijing, the Chinese moved with considerable dexterity to "allow" Filipino fishermen to once again resume fishing near the Scarborough Shoal/Huangyan island. The Chinese were conscious that with this move, opinion in South East Asian countries, would be considerable allayed about their aggressive intentions. The Chinese were also aware that fishing in the Philippines is an important industry, with about 1.61 million people employed in it. Although the total fish catch by Filipino fishermen is not excessively large, principally because they use only small boats with an average displacement of about three tons only, yet this industry plays a significant role in the economic life of the country. The Chinese decision has obviously gone down very well with the Filipino authorities and the ruling elites. It has certainly eased tensions in the South China Sea [SCS] area. It has also demonstrated to the South East Asian states that co-operation with China had certain positive benefits.
     However the Chinese have not rested their diplomatic initiative with this decision only. In what can be termed as a game changer, a proposal has been forwarded to the Philippines authorities for "joint exploitation" of the natural resources of the area in the SCS; claimed by both the Chinese and the Philippines governments. It would be recalled that Bloomberg in 2011 had put the crude oil reserves in the SCS area at 213 billion barrels, exceeding those of Saudi Arabia. The Chinese assessment was that the existence of such large oil reserves was one of the principal causes that triggered tension in the SCS area. It was felt that if Chinese diplomacy, by adopting very reasonable policies, could induce "co-operation" or "joint development", than this area could also become an area of peace and prosperity where the "peaceful" rise of China would not attract adverse reaction.
  It is in this context that the Chinese referred to the Power Development Plan [2009-2030] released by the Philippine Energy Department. In this plan the Philippines plans to produce 759 million barrels of oil and 2,694 trillion cubic feet of natural gas by 2030. Reaching this goal requires that, at the very least, 16 new oil and gas fields be discovered in the South China Sea region. Several years ago, the Philippine Forum Energy PLC opted for joint exploitation of oil with foreign enterprises, particularly in the Reed Bank area. The Philippine Energy Department also said that it expected China to bid for the joint exploitation. Statistics available suggest that Reed Bank has a reserve of at least 4.67 trillion cubic feet of natural gas. However, as the Chinese had claimed sovereignty over the Reed Bank, no third country was prepared to exploit this field for fear of offending China. Although this has not been confirmed by the Chinese authorities, warming Sino-Philippine relationship suggests that the two sides may be inching towards "joint co-operation"; just as the Chinese had hoped. The Filipinos know that China leads the world in offshore drilling technology and has sufficient funds to exploit the oil and gas resources of the region.
      If  the Chinese diplomatic initiative for "joint exploitation" of the oil and natural gas resources of the SCS area with the Philippines succeeds, it may also alleviate the need for the Chinese to import large quantities of oil from the Middle-East in the future. It would also mean that the Malacca "dilemma" referred to by the previous Chinese President Hu Jintao would also be adequately addressed. Perhaps this is the reason why the Chinese authorities are being so very reasonable with the Philippines!    

Tuesday, 22 November 2016

Trump SinksTPP: Road Open for Chinese Domination?

    It seems that the Chinese have had a very good day at the office. Not only has Trump scuttled the Trans Pacific Partnership [TPP], but severely left alone his campaign promise to name China as a "currency manipulator", as also his assertion that he would slap punitive tariffs of 45 per cent on Chinese imports into the US. The Chinese saw the TPP as a thinly disguised US effort to "contain" China, for as Xinhua had claimed only very recently,"the TPP was the economic arm of the Obama Administration's geo-political strategy to make sure that Washington rules supreme in the region". US supporters and allies in the Asia-Pacific region were aghast at the enormity of what Trump has done. As the Singapore PM only recently lamented, "each one of us has overcome some domestic political objection, some sensitivity, some political cost to come to the table and make the deal". PM Abe of Japan said that without the US, the TPP was dead.
   The TPP was the largest trade deal in history, involving 12 states of the Asia-Pacific region with about two-fifths of the world's GDPThe signing of the text of the TPP, on 4 February 2016, was thus seen as a US policy response to the rapidly increasing economic and strategic linkages among the Asia-Pacific states and that this effort had become the economic linchpin of the Obama Administration’s renewed strategic involvement with the region. The TPP agreement contains over 5000 pages of text, with 30 chapters covering different issues such as non-tariff barriers [NTBs], labor, environment, investment, state owned enterprises [SOEs] and some regulatory mechanisms not covered under WTO. The TPP was supposed to be designed for facilitating US business, as the US was the prime mover in the negotiations, for as President Obama himself had observed "we have to make sure that the US--and not countries like China--are the ones writing this century's rules for the world economy".
    The Chinese President Xi Jinping, while on a tour of Latin America, was not slow to see the openings for China and moved in rather quickly. Xi told his interlocutors that this was the time for "strong partnerships", for "win-win" solutions and strategic initiatives. As opposed to what Trump has been saying, Xi Jinping emphasized that China will not shut its doors, but open them even wider for facilitating trade and investment. Xi Jinping also has pushed for the Chinese sponsored FTAAP, that includes the US, but which in the context of Trump's rejection of the TPP, is hardly likely to succeed. But where the Chinese can make a considerable dent is the RCEP, where in the context of the Chinese initiatives of the OBOR, the RCEP that excludes the US, can help expand Chinese trade, investment and strategic influence in the Asia-Pacific. The RCEP is not very ambitious, for it is essentially a tariff reduction mechanism. At present Asia has 147 free trade agreements in force, up from 82 a decade ago. A further 68 free trade agreements are under negotiations.
   Trump has indicated that the US would negotiate bilateral trade agreements with individual states of the Asia-Pacific region; at best a tedious and a time consuming process. Meanwhile Chinese interlocutors would have fanned out in the region, dubbing the US as "untrustworthy" and "unreliable". If the US can renege on an important strategic initiative, albeit a trade and an investment deal, what will the states of the Asia-Pacific region make of the US security umbrella? Unfortunately, Trump has left the Asia-Pacific region wide open for Chinese influence to expand exponentially

