How China Plans to Further its Technology Ambitions – A Snapshot from Semiconductor Industry

Megha Pardhi

       Source: Marketwatch.com

Even as scientists call for a Marshall Plan to preserve US dominance in computing power, its technology war might have turbocharged China’s ambitions instead of scuttling them. The Communist Party has responded to America’s ‘decoupling’ strategy with a clarion call for self-reliance while using post-COVID19 recovery efforts to galvanize its entrepreneurs, researchers and even retail investors. Recent developments in China’s semiconductor industry indicate that progress there might serve as a playbook in the future for other segments of the technology world.

Semiconductors form the backbone of high technology used to make integrated circuits (IC) (chips) for use in electronic gadgets ranging from digital clocks to avionics. The current crop of chip industry leaders hail from US, Europe, Taiwan, and South Korea. China’s ambitions to dominate this industry are not a secret but despite a plethora of State-led policy measures such as special funds, tax incentives and even alleged espionage, Chinese companies are nowhere close to their foreign peers.

Focused support for the semiconductor industry can be traced back to 2014 when China released the National Semiconductor Industry Development Guidelines and set up the China National Integrated Circuit Industry Investment Fund. This 200 billion-yuan (US$29.08 billion) fund aims to back the research and innovation in the semiconductor industry. Moreover, the semiconductor industry in one of the ten sectors prioritized under ‘Made in China 2025′ initiative.

A new policy introduced by the State Council in August 2020 exempts corporate income tax on enterprises based on specified criteria. For example, integrated circuit (IC) projects and enterprises that have operated for more than 15 years will be exempted from corporate income tax for up to 10 years if they employ the 28-nanometre processor or more advanced nodes, while projects from 65nm to 28nm will get five years tax-free and qualify for a 50 per cent discount on the corporate rate for the subsequent five years. The ‘thousand talents program’ of China aims to attract Chinese diaspora in high technology areas, including AI and semiconductors. According to a study by MacroPolo, China still lags significantly behind the US in terms of expertise in AI. While 29 per cent of global AI researchers hail from China, only 11 percent of them work in China. On the other hand, 59 per cent of AI researchers work in the US. With the ‘thousand talents program’ and other similar initiatives, China aims to bridge this gap. Despite setbacks due to COVID19 and trade war with the US, China has persisted with its efforts to develop chip manufacturing capabilities. In September 2020, China included the third-generation semiconductor industry into China’s upcoming  14th Five-Year Plan (2021-25). The details of this policy are still unknown and likely to be available after October 2020.

In addition to State agencies, the Chinese private sector has also played a crucial role in furthering the chip self-sufficiency ambitions of China. First, the private sector has been vital in acquiring key strategic semiconductor technologies and companies. For example, a recent Reuters report unearthed an extraordinarily complex series of transactions which landed Microprocessor without Interlocked Pipelined Stages (MIPS), a leading US chip technology, in the portfolio of China registered CIP United. Second, the private sector in China is also engaged in research and development of advanced semiconductor technologies. Huawei’s fabless IC company Hisilicon is currently one of the most advanced IC companies in China. Chinese tech giants like Alibaba and Baidu also have their semiconductor chips design companies. Moreover, numerous startups in China focus on semiconductors. Some of the top startups in China are CXMT, Senscomm, Yangtze Memory Technologies, ProPlus Electronics, Spectrum Materials, and ASR Microelectronics.

The culmination of all these efforts is that China’s semiconductor industry is slowly inching forward despite challenges posed by trade war and COVID19. Self-sufficiency in funding is perhaps easiest to achieve. Semiconductor Manufacturing International Corporation (SMIC), a Chinese foundry with government stakes, was recently listed  on Shanghai STAR stock exchange after delisting in the US. The listing received fast-track approval within a record 19 days and SMIC shares gained 245% on the first day of listing. This offering made STAR the exchange with the second-most funds raised in the world in 2020, behind Nasdaq and ahead of Hong Kong.

