Book Review: Dexter Roberts, 2020. The Myth of Chinese Capitalism: The Worker, The Factory And The Future Of The World. New York: St. Martins Press

Yash Johri, Research Assistant, ICS

For years, China’s leaders have had an unspoken agreement with the people: they guarantee rising living standards, and, in turn, the populace tolerates control by a non-democratic and often unresponsive party… There are fatal problems with that equation today. Growing inequality means that a large proportion of the population decide that the party no longer is fulfilling its side of the bargain, and begin to demand changes.” (Pg. 179)

Dexter Roberts, Bloomberg Businesweek’s  China Bureau Chief in his recently published book, The Myth of Chinese Capitalism (St. Martins Press, New York) investigates how these aforementioned problems came to pass. Having spent more than two decades in China and having reported from every province in the middle kingdom, Roberts’ analyses span from the heart of corporate Beijing and Shanghai to the dusty roads of the Guizhou hinterland. In the introduction he states that the guiding motives for his work  “was to see how the party’s grand bargain was working for the Other China, of workers and farmers from lagging interior provinces – not the relatively well-off residents of its showcase coastal cities, where signs of material success were becoming increasingly apparent.” (Pg. XXIII) This holistic approach serves Roberts’ analysis of China well, especially at this moment in time. While in the early years of reform, China followed Deng Xiaoping’s trickle down economics formulation of the coastal areas becoming wealthy at first and a subsequent transfer of wealth to the rural inlands, there is now a targeted focus on programs such as ‘develop the west’ and the ‘rural vitalisation strategy’. Additionally, now that the Chinese economy has crossed its Lewis Turning Point[1] it faces the challenge of not only improving its total factory productivity with automation and a move to the digital world but more importantly in upgrading its social contract with migrant labour and rural persons upon whose toil the Chinese economic miracle has been built on so far.

From a political stability point of view, looking after the interests of migrant families who form a large portion of the Chinese middle class will be paramount. These persons now having lived in urban areas albeit without the benefits of urban residential status (Hukou) now desire further upward mobility within the cityscape, finding it difficult to go back to the village lifestyle. The author in the book also makes the point that migrants are no longer as docile as they first were, enough experience has been earned regarding their ability or inability to bargain for what they deem to be their due. There have also been a large number of persons who have returned home, largely spurred on by government schemes in order to rejuvenate the countryside in order to help China achieve higher levels of consumption required for it to reach its goal of becoming a moderately prosperous society. However the success of these schemes seems to be far from guaranteed as per Roberts.

Hukou – Household Registration System

The author views the continuance of this system as one of the biggest barriers to Chinese migrants joining the middle class and boosting consumption. This is because, only once citizens have an urban hukou can they avail benefits of state provided healthcare and education for them and their families. Given the higher costs to these vital services, most migrants leave behind their children in the villages or in state run boarding schools, earning these children the wintry moniker of ‘Left-Behind Children’, further for those who decide to migrate with their children non-aided private education is very expensive. This system was brought in to existence in 1958 before the Great Leap Forward to prevent internal migration among other reasons.

In the initial period of Gaige Kaifang (Reform and Opening Up) while internal migration was relaxed, the Hukou system remained. This situation has naturally created a large social and economic gulf in the cities and Roberts argues that even though the government recognises reforming this system as an important policy matter, one of the major constituencies against any reform are the well-entrenched urban residents themselves, unwilling to share already constrained resources. Other reasons are of course the high costs of accommodating this large population on the part of the various municipalities. The government is attempting numerous initiatives to address this issue, such as creating point systems to induct persons who meet the criterion for an urban hukou, granting hukou’s for Tier – 2 and Tier – 3 cities as well as large projects such as that of Xiong’an which aims to decongest Beijing of its various non-governmental functions and reduce pressures on the city’s own resources. However these efforts have translated into little positive change on the ground. Roberts, writes, “Ultimately, ensuring that migrants integrate into China’s middle class requires ending the rigid Mao-era policies of household registration and the collective-ownership system for rural land, allowing them to live and work where they wish while truly benefiting from the land they hold.” He goes on to state that the present government’s approach to increase restrictions as opposed to loosening them doesn’t really bode well for ending the Mao-era policies and integrating migrant labor into the Chinese Middle Class. 

“Rural Vitalisation Strategy”

With the rising costs of manufacturing coupled with the state’s desire to maintain its status as factory to the world via automation, there has been a large reverse migration to the hinterland areas as well as the West. One of the major planks of Xi Jinping to successfully achieve the goals of the Made in China 2025 policy, decongest cities and rejuvenate rural spirits is the aforementioned rural vitalisation strategy which aspires to devolve property rights (in the form of 30 year leases) to migrants. In Beijing the repopulation of the hinterland has been seen in a positive light, that persons with urban experiences would energise the countryside with their gained know-how and skills. However one of the challenges Roberts highlights to the enforcement of these newly devolved property rights that would serve as a catalyst rural vitalisation are two fold:

 1. Local Government and Real Estate Builder Nexus that ceases local land at low prices as has been illustrated by Roberts on Pg. 75-76 (Roberts further quotes a 2011 World Bank report that states that rural farmers have often lost their and been short-changed about $321 Billion); and

2. Continuing ideological commitment to land collectivisation, Xi Jinping at a speech in Xiaogang stated that the core of reform in the countryside is sticking to the collective ownership of rural land.

Therefore while the government often proposes policies to aid property rights in the hinterland, these two aforementioned factors act as countervailing pressures.

However eliminating absolute poverty is one of the paramount challenges faced by the incumbent government, and Guizhou being one of the most backward provinces has received a lot of political attention notes Roberts. Guizhou has in the recent past attracted a lot of investment as an important spot for data storage, numerous companies such as Apple, Qualcomm, Huawei, Tencent and Alibaba being investors. Additionally, given its natural beauty, the provincial and local governments along with companies and common citizens have made a bet on its tourism potential and have been building numerous hospitality retreats, from big five star resorts to small bed and breakfast places. However while the province has benefited from the hospitality industry in the recent past, numerous locals – some of whom have returned from urban areas and had plans to invest in the tourism industry – interviewed by Roberts in the village of Binghuacun continue to wait for the benefits to trickle down as well as demand for tourism arise.

China faces a number of challenges at this moment of transition, while its attempted shift to a technological superior society has catalysed the US-China trade war along with other related developments on the international front, domestic migrants who’ve not benefitted equally benefitted from China’s go-go years serve as a major challenge domestically. Dexter Roberts in his work successfully brings to light the domestic imbalances that are showing up at this time of transition, the disparities have only been accentuated by Covid – 19.


[1] The Lewis turning point is a situation in economic development where surplus rural labor is fully absorbed into the manufacturing sector. This typically causes agricultural and unskilled industrial real wages to rise. The term is named after economist W. Arthur Lewis.

Korean View: India-China Conflict

Vyjayanti Raghavan, Professor, Centre for Korean Studies (CKS), School of Language, Literature and Culture Studies (SLLCS), JNU, Delhi

This article is based on the news reports in the mainstream media in South Korea during the period August 21- September 6, 2020.

Source: TheIconist

As expected what got the maximum coverage was the India-China border conflict. Chosun Ilbo of 21st August reported it as “From Sticks to latest fighters …. the endless border dispute between China and India” where the focus was on the appearance of two Zen 20 stealth fighters at the Heten Air Force Base in China’s Xinjiang Uighur Autonomous Region. It was reported that satellite images showed them placed side by side at the base which is 320 km away from Aksai Chin region, where the two countries are in border dispute. The report also mentioned the deployment of 5 Rafale planes by the Indian forces in Ladakh.

Another media site called Newsis.com, reported on August 25 China builds air-defence missile base on the Indian border- ‘S300 Hungchi 9 deployed. It was reported that China had built an air defence missile base on the China-India-Nepal border to deploy a new surface to air missile. The Chinese claimed that this missile greatly improved the detection capability of air threats from India. The report also stated that as India had increased its troops by 35000 in the border area, China too was increasing its artillery and tanks – raising concerns of a military conflict. Yonhap News of August 26 reported India laying military roads near border dispute because ‘We don’t trust China!