Friday, 18 November 2016

How Does China Evaluate Trump?

    With the APEC summit due to take place in Lima shortly, most leaders of states on the Asia-Pacific rim are in the process of evaluating the likely policies that President Trump may follow and how these policies might affect them. Of deep interest for them would be the assessments of PM Abe of Japan, who became the first foreign leader to meet Trump. It is possible that PM Abe might like to share his assessments with the leaders of APEC states. It is also possible that PM Abe may not do so with the Chinese President Xi Jinping, with whom Abe has had rather frosty relations.
   Nevertheless what is the Chinese evaluation of Trump and his likely policies? The Chinese never expected that Trump would win the elections and therefore are a bit perplexed as to what policies Trump may follow. They aver that he has no diplomatic or international political experience. Thus while reading the Chinese press, the first impression gathered is that the Chinese leadership is convinced that Trump will put America first, promote US interests even ahead of those of US allies in the region and promote a US based order rather than a rules based order that President Obama promoted. In a specific context, the Chinese feel that the Trans Pacific Partnership [TPP] that President Obama promoted as the apex of his pivot to Asia is probably dead, but that the US would not give up other free trade agreements. The demise of the TPP, from which China was excluded, is music to the ears of the Chinese leadership. They also feel that Trump would not promote multi-literalism, but would prefer bi- lateral deals. The Chinese leadership is not averse to striking bilateral deals with Trump. It promotes, in a sense, their own concept of new "great power" relations.
   On South East Asia, the Chinese do not anticipate any lessening of US interest, but feel that Trump would probably promote US policies on lines of what former President Reagan advocated "peace through strength". The Chinese even anticipate that Trump would not be averse to using "force" if it became necessary to protect US interests and as such US military presence may be enhanced rather than diminished. Of particular concern for the Chinese is what policies Trump may follow on North Korea. They anticipate that the US would probably enter into negotiations with the North Koreans on the nuclear issue, but if no satisfaction is received Trump may, unlike President Obama, not be so prudent and he may even risk a confrontation. The fifth nuclear test carried out by the North Koreans has set the stage for a showdown.
    It is the firm Chinese belief that "Islamic radicalization" is the main concern for Trump, for as he has been consistently maintaining, it presents the principal threat to the security of  the US. In such an event, the Chinese believe that Trump would be heavily involved with the affairs of the Middle-East and may not pursue the South China Sea[SCS] dispute as diligently as President Obama did.  They feel that here is an issue on which grounds for "cooperation" exist between China and the US. In return for Chinese assistance in beating back "Islamic radicalization" the Chinese feel that grounds for a "bargain" exist. What should that "bargain" be has not been explicitly spelt out. China could also offer assistance as a permanent member of the UN Security Council.
    As Trump begins to concentrate on fulfilling some of his election promises, particularly those relating to economic rejuvenation of the US and to put America "first", it is bound to down- size its leadership positions in important area of the world. In the vacuum thus created, the Chinese leadership senses an opportunity. Take the case of Latin America. At the APEC meeting at Lima in Peru, the largest delegation is that of China and President Xi Jinping is present with a large number of trade, investment and other officials all to ready to fill the gap that the US might leave!    

Monday, 14 November 2016

Trump and China: A Trade War on the Cards?

