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Guns vs. butter at Wuhan meeting

By M K Bhadrakumar | Indian Punchline | May 2, 2018

The anxiety syndrome in the American write-ups on the Wuhan summit is truly tragi-comic. An analyst at the Brookings Institution confidently predicted even before the summit between Prime Minister Narendra Modi and Chinese President Xi Jinping that the event was much ado about nothing. The US government-funded Voice of America in an analysis has now arrived at the same conclusion, after the summit. Why are these American analysts in such tearing hurry to debunk the Wuhan meeting?

It’s geopolitics, stupid! The prestigious Stockholm International Peace Research Institute (SIPRI) released a report today which says amongst other things that India’s defence spending rose by 5.5 per cent to US$63.9 billion in 2017, overtaking that of France as one of the world’s top five military spenders. The report estimates that one of the main motivations behind India’s plans to expand, modernise and enhance the operational capability of its armed forces lies in its tense relations with China.

From the US perspective, the situation is ideal to advance the business interests of America’s vendors of weaponry. Last year, business deals worth $15 billion were chalked up. Any improvement in India-China relations will profoundly hurt American interests. Fueling India-China tensions is a major objective of the US’ regional strategy.

Alas, there are Indians too who are eagerly serving the US interests. A prominent Chinese expert on South Asia recently wrote (in the context of the Wuhan meeting), “Many strategic elites in India are financially backed by the West and hence speak for Western countries.” It is a national shame, but true.

Be that as it may, these guys are missing the plot. Prime Minister Modi’s recent decisions to improve India-China relations, adjust India’s neighborhood policies and to rebalance India’s ties with the major powers are linked to his political agenda. Of course, the good part is that this agenda is also in the national interests.

Take India-China relations. The Voice of America is stupid to assume that the Wuhan meeting was about border tensions. No doubt, it is important that peace and tranquility prevails on the border with China. The Doklam standoff was an eye-opener for the political leadership. Hence the “strategic guidance” to the military issued from Wuhan (which is actually an order from the civilian leadership to the generals) to defuse confrontations during patrols in accordance with existing protocols and mechanisms. The military people may not like it, but that’s how a democracy prioritizes butter over guns.

Clearly, Modi’s top priority is about Chinese investments in India. The drivers of the Indian economy in our establishment played a decisive role in bringing about the strategic shift in the thinking toward China – and in preparing for the Wuhan meeting.

The fact of the matter is that China is already positioning itself as among India’s top investors. In 2017, despite Doklam, China tripled its investment to $2 billion. Bilateral trade touched $84.44 billion in 2017, which is an increase of 18.63% over 2016. (By the way, Indian exports to China went up by 40%.) This year, bilateral trade in the first quarter already hit $22.1 billion, up 15.4% year on year. In April, the two countries signed over 100 trade agreements, worth $2.38 billion, when a Chinese trade delegation visited India.

According to a report in Forbes magazine recently, India is courting Chinese companies to bridge its infrastructure deficit. Last year, China’s Sany Heavy Industry planned an investment of $9.8 billion in India, while Pacific Construction, China Fortune Land Development and Dalian Wanda planned investments of more than $5 billion each. Earlier this year, the China-led Asian Infrastructure Investment Bank approved funding of $1 billion for projects in India.

Meanwhile, Chinese investors have been pouring money into sectors outside the remit of government agencies. In 2015, Alibaba invested $500 million in Snapdeal and $700 million in Paytm. In 2016, Tencent invested $150 million in Hike, a messaging app, and a consortium of Chinese investors paid $900 for media.net. In 2017, Alibaba and Tencent announced or closed deals valued close to $2 billion—Alibaba’s second tranche of $177 million in Paytm, $150 million in Zomato, $100 million in FirstCry and $200 million in Big Basket. Tencent’s investments included $400 million in Ola, $700 million in Flipkart and a second round of investment in Practo. Last year, China’s drug giant Fosun Pharma acquired a 74% controlling stake in India’s Gland Pharma for $1.1 billion. Chinese smartphone makers Xiaomi, Huawei and Oppo all are operating manufacturing plants in India, and have had great successes in Indian market, too.

These plain facts may not be significant enough for our ‘China hands’, but they are a compelling reality for the PMO and North Block. Let me quote from the report in the Forbes magazine:

  • Seemingly, there’s a shared belief in both countries (India and China)  that a position of hostility undermines their interests, and stabilizing relations at a time of global uncertainty will yield economic dividends. India’s competitive edge in information technology, software and medicines, and China’s strengths in manufacturing and infrastructure development make the two sides natural partners…

By the way, it is yet to sink in that the single most far-reaching outcome of the Wuhan meeting could be that India is sidestepping the CPEC controversy and is moving on to join hands with China in the construction of the so-called Five Nations Railway Corridor connecting Xinjiang with Iran. It is a prestigious flagship project of the so-called Silk Road Economic Belt, which was proposed by President Xi Jinping in 2013. Conceivably, this could be the first step in a long journey. China has shown great interest in developing economic corridors to India across Nepal and Myanmar.