Yonhap News of August 30 reports Xi Jinping to strengthen Tibetan Border Security because of ‘conflict with India.’ The report quoted President Xi making this statement while addressing the Party, and the political and military leaders at the 7th China Communist party Central Tibetan Affairs Debate held in Beijing on August 28th and 29th, respectively. Xi emphasized that along with the border disputes the Tibetan Separation Movement is a major issue with India. He said “We need to strengthen political and ideological education for the residents, and focus on the reunification and protection of the motherland and national unity”. He added,” Education on the history of the Communist Party and new China, Reform and Opening, Socialist Development, Tibet and China relations should be deepened”. Xi further added, “We must strengthen ideological and political education in schools to achieve the spirit of patriotism in the whole process. We must plant seeds of love for the Chinese people in the hearts of all youths.”

The Yonhap News of August 31st reported India sends Warships to South China Sea right after the border conflict in June…. Stimulating the Chinese nerve. The AjuKyongje News on 1 September reported Another Clash between India and China at the border…… Is anti-China public opinion in India getting stronger? The media report of September 2 of Newsis, reports Indian troops move to Northeast China borders…. Another international angle of IndiaChina conflict that found reportage was: the August 23 report of Yonhap news, Crack in China-Russia Honeymoon? Xi emphasized that along with the border disputes the Tibetan Separation Movement is a major issue with India. ‘Possibility of expanding conflict’, whereas Hankook Ilbo of the same date( 2 Sept.) reports, China-India Conflict boils due to Corona Crisis.

Meanwhile, other international angles of conflict that found reportage were: the August 23 report of Yonhap news, Crack in China-Russia Honeymoon? The news reports Russia stalling the sale of S-400 surface to air missiles to China since 2018, and continuing to do so now stating the Corona virus as the reason, while it agreed to sell the same (S 400) to India now. This report cited reports in China which stated that this was happening despite Russia and China cooperating closely recently because of Covid-19 and despite the leaders from both the countries having met 30 times since 2013. It is said that there were comments of disappointment such as “If you’re fighting an enemy and your friend handed him a knife, how would you feel?” in the Chinese social media.

It also reported that the Chinese had been upset with Russia for the Tweet by the official of the Russian Embassy in China on 2 July, celebrating the 160th Anniversary of Vladivostok, which the Chinese claim as theirs and claim that it was forcibly taken by Russia from Qing China in 1860. In the background of all this, the fact that Russia agreed to the sale of fighters to India soon after India’s border clash with China on 15 June has not gone down well with the Chinese.

Reports on the economic front included that by Chosun Ilbo on August 25, as Joining anti-Chinese solidarity India also abandons Huawei. The Global Biz-24 of August 27 reports, Alibaba temporarily suspends investments in India due to rising conflict between China and India. Chosun Ilbo of September 2 reports, ‘Lower the dependence on China ‘- Japan-Australia-India strengthen supply chain cooperation. This also The Chosun Ilbo report stated that the sanctions imposed by the Indian government were hitting hard the Chinese tech. companies. found reportage in Aaju Kyongje of September 2 as Japan-India-Australia in one voice –‘ Departing from China Supply Chain!

Chosun Ilbo of September 3 reported, India Blocks 118 Chinese-made apps, including ‘battleground’ developed by South Korea. The Gukje News of September 6, reported India’s domestic and American IT companies on the overtaking-lane following India’s ban of Chinese Apps. The report stated that the sanctions imposed by the Indian government were hitting hard the Chinese tech. companies. At the same time the report raised concerns whether the Indian domestic and the American tech. companies will be able to compete with the Chinese ones.

The Lasting Effects of Hong Kong’s National Security Law

Aadil Sud, Research Intern, ICS

In early May 2020, China announced its plan to draft a new National Security Law (NSL) for Hong Kong, a move long required under Hong Kong basic law, but that too should have explicitly been written and enacted by the Hong Kong government. According to the South China Morning Post (South China Morning Post, 2020), the National People’s Congress Standing Committee unanimously voted to enact the law into power, taking effect the same day. This was a significant move as the law was passed weeks after it was announced, bypassing the Hong Kong legislature, with the text being kept secret from the public and even the Hong Kong government until it was enacted. It drew diverse reactions from around the world, most notably from the US, where Secretary of State Mike Pompeo called the decision the ‘latest in a series of actions that fundamentally undermine Hong Kong’s autonomy and freedoms’ and certified to congress that Hong Kong was no longer autonomous, with President Trump announcing that his administration would end Hong Kong’s trade privileges. The UK also announced that if passed, Britain would open a route for all Hong Kong residents born under British rule to apply for and become British citizens, numbering to almost three million people.

Under the law, acts of secession, subversion, terrorism, and collusion with a foreign country are all seen as endangering national security. The law has been met with criticism by activists domestically as well as internationally. According to human rights organisations such as Amnesty International, ‘Endangering national security’ remains a very vague term that can be used to refer to anything and everything. The terms are so broadly defined that they can become catch-all offences used in politically motivated prosecutions with potentially heavy penalties. The law gives central, as well as Hong Kong governments the power to oversee and manage schools, social organisations, media, and the internet in Hong Kong. Additionally, suspects can be removed to Mainland China, with cases being tried within the Mainland criminal justice system and under their laws, which is of major concern, as China has an estimated conviction rate of 99% in Mainland courts.

This move has caused massive changes within the legal capacities of investigating authorities, allowing them to search properties, restrict travel, freeze assets, and engage in covert surveillance without a court order. Authorities can also require information from organisations and people even if it is self-incriminating and have the power to levy fines or imprisonment for failure to comply, a gross dilution of human and internationally agreed human rights. The passing of the law has acted as a death knell to the Hong Kong democratic movement. One of the more high-profile arrests was that of Jimmy Lai, the publisher of the pro-democracy paper Apple Daily, who was arrested on suspicion of foreign collusion. Additionally, as the law does not differentiate between Hong Kong citizens and overseas activists, the police have issued warrants for democracy activists living abroad as well, the first time that people not living in the city have been targeted. This has led many legal experts in Chinese law to state that the re-evaluation of extradition and legal assistance agreements is a necessary move that foreign countries must make, to be able to protect their people in exercising their rights to free speech and expression.

The law has purposefully been left vague, which prevents people from understanding how and when they are in violation of it. This has led to the shutdown of numerous social media accounts run by activists and organisations, the removal of banners and stickers in support of the protests by shops and restaurants, and even moves such as libraries sorting out books on ‘sensitive’ issues (and those critical of the government). Many leaders of Hong Kong political groups and student-led movements have since resigned, citing the new law as the causative factor behind them. This has resulted in the disbanding of important groups such as Demosisto, over fears of being labelled as ‘colluding with foreign forces’.

Legal aspects aside, the new law has also had a massive impact on academic freedom. According to a Global Times article, a large majority of the anti-extradition bill protestors were students. Carrie Lam has been quoted as saying that the arrests of teenagers and children at protests showed how city campuses had been influenced by forces hostile to both local and central governments. With this move, children as young as kindergartners are to be taught about this new law and the consequences it entails. While defenders of the law have argued that student freedom would remain untouched, they have reiterated that free speech comes with limitations. Most notably, Regina Ip, chairperson of the New People’s Party stated that ‘You can’t just allow teachers to talk, and impose their views, free for all’, and that ‘critical thinking does not mean training people to criticize or attack.’

There has been a commensurate impact of the policy in China studies in universities and colleges abroad as well. To try and safeguard students (especially those from China and Hong Kong) from the danger of frivolous litigation, Students in Chinese Politics classes at Princeton plan to use codes instead of names on their work to protect their identities. At Amherst, professors are considering anonymous online chats so students can speak freely, without fear or repercussion. Similarly, at Harvard Business School, students may excuse themselves from discussing potentially sensitive topics if they are worried about the risks. Another option put forth is to use codes to refer to sensitive events such as Tiananmen Square or Xinjiang. Such code switching is not dissimilar to what already happens on WeChat in China. As prestigious schools such as those in the Ivy League have thousands of Chinese students, and major donations from China, they aim to protect both their students, as well as their donors from prosecution by Chinese authorities.