Several challenges plague China’s ambitions to become self-sufficient in semiconductor design and manufacturing. First, the COVID19 has affected several industries including semiconductor manufacturing. The semiconductor chip manufacturing industry is one of the truly global industries with the operations spread out across several locations. The COVID19 situation has affected the global supply chains and in turn, the semiconductor industry in China. Despite the COVID19, market sentiment in China’s semiconductor manufacturing remained positive. Second, the poor planning can likely be an obstruction in achieving the Chinese dreams of self-sufficiency in manufacturing. For example, reports have emerged of a US$20 billion government-backed state-of-the-art semiconductor manufacturing plant in Wuhan being stalled due to poor planning and lack of funding. Another US$3 billion government-backed chip plant owned by Tacoma Nanjing Semiconductor Technology was reported for going bankrupt. Third, the semiconductor industry in China is generations behind the top manufacturers in the field. SMIC has just started mass production of 14nm 1st generation FinFET technology ICs while world’s largest semiconductor foundry Taiwan Semiconductor Manufacturing Co. (TSMC) is moving towards manufacturing 5nm technology. Moreover, as per the SCMP China Internet Report 2020, China still lacks 20 key technical materials and 30 advanced technology processes. China plans to overcome this technological gap by concentrating on ‘AI chips’. AI chips are specialized chips optimized for Artificial Intelligence computations. The limitations of chip design, as postulated by Moore’s law, are making it difficult for chip makers to design and manufacture cost-effective chips. AI chips can be manufactured using relatively older technology and are comparable in terms of performance. AI chips have low barriers to entry as compared to the traditional chips. Hence, it is easier for startups to enter the chip industry. Third, the US-China Trade War has severely hampered China’s plans. However, Chinese government and private industry are determined to counter the loss due to this trade war. For example, gauging the difficulties caused due to the US-China Trade War, China’s tech veterans have launched a fund to support the Chinese tech companies sanctioned by the US.

These technological and political obstacles will at most delay China’s goals but are unlikely to halt them.  If recent trends in China’s semiconductor industry gain momentum, they are likely to form part of a template of the high-tech industry seeking self-sufficiency.

Harnessing the untapped potential: India-Taiwan cooperation in education

Kannan R Nair, Former Research Intern, ICS

                                                Source: TaiwanToday

Recent border tensions between India and China after the Galwan valley skirmishes has led to heated debates on the future of cooperation between the emerging markets in Asia. Amongst emerging bilateral deficiencies beyond the strategic, the partnership in higher education is being contested. The Confucius Institutes, which teaches Mandarin and acts as a primal agent of Chinese soft power in India is now under scrutiny after the new low in Beijing-New Delhi relations. These developments are reflected in the New Education Policy (NEP) released by the Government of India by taking down Mandarin from the list of foreign languages. Contextualising this, in order to broaden the scope of student enthusiasm to study China better, Taiwan could act as the best possible alternative.

The primary concern for students opting for higher education in foreign countries is post-study work opportunities, quality infrastructure and decent remuneration. In the case of Taiwan, sustained rapid economic development is reflected in the development of higher education wherewithal. According to QS Asia University Ranking 2020, twenty-seven Taiwanese universities are in the top 300. The Times Higher Education Report shows that Taiwan is one of the top ten places with the most inexpensive fee structure to study at university level. Taiwan becomes a better alternative in terms of cost of living in comparison with other top educational hotspots in Asia like Singapore, South Korea, Hong Kong and Japan. 

Education in New Southbound Policy 

In 2016 under the leadership of Tsai Ing-Wen, the Democratic Progressive Party (DPP) won elections against Ma Ying-jeou of Kuomintang (KMT). The New Southbound Policy (NSP) announced in 2016 was the political response of DPP against policy orientations of the KMT towards Mainland China. The NSP was designed to diversify Taipei’s economic, cultural, educational and technological relations to South and Southeast Asia. 