To be sure, Modi travelled to Wuhan with the “big picture”. Read a perspective on the Wuhan summit featured in the CNBC entitled China and India are trying to write a new page of the world economy, here.

May 3, 2018 Posted by | Economics | , , , , | Leave a comment

CPEC heading north to Hindu Kush

By M K Bhadrakumar | Indian Punchline | December 26, 2017

From the Indian perspective, today’s announcement by Chinese Foreign Minister Wang Yi that Beijing and Islamabad are open to extending the China-Pakistan Economic Corridor to Afghanistan dramatically changes the power dynamic in the region. Wang was speaking at a press conference following the first meeting in Beijing today of the newly created China-Afghanistan-Pakistan Dialogue format at foreign minister level, which has been a Chinese initiative. (Xinhua )

Some early deductions are possible. First, for the first time in the region, China is deploying the Belt and Road Initiative to leverage regional security and stability in South Asia. Of course, the economic aspects are there in terms of connectivity, infrastructure development, expansion of trade and investment and so on, but if Kabul becomes a CPEC partner, something fundamentally changes in the 3-way Afghan-Indian-Pakistani equation. That this would be happening under China’s mentorship is important.

Second, India is getting surrounded by BRI projects – north, east, south and west. It lacks the energy and resources to project and sustain a counter-strategy. All we are left with is our vacuous negative propaganda to malign the BRI for which there are no takers abroad. By implication, Afghanistan is rejecting India’s notions of “territorial sovereignty”, et al. At the same time, China’s interest in Indian participation in the BRI is self-evident. Time is running out for India. New thinking is needed urgently.

Third, Wang’s statement in Beijing on Monday during a media briefing on the agenda for Chinese diplomacy in the coming year singled out North Korea and Afghanistan as two regional problems where China intends to push for peacemaking. Today’s disclosure fits in with that. The trilateral format may eventually provide the platform for a regional initiative. The joint press release issued after today’s meeting called on the Taliban “to join the peace process at an early date.”

Fourth, China is displeased that the US is seeking a military solution to the conflict in Afghanistan. The Trump administration is pursuing a dangerous strategy that can destabilize the entire region surrounding Afghanistan. But China will not confront the US, either. Instead, China is introducing a counter-narrative. The US will increasingly find itself in a false position by threatening Pakistan even as Afghanistan is edging toward the CPEC to “conduct win-win trilateral economic cooperation”.

Fifth, the geopolitical implications are profound. Wang today outlined that the CPEC will eventually extend northward to link with the China-Central Asia-West Asia Economic Corridor (CCWAEC), which connects China with the Arabian Peninsula. The CCWAEC starts from China’s Xinjiang and traverses Central Asia before reaching the Persian Gulf, the Mediterranean Sea and the Arabian Peninsula. It crosses the five Central Asian countries and 17 countries and regions in West Asia (including Iran, Saudi Arabia and Turkey). It is a vast landmass, which is rich in resources but backward in infrastructure.

Finally, there is a high degree of foreign-policy coordination between Beijing and Moscow. We must anticipate that it is a matter of time before Russia evinces interest in the CPEC in one form or another. President Vladimir Putin disclosed on Monday that during a phone conversation with his Turkmenistan counterpart, the subject of the TAPI (Turkmenistan-Afghanistan-Pakistan-India) gas pipeline project came up. “He invites us to participate. Generally, certain projects are indeed implemented there, and quite successfully, including by Turkmenistan. But we must take a look, of course, at how feasible projects of this kind will be,” Putin has been quoted as saying.

Indeed, the bottom line is that the tense relations with Pakistan — and the downhill slide in the relations with China — through the past 3-year period virtually shut India out of the power dynamic in the region and reduces it to a lone bystander. The scenario looks pretty bleak.

December 26, 2017 Posted by | Economics | , , , , | 2 Comments

Trump holds the line on foreign policy

By M K Bhadrakumar | Indian Punchline | November 13, 2017

For the first time since US President Donald Trump took office, a reality check is possible on the foreign policy platform he espoused during the 2016 campaign. Most of the key elements of that platform faced the litmus test one way or another during his 11-day Asian tour, which concludes today. How does the scorecard look?