Conclusion
The standards of free debate and parlance in academia and Hong Kong society have been sent into a tizzy following the passing of this law, and institutions worldwide are working to come up with methods to protect their students, especially ones from mainland China and Hong Kong, from any danger of litigation or arrest. It can be gauged that the CCP’s goal is to create a new generation of ‘loyal’ Hong Kong youth, aiming for a strategy of institutional and social control that could undermine Hong Kong’s reputation for academic freedom. The NSL is aimed towards strengthening the stranglehold China is attempting to establish over Hong Kong and is a slap in the face of pro-democracy activists and citizens alike. In line with the expectations of the ‘One Country, Two Systems’ ideology, China must proceed to properly clarify how and when the law would apply, and to whom it should apply. The potential for misuse of this law is immense. Any effort for a nation to stifle democratic dissent against it (potentially around the world), especially for those most affected by it (those who reside in Hong Kong itself) by threat of prosecution is immensely condemnable, and should be of utmost concern for activists, governments, and citizens of a globalised world.

Interview of Aparna Pande on her book ‘Making India Great: The Promise of a Reluctant Power’

Yash Johri, Research Assistant, ICS

Q1. In your first chapter you illustrate an incompatibility between the prevailing nationalism and India’s ability to effectively engage with the world community? Can you please explain this further; particularly given that nationalism in India has been electorally validated as well as the fact that it has been on the rise across the world.

I accept both presumptions, nationalism, populism and protectionism are in ascendance across the world, including in the United States where I currently reside. India isn’t unique, however, there are differences, the United States has strong institutions, the American media, judiciary as well as the political parties provide an adequate balance of power to the executive. In the Indian scenario, these institutions aren’t commensurately strong. While our founders put us on the path of a constitutional democracy in practice, we are far from achieving the same. Conversely, there has always been an alternative idea of India which we see has gained electoral validation from the late 1980s onward.

The reason I say it matters today is because we are no longer in the post-cold war era, we live in a world where anything happening around the world is on social media within a very short span of time. At a time when the world is looking at India as a counter to China, as a democratic model for the rest of the world, ally and partner with the United States or other South East Asian countries as well as to be a model developmental state within our own neighborhood, we cannot say that what is happening within cannot impact what’s happening without. Domestic politics impacts foreign policy.

If India wants to be seen as a regional power and wants acceptance from its South Asian neighbors (Bangladesh, Nepal, Sri Lanka, Maldives, Afghanistan, Pakistan, Bhutan) as well as from countries of Central Asia and Middle-East and seeks to project its power in the Indian Ocean Region and beyond then the vision of India portrayed to the outside world, has to be one that our neighborhood, extended neighborhood and the world is comfortable with. We may not like this and may say that our electorate has chosen us and others don’t have a right to criticize, but the world in the past has looked at India as a democratic, plural, multi-religious and multi-ethnic nation which despite numerous fissiparous tendencies managed to sustain high rates of growth.

Q2. Numerous analyses of India often compare it to the development story of China and how it lags behind on numerous measures, the book uses a number of these measures in the second chapter on human capital. However, India is an electoral democracy and it is true that a number of the government’s initiatives will work towards serving the platform which has elected it to power – yet at the same time the Indian people do trust the Prime Minister to deliver reform and a better standard of living. For all the criticism, the incumbent government is working on numerous initiatives such as Aayushman Bharat, National Digital Health Mission, Swachh Bharat Mission, a new National Education Policy, repeal of the Essential Commodities Act, on the digital front there’s been unparalleled global investment in the country even if its been to one corporation. Therefore, even though one can rightly question his politics, it has delivered to the country political stability. Further there is criticism on execution, that the entire government’s work can’t be remote controlled by one office and that enough ministers and domain experts are not empowered enough, is this hindering the process?

I’ll take the second part of your question first, if you are referring to the recent exits of Economists then yes, it is something which institutions like the World Bank and International Monetary Fund closely monitor. Rating agencies like Moodys and Standard & Poor also observe and ascertain who is really making decisions about the economy, they keep a close tab on the management and health of the country’s economic institutions such as the RBI and Finance Ministry.

As to the first point, I don’t understand how these new initiatives counter the arguments that I have made in my book. Forget about China, over the last few decades Bangladesh has done a better job in literacy than India has done, why is that? The question isn’t about who you are being compared to, the comparison with China is important because they are who we always benchmark ourselves against. Let’s take one step back, which of these areas have we done a good job in the past. There’s a lot that’s been started now that could have been started 6 years ago, the reason I say this is that Covid has brought to light the many glaring deficiencies in both education and healthcare. The more literate a society the better it responds to crises and listens to experts, my argument primarily is at the core one has to rebuild institutions, we have to invest in people at the primary and secondary level. We need to build the skill capacity, and this has a long gestation period. The question is why is it that even when we start and talk about reforms, we rarely bring them to fruition?

Let us give an example there are numerous policies from the UPA years, such as MNREGA. At the end of the day if an industrialised country is supposed to have 60% skilling of the workforce and India has just 7% there is a real problem which has national security implications. If you fix the primary and secondary school systems along with skills and basic healthcare there’s a lot that will take care of itself. One will not have to worry about finding a job if he/she has skills. Our challenge is that we need vocational training to provide a productive outlet for the 1.3 Billion persons of our country.

Q3. You state that there is a mismatch in strategic planning, between the civilian and military arms of the government. However, what do you think about the latest reform that’s been brought of a negative import list in the realm of defence? Do you feel that this is a result of policy being created by the newly formed office of the Chief of Defence Staff (CDS) that wishes to address this very problem by bringing civilian and military personnel under one roof or is it just further encroachment on the independent institution of the army by the political leadership?

We will have to wait a few years to see how India’s CDS and the new Department of Military Affairs (DMA) actually works. Given the strong British legacy that continues to persist in our armed forces we haven’t ever had such an office that brings civil and military actors under one roof to jointly pursue strategic goals. There have however been integrated headquarters and there has been some coordination. So, it will take a few years to find out really how effective the CDS will be? We have to bear in mind the fact that most of the new capital acquisitions will not be under CDS and DMA therefore the jury is still out. There is a likelihood that the CDS can actually bring about the coordination that India needs and there’s a chance that it doesn’t really work. We have to wait a few years to see that.

What I would say is three things. First, at the end of the day what matters is how much money we allocate to the military. If we are spending only 1.5-1.7% of our, as of now, shrinking GDP the majority of which goes in salaries and pensions, we are going to have almost nothing to modernise and purchase new equipment. Almost 65%-68% of military equipment is outdated. The People’s Liberation Army (PLA- China) which is sitting on our border and has taken our territory has allocated large funds and has rapidly modernised. If we don’t increase our budget allocations the CDS will not have the money and resources to do what he needs to do. Second, in addition to the office of the CDS what we also need is to build a systematic method of working whereby the country can plan not just a few months ahead but 10-20 years ahead for each of the services. Third, is going to be the question of what purpose is achieved by adding a layer of bureaucracy to perform powers and functions that are already being performed by the incumbent Chiefs of the Army, Navy and Air Force on the military side and the defence officials in the Raksha Mantralaya on the civil side.

Budget allocations at the end of the day are indeed a deeply political exercise. However, there is an important need to ingrain a strategic culture that becomes a mainstay in defence allocations and isn’t affected by the whims and fancies of politics. Forget external events, to deal effectively with our internal insurgencies of Naxalites, North-East, Kashmir the fight begins in the correct allocation of resources. Secondly, for us to be able to continue to fortify the foundation of our national security, it is essential that we meet the challenges of developing our economy further

At end of the it is our country. It’s like, it’s your house. The house may have certain problems and you may need to you know, rebuild the floor and you may need to breakdown a wall and build a new one, but it’s your house at the end of the day. So, you care about it, you invest in it, and you want it to last, there’s a pride in it. At the end of I’ve written this book because, I really do believe India can become great, but like most Indians my concern is that to do that we are lagging and need to accomplish things, so this is a wake-up call. My duty is to ask the questions to provoke people to start thinking about the same.

