Month: August 2020

China Myanmar Friendship: Implications on India

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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.

The Hong Kong National Security Law

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Bihu Chamadia, Research Intern, ICS

The new Hong Kong National Security Law (香港国家安全法 ) has caused massive controversy in Hong Kong as well as in the international community. On 21st May the Chinese authorities introduced a proposal in National People’s Congress (NPC) to enact the National Security Law. Further, on 28th May, the 13th NPC (人民代表大会), voted in favour of the National Security Law (NSL) for Hong Kong.  The new law aims at tackling secession, subversion, terrorism and foreign interference, the details of which were kept under wraps until it was implemented on 30th June2020. A protest broke out in Hong Kong city on 1st July and several people were charged under the new NSL.

The NSL consists of a total of 66 Articles divided among six chapters. Some Articles are more important to look at, as they provide an overview of what awaits Hong Kong (香港) and anti-CPC Hong Kong citizens.

Article 12 of the Law states the establishment of a Committee for Safeguarding National Security, which will be under the supervision of and accountable to the Central People’s Government in Beijing. Although the committee will be headed by the Chief Executive, Article 15 states that the committee will also have a National Security Advisor, who will be designated by the Central People’s Government and shall be responsible for providing advice to the committee relating to its functions and duties. Article 14 states that the committee will work in secrecy and its decisions are  not reviewable by the court. While Article 5 states that all persons shall be considered innocent until declared guilty by the judicial organ, Article 42 contradicts it by stating that no bail shall be granted to a criminal suspect or defendant unless the judge has sufficient grounds for believing that the criminal suspect or defendant will not continue to commit acts endangering the national security.  Article 38 states that the law would be even applied to offences committed against the Hong Kong Special Administrative Region (HKSAR) from outside the region by people who are not a permanent resident of HKSAR. Article 40 provides that the jurisdiction is in the hands of the Hong Kong authorities by default but it can be taken over by the mainland’s office for Safeguarding National Security. Further, Article 57 states that once in mainland, the processing and sentencing will be done according to the Chinese Criminal Law Procedure.

On the other hand, Article 60 provides complete impunity to the office and its personnel as they are not subjected to the jurisdiction of HKSAR while performing any act in the course of duty. The National Security Law has caused ripple effects not only in Hong Kong but in the international arena as well.

Hong Kong in Sino-US Relations

Sino-US relations have seen a massive downgrade since the Trump administration came into power in 2017. Human Rights and Trade have been a point of contestation between the US and China. Hong Kong has always acted as a geopolitical buffer state between China and the West especially for the U.S. Under the Hong Kong Policy Act of 1992, the U.S. had decided to maintain its favourable treatment, especially in the matter of trade, even after Hong Kong was reverted to Chinese sovereignty in 1997. The underlying condition for the preferential treatment was the autonomy of HKSAR. The Act also stated that “whenever the President determines that Hong Kong is not sufficiently autonomous to justify treatment under a particular law of the United States,” he is authorized to “suspend the favourable treatment.” In the wake of anti-extradition bill protests in 2019, the U.S. Senate and the House respectively passed the Hong Kong Human Rights and Democracy Act (HKHRDA) in November of the same year.

This indicated that the State Department would annually require to re-certify Hong Kong’s autonomous nature, in order to continue the so-called “special treatment” the U.S. affords to Hong Kong. It was a week after the National Security Law was tabled for voting before the NPC on 27th May, 2020 the U.S. Secretary of State Mike Pompeo refused to certify the autonomy of HKSAR.  On 28th May, the NPC passed the Hong Kong National Security Law. On 29th June, the U.S. Department of State ended exports of U.S.-origin defence equipments to Hong Kong. It also mentioned that U.S. will take steps to impose the same restrictions on U.S. defence and dual-use technologies to Hong Kong as it does for China. Mike Pompeo in his Tweet mentioned about the waning of ‘One Country, Two Systems’ （一国两制） and replacement of it with ‘One Country, One System’. As the Sino-US relations have already been in a tailspin due to the ongoing trade war and the COVID-19 impact, the recent issues have further exacerbated tensions in an already fragile relationship.

Sino-British Relations

Hong Kong has been a major component of the Sino-British relations. The recent move by the Chinese government has led to deterioration in the relations between two countries. Hong Kong was handed back to Chinese sovereignty in 1997 under the Sino-British Joint Declaration, 1984. Since then Hong Kong has been ruled under the framework of ‘One Country, Two Systems’, which is to continue until 2047. Under this system Hong Kong maintains a mini-constitution and enjoys autonomy on matters other than defence and foreign relations. On the National Security Law, the UK criticized China for breaching the ‘One Country, Two systems’ formula. On 11th June 2020, while presenting the 46th report to Parliament on Hong Kong, the British Foreign Secretary mentioned that China must respect Hong Kong’s autonomy and its own international obligations. Britain also mentioned that the Joint Declaration is registered with United Nations (UN). Thus, indicating its international obligations. On the other hand, China has mentioned that the Sino-UK Joint Declaration is unilateral policy announcement by China and not an international commitment.