     Every US Presidential election witnesses a high tide of anti- China rhetoric, mostly by right wing candidates. Trump was no exception. What he proposed to do, with the certainty of an evangelical preacher, was that [a] he would impose a 45 percent tariff on Chinese imports to the US [b] officially declare China as a "currency manipulator" and [c] alleged that it were the Chinese who "finished" the US manufacturing industry. Every US President in the recent past has invariably started his innings, with some such accusations against the Chinese authorities. For example, President Clinton sought to link the denial of human rights in China with trade, President Bush declared that he would "do whatever it takes to defend Taiwan", whilst President Obama pushed for a "pivot to Asia". The question is will a future President Trump push for the implementation of his campaign rhetoric or will he, realizing the realities of the case, become considerably tamed?
     Judy Sheldon, a Trump economic advisor, told Bloomberg TV in an interview after the elections, that Trump is "someone who is going to carry through what he said". If that is so, then what is the future for the Sino-US trade relationship? Is a trade war looming?
    Let us take the case of the proposed 45 per cent tariffs on Chinese imports into the US. Firstly, as per existing law, a US President can only impose a 15 per cent tariff across the board and that too only for 150 days. This limit can only be broken if the President were to declare a 'state of emergency". A proposition that is hardly likely to be enacted! But what the President can do is place tariffs on individual commodities imported from China. The last time this was attempted was when President Obama imposed a 35 per cent tariff on the imports of Chinese tires. The Chinese immediately retaliated by placing tariffs on imports of chicken and automotive products from the US. Both sides lost. But the lesson was learned and thereafter there were no more attempts at imposing tariffs by either side. The Global Times [GT] has already threatened that if Trump imposes tariffs, then China will inevitably retaliate. Orders for Boeing aircraft will be replaced by Airbus; US auto parts and I-phone imports by China from the US will suffer. US exports of maize and soybeans to China would also come under pressure. Presently, US exports of corn are up 80 per cent world wide from same period last year, as are wheat up 27 per cent and soybeans up by 18 per cent. China is a major importer of these agricultural commodities.
    As for naming China as a "currency manipulator," the Chinese maintain that the Rmb [Yuan] is already in the  SDR basket of currencies with monetization of the exchange rate. If Trump persists, there is nothing that prevents the Chinese from letting the value of their currency fall even further. Already it is trading at the lower end of the permitted range. This would make imports of Chinese goods into the US even more attractive; thus further hitting at US local manufacturing.
    Despite Trump's campaign rhetoric there are no easy solutions, if he tries to implement them. Both the US and China are deeply intertwined together and any turbulence in the relationship would cause immense hardships to both. That is the bitter lesson that Trump is going to learn when he enters the White House. A President Xi Jinping reportedly told Trump in a telephone conversation "cooperation" is the only way forward!         

Saturday, 12 November 2016

The Two Faces of China

    Recently while reading the mainland China press, a startling picture of two very different Chinas emerges. The People's Daily [10 November 2016] published a report on the 'left behind' children, particularly of those in the rural areas. These are children who have been left behind by their parents, who have migrated to the cities for improving their economic prospects. The number mentioned by the People's Daily is rather large; about 9.02 million. Of interest is the fact that this phenomenon is largely concentrated in West and Central China. Of the 9.02 million children left behind, about 27.8 per cent are between the ages of 0-5 years and about 62 per cent are between the ages of 6-13. In other words, of the youngest lot very few would even know let alone recognize their parents. Some do not even have grand parents to look after them and are dependent on distant relatives. The People's Daily also estimates that about 50,000 children die each year due to accidental injury and most of them are the left behind children.
    Another startling statistic that has been published is that about 70,000 children are kidnapped annually in China by gangs indulging in illegal adoption, forced labor and often these kidnapped children are reared to become sex workers. All these heart rending stories are due to China's unprecedented and headlong march towards economic resurgence, but the cost in terms of human suffering also has been colossal. The march to becoming the world's second largest economy has not been cost free!
   Yet on the other hand, in another article the National Business Daily quoted from a report jointly prepared by the Huran Research Institute and the China CITIC Bank to say that as of May 2016 there were 1.34 million millionaires in China; up by 10.7 per cent from last year! It also quoted the same report to say that of the millionaires mentioned above about 89,000 were actually billionaires; up again by 14.1 per cent from last year. As per data released by the National Bureau of Statistics, the total population of China has reached a figure of 1.368 billion, which means that the per cent age of the multi-millionaires to the total population now stands at 0.1 per cent.
    But where do most of the Chinese millionaires live? Again according to the report mentioned above, most of them now live in Guangdung province. There are 240,000 people in Guangdung so classified. It seems that Guangdung has replaced Beijing as the favored place of residence, but Beijing still retains the distinction of having the highest density of millionaires living in the city with 1.1 millionaires per 100 people! The Huran report also detected the fact that most Chinese millionaires like to keep their wealth in foreign exchange deposits, insurance products and overseas property.
   It is not for nothing therefore that there is the existing malady of rising inequality in China. The gini co-efficient of inequality for China, the internationally accepted measure of inequality within a country, was between 0.46 and 0.49 in 2007; the highest measure for any Asian country. Presently, it may even be approaching 0.61! According to the UN, if the gini co-efficient of inequality touches 0.44 danger signals for internal stability should start flashing. This income disparity is a source of discontent and social protest and this in turn leads to public cynicism that erodes the popular support for the Chinese Communist Party[CCP]. This is also the reason why the Chinese President Xi Jinping is so adamant in pushing through his anti-corruption campaign. He has also strictly forbidden the Party officials to display their wealth. It is also the reason why the Chinese budget for internal security is larger then the budget for the PLA!
    These are the two faces of China today.