Q4. To what extent do you believe that the recent events in Ladakh between the Indian and Chinese armies have hastened India’s western embrace? Do you agree with people like Gideon Rachman, who’s recent op-ed in the Financial Times states that India has picked a side in the new cold war, because Foreign Minister Jaishankar in a recent interview on the 20th of July has stated that non-alignment was a term of a particular era and geopolitical landscape but that India will never be a part of an Alliance? While there may not be a de jure alliance, but on the ground what strategic formation do you see taking place?

I would come more on the Jaishankar side of this debate. I don’t think that we have picked a side. We have had a close relationship with the West for decades, from the 1990s our relations with not just the United States but with the United Kingdom, France, Germany as well as American allies to our East. So, I would say, its not a question of India making a Western embrace, what I would say actually is that if China thought it could teach India a lesson and India for its growing proximity to the Western liberal order then I think it has miscalculated. We are not going to stop catering to our national interest which we have been pursuing in the past, which is building closer relationships with countries with whom it sees strategic, economic and cultural ties benefitting itself. However, that won’t stop India from having a relationship with the Russians or with Iran even though these countries face western sanctions. I also believe a further deterioration of relations with China is only detrimental to our national interest. But I don’t believe it is a western embrace. I believe we are already quite close to the US and many of the western countries.

Due to connectivity and inter-dependence the question of picking a side today compared to the Cold War era is very complex and challenging one. During the Cold War there were no global supply chains, the NATO and Warsaw Pact spheres provided economic aid to help development in their respective countries. It was basically the Soviets giving us aid or helping us set up factories. Today except for in the defence industry where we are dependent on the supply parts, we don’t have a supply chain Relationship with Russia. The difference is that China has since the early 90s built a strong trading relationship with most countries, further with its new initiatives of Belt and Road it is building a strong foreign investment relationship as well. Therefore, in practice, it is very difficult to decouple.

Experience of Chinese Technologies and Products for the Industries of Eastern India

Amitava Banik, Research Intern, ICS

Source: Indian Industry Plus

China’s progress in manufacturing

China is considered as the world’s manufacturing powerhouse. China had been successful in building infrastructure supporting world corporations to make their products in the country. Over time, the world’s leading companies have shifted their manufacturing assembly lines to China. Also, the home-grown manufacturing industry in China is itself quite big. China is successful in manufacturing and exporting a whole range of products from simple electronics to complex machineries.

According to Yue and Evenett (2010), China attracted huge FDIs between 1979 to 2007 of which 70 per cent went to the manufacturing industry. The concentration and development of the global value chains of all industries, including the high-tech industry, on the eastern coast of China have boosted the country’s exports, resulting in the “Made in China” phenomenon.

Multinational corporations such as Siemens have set up facilities for assembly and manufacturing of many of its products including high-end medical equipments such as CT Scanners for their South Asian market in China, taking advantage of low manpower cost and good connectivity networks. A world-renowned instrumentation company such as Yokogawa of Japan, manufactures and exports their meters and oscilloscopes from China. The Chinese are considered to be good with reverse engineering capabilities, which have helped grow a lot of domestic manufacturers across industrial sectors.

China’s market for capital goods and spares in Eastern India

The Chinese machineries and capital items occupy the top of India’s list of imports from China valued at US$ 19,103(2019-20). Unlike China, the global multinationals are more focused on making India a marketing hub for catering to the huge domestic market of India and South Asia rather than India being a global manufacturing destination. Thus, India’s manufacturing capacity for capital goods like other high technology products is low.

In Eastern India, where there is dearth of both capital and new industries, China has successfully filled the vacuum to some extent with its cheaper and competitive products and industrial solutions. According to a survey conducted by the author, traders and businessmen are of the view that there could be further enhancement of Chinese market in this part of the country if the Chinese companies could set up manufacturing and assembly lines for their products – both capital goods and spares in Eastern India. China has made considerable inroads into the industrial market in Eastern India both for high value capital goods as well as low value tools and spares. However, there is dearth of specific data on import of capital goods and spares parts from China by the industries of Eastern India, so this assumption is based on practical experience and field survey as illustrated in Table 1. According to some of the users interviewed from these industries, the satisfaction level of the industrial customers and the value for money proposition is good for Chinese products and their installations. The traders interviewed are of the opinion that easy loan and financial credit facilities are available for buying Chinese machineries. Companies such as Donfang Electric Corporation doing power projects have also set up offices in Kolkata to oversee their projects, marketing, and customer services, etc. The traders are vocal about dealing with China’s ease of doing business. According to them, it is easy to get dealership of Chinese companies and start doing business with them, and Chinese manufacturers are also prompt in responding to trade or dealership enquiries.

Eastern India is primarily a mineral rich belt of India producing steel, ferroalloys, power, etc. Earlier, most of the installations in old plants had been of Russian, US or German technology, but now most of the plants, particularly those built on private investments are using Chinese technologies (Refer Table 1). Even in many of the tenders called by the central and state PSUs*, Chinese companies are the lowest bidders and many of them are ordering Chinese products.


Just like industrial installations of capital goods in Eastern India, Chinese manufacturers have made considerable penetration into the market for low-end manufactured products, tools and spares. The trading communities in Kolkata and other places import Chinese products at lower price and sell them in the market at a premium and make considerable fortune. The result of the survey of a leading bearing trader in Kolkata is put up in Table 2.

Present Situation

The military standoff situation like the recent Galwan Valley clashes and its aftermath creates anxiety among the trading and industrial community, which affect business sentiments. As the Chinese influence is currently highly embedded in Indian economy, trade and commerce, complete decoupling may be expensive for India especially in the present Covid-19 pandemic scenario. However, though decoupling is tough, at the same time it is not possible to entirely ignore border and security issues in the face of economic or business considerations. Thus, India needs to look at economic growth with leverage on China.

Conclusion

Chinese economy (about US$ 14 trillion) is much bigger than that of India (about US$ 3 trillion). India is home to 1.3 billion people (17 per cent of world population) but has only 3-4 per cent of the world GDP. Although the two countries try to co-operate on several international forums such as WTO, BRICS, G20 etc., strategic rivalry is visible. This shows that while there is an understanding on many common matters of concern, the two economic giants sharing a common boundary and geopolitical and historical landscape are often at loggerheads on issues of diverging interests, geopolitical and economic ambitions.

In view of the evolving world order during the pandemic, several multinational companies are looking to relocate their manufacturing facilities out of China. It may be an opportunity for India to pitch in and fill the void by offering incentives to these corporations as well as to Indian corporates for setting up more manufacturing facilities in east and northeastern parts of India, and other untapped industrial belts. This may also help in developing these deprived regions as new industrial pockets. If this happens, it would lead to overall growth and development of these regions and augment the value chains for the industries.

Abe’s imprint on India-Japan relations: Speculating the future of bilateral relationship post Abe

Shamshad A. Khan, Visiting Associate Fellow, ICS, New Delhi and
Assistant Professor, Department of Humanities and Social Sciences, BITS Pilani Dubai Campus.

Weeks before a scheduled virtual India-Japan summit meeting, Japanese Prime Minister Shinzo Abe’s announcement to step down from the office citing his deteriorating health, have been received as a surprise and shock in India. As the ruling Liberal Democratic Party is engaged in electing Abe’s successor, it is unlikely that the meeting will be held on scheduled time. Ministry of External Affairs is also non-committal about the scheduled meeting. Irrespective of the cancellation of virtual summit meeting, Abe’s absence will be felt in India and especially the Indian strategic circles for a long time to come even though his departure is unlikely to derail the bilateral engagement process.

When it comes to India-Japan relations, Abe is regarded very high among the Indian strategic circles and media for strengthening the bilateral relationship. Undoubtedly, Abe has played a leading role in strengthening India-Japan relations during his previous short stint which ended in 2007 and during the present term which started in December 2012. He attached special importance to India-Japan relations much before he assumed the top post. While he was still serving as a Japanese Cabinet Secretary during Junichiro Koizumi’s regime, he envisioned in his most talked about book “Towards a Beautiful Japan” that in the coming decades India-Japan relationship will “overtake” Japan-US and Japan-China relations. He had developed deep emotional connect with India as we witnessed that New Delhi figured prominently in almost all his key policy strategies starting from confluence of the two Seas, (now evolved as Indo-Pacific) Asia’s Democratic Security Diamond and the Quadrilateral Initiatives envisioned in 2007 and revived in 2013. Why India was so special to Abe? Tomohiko Taniguchi an advisor to the prime minister and an speech writer for Abe once told this author that Abe spent his childhood with his maternal grandfather Kishi Nobusuke who held India in high esteem shared his memories of his India’s visit to Abe especially how India treated him when he visited India on his first overseas visit in 1957.

