Saturday, 18 February 2017

Abduction of Billionaire Xiao Jianhua and Corruption in China

       Chinese billionaire business tycoon Xiao Jianhua is no ordinary run of the mill businessman. That Xiao was “abducted” from his luxury flat from Hong Kong by Chinese State Security officials and taken to the Mainland, immediately raised antennas about the persona of Xiao Jianhua. Interestingly, Xiao is presently a Canadian citizen and carries a diplomatic passport of Antigua and Barbuda and probably never imagined that he would be whisked away from Hong Kong. That the Chinese state security officials would go to such lengths shows the importance of the man. He is reportedly the person who has over the years been identified as the “front-man” for business dealings of elite Chinese politicians, party hacks and senior government officials. Fairly young at 46 years old, Xiao was a student leader during the Tiananmen crack-down in 1989 and who sided with the government. He has never looked back since then and is presently reportedly worth US$5.8 billion; which makes him the thirty-second wealthiest Chinese tycoon businessman. His companies have shares in banks, insurance, coal, cement and are amalgamated under the banner of “Tomorrow Group” and are listed on the Chinese stock market.

    That this was no ordinary abduction, but perhaps something more, is bolstered by the fact that in 2012,  a company co-owned by Xiao, bought shares worth US$ 2.4 million from Qi Qiaoqiao and Deng Jiagui; the sister and brother-in –law of the Chinese President Xi Jinping. Later he admitted to NYT that he had “helped” the family of Xi Jinping. He also reportedly helped Zeng Wei, the son of the Chinese Communist Party [CCP] Vice Chairman Zeng Qinghong, to acquire Shandong Luneng, a State power company that was subsequently privatized. CCP Vice- Chairman Zeng is reportedly politically close to the former Chinese President, Jiang Zemin.

   The abduction of Xiao Jianhua raises a larger question. Is China’s anti- graft drive, so assiduously pursued by President Xi Jinping, merely a cover for getting rid of political opponents or is it actually a drive to eliminate graft from the Chinese system? Very early on in his innings as President beginning 2012, Xi Jinping had made the elimination of corruption from the Chinese political system as one of his important policy imperatives. The feeling was that corruption was slowly eroding the Communist State system, with a concomitant threat to the very existence of the Chinese Communist Party [CCP]. As it is the CCP Central Discipline and Inspection Commission reported that in 2016 about 11,000 corrupt officials were prosecuted, but significantly this figure represented a drop of about 20 per cent from those that were prosecuted in 2015.  This fall in the number prosecuted was seen as representing a winding down of the anti-corruption movement, just prior to the forthcoming Party Congress later this autumn, where Xi is expected to be confirmed for a second term and a new standing committee of the politburo nominated. In fact only President Xi Jinping and the Premier Li Keqiang are expected to retain their respective positions, out of the existing seven standing committee politburo members. It may be recalled that the real rulers of China are the seven standing committee members of the politburo. The significance of the choice being made now lies in the fact that the next CCP leader to replace Xi Jinping at the next party congress in in 1922, would also be expected to be identified from within the new standing committee members of the politburo now nominated.

    Could the abduction therefore of Xiao Jianhua be linked to murky maneuverings that are taking place within the ruling CCP leadership groups, as to who would be the eventual successor to Xi Jinping as President?  One of the easiest methods to eliminate a potential rival would be to paint him with the tar of corruption. In China the Chinese Academy of Social Sciences has estimated that the liquid assets of State Owned Enterprises [SOEs] and cash generated by land sales of the Chinese state to be about US$ 4 trillion. It is not difficult to envisage that important officials, holding extensive power, are able to easily access this cash. Even those Chinese officials, who are under investigation, continue to serve and often are even promoted. At present the Chinese judicial system is rather weak and subject to CCP guidelines and therefore cannot be considered to be independent. Without a free press, it is the word of the CCP Central Discipline and Investigation Commission that counts as the ultimate arbiter of the fate of a “corrupt” official. And the Central Commission is fully under the control of who- ever is the Party leader; in this case President Xi Jinping who operates through Wang Qishan, the politburo standing committee member in charge of anti-corruption.

     Within Chinese ruling circles the need for “stability” to the run up to the 19th Party Congress later this autumn is seen as a paramount requirement. Thus even Xie Zhenjiang was removed from his post of Chairman of the Beijing based Securities Daily, as he was seen as to close to Xiao Jianhua. The charge against Xie was that he had the potential to create “instability” in the Chinese Stock market in conjunction with the extensive holdings of Xiao’s companies listed on the stock exchange. The Chinese political system cannot sustain the melt down of the stock exchange as had happened earlier. It would be a severe indictment of the present ruling group.