The KMT government led by Ma Ying-jeou in 2010, signed the Economic Cooperation Framework Agreement (ECFA) with China, which had a decisive role in intensifying Taiwan’s economic over-reliance with Beijing. This engagement reflected in the expansion of the number of students from Mainland China to Taiwan. There are also reasons which attract Mainland students to study in Taiwan is the opportunity to study Mandarin in traditional Chinese scripts, unlike simplified script in China. The percentage of international students in Taiwan from China rose from 21% in 2011 to 36% in 2016. Over the same period, the students from NSP target countries reduced from 31% to 27%. 

When anti-Beijing Tsai Ing-Wen came into power in 2016, Taiwan witnessed a policy shift that modified the stance of the previous government. Tsai stressed in assorting choices in the realm of higher education beyond China. In the aegis of NSP, Tsai initiated a New Southbound Talent Development Plan in 2016. This plan acted as a platform to conduct high-quality research in Taiwan and encourage interflow of students across the globe. The Ministry of Education allotted 0.4% of the total budget to NSP in 2017. The spending on education in NSP was increased in the immediate year, by an increase of 70% to 0.7%. Even Though NSP showed limited success in advancing political relations with target countries; it paved the way for the omnipresence of a diverse international student community. For the first time in 2017, students from Southeast Asia studying in Taiwan surpassed numbers of mainland Chinese students in Taiwan. 

The ‘Taiwan’ opportunity for India 

Taiwan is leveraging its economic potential to transform it into a ‘Higher Education Hub’. The aim is to diversify Taiwan’s higher education leveraging potential beyond Mainland China. In that, to increase the outreach of NSP across South Asia, India can act as the most reliable partner. For India, balancing China needs multifaceted strategies, and in the soft power realm, Taiwan is the appropriate opportunity. To understand and decipher China in a better way it is necessary to propagate Mandarin learning centres across India. 

However, recent developments question the transparency of Confucius Institutes in India. The institute acted as an official word on Chinese education. It was accused previously in different countries, like the United States, Israel, Australia and Canada charged with espionage and misuse of political influence. In this context, the Taiwan Education Center (TEC) in India gets utmost importance. TECs are institutes funded by the Taiwanese education ministry specialized in teaching Mandarin, Chinese History and Culture and to foster international academic collaboration. Currently, India has eight TECs associated with prestigious institutes like Jawaharlal Nehru University, IIT Bombay and IIT Madras, Jamia Millia Islamia, O.P. Jindal Global University, Amity University, Chitkara University and Sri Ramaswamy Memorial Institute of Science and Technology in Chennai.

It is Kapil Sibal who first went on to take a pro-Taiwan position to invite 10000 mandarin instructors to India for popularising Mandarin education in High Schools across India. The proposal went into no effect considering possible responses from Beijing. Nevertheless, inspecting the vulnerabilities in the current situation, it is time that Indian policymakers replace non-functional Confucius institutes with TECs to promote Chinese language training, Chinese culture and academic exchanges. 

In 2018, the Indian students enrolled in Taiwanese universities were 2398, a sharp hike of 56% as compared to the previous year. Over the last decade, about 300 Indian students have availed scholarships to study in Taiwan. A MoU was signed between Association of Indian Universities and Foundation for International Cooperation in Higher Education of Taiwan in 2010 for mutual recognition of academic degrees. The recognition will enhance more academic exchanges and transactions in higher education. As of 2015-16, among the NSP target countries, only 4% are from India studying in Taiwan. Malaysia tops the list by 52%, second being Indonesia with 15.4 per cent. In total, overseas students studying in Taiwan from NSP target countries, 85% are from Southeast Asia. 

Analyzing the outreach of NSP beyond China, available data shows its evidence only in Southeast Asia. India’s disposition in tapping Taiwan’s potential and policy proposals discerning cooperation in education has shown meagre results. Especially in higher education, India needs to work on narrowing down the information gap to popularize the ‘Taiwan opportunity’ by effectively cooperating with TECs in this regard. New Delhi should also welcome Taiwanese students to study in prestigious institutes across India by providing scholarships. 