Indian Prime Minister Nehru offered Kishi Nobusuke a big platform to address a large gathering of Indian audience from the rampart of the historic Red Fort from where only the Indian Prime Ministers address to the nation on every Independence Day. At that time, the memory of Imperial Japan was afresh among the Asian countries and no Asian country was keen to give such a platform to a Japanese leader and Kishi Nobusuke was moved by this gesture offered by the Indian leadership. In a speech delivered at New Delhi based Indian Council of World Affairs in 2011, Abe noted that his grandfather’s visit to New Delhi before embarking on a US trip provided him much needed “political capital” to bargain with America with whom Kishi was going to renegotiate the revision of US Japan security treaty. While the Cold War politics dampened the chances of fostering a closer cooperation between India and Japan, Abe driven by the emotional connect and compelled by the strategic needs saw India as an inalienable partner in Japan’s National Security Strategies and Defense planning. Japan’s first National Security Strategy unveiled during Abe’s second term in September 2013 noted India’s ascendance and considered it as an important player to strengthen its relations “in a broad range of fields, including maritime security, through joint training and exercises as well as joint implementation of international peace cooperation activities.” Considering the fact that from Kishi to Koizumi, America was considered ‘first, second and third’ important country for Japan, the special importance Japan acceded to India during Abe’s period was considered as Japan’s acceptance of India as an important partner.

Abe, indeed, invested his energy to strengthen India-Japan relations when he assumed office after Koizumi left the scene soon after signing the bilateral Strategic Partnership in 2006 which gave much needed institutional backing to Japan’s relationship with the south Asian country. But he could not leave a mark on the bilateral relationship during his first stint as Abe held only one summit level interaction with the then Indian Prime Minister Manmohan Singh. In his second term in office, India-Japan relations progressed in a faster pace as Abe held seven summit level interactions with his Indian counterparts- two with Manmohan Singh and five with Narendra Modi. At the bilateral level, signing of the long pending India-Japan civil nuclear cooperation agreement, upgrading the ‘two plus two’ strategic dialogue to ministerial level, an annual Maritime Affairs Dialogue, an in principle agreement on Acquisition of Cross Services Agreement which will give a fillip to bilateral defense cooperation, signing the contract to lay first Shinkansen project between Mumbai and Ahmedabad and upgrading the currency swap agreement to 75 billion US dollar are a few agreement during his last tenure which will be remembered as Abe’s legacy on India-Japan relations. At the multilateral level he pushed for a greater cooperation with India by identifying New Delhi as an important partner including in Asia Africa Growth Corridor, Indo-Pacific, UN Security Council reform

Since Abe has left a deep imprint on India-Japan relations, it is quite natural that Indian media and New Delhi is missing his presence and is speculating the fate of India-Japan relationship post Abe. In the past, similar concerns also came to the fore in 2009 from the Indian strategic circles, when Japan was undergoing a regime change and in Japan in 2014 when change of government was certain in India. Since the Liberal Democratic Party which has forged the strategic partnership with India in 2006 lost power to the Democratic Party of Japan (DPJ)-a party which sought to forge an equidistant security relationship between the US and China, it was believed that India-Japan relationship will be derailed. For those who believed that India-Japan relationship is a byproduct of a burgeoning US-India relations post Indo-US nuclear deal, it was quite natural to believe so. But belying those speculations, the DPJ showed keen interest in taking the bilateral relationship forward. In fact, the negotiation on the civil nuclear cooperation agreement started during the DPJ regime and a landmark Comprehensive Economic Partnership Agreement to uplift abysmal bilateral trade volume was signed. Similarly, when Manmohan Singh who is considered as an architect of modern India-Japan relations had various official meetings with Japanese government in the capacity of Finance Minister and Prime Minister of India, questions were raised about the fate of India-Japan relationship post Manmohan Singh. But the ruling Bhartiya Janata party continued the momentum in the bilateral ties and deepened it further. This is enough to suggest that India-Japan relationship enjoys a bi-partisan support both in India and Japan and will remain immune to the political changes at the domestic levels. Moreover, India-Japan relationship is no more personality driven as was the case during the Cold War period.

The bilateral relationship is much more “institutionalised” as both the countries have made a commitment in 2006 strategic partnership to hold a prime ministerial level meeting annually and it is evident that the change of government has not had any negative impact on the bilateral relationship. In addition to this, India-Japan relationship, thanks to the strategic partnership, is much more diverse. Apart from the bilateral level dialogues, they are engaged in various multi-lateral dialogues including on UN Security reforms, a quadrilateral dialogue involving US and Australia and two prominent trilaterals- JIA consisting of Japan, India and Australia and JAI-consisting of Japan, America and India. These bilaterals and multilaterals will continue to bind Japan and India together.

Moreover, most of the probable successors of Abe including Fumio Kishida, Shigeru Ishiba, Taro Kono, Toshimitsu Motegi and the top contender Yoshihide Suga have dealt with India in different ministerial capacities and India is no stranger to them. Even though Abe’s absence may be felt in India, Japan’s economic and strategic interest in India and the need to strengthen strategic partnership amid assertive China will not let the bilateral relationship go off the track.

Made in China 2025: Dead in Letters, Alive in Spirit

Megha Pardhi, Research Intern, ICS

Source: Bangkok Post

The Made in China 2025 (MIC) policy was launched in May 2015 as an umbrella policy to develop ten high technology focussed sectors and convert China into a technological powerhouse. This came after increasing worries that China would lose its competitive edge over developed economies due to rising labour costs. A state led plan for ten years was released by Chinese Premier Li Keqiang to develop 10 key sectors: New information technology, Numerical control tools, Aerospace equipment, High tech ships, Railway equipment, Energy saving, New materials, Medical devices, Agricultural machinery, and Power equipment. It contained key performance indicators like R&D costs, patents, Manufacturing Competitiveness, Broadband penetration etc. to measure the performance of various sectors from 2015 to 2025.

The ‘Internet Plus’ policy launched in 2015 by Chinese Premier Li Keqiang compliments the goals of MIC2025. The ‘Internet Plus’ policy aims to integrate the internet with traditional industries and manufacturing sector. Some scholars in China have also touted the ‘Internet Plus’ policy as a key to handling overcapacity in Chinese manufacturing sector.

MIC2025 is believed to be inspired from Germany’s Industry 4.0 initiative. ‘Self-sufficiency’ is among the primary motivators behind this policy. Regulatory changes, state led financing, developing industry standards, industry-academia collaboration, international brand awareness, etc. are its other salient features.

The MIC2025 policy garnered significant international attention within geopolitical and economic circles mainly on account of it being representative of China’s ambitions. A host of concerns were voiced including discriminatory treatment of foreign bustiness, unfair trade practices, forced technology transfers, intellectual property theft, and security. For example, the 2017 IP Commission report estimates the cost of Chinese IP theft to be around $225 million to $600 million. The US also started investigations into technology transfer allegations and considered banning some Chinese companies over allegations of IP theft.

These fears are not new. Author Mara Hvistendahl in her book, ‘The Scientist and the Spy: Chinese industrial espionage and the atmosphere of fear in the West’ tells an intriguing story of industrial espionage by ethnic Chinese scientists in the US. Moreover, MIC2025 was not the first of China’s policies viewed with suspicion. More than a decade ago, China’s “The National Medium- and Long-Term Plan for the Development of Science and Technology (2006-2020)” was also criticised as “a blueprint for technology theft on a scale the world has never seen before.” The ambitious nature of the MIC2025 complimented with growing assertiveness in Chinese foreign policy under Xi Jinping added to the heightened insecurities of the Western countries.