  Therefore the main beneficiary of the arrest and abduction of Xiao Jianhua is likely to be Wang Qishan, the standing committee member of the politburo in charge of the Central Discipline and Investigation Commission and who is a very close political associate of President Xi Jinping. In fact speculation abounds that if Wang is able to ensure “stability” in the run up to the 19th Party Congress, then his chances for promotion are considerably brightened. The question therefore still remains moot whether the abduction of Xiao Jianhua from Hong Kong was linked to an anti-corruption drive, or was it linked to the political maneuverings that are going on in Chinese political system just prior to the CCP Congress? 

Wednesday, 15 February 2017


       When the People’s Republic of China was proclaimed by Mao Zedung on 1 October 1949, the new Chinese leadership was very clear on one aspect. Speaking to the then Soviet Ambassador Roschin, on 1 January 1950, Mao clarified that any state that was sincere in establishing diplomatic relations must first ‘completely break all [emphasis added] ties with Jiang Jieshi [Chiang Kaishek] unconditionally, refuse any kind of support and assistance to this regime making it an official declaration. It was only under those conditions that a state could send a delegation for negotiations for establishing diplomatic relations. Mao made no distinction for any state and India too had to follow Mao’s dictum.

    As far as recognition of the new Chinese regime was concerned, it was the Attlee government in London that took the lead. On 22 October 1949, Sir Esler Dening submitted a note to PM Attlee that the recognition of the new Communist government of China ‘cannot be said to be contrary to the principles and practices of international law’. On 27 October 1949 the British Cabinet approved the note and Attlee sent it to all Commonwealth governments, including India, for consideration. The British government note did not seek any assurance from the new Chinese government on whether it intended to honor all previous international obligations made by previous governments of China. The British explained away this aberration by saying that ‘the disadvantages of non- recognition were so great so as to outweigh any possible advantages to be obtained from securing Chinese assurances…’. On 18 December 1949, Attlee conveyed to Nehru that the British government intended to recognize the new Chinese government on 2 January 1950. Nehru whose personal inclinations were wholly in tune with British thinking, readily agreed; but insisted that India would recognize the new People’s Republic on 1 January 1950. Nothing was asked for in return.    

     But the Chinese were not finished just yet. They clarified that while recognition was one aspect, establishing diplomatic relations was quite another. Thus India was asked to send a delegation to Beijing to negotiate setting up diplomatic relations, as were the British. The Chinese made two demands. First, India must clarify what it intended to do with KMT Chinese properties in India and secondly it must ‘explain’ its voting patterns in the UN. For once even Nehru baulked at these untenable ‘demands’ and declined. Realizing their folly rather quickly and the felt need to keep Nehru on their side, as they were about to ‘invade’ Tibet, the Chinese quickly changed track and agreed to establish diplomatic relations with India on 15 March 1950. The British were kept waiting for years!

      Let us now fast forward to 1972. When Nixon visited China, the Chinese insisted on one core demand. The US must recognize that Taiwan was a part of China. As per the 1979 US-PRC Joint Communique, the US switched diplomatic recognition from Taipei to Beijing. In the Joint Communique, the US recognized the Government of the People's Republic of China as the sole legal government of China [emphasis added], acknowledging the Chinese position that there is but one China and Taiwan is part of China. This principle is enshrined in the two subsequent joint communiques that followed. The Joint Communique also stated that the people of the United States will maintain cultural, commercial, and other unofficial relations with the people of Taiwan. So when President Trump raised the specter of not following the ‘one China’ principle, it caused considerable consternation within the Chinese leadership. Of course, since then suitable amends have been made by the US and the ‘one China’ principle reiterated in a phone conversation between President Trump and President Xi Jinping. It must have come as a great relief to the Chinese leadership.

    However international law is sufficiently opaque on the subject and if a state wishes to exploit the loop holes; these are available. International law makes a clear distinction between the recognition of a state, as opposed to the recognition of a government. For example, India recognized the state of Israel ever since its inception, but did not recognize or establish diplomatic relations with the government of Israel till many years later. The fact remains that hardly any state disputes that Taiwan is indeed Chinese Territory. The Taiwan authorities say so themselves. But the indisputable fact is that the People’s Republic does not exercise administrative control over the whole of Chinese Territory, but only does so on the mainland and over some island territories. Taiwan remains outside its administrative control. China is the only P-5 state that does not exercise full administrative control over its entire territory [emphasis added]. Therefore the question that remains is: what should the nature of relations be that outside powers can establish with the authorities exercising administrative control in the area of Taiwan?