The Progression of Chinese Soft Power

Aadil Sud, Research Intern, ICS

           In politics, soft power has often been described as the ability to be able to persuade or attract other political actors to support your own interests. It shuns the traditional carrot and stick approach, and strives to attract and co-opt, rather than coerce, seeking instead to achieve influence by building networks and making a country naturally attractive to the world. The most popular definition of this concept was given by Joseph Nye, who stated that soft power was “when one country gets other countries to want what it wants”. Over the years, many different aspects of soft power have been talked about. Some of the most common forms of soft power promotion are a country’s global image, political prestige, and cultural capital.

China is a country that has over the past decades invested heavily in its soft power capabilities, often accompanying its hard power strategies with soft power parlance. A good example of this has been China’s ‘historical’ claims to territory in the South China Sea, which they state had been controlled by China even before the rise of modern nation-states, trying to add more legitimacy to their claims. To date, it has also promoted itself heavily in the fields of diplomacy, education, culture, and economics as well, which have resulted in tremendous returns for them.

Soft power was explicitly referenced for the first time at the seventeenth National Congress of the Chinese Communist Party (CCP) in 2007, where former president Hu Jintao stated that “The great rejuvenation of the Chinese nation will definitely be accompanied by the thriving of Chinese culture”. Xi Jinping was further quoted as saying in 2014 that “We should increase China’s soft power, give a good Chinese narrative, and better communicate China’s message to the world”.

To this end, China has made efforts to increase its diplomatic power, overtaking the USA to have the largest diplomatic force in the world in 2019. It has also made a concerted effort to promote Chinese culture, focusing on language, art, music, and movies. One of its biggest achievements in this has been the spread of Confucius Institutes around the world. Having criticised Confucius for decades, the CCP has since co-opted interest in pre-modern Chinese culture, recognising that Confucius is one of the more recognisable intellectual minds outside of China, and has avoided negative connotations like those surrounding leaders like Mao. Starting in 2004, China began “establishing non-profit public institutions which aim to promote Chinese language and culture in foreign countries”. As of 2019, there were an estimated 550 institutes around the world. This has been part of the push to spread and increase interest in Chinese language education around the world. Another similar push has also been implemented in countries like Nepal, where China proposed covering the salaries of teachers who teach Mandarin, resulting in many schools making learning the language compulsory.

Another aspect of Chinese soft power, in the current world climate, has been touting the efficiency of its system of governance. Before the pandemic, China united countries behind the leadership of Xi Jinping, attempting to usurp the influence of a rapidly declining America under Donald Trump, which was heading towards further isolationism and walking back from previously agreed trade and climate deals. The most important issues where China has strived to integrate itself and replace the role of the USA includes, but is not limited to the Paris Climate Agreement, negotiating with the Taliban in Afghanistan, as well as with trade issues. It has showcased China under President Xi and the CCP as a conscientious leader, willing to sacrifice its own interests for those needed to combat issues like climate change. Since the advent of the pandemic, there has been a renewed interest in showcasing China’s institutional advantage worldwide. With the failures of liberal democracies around the world to control the spread of the pandemic, and with China effectively quarantining the epicentre of the pandemic, registering only around 80000 cases, China’s governance system has been touted as extremely effective in crisis situations.

This, combined with discourse about how a difference in attitudes between the East and the West influenced the handling of the pandemic, have resulted in a highly politicised soft power tussle, with Trump blaming China for the virus, referring to it as the “Chinese Virus”. Conversely, China has also made efforts to shift the blame onto western countries such as France and the USA and tried to raise international goodwill by donating medical equipment and supplies to many countries in need. Along with this, it has also engaged in pandemic propaganda. For example, China mobilised 5000 medicinal practitioners in support of their response to the virus, and proposed vaccines based on traditional Chinese herbal medicines. According to Prof. Ji Zhe, more than 90% of China’s cured cases had made some or the other use of such herbs, very similar to how certain sections of society in India have touted Ayurveda and immunity boosting as effective ways to combat the pandemic. While the effectiveness of such medicines is a separate issue, it has become highly politicised, as it has been portrayed as Chinese products, pushed forward by the CCP, which had been used to save the Chinese people (and can be used to save others across the world).