The anxiety in the West, especially in the United States over this policy stems from multiple reasons. First, currently the US is a world leader in the high technology industry and innovation. The MIC2025 not only aims to move China up in high technology manufacturing ladder, but also aims to make China a world leader in research and innovation. Second, China’s rise to great power status does not bode well with the interests of the US. In 2018, National Security Strategy of the US termed China as a ‘revisionist state’. The Belt and Road Initiative (BRI) and the MIC2025 are key pillars of China’s ambition to become a great power on par with the US. Third, the strategic technology development aspect of this policy means China would be self-sufficient in the advanced strategic technologies. This in turn would strengthen China’s position in Asia and world as a security provider over which the US has had a practical monopoly since the end of the Cold War. Hence even though the MIC2025 aims primarily to develop high tech manufacturing, its geopolitical implications cannot be ignored.

In recent years, there have been reports of the Chinese government toning down the rhetoric on MIC2025. As a result, the MIC2025 does not appear much in official documents and media anymore. However, this does not mean that China has abandoned the project completely.

It can even be argued that the US-China trade war which began in 2018 was a manifestation of discontent frothing beneath the surface. The targeting of Huawei, which is also identified as a key company under the MIC2025, was perhaps not a coincidence. Perhaps due to these setbacks the Chinese premier Li Keqiang omitted to mention ‘Made in China 2015’ in his address to the opening session of National People’s Congress in 2019.

Does this mean MIC2025 is dead? Even if direct references to the MIC2025 have reduced, the spirit of the policy is still alive. Various aspects of the MIC205 policy are still active and the targets are being pursued.

First, a media analysis of Beijing’s response to the US pressure during trade war by Eliot Chen noted that “the fact that MIC2025 is being directly linked to Reform and Opening Up suggests that Beijing continues to attach significance to the plan, if not in name then in substance and spirit.” The author goes on to explain that even though the references to MIC2025 in media have almost vanished, the idea and inspirations behind the policy has not. To analyse this, he uses the two terms relating to MIC2025 ‘Indigenous innovation’ and ‘Core technology’. His analysis shows that there has been a significant spike in the in the use of term ‘core technology’ in second quarter of 2019.

Second, the 2019 speech of Li includes many aspects of the key industries envisioned for development under MIC2025 without mentioning the policy directly. The references to the “high quality manufacturing” and “boosting technological innovation capacity” point indirectly towards the goals envisioned MIC2025.

Third, the Ministry of Industry and Information Technology (MIIT) which is responsible for the overall implementation and coordination of the MIC2025 is still working towards the goals of the policy For example, the documents released by MIIT since 2019 till now include range of initiatives like “formulation and revision of 10 national standards” in communications industry, “Strengthening the Construction of Quality Brands to Support the High-quality Development of Manufacturing Industry”, “Declaring the Cities (Prefectures) with Stable Industrial Growth and Transformation and Upgrading in 2019”. Moreover, the newly appointed head of MIIT, Xian Yaquing is a technocrat who is expected to have control over licensing of new technologies like electric cars and 5G. Also, in the aftermath of COVID19, China aims to increase the domestic consumption to revive the economy. For example, in June 2020 Li Keqiang presented a work report to National People’s Congress (NPC) which refers to the push towards consumption including e-commerce facilities in rural areas. Tapping these previously untouched regions can provide a boost to the China’s manufacturers. These examples indicate the slow and steady move towards the larger goals of developing a high-tech manufacturing industry in near future, if not as envisioned under rhetoric and timeline of MIC2025

In conclusion, reducing the rhetoric on MIC2025 seems to be a strategy to pacify the US and divert the media attention from the overall goals of the policy. The post COVID19 world seems more determined to face the China challenge, whether it is the US or developing countries such as India. It remains to be seen whether China’s ambition to gain leadership in technology will survive these challenges.

China’s Railway Network: A roadmap to change Iran’s status quo in the Gulf

Neha Mishra, Research Intern, ICS

The perception of the Persian Gulf countries about Iran has been built across two time frames – Pre and Post-Islamic revolution. The Pre-Islamic revolution Iran was seen as a preserver of regional stability and an agent of the USA in the region. Mohammad Reza Shah (1941-79) played an important role in this context as he tried to dismantle every challenge to the regional stability whether it was Iraq’s regional hegemonic aspirations or any rebellion unrest in the Gulf monarchies, along with sustaining US legitimacy in the Persian Gulf. Ironically, the Islamic or Iranian Revolution (1979) led to a revolutionary wave in the other Gulf monarchies that made Gulf rulers perceive Iran as a threat to the regional solidity and, weaken the US-Iran ties as well. The events including- Islamic Revolution, Iran-Iraq war (1980), Gulf crisis (1990-91), and regional conflicts or disputes over Abu Musa, Tunb Islands, annual Hajj pilgrimage, and so on, contributed further to change the relation between Iran and Gulf states.

The Post-Islamic revolution Iran began to be perceived as a threat to the Gulf security, despite all the efforts made by President Muhammad Khatami and President Hassan Rouhani including the JCPOA agreement, to bring back the pre-revolution status of Iran. Broadly speaking, the securitization of Iran in the region has been the outcome of two developments: – a) the US-Israel Alliance that portrayed Iran’s nuclear program as a threat to the regional security; b) the insecurity of the neighbors about Iran, having a high amount of reserves and overpowering them. The regional security, peace, and cooperation are imperative for the domestic stability and economic recovery of Iran, but the above-mentioned developments had made it difficult for Iran to resolve the issues with its Gulf neighbors.

In this context, it could be argued that being a part of China’s BRI railway network could help Iran not only in establishing itself as a trade hub for the region, but also to boost its bilateral connection with the neighbors, thereby restoring its preserver status.

Iran became an integral part of the Chinese BRI program in 2016 when President Xi Jinping declared his intentions to help Iran in the facilitation of long-term peace and stability in the Middle East, claiming that Chinese planning to build railway network connectivity with the region will certainly improve the regional integration of the region as well.

The interest of China in the Persian Gulf region evolved majorly due to its geostrategic and geopolitical significance. The involvement of China in the Gulf region increased further during the 1970s to counteract the augmented Soviet presence in the Indian Ocean region, since Gulf is connected to the Indian Ocean through the Strait of Hormuz. Iran with domination over the Strait consequently became geopolitically important for China. Furthermore, Iran’s uneasy relationship with the USA and the strategic interest of India in Iran were the other factors that shaped Sino-Iran interactions.

The opportunity to be a part of BRI came as an advantage for Iran when it declared the plan to expand its railway network and connectivity to the Gulf neighbors as well as the other powerful actors. The Railway Restructuring/ Revolution plan of Iran invited major foreign investors including China, India, Russia, and others to participate in the progress. The Projects like- International North-South-Transport Corridor (INSTC), Eastern corridor, and Ashgabat agreement will connect Iran to India, Pakistan, Afghanistan, Central Asia, and the Gulf country Oman, but might not contribute enough to change the regional equations of Iran. Chinese BRI railway connectivity project, on the other hand, is more likely to facilitate the geo-strategies of Iran in the Persian Gulf. For instance- in 2016, the first freight (Cargo) train was launched to transport goods in bulk between Iran and China and this developed the chances of turning Iran into a central hub of the Eurasian region. The hopes of connectivity continued to develop with launches of second, third, and fourth train services from 2016 to 2018, connecting China to Tehran passing through Central Asian countries and former Soviet Union Republics as well.

Besides these freight trains, Chinese Railway Engineering Corporation has approved loans for two important railway networks- a) The Tehran-Qom-Isfahan railway network- a $1.2 billion loan agreement on 400km double-tracked railway lines, to connect these three cities of Iran to develop Iran’s transporting capacity and speed, b) The Urumqi-Tehran-Mashhad railway network- this route will start from Urumqi (China), passing through Yining and Almaty (Kazakhstan), Bishkek (Kyrgyzstan), Tashkent and Samarkand (Uzbekistan), Ashgabat (Turkmenistan), then crosses Tehran to reach Mashhad (Afghanistan). This project will help China as well as Iran to deal with the incompatibility of the Persian Gulf neighbors since the benefits attached to the networks will certainly magnetize Gulf monarchies towards Iran as well as BRI railway projects. In addition, the Chinese railway networks being a gauge for its Silk route plan have the efficacy to improve the regional solidity and interaction for Iran. For instance:- the proposed Khorramshahr-Basra Railway network between Iraq and Iran is receiving aid from China, considering it as a potential route to connect Silk Road with regional rail system of Gulf Cooperation Council (GCC) countries, as Basra is only 154 km away from the GCC country, Kuwait that would extend the connectivity further. As the Chinese railway project in Iran will not only make Iran a giant crossroad of the trade routes but also in boosting its economic as well as regional connectivity, thus largely viewed as a win-win collaboration.