Tuesday, 8 November 2016

Is the US Pivot to Asia on the Verge of Collapse?

    On 3rd November 2016, the People’s Daily in China crowed happily that “State Department Official Struggles with Facts: As US Pivots to Asia, the Region Turns to China”. In a remarkable turnaround it seemed as if every South-East Asian leader was making a beeline to China in an effort to placate the Chinese leadership. First it was the Philippines President Duterte who set the ball rolling, followed by the Myanmar Defence Chief, General Min Aung Hliang and then the Malaysian PM Razak. Not far behind was the new Vietnamese PM, Nguyen Xuan Phuc who stressed to President Xi of China that “maritime cooperation through friendly negotiations” was the best way forward. Even Singapore reportedly declined to refer to the PCA ruling and the UNCLOS provisions in a joint statement when their PM visited India recently. The Thai generals turned towards China after their 2014 coup was criticized by Washington. None of the South East Asian leaders, it seems, remembered the PCA ruling on the South China Sea [SCS] dispute. Or was it diplomatic amnesia? It was only a few months ago, July 2016 to be precise, when the ASEAN FMs had voiced “serious concern” over “land reclamation and escalation of activities” in the South China Sea [SCS]. What has changed so dramatically that has allowed China to slip away from a totally disadvantaged position to one where most of the South-East Asian States are now abjectly toeing the Chinese line? 

     A foremost factor has been that neither of the two US Presidential candidates has supported the Trans Pacific Partnership [TPP] which means that, unless there is a dramatic reversal, this pivot [the TPP] of US policy in the Asia-Pacific is doomed to pass into history. As per Chapter 30 of the TPP ‘final provisions’, all countries need to ratify the agreement within two years of signing, or it shall enter into force 60 days after expiry of this period if at least six of the original signatories which account for 85%of the combined GDP of the original signatories approve. In other words, without US ratification of the TPP as its GDP is 40% of the total, the TPP initiative is doomed. Most South East Asian leaders have duly noted US policy shenanigans, as practiced by its leaders and have ostensibly come to the conclusion that it would be extremely unwise to annoy China under the given circumstances. If there is no TPP, what would the US economic profile in the Asia-Pacific look like?

     Secondly, President Xi Jinping has very deftly used this opportunity to demonstrate that being “friendly” with China has certain distinct advantages. Take the Philippines and the Malaysian case as examples. President Duterte came away from his visit to China with loans and grants totaling US$13.5billion, a promise that the over one million illegal Filipino maids working in China would not be disturbed; and most important of all, China opened the gates to the Scarborough Shoal to allow Filipino fishermen a share of the lucrative fishing available there. China did not dilute its position on the Scarborough Shoal, but compromised on ground reality. The Philippines have a 64 year old security agreement with the US and the previous Filipino President had allowed US naval warships access to five bases for the first time since the end of the cold war.

     The Malaysian PM signed 14 agreements worth about US$34.28 billion. China is Malaysia’s largest trading partner and has replaced the US to become the largest investor since 2015. In addition, Malaysia signed the first significant arms deal with China by agreeing to purchase 4 naval vessels to operate close to the Malaysian shore. But what has buoyed the Malaysian PM considerably, was the fact that the Chinese made no reference to the on- going US Justice Department investigation into Malaysia’s Sovereign Wealth Fund; where persons close to the Malaysian PM are alleged to have siphoned off US$ 1 billion to buy personal assets in the US. Thus in a few weeks, the Chinese demonstrated that showing the cheque book could cause even the closest US allies in South East Asia to wilt and perhaps move away from their pro-US orbits.

    But it is time for caution also. The fact that the US is the world’s sole super power with the ability to reach and influence any part of the world just also cannot be wished away. The US remains by far the more important source of foreign direct investment into ASEAN. Last year US FDI into the region was US$ 13.6 billion, as opposed to China’s US$8.3 billion. But in diplomacy sometimes perception more than reality plays an important part. And the perception is that American public opinion just will not countenance any further US military engagement overseas, nor will public opinion favor that the US go to the aid of its Asian allies in their territorial disputes, until and unless the American mainland itself is under threat. The Chinese too realize this and therefore its diplomacy is orientated towards widening this drift away from the US.

    President Xi Jinping has emerged strengthened from the 6th Plenum of the CCP, where he was designated as the “core” of the Chinese leadership. As he plans ahead for the next Party Congress due in autumn next year, the Chinese leadership has concentrated on reclaiming its “historic” rights to maritime territory as marked by the nine-dash line. China has sought to blunt the PCA ruling with a strategy aimed at “shelving” the dispute, maintaining its position; but allowing for “joint” development of resources in the disputed area. Thus both the Filipino President as well as the Malaysian PM, during their visits to Beijing, deferred to the Chinese position and did not press for the PCA ruling to be implemented in exchange for promised trade and investment deals. The stress now is on bilateral negotiations. A far cry from what was on the ASEAN table just a few months ago. China it seems is getting better at playing the geo-political game and using its very considerable economic heft for strategic gain.