    It goes without saying that establishing full diplomatic relations is ruled out, since few states recognize the Taiwan authorities as the legitimate government of China. Few states would also like to risk bearing the wrath of China and its military and economic clout. Nevertheless, day to day dealings have to take place with the Taiwan authorities. The 1979 US-PRC Joint Communique also states that the people of the United States will maintain cultural, commercial, and other unofficial relations with the people of Taiwan. The American Institute in Taiwan [AIT] and the Taipei Economic and Cultural Representative Office [TECRO] does just that. Similarly India maintains representation in Taiwan under the India-Taipei Association [ITA], as does Japan and 72 other states. The Chinese authorities have had no objection to the participation of Taiwanese in the Olympics and other international events as Chinese [Taipei]. Short of official diplomatic functions at government to government level, these offices perform all other duties such as issuing visas, promoting trade etc. What if the US and all other states together, particularly in the Asia-Pacific region, were to change these innocuous names of their offices and start calling them as “Representative Office of the United States” or “The Representative Office of India” and so on? The Chinese would be certainly miffed, but it would reflect reality and would not in any case contravene any international law.  

      Last year the Chinese President Xi Jinping took the unprecedented step of meeting the former Taiwanese President, who was then still in office, in Singapore. Both met as party leaders with no mention by either side of their official designations. Therefore it follows that other state leaders could also possibly meet the Taiwanese President as party leaders, in third countries, without risking any possible Chinese reproach. It has not been tried so far by any other state leader, but the precedent is there. Should such a meeting take place, it would severely test Chinese resolve, but it would begin to give the Taiwanese an international personality.

    It must however be emphasized that playing the Taiwan card would certainly invite Chinese ire, which could prove quite costly, since China is a great power and has the capacity to inflict considerable damage. It is a 'core' issue for the Chinese. But if the Chinese continue to push their agenda aggressively, particularly in the South China Sea [SCS] area, they should also be made aware that other states in the region, and particularly in conjunction with the US, are not completely bereft of options. The Taiwanese card is always there.

Monday, 6 February 2017

Dealing With China--Part III

                        Proposal for merging OBOR with India’s Act East Policy [AEP

         In his remarks at Mumbai recently the Chinese Ambassador Luo Zhaohui made the third of his proposals in that he advocated the merging of China’s ‘One Belt One Road’ [OBOR] concept with India’s ‘Act East Policy’ [AEP]. The first two of his proposals have already been dealt with in Parts I and II of ‘Dealing with China’. It is not in the public domain if any of these proposals have been formally presented to South Block and if so in what form. Nevertheless, this too is an important initiative and deserves to be studied very carefully and responded to in the course of time.

      When the Chinese Ambassador spoke of the OBOR what exactly did he have in mind? Does it mean that the OBOR initiative also includes the China-Pakistan Economic Corridor [CPEC] as an inseparable component? A clear understanding of what is on offer would assist in the study of the implications of the proposal and facilitate a response from India.

      On 7 September 2013, President Xi Jinping while addressing the Nazarbayev University made the proposal for a new Silk Road Economic Belt and later while addressing the Indonesian Parliament on 3 October 2013, proposed the new 21st Century Maritime Silk Road. In time both these initiatives were amalgamated and became known as the ‘OBOR’ concept. The present Chinese leadership has done well to choose this name, the Silk Road, for no matter where located in the Asian heartland, the name would always find resonance. The Chinese believe that the OBOR provides a fresh way of thinking about regional and global cooperation and that by including both bilateral and multilateral cooperation in political, economic, cultural and other fields; a new paradigm would be created. Not without reason the OBOR concept takes care of China's over- capacity in steel and cement industries, as well as the desire for utilizing accumulated capital resources to further Chinese ambitions. Its scope would not be limited to Asia only, but certainly its success does, to some extent, depend on co-operation that the Chinese receive from important countries such as India. If this initiative of the Chinese authorities comes to fruition, it would link 65 countries and 4.4 billion people.