Finally, with the projected global recession, China has sought to improve its appeal economically as well. This, for them, would improve chances of governments working with the CCP, as a way to boost their economies in the post-pandemic period. This has been matched with a widespread admiration for the way China has successfully transitioned from a low-income country to a middle-income one very rapidly. The Chinese growth miracle has been one of its biggest successes, and one of its biggest attractions as well. For example, the Barbadian Prime Minister David Thompson has expressed admiration for the Chinese economic model and sought to emulate the way Chinese state-controlled banks guided development, both within China, and abroad. This has, in recent years, been combined with their promotion of the Belt and Road Initiative (BRI). China’s economic heft has also been used to promote the One China policy, where countries have been offered low-interest loans with the only preconditions being to recognise the PRC as the ‘real’ China, a method that has been immensely successful for them in the past.

However, the CCP’s efforts to promote Chinese soft power have often been met with many obstacles in the past, as well as currently. For many years, China has been seen as an imperialist nation by many of its neighbours, and by others around the world (due to, for example, its territorial tensions in the China Seas and beyond, with Vietnam, Taiwan, Japan, as well as in Southeast Asia), something that has dampened excitement of integrating with the Chinese growth miracle. This has been exacerbated by allegations and concerns of falling into a debt trap over the BRI, which takes on more concern amidst a pandemic-induced recession, decreasing the pull of China as both an economic and political partner for many. Concurrently, China’s recent actions relating to Hong Kong, accusations of human rights abuses in Xinjiang, as well as concerns over similar actions in Tibet have served to reduce trust and raise criticism of the Chinese state. According to Dr. Victoria Tin-Bor-Hui, international opinion of China around the world currently is at its lowest point since 1989, the year of the Tiananmen Square agitations.

As we can see, China’s soft power, as well as its efforts to promote the same, are something many countries around the world can learn from. The CCP has learnt very effectively, that soft power does not only revolve around Nye’s erstwhile definition of it, but also includes aspects that may have come under traditional hard power tactics. However, we again see the importance of good relations with other countries, as despite all their achievements, China is often portrayed as having several black marks against it, that has served to reduce the willingness and interest of many countries to outright ally with it, as opposed to offering them issue-based support – which is the nature of world politics today. However, China’s pull – culturally, economically, politically, as well as technologically cannot be ignored, and has played a large part in how they have managed to secure a preeminent place in world politics, and solidified themselves as a major actor in issues around the world, providing a direct challenge to the US-based hegemony that we see in our world today.

QUAD is the US “Latest Toy” to Thwart China’s Growth. But India Now More Keen to Play Along, say Chinese Experts

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

On 6 October, 2020, the world’s attention was focused on the rare in-person Quad foreign ministers’ meet in Tokyo. But some Chinese commentators were closely watching India’s External Affairs Minister Subrahmanyam Jaishankar and New Delhi. Why?

                        Pompeo with Jaishankar in Tokyo                        

                        Photo: wionews.com

As was expected, not “Japan’s ‘Trump Whisperer’,” the Foreign Minister Toshitmitsu Motegi, but the US Secretary of State Mike Pompeo called the shots in Tokyo during the Quad second ministerial talks. But some Chinese observers, as also the Chinese Foreign Ministry mandarins, had their eyes and ears set on the Indian EAM Jaishankar and on the outcome of his separate meeting with Pompeo. For as the US presidential election voting day draws closer, Pompeo’s Mission Tokyo was to use the Quadrilateral Dialogue – President Trump’s key to realizing the Indo-Pacific strategy – to remind its allies in the region to step up putting pressure on Beijing, some Chinese commentaries observed days before the curtain went up for the Quad foreign ministers’ talks. “The [Tokyo] meeting is set to be one of the highest-profile diplomatic gatherings for the Trump administration before the US presidential election, where policy toward Beijing has become a major campaign issue,” The Washington Post had stated just before the Quad meeting in Tokyo.