      Thus as the new US President assumes office in January 2017, the US has some very pressing issues to attend to. First it would have to convince the South East Asian leaders that despite not being able to ratify the TPP, it is here to stay and that its security umbrella is for real. It is indeed a tall order what with the Syrian crisis on hand as well as the pressing need to develop a viable strategy to engage the Russians. Meanwhile it would be prudent for other regional players to watch very carefully on going developments in the South China Sea area and not commit themselves till the counters of the evolving Sino-US relationship become clear under the new US leadership.

Thursday, 3 November 2016

The Implications of President Xi Jinping as 'core' of leadership in China.

      At the 18th Chinese Communist Party Congress in November 2012, Xi Jinping assumed formal power not only as China's President, but also as Party Secretary General and Chairman of the Central Military Commission. Thereafter he increased his power base by assuming the leadership of newly established policy coordinating commissions and small leadership groups. In a sense, therefore, the addition of a new designation as a 'core' [he xin] leader does not add to his formal institutional power, but nevertheless has immense importance and is a significant signal that he is indeed the final authority in almost all matters of state and party policy.
      This is not the first time that a Chinese leader has been so designated. Such a description was first used by Deng Xiaoping in 1989, when he stated that any leadership must have a 'core' and that a leadership without a 'core' was not reliable. Deng referred to Mao as the 'core' leader of the first generation, himself as the 'core' leader of the second generation and Jiang Zemin as the 'core' leader of the third generation. Thus by assuming this title, Xi Jinping automatically assumes the mantle as a 'core' leader of the fourth generation. Xi Jinping is now on par with Mao, Deng and Jiang Zemin in the pantheon of the Chinese leadership.
    With no serious political challenge to Xi Jinping's leadership in sight, what are the implications of this new development in Chinese politics?
    Firstly, with the 19th Party Congress due to be held in autumn 2017, there are nearly three hundred seats that have to be filled in the Party's Central Committee as full and alternative members, about eleven seats in the twenty five member politburo and most important of all, five new members in the standing committee of the politburo have to be nominated. In  other words, since the selection process would have the imprimatur of Xi Jinping; it goes without saying that he would have the major say in selecting the future leaders of China. If he wishes his legacy of realizing the 'Chinese dream' to be a reality; than his selections of personnel at the apex level of Chinese leadership would an important factor. Similarly if he wishes to 'amend' the rules to continue beyond 2022; that too would require the acquiesce of the leadership that he would have put in place.
     Secondly, China today has achieved a power status in the world that few Chinese leaders in the past could ever have imagined. When Deng first alluded to this concept of a 'core' leader in 1989, China's GDP was one-fifth of Japan, half of UK and less than one-tenth of the US. In 2015 China's GDP is more than twice Japan's, five times larger than India's and four times larger than the combined GDP of the ten ASEAN states. All these developments have significantly altered the world view of the Chinese leadership and increased their ambitions, since the Chinese now have the resources to play a dominating role. Therefore the challenge before President Xi is how to channel such resources into converting China into a global world power.
   Thirdly, whatever decisions that President Xi takes will have repercussions not only in the domestic sphere, but would impact the world outside. The slowing down of the Chinese economy is one such example and therefore whatever decisions that he takes to ameliorate the economy would have an impact on the global economy.
    Fourthly, as China's power grows as do its ambitions its smaller neighbors on its periphery are bound to feel the impact. Some have already tried to seek the security umbrella of the US, whilst others have come to an accommodation with China. The dexterity shown by President Xi in handling the case of the Philippines and more recently of Malaysia, has raised the specter of Chinese economic and military power posing a serious challenge to the US. The ongoing strategic rivalry with the US may therefore intensify, as President Xi moves to consolidate the Chinese position in Asia. It is already evident that this power projection has led to a hardening of the Chinese position on issues that pertain to India, such as the boundary dispute.
    The conferment of near absolute power on President Xi Jinping is therefore a realization within the Chinese leadership that as China faces a far more complex set of challenges than faced by earlier leaders; it becomes imperative that no domestic impediments are placed in the execution of these policies. It for this reason that the party plenum while emphasizing "all party members should closely unite around the Central Committee with Comrade Xi at the core" has also emphasized that the "system must always be followed and should not be violated by any organization or individual under any circumstances or for any reason". The Chinese leadership has thus been careful while granting near absolute power, not to spawn yet another Mao Zedung!      