On a scale of 10, one can say it stands at 8-9. Trump’s performance through the tour of the 5 Asian states – Japan, South Korea, China, Vietnam and the Philippines – shows that there has been a remarkable consistency in terms of the foreign policies he pledged to deliver if elected as president.

The first key element in the Asia-Pacific context has been Trump’s total rejection of the Trans-Pacific Partnership agreement, which the Obama administration had negotiated. The Asian tour put to test whether he’d hold the line to scrap the TTP. The pressure was immense, led by Japan and Australia, that the TTP should be revived in some form.

But Trump stuck to his ‘Nyet’. In his speech at the APEC summit in Da Nang on Friday, he reiterated that his administration would only seek bilateral trade agreements with the Asian countries. In fact, he let loose a volley on the WTO as well. That leaves Japan to lead a coalition of 11 countries originally a part of TPP – Japan, Australia, Canada, Mexico, Singapore, Malaysia, Vietnam, Chile, Peru, New Zealand and Brunei – to make their own deal.

It is unlikely that the effort to revive the TPP will go very far after Trump made it clear that the US has no interest in it. In any case, the latest development – Canada’s decision last week to pull out as well – virtually means that the efforts to revive the TPP in some form are unraveling.

Now, the TPP was supposed to have provided the vital underpinning for the Obama administration’s containment strategy against China (known as ‘pivot to Asia’.) This brings us to another Trump platform. During the 2016 campaign, it was apparent that Trump had no interest in pursuing a containment strategy against China.

Of course, candidate Trump was highly critical of China. But that was for other reasons – over the issue of trade deficit, currency manipulation, breach of intellectual property rights, market access, taking away US jobs and so on. The criticism continues. But then, Trump intends to sort out the issues directly with the Chinese leadership.

The point is, a containment strategy against China is unviable and unsustainable sans the TPP, but Trump couldn’t care less. The Asian tour has further confirmed his panache for transactional diplomacy, which he thinks is the optimal approach from the perspective of ‘America First’.

Trump is not a grand strategist; nor is he professorial like Barack Obama. He has no time or patience for geopolitics woven onto the tapestry of a comprehensive Asia-Pacific strategy. The Asian tour brings this out very clearly.

Nonetheless, it has been a most productive tour for ‘America First’. In Japan and South Korea he pushed arms exports. He got South Korea to increase its share of the financial cost of maintaining the big US military bases. He has lifted the cap on South Korea’s missile development program. These are in line with his approach to the importance of cost sharing and burden sharing by the US’ allies.

The “state visit-plus” to China was of course the high noon of the Asian tour. Trump wrapped up deals worth $235 billion, which ought to translate as tens of thousands of new jobs in the US economy.

Was he perturbed that China is overshadowing the US as the region’s principal driver of growth in Southeast Asia? Trump’s APEC speech showed no signs of it. He never once berated China’s Belt and Road Initiative. Ironically, he complimented the Chinese leadership for serving the national interests effectively! He didn’t show signs of competing with China for the ASEAN’s friendship, either.

Candidate Trump had shown an aversion toward US interventions in foreign countries except when American interests are directly involved. Indeed, North Korea was the only ‘talking point’ in his agenda.

Incredibly enough, Trump didn’t even mention the territorial disputes in the South China Sea in his remarks at the US-ASEAN summit in Manila earlier today. Instead, Trump’s focus was on economics. He said in the speech:

  • We have the highest stock market we’ve ever had. We have the lowest unemployment in 17 years. The value of stocks has risen $5.5 trillion. And companies are moving into the United States. A lot of companies are moving. They’re moving back. They want to be there. The enthusiasm levels are the highest ever recorded on the charts. So we’re very happy about that, and we think that bodes very well for your region because of the relationship that we have. (Transcript)

The most controversial part of Trump’s tour came on Thursday when he was expected to meet Russian President Vladimir Putin but didn’t – apparently due to scheduling difficulties. (Putin later told the Russian media that functionaries will be ‘disciplined’ for the botch-up.) But what stood out was the Trump-Putin joint statement on Syria that was eventually issued on Friday, reflecting Trump’s intention to take Putin’s help in ending the war.

Trump is unwavering that it is in the US’ interests to engage with Putin. This is despite the civil war going on back home where critics are braying for his blood for being ‘soft’ on Russia. We get a glimpse of the classic Trump in his dogged persistence all through that the US and Russia ought to have a productive relationship and Russia’s help is necessary for solving regional and global issues. He rubbed it in in while speaking to the White House press party aboard Air Force One.