However, some Western strategic and security affairs critics of Trump’s foreign policy have ridiculed the President by saying he has been brandishing the term “Indo Pacific” as the US “latest toy” to checkmate a rapidly rising China. They are also quick in pointing out “Indo Pacific” is the alternative grouping Trump has found to replace his predecessor Obama’s TPP in the Asia Pacific region in which China has been excluded. While not quite subscribing to the views of the critics of “Indo Pacific” strategy, at least one Chinese analyst perceives “Indo Pacific” to be a “brilliant concept but difficult to implement.”

Interestingly, in Beijing’s view, India’s recent change in stance on QUAD from being a “geographical concept” to “good mechanism” in Asia Pacific has provided enough dynamism to the US “Indo Pacific” concept to revive up its China containment policy. Quite in tune with what at least some scholars in China have been telling us, a US commentator recently wrote of both Indo Pacific concept and Quad security dialogue: “QUAD was served up to spice up (the Indo Pacific) alphabet soup, as a new strategy to slow, if not thwart, China’s rise as the predominant economic powerhouse in Asia Pacific.”

For example, Zhang Jie, a senior researcher at the China Academy of Social Sciences (CASS) in Beijing strongly believes the transition from “Asia-Pacific” to “Indo-Pacific” is a prominent feature of Quadrilateral Security Mechanism dialogue. This trend highlights the importance of the Indian Ocean, the increasing connection between the Indian Ocean and the Pacific Ocean and the increasing weight of India in the world, Zhang recently observed in his widely read article in Guangming Daily – China’s most influential newspaper among the urban intelligentsia.

This explains, in spite of the fact that Pompeo had told reporters before leaving for Tokyo the outcome of the talks will not be made public until after he gets a nod from the POTUS on his return to Washington, why China’s strategic affairs community was closely watching the Indian EAM Dr. Jaishankar’s tête-à-tête with Pompeo during the QUAD Tokyo Forum. Primarily due to India making a significant shift during past six months from what Prime Minister Modi had asserted at the Shangri La Security Dialogue in 2018 that “Indo-Pacific is not a strategy or a club of limited members” to New Delhi’s reticence today on the militarization of Quad.

Highlighting the fact, an Indian national English language daily, The Hindu in its editorial on the eve of the Tokyo talks cited the country’s powerful Chief of Defense Staff (CDS) – believed to be close to PM Modi – as having stated “India believes the Quad would be a good mechanism to ensure Freedom of Navigation Operations in the Indian Ocean and surrounding oceans including the Indo Pacific.”

“Quad” – Background and Past Trajectory

While a handful of commentators first explained the origin of the US, Japan, India and Australia quadrilateral grouping at the initiative of Prime Minister Abe at the ASEAN Regional Forum in Manila in May 2007, when Abe advocated the “Broader East Asia” or “Greater Asia” concept. They also pointed out the US multilateral security interaction was launched following a series of bilateral and trilateral meetings between and among the present-day Quad four countries. But due to several uncertainties then prevailing both in some of the Quad countries and also in the world, the “Greater Asia” concept along with the US, Japan, India and Australia security grouping – also dubbed by some in Beijing as the “Asian NATO,” failed to see the light of day.

In the words of widely respected Professor Zhang Li of Academy of Ocean of China (AOC), some key factors which led to premature death of the so-called Quad or the Asian NATO were, namely Abe’s sudden resignation on health grounds, the refusal of the then newly elected Australian Prime Minister Kevin Rudd of the Labour Party to join any multilateral grouping targeting China and the impending global financial crisis. Besides, Zhang Li also attributes full credit to the “alert” Chinese diplomacy in sounding death knell for the quadrilateral security grouping when Rudd visited Beijing soon after he assumed the post of Australian Prime Minister in late 2007 and unilaterally declared withdrawal of Australia from the quadrilateral security dialogue.