Tuesday, 25 October 2016

The implications of US Ambassador Verma's visit to Tawang

         On the surface the recent visit of the US Ambassador Richard Verma to Tawang in Arunachal Pradesh is unexceptionable, for after all he is the duly accredited US Ambassador to India and Arunachal Pradesh is a constituent state of the Indian Union. Ambassador Verma is perfectly entitled to visit any state of the Indian Union in the course of his duties, subject of course to local conditions. The US Ambassador not only “tweeted” his presence from Tawang, but was prominently photographed in the company of the Arunachal and Assam Chief Ministers. These photographs were prominently published in the media. As the MEA spokesman, perfectly legitimately, maintained “there is nothing unusual about it”. But Ambassador Verma is no ordinary diplomat and neither is Arunachal Pradesh an ordinary state of the Indian Union, for China lays claim to almost the whole of the state. China remains vociferous in its belief that this is “disputed” territory and dubs the state as “Southern Tibet”. The Sino-Indian boundary dispute is still ongoing and the subject of negotiations at the Special Representatives level. About nineteen rounds of negotiations have been held so far, but there has been little progress as the negotiating positions of both India and China are as far apart as ever.

   At a most delicate moment in the Sino-Indian border conflict of 1962, in a Telegram sent on 26th October 1962, by the US Department of State authorized the then US Ambassador to India, Galbraith to convey that the US “recognized the McMahon Line as the traditional and generally accepted international border and fully supported India’s position in that regard”. This assertion was indeed very welcome from India’s point of view. This was the first time that the US had given such a recognition to the McMahon Line, for earlier on 12th November 1959 the then acting US Secretary of State, Herter had publicly proclaimed that the US had NOT taken any side in the border dispute and as far as the “legalities of rival border claims were concerned the US had no views”. However, an important point to be noted is that the US, even up to present times, has not taken any position on the western sector of the Sino-Indian boundary. It still maintains a neutral stance.

      The present visit of Ambassador Verma to Arunachal Pradesh and particularly to Tawang drew an anticipated sharp response from the Chinese authorities. The Chinese protested sharply both to the US as also to India on the Ambassador’s visit. But one point is very interesting in the Chinese spokesman Lu Kang’s protest statement. Lu said that “any third party with a sense of responsibility should respect the efforts made by China and India for peace, reconciliation and tranquility rather than the opposite”. Was Lu Kang hinting that the US was trying to create “problems” between India and China and thus retard the progress towards a settlement? If this line of thinking is indeed to be followed to its logical conclusion, then it becomes imperative to examine what recent US policy has been in this regard.

      When the Sino-Indian conflict in 1962 over the boundary issue entered a critical phase, the US administration was debating what policy it should follow as regards the Sino-Indian conflict and on the larger question of relations between India and China. In US Department of State archives, there is an interesting document that illuminates the US position. In Document No 226 [available at FRUS 1961-63, Vol XIX, South Asia], Robert Komer a National Security Council Staff recommends to President Kennedy that thus it is as much in our strategic interest to keep a high degree of Sino-Indian friction, as it is to prevent it from spilling over into larger scale war”.

     The point to ponder is whether US policy has over a period of time undergone a change or is it still the same as recommended by Komer to President Kennedy in 1962? If latter is the case, then the visit to Tawang by the present US Ambassador, where he made every effort to be noticed, assumes a completely different connotation from an ordinary visit by an accredited ambassador. Was Ambassador Verma trying to create “complications” in Sino-Indian relations or was his visit just an ordinary visit by an accredited ambassador? The answer to that question still remains moot.          

Friday, 21 October 2016

President Duterte's visit to China---A Game Changer?