However, the outspread of the Covid-19 Pandemic in the Iranian holy city of Qom has halted the work of railway network projects. On the one hand, there has been a considerable increase in the anti-Chinese sentiments in Iran, with a certain section of populace claiming that Iran contracted the virus in lieu of the economic and trade support from China. The spread of the virus has also affected the somewhat improving relations of Iran with the Gulf countries, as reports allege that Iranian travelers had spread the virus to these countries. While on the other hand, the unwillingness of majority Iranian politicians to accept Chinese workers/ travelers as a source of the virus, due to the importance of China to Iran is also noteworthy. Moreover, the latest removal of India from the Chabahar-Zahedian line project citing continuous delay in the funding is going to fuel up the Sino-Iran interactions, as the involvement of India in the Chabahar Project remained a critical concern of China and challenge to its Gwadar port project in Iran.

The BRI railway network has the potential of not only bridging the infrastructure and connectivity gap at the global level, but also at the regional level for Iran. However, Iran should not be excessively dependent on China, as it can lead to a situation reminiscent of pre-revolution era when it shared a skewed power dynamic with the USA. Moreover, China has certain unilateral goals through the BRI railway network and any conflicting stance of Iran can be a major setback to achieving its regional aspirations.

‘Shinzo Abe Fails to Double Down under Mounting US Pressure Twice Over, Prefers to Step Down: Chinese Experts’

Hemant Adlakha, Honorary Fellow, ICS and Associate Professor, JNU

Abstract: Experts in Beijing believe Abe got caught up in the unending hostility between Japan’s key ally, the U.S. and China, its largest trading partner — just like in 2007

Japan’s Prime Minister Abe Shinzo, considered a strong leader in several foreign capitals, including Beijing, abruptly announced last Friday that he is resigning for health reasons. But writing for the New York Times last Sunday, a leading political scientist in Japan, Koichi Nakano, did not believe a relapse of ulcerative colitis was the only reason why Abe abruptly announced his decision to quit.

Like Nakano, most analysts both at home and abroad have cited multiple factors preventing Abe from extending his record as Japan’s longest serving prime minister – seven years and eight months, to date. At the time of Abe’s “surprise” announcement, his disapproval ratings stood at 34 percent, the highest ever during his record tenure. Among the most prominent reasons for his rising unpopularity include a negative view of Abe’s response to the pandemic and allegations of a series of scandals and controversies he is still mired in – including extravagant, lavish events such as “the cherry blossom viewing party” that the prime minister hosts every year but is paid for by taxpayer money. Other factors behind his dropping popularity include: a dismal failure in rebuilding the Japanese economy as promised by his signature “Abenomics”; the controversial re-militarization of Japan, which saw massive street protests by the anti-war Japanese people; and last but not least the ill-conceived “Abenomasks” policy, under which each household was promised two washable cloth masks – the plan not only irritated the people but was immediately dismissed as “useless” and “inefficient.”  The endless list of the Abe government’s failures goes on and on, analysts are telling us.

Interestingly, neither Japanese experts nor Japan watchers in the West have seen a possible connection between the prime minister’s resignation and the worsening U.S.-China rivalry. On the other hand, as the South China Morning Post put it, Abe’s “eight-year spell in office saw several ups and downs in Japan’s relations with Beijing, the most recent being the straining of ties between Tokyo and Beijing due to the introduction of a national security law in Hong Kong earlier this year.”

To be fair, some analysts in Japan haven’t lost sight of the predicament Japan finds itself in: The country continues to depend on China economically while remaining dependent on the United States for security. “Aligning with the U.S., but at the same time maintaining functioning relations with China, is Japan’s top priority…this will not change,” Michito Tsuruoka, associate professor at Keito University in Tokyo, told SCMP on the day Abe announced his decision to step down.

The authorities in Beijing have refused to react to political developments in Japan, preferring to maintain a stoic silence — even while knowing full well the implications of a new leader in Tokyo. Chinese foreign ministry spokesperson Zhao Lijian declined to comment both on Abe’s resignation and on the leadership succession.

Chinese experts, however, have not only been forthcoming but even voiced differing opinions.

Liu Jiangyong, a Japanese affairs expert at the Tsinghua University in Beijing sees a “friendlier” post-Abe Japan. But Liu does not rule out continuation of the current Abe government’s foreign policy approach of trying to maintain a balance between Beijing and Washington in the event of U.S. President Donald Trump winning a second term. “If Trump wins and continues his aggressive policies with China, Sino-Japanese relations would be affected because Japan is, after all a key ally to the U.S. but Joe Biden may adopt a less extreme approach to Beijing,” Liu told SCMP.

Some Chinese scholars have been more appreciative of Japan’s mature approach toward Beijing under Abe in recent years, be it in the context of the two East Asian neighbors’ territorial dispute in the East China Sea — where Tokyo is not keen on starting a direct conflict with Beijing — or more recently, in tackling tensions with China over the COVID-19 pandemic and over Beijing’s imposition of a national security law in Hong Kong. “His [Abe’s] policy is one that emphasizes being both realistic and pragmatic,” according to Huang Dahui, an IR expert with Renmin University in Beijing.

Sima Nan, the stage name of a well-known nationalistic commentator, on Monday displayed a more hard-line approach toward Abe’s Japan. Sima dismissed a Keito University professor’s predictions about Japanese policies toward America and China in the post-Abe era as untenable. Overall, the take sounded like a warning to whoever is going to succeed Abe: “If you wish to reap China’s economic benefits, but at the same time you do not wish to sin against both China and America, this will no longer be possible in the face of the irreversible worsening U.S.-China bilateral relations.”

In 2007, Abe resigned for the first time from the prime minister position. Then, as now, the mainstream media both in Japan and in the West cited the following reasons for the fall of the government: Abe’s failing health, his controversy-plagued government, which foundered on scandals and gaffes, Japan’s decision to continue its military’s participation in the Afghanistan war, and most of all Abe’s rising unpopularity. In China, on the contrary, it was widely believed that a significant factor leading to Abe’s resignation in 2007 was his failure to maintain a perfect balance in Tokyo’s relations with the United States and China. Abe, who had just become prime minister, actually wanted to revive the fledgling Japanese economy by developing good relations with China and at the same time he wanted to establish a China-Japan-South Korea free trade area. Unfortunately for Abe, the United States found this to be against its national interest.

Abe proved to be wiser as he began his second tenure as Japan’s prime minister in 2012, Chinese Japan watchers say. He won former U.S. President Barack Obama’s confidence in Japan as a reliable ally committed to free trade and a stronger military ally in the Asia-Pacific region. Notably, Abe and Obama reached an agreement that would extend Japan’s ability to come to the defense of the United States. However, with the change of guard in the White House following the Trump victory in 2016, Abe’s policy of wooing the United States faced a huge challenge. And now as the worsening U.S.-China rivalry is accelerating, Abe has fallen sick once again.

In the words of veteran “leftist” Chinese foreign affairs observer Zhang Zhimin, if U.S.-China relations today were at the same level as before Trump launched the trade war or even before the outbreak of COVID-19, it would have been okay for Japan to still dabble with both parties. But now Japan is caught in a dilemma of having to choose between China and the United States. No wonder, Zhang uses the famous Chinese saying “one cannot have fish and bear’s paws at the same time” to describe Abe and Japan’s predicament. The saying actually means that in order to get something, one must sacrifice something.

In other words, what Zhang is implying is that Abe’s timing to resign both times has been perfect. And both times, his resigning in the middle of worsening U.S.-China tensions was not a coincidence.