From Quad to Quad 2.0 – India a Key Factor since 2006

Irrespective of whatever happened to the fate of Quad 1.0 and contrary to what is generally believed both in India and among strategic affairs community in the US, Japan and Australia, Beijing has been closely monitoring India’s growing importance in quadrilateral security dialogue for over a decade and a half now. According to Professor Cu Caiyun of Institute of Asia Pacific and Global Strategic Research at the Beijing’s prestigious China Academy of Social Sciences (CASS), with the rapid and powerful rise of China since the unfolding of the 21st century, the US, Japan, India and Australia have drawn closer to each other.

“Held together by the outdated Cold War mentality of yesteryears, the four nations have been sticking together under the so-called bogey of common values and have formed groupings such as Democratic Alliance or a quasi-alliance with a singular aim to carry out their China containment design,” Professor Caiyun recently wrote in a widely influential research paper. Interestingly, Caiyun’s paper, entitled “A Rising China and Formation of Four Nation Democratic Alliance comprising of the US, Japan, Australia and India” was not published in the CASS journal, but it appeared in the flagship bimonthly Global Review of the Shanghai Institute of International Studies (SIIS) – both SIIS and GR enjoy a good rapport with the central authorities in Beijing.

Quad 2.0 – “Beggar’s Club” and Empty Rhetoric

Dismissive of President Trump’s initial desperate efforts to revive Quadrilateral Security Mechanism three years ago, scholars in China had called Trump’s “anti-China” move as “a meeting of four poor beggars” in the Indo-Pacific region. Long Kaifeng, a former PLA navy senior officer who now writes syndicated columns on military affairs, points out several inherent contradictions in Quad’s conceptual framework. First, the “negative” premise on which the concept is conceived, that is to treat China as an antithesis or an imaginary enemy. Second, the US alone does not have the wherewithal to carry out its China containment policy. This is because within Quad, it is only the US which thinks it is in its national interest to implement China containment policy. Third, closely linked to the second factor above, it is true that Japan, Australia and India (notwithstanding ongoing border tension between India and China), given their respective economic compulsions, are least willing to or prepared for directly confronting China.

Perhaps aware of what China’s Foreign Minister Wang Yi told Japan’s national broadcaster NHK last week (the NHK reported a possibility that Wang Yi may also visit Tokyo this month): Quad is a “headline-grabbing idea,” Professor Wang Zheng of Dr. Sun Yat-sen University in Canton, unlike most other Chinese analysts, scornfully dismissed the Quad grouping as “empty rhetoric.” With sarcasm in tone, Wang Zheng recently wrote: “Let the four countries first come up with their top leaders’ summit meeting or set up an institutional arrangement.”      

Finally, scholars in China are confident that in the post COVID world, the continuing decline of the United States – both economically and as the world’s dominant power – is inexorable. Hence, Beijing is in no doubt, Washington’s China containment policy is in need of New Wine in a New Bottle. Meanwhile, the Indian EAM Jaishankar’s remarks after the Quad talks in Tokyo that “it’s a matter of satisfaction that Indo-Pacific concept has gained increasingly wider acceptance” might have only further strengthened what the Chinese scholars have maintained all these years. Therefore, Beijing was least amused in what was one of India’s several “independent” TV news channels’ lead headlines hours before the Tokyo talks: “Quad FMs Meet in Tokyo as India Looks to Unite Allies against Aggressive China.” Undeterred, Beijing continues to closely watch which way Quad headwinds will be blowing in the Indian capital!

Originally published as Is QUAD the US “Latest Toy” to Thwart China’s Growth? by Nepal Institute of International Cooperation and Engagement (NIICE), Kathmandu on 6 October, 2020.

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.