         President Rodrigo Duterte's four day visit to China was accompanied by his very public hyperbole and rhetorical flourishes against the US; that are rarely seen at Heads of State level. Did Duterte really mean what he was saying or was he just trying to please the Chinese leadership? His public outbursts against the US ["Its time to say goodbye to the US"]at the Great Hall of the People in Beijing, was said in the presence of the Chinese Vice Premier Zhang Gaoli; but it seems that the Chinese leadership was well aware of the volatile nature of the Filipino President. Nevertheless, these statements did create public headlines, sufficient for the leaders of ASEAN countries and the US to take notice. It must also be remembered that preceding Duterte's visit, detailed talks were held between Fu Ying, presently the Chairperson of the NPC Standing Committee on Foreign Affairs and the former Filipino President Ramos at Hong Kong in August this year. The positive outcome of these talks led to the Chinese invitation.What then were the main results of Duterte's visit?
      Firstly, both sides decided to shelve the South China Sea [SCS] dispute with the Chinese Vice Foreign Minister Liu Zhenmin maintaining that "both sides agreed that this issue is not the sum total of the bilateral relationship". It was also agreed that the eventual settlement of the dispute would be through "bilateral" discussions. In other words, it seems that the Philippines has abandoned its position on the SCS dispute and ditched the PCA award. This is a huge Chinese gain.To be on the safe side, it would be prudent to await Duterte's visit to Japan that follows almost immediately to see what he says there.
     Secondly, the Chinese appear to be in a conciliatory mood and may allow Filipino fishermen to approach the Scarborough Shoal [Huangyan island] for fishing rights in a calibrated manner.
    But what have the Filipinos gained from this huge concession made to the Chinese on the SCS dispute?
* Both Duterte and Xi Jinping signed 13 Agreements.The Chinese have agreed to extend US$6 billion in soft loans, US$3 billion in credit from Chinese Banks and about US$4.5 billion for fighting the drugs menace etc. A Chinese businessman, Huang Rulan, whose net estimated worth is about US$ 3.9 billion, will also build four more drug rehabilitation centers in Philippines.
* The Chinese will resume importing Filipino agricultural products and indicated that they will lift the travel ban on Chinese tourists visiting the Philippines.
* The Chinese have agreed to undertake a survey for infrastructure projects, including building a railway line in northern Philippines.
* But what is of paramount importance is the fact that there are about 100,000 Filipino maids illegally working in China. There is a high demand for these maids in China, for they are considered much better at their work than locals [yuesaos] and who also teach English to young Chinese children. In any case, the local nannies demand much higher wages as per local law, almost about 10,000 yuans per month; whereas the illegal Filipinos are available at about 6000-7000 yuans per month. There is thus a huge demand for Filipino maids in China. The Chinese government cannot legalize the stay of the Filipino maids, as Chinese law does not permit them to do so and therefore they turn a blind eye to the problem. The Chinese press openly called for some kind of legalization. Nevertheless, this remains an unresolved issue with the Filipino government.
     On the surface, therefore, President Duterte's visit was a resounding success. It boosted China's regional standing and has the potential of weakening the strategic position of the US in the western pacific. In order to secure its position, the Chinese did not yield on the territorial dispute or give concessions, but did indeed give limited economic favors and selected political support. Nevertheless, the Chinese are also conscious that the position of the US is not all that weak in the Philippines and that they have the potential to derail Duterte's efforts. Dutete's posturing in China will certainly stimulate pro-US forces that might fatally undermine his domestic position.
  The bottom line for both the US and China is: How much faith to put in a leader whose views are so obviously volatile? The answer to that key question remains moot.    

Monday, 17 October 2016

President Xi Jinping visibly demonstrates China's growing geo-economic power.

          It is said that the post Cold War consensus on world order rested on the premise that the US would underwrite international peace and advance democracy, the EU would be seen as a model for regional integration and that both China and Russia would recognize national advantage to find accommodation in this new system. However none bargained that the rise of China would make such rapid strides, nor that the US intervention in Iraq would demonstrate the limitations of its power, rather than its potency. The financial crisis of 2008-09 exposed the weaknesses of the western ordained international economic order and further put paid to the concept of total western dominance of global financial institutions.
       But what concerns us the most is the rapid rise of China and the implications that follow. Some of these "new realities" were on full display, when President Xi Jinping visited Cambodia and Bangladesh; just prior to the BRICS summit at Goa.
       Both Cambodia and Bangladesh, not in the very distant past, were totally anathema to the Chinese state for reasons that are well recognized. The Cambodian PM Hun Sen rode to power supported by Vietnamese tanks, against considerable opposition both from the west and from China. The Chinese were totally hostile to and stiffly resisted the birth of Bangladesh as an independent state. Both Cambodia and Bangladesh, should therefore, normally not only be expected to remain conscious of the role played by the Chinese, but were expected to retain a certain amount of reticence and a healthy distance. But in actual fact, the ground realities are so very different today.
      PM Hun Sen's Cambodia today is one of the staunchest supporters of China and resolutely resisted any combined ASEAN attempt to corner China after the PAC [UNCLOS] ruling on the South China Sea [SCS] dispute. It has been well rewarded. During his visit, President Xi has cancelled US$193m of Cambodian debt. Further, soft loans of US$237m and military aid of US$14m were announced. President Xi also promised to double the imports of Cambodian rice from the present 200,000 tons/year, as this is vital for the Cambodians who have seen the international price of rice plummet from US$250/ton to US$193/ton ; thus severely cutting into their foreign exchange earnings. No other state is in a position to bail out the Cambodians and therefore they are wholly dependent on Chinese goodwill and largess. The Chinese leadership knows this and are not averse to playing the economic card to further their strategic ambitions.
      Realizing the strategic location of Bangladesh, the Chinese are aware of the pivotal role that it can play in furthering their ambitious concept of OBOR. President Xi again showed his acumen and signed 27 agreements, funding infrastructure projects worth US$20 billion. It is Bangladesh's largest foreign credit line. In addition, Bangladesh and Chinese private firms signed US$13.6 billion in trade and investment deals. China is Bangladesh's largest trading partner. An economic zone is expected to be set up near Chittagong specifically for Chinese firms. It is not for nothing that the Bangladesh PM Sheikh Hasina characterized China as a "trusted friend".
     In present times as the US remains convulsed in domestic political agendas, with strident internal opposition to the TPP and the desire to severely limit any foreign military entanglements; the shadow of Chinese economic prowess pervades over South and South-East Asia. The PCA ruling on the SCS dispute seems all but forgotten. The EU seems overwhelmed in trying to maintain internal cohesion, following Brexit and faces the danger of being swamped by ever greater numbers of refugees leading to the rise of extreme right wing political fanatics. It is hard to see the EU, bereft of political cohesion, playing a sterling role again so soon.
     Have other Asian states also seen the writing on the wall? The Philippines President is seen to be moving towards seeking an accommodation with the Chinese leadership. Recently, a Vietnamese official, Tran Truong Thuy stated that Vietnamese foreign policy would consist of three "noes". These were [1] No ally [2] No go with any country to oppose a third country and [3] No foreign military bases. In other words, the Vietnamese were not interested in opposing China.
    It is not for nothing that there is a sense of hardening of Chinese positions on various issues, particularly of those in the Asian region. They sense that the time is ripe for them to play an even more robust role in the affairs of Asia.