Indeed, Trump’s remarks have raised a furious storm in the US with Senator John McCain leading the pack of wolves. Read the transcript of Trump’s remarks on Russia here.

November 13, 2017 Posted by | Economics | , , , , , , , , | Leave a comment

Singapore resets China ties

By M K Bhadrakumar | Indian Punchline | September 20, 2017

The visit by Singapore Prime Minister Lee Hsien Loong to China (Sept 19-21) will be keenly watched in Delhi. It is no secret that over the years Singapore has significantly influenced the Indian discourses regarding China. Although the bamboo curtain lifted a long time ago, India’s ‘China watchers’, aside a clutch of noble exceptions, rely largely on second-hand knowledge, and Singapore being the West’s outpost, became a watering hole for think tankers speculating on the ‘takeaways’ from China’s rise.

Coincidence or not, Singapore-China relations also went downhill through the past 3-year period – similar to the trajectory of Sino-Indian ties under Modi government. The common factors were rather striking: Singapore was the only ASEAN country – like India in the South Asian region – to urge that China should “fully respect” the South China Sea arbitration award in June last year (although the island state, like India, was not party to the territorial dispute); Singapore too has been disdainful toward China’s Belt and Road Initiative; Singapore cozied up to Taiwan; and, Lee departed from the wise policy of striking a careful balance between China and the US laid down by Lee Kuan Yew, to embrace the US as geopolitical ally.

Thus, Lee’s visit to China signals a significant adjustment in Singapore’s strategic posturing, riveted in the recent years on the US’ ‘pivot to Asia’. While receiving him in Beijing on Wednesday, Chinese President Xi Jinping said the strengthening of political trust and the consolidation of bilateral relations are not only in mutual interests but also will benefit peace, stability and prosperity of the region and globally.

All this may come as disappointment to pundits in India who are wedded to the belief that Singapore shares their adversarial mindset toward China. On the contrary, Singapore realizes that the containment strategy against China has become a relic of history and the smart thing to do is to re-engage China. In some ways, it’s the old political adage, ‘If you can’t beat ’em, join ’em.’  In an exclusive interview with Xinhua news agency on Friday Lee expressed willingness to see Singapore as a hub for Chinese business and headquarters of some Belt and Road projects, based on its advantages in finance, transportation, trade and services.

Through the past 3-year period, China began engaging with Malaysia as a key interlocutor for the BRI in the ASEAN region. The message was loud and clear in the Chinese investment ($7.2 billion) to develop Malacca as a new deep-sea port rivalling Singapore. China also unfolded big plans to expand relations with Malaysia. It has committed to import goods worth $2 trillion from Malaysia over the next five years (a nearly eight-fold jump from 2016 imports over that period), invest up to $150 billion in the country and offer 10,000 places for training in China. During Malaysian Prime Minister Najib Razak’s visit to China last December, deals worth $33.6 billion crystallized.

China hopes that Lee’s visit provides an opportunity to canvass its bid for the prestigious 360 kilometere long high-speed railway project connecting Singapore with Kuala Lumpur (which will cut travel time to about 45 minutes.) Premier Li Keqiang raised the topic upfront with Lee on Tuesday at their meeting in Beijing. From Lee’s initial remarks, Singapore takes a positive view of the Chinese bid.

Another point of interest for China will be that Singapore is assuming the chairmanship of the ASEAN next year. Beijing appreciated that last month at the ASEAN conclaves, Singapore played a lead role to promote the finalization of a code of conduct between the grouping and China regarding the South China Sea. Conceivably, China sees Singapore as a bellwether within the ASEAN.

Lee’s visit to China comes before the 19th National Congress of the Chinese Communist Party (October 18) and Trump’s state visit to China in November. Lee is due to visit the US in October. From all appearances, Singapore appears to be inserting itself into the ‘new type of big-power relations’ reshaping the geopolitics of the Asia-Pacific while also positioning itself at a crucial juncture of political transition in the Chinese leadership.

Singapore is well clued in traditionally on the alignments within the Chinese leadership. Interestingly, amongst other top Chinese leaders, Lee is meeting the Secretary of the Communist Party of China Central Commission for Discipline Inspection Wang Qishan. Singapore Foreign Minister Vivian Balakrishnan visited China in June after which he disclosed that the two countries have agreed to work together on the Belt and Road Initiative. This was followed by a meeting between Lee and Chinese President Xi Jinping in Hamburg on the sidelines of the G20 summit during which cooperation within the framework of BRI figured. Clearly, there has been a build-up toward Lee’s visit to China, which is taking place after an unusual hiatus of 3 years.

September 20, 2017 Posted by | Economics, Timeless or most popular | , , | Leave a comment