    The Indian position has been that it has never been officially consulted on the OBOR. The assumption in India is that the China-Pakistan Economic Corridor [CPEC], in which the Chinese have invested US$ 46 billion, is an important component part of the OBOR.  In December 2014, EAM stated in Parliament that ‘the government was aware that China’s involvement in the construction of or assistance to infrastructure projects, including hydroelectric and nuclear projects, highways, motorways, export processing zones and economic corridors in Pakistan. Government has seen reports with regard to China and Pakistan being involved in infrastructure building activities in Pakistan Occupied Kashmir [POK] including construction of CPEC. Government has conveyed its concern to China about their activities and asked them to cease such activities’. While EAM was expressing her concern, a PTI report quoted the Indian High Commissioner to Pakistan, as saying that ‘India has no worry over construction of the CPEC, as an economically strong Pakistan would bring stability to the region’.

      This dichotomy of approach still remains to be reconciled for it seems that it stems from strategic ambiguity. If the past is any guide then in 1965 at Tashkent, India agreed to restore the 1949 Cease Fire Line [CFL] and withdrew from areas it occupied across the CFL in the 1965 conflict. Similarly the whole ethos of the Simla Agreement in 1972 was that Pakistan would accept and at an appropriate time convert the CFL [now LC] into an international border. In 1999 as well, India maintained the sanctity of the LC, never crossed the line militarily and forced Pakistani troops to withdraw back and beyond the LC. Thus it seems that India was quite prepared to give up its claims to Pakistan Occupied Kashmir [POK], if Pakistan accepted the LC as an international border. It is not in the public domain if any such concrete offer was ever made in writing to Pakistan. On the other hand, PM Modi recently reiterated in his 15th August Independence message that POK was indeed sovereign Indian Territory. The question is which of the two strategic modules would India prefer to pursue on long term basis?

    Thus if the CPEC is indeed a vital component of OBOR, then it violates Indian Territory and for India to accept OBOR is a matter of national territorial integrity. On the question of the CPEC traversing POK, a Chinese Foreign Ministry spokesperson Hua Chunying prevaricated on the issue and stated that ‘with regard to whether the economic corridor passes through [Pak] Kashmir, as far as I have learnt a joint committee for the construction of CPEC has been established and a second meeting has been held coinciding with the visit of the Pak President. I do not know if they have talked about whether the corridor will pass through this region [Pak-Kashmir], but I can tell you that we hope the Kashmir issue can be resolved through consultations and negotiations between India and Pakistan’. Clearly the Chinese were hoping to obfuscate the issue of POK and the fact that the CPEC passed through this region. Recent Chinese press reports have also taken the same view, calling upon India and Pakistan to settle the matter amongst themselves. 

     Therefore if India cannot join OBOR then the Chinese Ambassador’s proposal of joining the OBOR with India’s AEP clearly becomes a non –starter. Alternatively at present, India does not have sufficient economic resources or the political heft to put in place either a competitive or an alternative connectivity networks, on a scale that can offer an alternative option to the OBOR. In such circumstances would it be plausible to prudently study those components of the OBOR that may improve India’s own connectivity to major markets and just as India has chosen to join the AIIB and the NDB, also join those components of OBOR that suit India’s needs? For example, India’s proposal to build a road cum rail link to Central Asia through the Iranian port of Chahbahar could ostensibly be linked to the Chinese built routes in the Central Asian region to obtain access to both Central Asian as well as Russian destinations. Would the Chinese be prepared for allowing limited participation by India in OBOR as opposed to full participation?

        If India’s resources are indeed limited then it automatically follows that strategically these must not be spread too thin as a part of its AEP. As the Indian Ocean area is strategically extremely important for India, it may be more imperative to deploy resources to build an Indian Ocean network of ports, with connecting highways and rail routes, such as the planned Mekong-Ganga corridor and the Sittwe-Mizoram multi-modal transport corridor. Plans to develop the deep water port on Sri Lanka’s eastern coast, Trincomalee, as a major energy and transport hub are still in limbo, despite the fact that the Chinese have gone ahead and built Hambantota port in Sri Lanka and expanded the Colombo port. The Andaman and Nicobar Islands are strategically located in the Bay of Bengal and opposite the Malacca Straits and yet, India continues to treat these islands as a distant outposts rather than developing them as important commercial and transportation hubs. The idea of launching a Spice Route, Cotton Route and even a Mausam project are, at present, mostly rhetorical ripostes to China’s OBOR and to the CPEC. Much more therefore needs to be done. At some point in time strategic choices would have to be made. For the present it seems that strategic ambiguity would perhaps continue.