Monday, 10 October 2016

China's PR Charm Offensive: Is it Working?

        There is no doubt that the rise of China, both economically and militarily, has caused considerable disquiet amongst its neighbors as well as further afield. The Chinese leadership is aware of this phenomenon and that is the reason why President Xi Jinping, on assuming power in 2012, announced that "we should increase China's soft power, find a good narrative and better communicate to the world". The real question remains on how to translate the President's wishes into reality, for removing apprehensions that exist in the minds of other people, fed consistently by a western controlled media, is easier said then done. But the Chinese have not erred for lack of trying. What then constitutes the main elements of the Chinese effort? And have they succeeded?
           The nerve center for the Chinese effort is the State Council Information office [SCIO]. This office co-ordinates all efforts and has a large staff, a giant budget and a great deal of bureaucratic clout within the Chinese system. Every December, the SCIO convenes a conference in which it outlines the guide-lines for internal and external "propaganda" work. Its principal responsibility is to generate "ideas". Most of the ideas that it generates can be accessed at the China Media Year Book, published annually. It should be noted that in China, the term “propaganda” does not carry any negative connotations, but is considered a positive aspect of governmental work. China spends about US$ 10b annually on external “propaganda” as opposed to the US, which had a budget of only US$ 666m for “public diplomacy” in fiscal 2014.
          The SCIO often holds press conferences, publishes magazines, books and produces films. Recently, both the well known US film personality, Stephen Spielburg and the Chinese entrepreneur, Jack Ma have decided to produce films jointly for the lucrative Chinese market. The SCIO has overseas publishing houses, such as the Foreign Languages Press and newspapers such as the China Daily and the Global Times that cater to foreign audiences. It controls the internet content, including issuing licenses for web-sites.
     The Chinese however realize that without a world wide media empire their efforts may not fructify. Therefore every has been made to convert existing media outlets into world class entitiesTake Xinhua, for example. At present Xinhua, the leading Chinese news agency,
employs about 3000 journalists, of which about 400 are posted abroad in 170 bureaus located in different countries. Xinhua has a very large subscribers list and of this about 80,000 are institutional paying subscribersTo supplement Xinhua' efforts, CCTV has gone global with broadcasts in 6 languages. It has a 24 hour English News Channel, with production facilities located in Washington and Nairobi. CCTV is emerging as a global hub and it has hired some of the highest paid foreign anchors on its staff. Similarly China Radio International, formerly known as Radio Peking, broadcasts 392 hours per day in 38 different languages and maintains 27 overseas bureaus. All this is designed to compete with CNN, BBC, Reuters and a host of other international news agencies.      
     At the same time, Chinese Embassies abroad regularly issue press statements, take out full page advertisements in newspapers and Chinese Ambassadors now regularly contribute to op-eds and personally write articles in the local press.
  Another area that the Chinese have tried to influence to create a positive narrative for themselves is through the medium of "think-tanks" and "track-2 diplomacy". Several institutions have been created. These include China's answer to the Davos Forum, the
Boao Forum for Asia. Several others such as the China Development Forum, the Beijing Forum, Tsinghua University World Peace Forum, the World Forum on Chinese Studies play crucial roles in promoting Chinese interests.
     The Chinese also organize the global "think- tank" summits on an annual basis, where several prominent "think-tanks" around the world are encouraged to send representatives.
China's own "think-tanks" such as the CCP’s International Department's —China Center for Contemporary World Affairs; the  Foreign Ministry's—Chinese People’s Institute for Foreign Affairs; the PLA's—Chinese Institute of International Strategic Studies are not only well funded, but put across China’s point of view consistently and clearly. Another method is to invite foreign strategic scholars and thinkers and initiate them into Chinese thinking on various subjects that are important to China. Hospitality is often fairly lavish
    But despite of all these efforts, China's image does not seem to be moving in the positive direction. In 2014 the BBC held a world-wide poll, where the results indicated that positive views about China had declined by 14% over the same period last year. The same poll indicated that about 49% of the respondents viewed China negatively. But this poll can be misleading, for the views about China differ from those in Latin America, to those in Africa, to those in Asia from those that are more negatively inclined in the US or in Europe. 
    But the central message is: respect and admiration cannot be bought; it has to be earned!