Originally Published as Chinese Experts Think US-China Rivalry Accelerated Abe Shinzo’s Departure in The Diplomat, 2 September 2020.

China Myanmar Friendship: Implications on India

Priyanka Madia, Research Intern, ICS

Myanmar is one of India’s most important neighbors, four of our sensitive Northeastern states share a border with Myanmar, and it is India’s land gateway to Southeast Asia. Myanmar is a country enriched with abundant natural resources with an economy complementary to India. India and Myanmar share a long land border of over 1600kms and a maritime boundary in the Bay of Bengal. India shares the strategically important ocean space of the Bay of Bengal with Myanmar. China’s dominant presence at the port of Myanmar, which gives open access to the Indian Ocean to China, could become a significant security concern for India. The blog argues that India must be far more focused on strengthening its relations with this neighbor than is evident today.

Myanmar is located on the eastern flank of India. It is shaped like a large kite, with a mountainous crescent to the north, alluvial plains at the center, and a long and narrow isthmus stretching into the Andaman Sea to the south. From east to west, it is watered by the Chindwin, Irrawaddy and Salween rivers all of which run north to south. This makes north-south communication links much more comfortable than the east-west links, which have to cross the deep river valleys and also the lines of hills. Myanmar is a multi-ethnic country. The 18 major ethnic groups occupy the rugged mountains on its borders with India, China, and Thailand, with the majority, the Burman population, inhabiting the flat plains at the center and along the coast. Myanmar has a history of ethnic conflict, which is a constant preoccupation for the central government. The ethnic groups also spill-over into neighboring countries, with India, for example, the Nagas and the Mizos (known as Chins in Myanmar) straddle the border. Just as the country enables access to Southeast Asia for India, it is also a corridor for China to the Bay of Bengal and a partial answer to its so-called Malacca Dilemma, or the need for most of its energy supplies and cargo from across the Indian Ocean to pass through the narrow confines of the Malacca Straits. Hence, Myanmar plays a crucial role in China’s ambitious Belt and Road Initiative(BRI).

Myanmar-China Relations

Throughout history, Myanmar has tried to balance its relations with its two giant neighbors, India, and China. However, Myanmar has had a higher threat perception from China because of the latter’s use of ethnic groups to keep the central government off-balance. This had continued though, in different forms, Chinese influence in Myanmar began to see a significant rise since the 1990s when the military junta staged a coup and prevented the democratically elected National League for Democracy(NLD), led by Aung San Suu Kyi from taking office. The military regime faced international criticism and sanctions. India, too, opposed the government and supported the National League for Democracy. China stepped in to help the Myanmar military with arms and economic and commercial links and soon became an essential partner. It assisted the regime by brokering arms for peace or ceasefire agreements with the various ethnic groups under its influence for several years. Despite the political changes that have taken place in Myanmar in recent years with Aung San Suu Kyi and her party sharing power with the deeply entrenched military, China has maintained enough levers of influence to continue its dominance country.

Myanmar has never been comfortable with its over-dependence on China. Even the military regime tried to balance Chinese influence by becoming a member of the ASEAN in 1997 and later of the BIMSTEC. It responded positively to India’s overtures in the 1990s and encouraged Indian support to infrastructure building, including cross-border links. Chinese involvement in infrastructure projects was slowed down, with the Myitsone hydro project suspension on the upper reaches of the Irrawaddy River. There was also a degree of caution in its participation in the BRI to avoid high debt levels. However, in other respects, China has probably emerged as an even more powerful influence in the country than a decade ago. Some of the key projects are the oil and gas pipeline from Myanmar’s Rakhine coast to Yunnan province, the development of the Kyaukphu deep water port, and the proposed rail and road links connect to Southeast Asia through Myanmar.

There are two significant projects between China and Myanmar in terms of the Belt and Road initiative. The Kyaukphyu special economic zone is one of China’s crucial projects at the Bay of Bengal coast on the western Rakhine state, giving China direct access to the Indian Ocean and allowing its oil imports to bypass the Strait of Malacca. It also serves the terminus for the twin cross border oil and gas pipelines between the two countries. The framework agreement was signed between the Myanmar government and the China International Trust and Investment Corporation (CITIC)in November 2018. The project investment in the initial phase was US$1.3 billion, with 70 per cent from CITIC and 30 per cent from the Myanmar government. The concession period is said to be 50 years, during which the Myanmar government will earn US$7.8 billion in revenue from the SEZ and US$6.5 billion from the deep seaports. The project covers a combined 1000 hectares, including an industrial park and deep seaports on Made and Yanbye islands. 

Muse Mandalay railway project travels from China’s Kunming through Myanmar’s Muse on the Chinese border in northern Shan state to Mandalay in Central Myanmar. It’s a part of Beijing’s plan to build a parallel expressway and railway line from Ruili (across the border from Muse in China’s Yunan province) to Kyakphyu. The 431kms electric railway passes through armed conflict areas in Shan state; the estimated investment cost is US$8.9 billion. 

During President Xi Jinping’s two days, visit Myanmar on 17-18 January 2020, which was the first visit by a Chinese leader in 19 years. There were talks held, and dozens of agreements were signed, paving the way for implementing various projects underway the Belt and Road initiative. However, Myanmar is not a passive bystander and has managed to negotiate better conditions regarding BRI projects. In 2017, the CITIC group decided to reduce its stake in the project from 85 to 70 per cent. Also, the Myanmar government effectively scaled the project down from $7.3 billion to $1.3 billion in 2018, realizing that the project was taking on too much debt.

India-Myanmar Relations

Since the 1990s, it has been an objective of Indian policy to become a significant countervailing presence to China in Myanmar. This has been moved by the need to elicit Myanmar’s cooperation in dealing with the Northeast insurgencies and promote India’s Look East policy. There are two significant projects in Myanmar led by India, which focuses on improving connectivity with Myanmar and enable to counterbalance China’s BRI in the Indo Pacific region. Still, its efforts have paled in comparison to China.

The India-Myanmar-Thailand highway project will boost trade and commerce in the ASEAN, India Free Trade Area, and the rest of Southeast Asia. It is a part of India’s Look East Policy that will cultivate and strengthen economic and strategic relations with the nations of Southeast Asian countries to solidify its standing as a regional power. The project helps the Indian position as a counterweight to the People’s Republic of China’s strategic influence in the region.

Kaladan Multi-Modal Transport Project is set to promote neighborly ties, trade, and tourism under the government’s Look-East or Act-East policy. But unfortunately, it hasn’t traveled much, the Kaladan Multi-Modal Transport Project is designed to connect Kolkata with Myanmar’s port of Sittwe by sea and to move northwards by the Kaladan river to Paletwa, and a long stretch of road from to Mizoram in India’s Northeast. This project is seeking an extension till June 2021. The fundamental goal of construction of Sittwe Port is to create a multi-modal sea, river, and road transport corridor for shipment of cargo from the eastern ports of India to Myanmar through Sittwe port and to the Northeastern part of India via Myanmar. The approved construction cost is US$68 million. But the projects are consistently facing delays.

India has failed to emerge as a credible countervailing power balancing China’s formidable presence in Myanmar. An entrenched Chinese presence along the Rakhine coast across the Bay of Bengal is particularly worrisome. With Nepal, Sri Lanka, Bangladesh, and Myanmar wading into the BRI, India stands badly isolated, and this is something India needs to work upon. Since 2012, India has been trying to modernize and extend its navy to counter China’s increasing challenge, but finances are scarce, and projects are yet to materialize. That makes it harder to maintain India’s ambition to become the Indian Ocean’s security provider.

To knit the Indian Ocean into existing defense plans for the Pacific, India should coordinate with the Quad, including countries in the United States, Japan, and Australia. Myanmar is desperate for financing to help build roads, ports, power plants, and other massive infrastructure to drive economic growth. Since the world is well aware that Chinese loans come with a deadly debt trap, expanding China’s geopolitical and military reach and failure to be transparent creates a vast opportunity for India to compete with China and blunt some of its recent gains. India should be focusing on the project that helps the Indian position as a counterweight to the People’s Republic of China’s strategic influence in the region.