On 1st July, Britain introduced a new route for those with British National (Overseas) (BNO) status to move to UK. BNO status holders refer to Hong Kong citizens born before 1997. The recent announcement by the British Prime Minister Boris Johnson in the House of Commons, extended the Right of Abode (ROA) to dependents of BNO passport holders, giving way for millions of Hong Kong citizens to acquire British citizenship. China’s Foreign Ministry criticized Britain’s decision and mentioned that the offering of ROA to BNO status holders is a breach of the terms of a memorandum offered by the UK to China in 1997.

China-Hong Kong Relations

Hong Kong maintains a democratic-capitalist system under the shadow of Communist China. It also enjoys certain level of autonomy on various matters and is governed by Hong Kong Basic Law. Article 23 of the law states that the HKSAR “shall enact laws on its own to prohibit any act of treason, secession, sedition, subversion against the Central People’s Government, or theft of state secrets, to prohibit foreign political organizations or bodies from conducting political activities in the Region, and to prohibit political organizations or bodies of the Region from establishing ties with foreign political organizations or bodies.”

Before the British handover of Hong Kong to China in 1997, China’s crackdown on the student-led democracy movement in 1989 created anxiety in Hong Kong regarding the handover and led to the political awakening of the population. In 1992, Chris Patten was appointed as the last colonial governor of Hong Kong. Patten initiated a series of political reforms designed to give the people of Hong Kong a greater voice in government via democratic elections to the Legislative Council (LEGCO).

When Hong Kong’s Democratic Party, led by barrister Martin Lee, routed pro-Beijing candidates in the 1995 LEGCO elections, Beijing denounced Patten and began a series of strong measures aimed at re-establishing its influence. On 24th March, 1996 China’s 150-member Preparatory Committee, which had been created to oversee the handover, voted to dissolve LEGCO and installed a provisional legislature after Hong Kong returned to Chinese sovereignty. In December 1996 a China-backed special election committee selected the 60 members of the provisional body, just days after it had overwhelmingly elected 59-year-old Tung Chee-hwa as the first Chief Executive of the HKSAR. Tung soon signalled his intention to roll back Patten’s reforms, announcing in April 1997 proposals to restrict political groups and public protests after the handover. After the handover, however, the situation in Hong Kong remained stable but complete freedom in the exercising political and civil rights remained doubtful.

In September 2002, Hong Kong government released a proposal to implement Article 23 of the Basic Law. In February 2003, the National Security (Legislative Provisions) Bill was introduced in the Legislative Council. This caused a massive upheaval in the city and the bill was finally withdrawn by the government following a huge protest by the citizens of Hong Kong on 1st July, 2003. The city has witnessed many protests since the British handing over of Hong Kong to China. Each protest has culminated into a “pro-democracy” protest. In 2012, Protests broke out in Hong Kong as the authorities tried to change the curriculum of the school system in Hong Kong. The 2014 Umbrella Movement was a movement against the decision of China’s National People’s Congress Standing Committee (NPCSC) regarding the ‘proposed reforms of the Hong Kong electoral system.’ The reforms suggested a pre-screening of the candidates by the CPC for the post of Chief Executive of Hong Kong.  The 2016 protestwas the first pro-independence protest held in Hong Kong as it demanded complete independence of Hong Kong from Mainland China. In 2017, as Hong Kong celebrated two decades of handing over of Hong Kong to the Chinese control, the pro- Democracy protesters marched against China’s refusal to grant ‘genuine autonomy’ to Hong Kong and the erosion of ‘one country, two systems.’ In 2019, the city, during the Anti-Extradition Bill movement, witnessed the most violent protests since its handover, as police used brutal force to supress it. It garnered the attention of the world and led to massive criticism of China on the international stage.

The Bill was eventually shelved indefinitely, causing major embarrassment for the CPC. Hong Kong was the last remains of the humiliation faced by China at the hands of a foreign power. Even when return to Chinese rule, in terms of politics, society and culture, there has been vast discrepancies between Hong Kong and Mainland. China, time and again has tried to interfere in the city’s day-to-day affairs in order to create more semblance between Hong Kong and Mainland. On the economic front, although, Hong Kong is just 2.7% of China’s but it remains a most favoured destination for FDI due to its financial and legal system. While international companies use Hong Kong as a launching pad to expand into mainland China. The bulk of foreign direct investment (FDI) in China continues to be channelled through the city. Although, recently Shenzhen surpassed Hong Kong in terms of GDP, Hong Kong still provided systems and frameworks which cannot be provided by Mainland Shanghai or Shenzhen. Most of China’s biggest firms, from state-owned Industrial and Commercial Bank of China (1398.HK), to private firms like Tencent Holdings (0700.HK), have listed in Hong Kong, often as a springboard to global expansion. Last year, Chinese companies raised $64.2 billion globally – almost a third of the worldwide total – via initial public offerings (IPOs), but just $19.7 billion of that came from listings in Shanghai or Shenzhen. Hong Kong has also been pivotal to China’s longer-term ambition to turn the RMB (Yuan 元) into a widely-used international currency, competing with the U.S. dollar.

Conclusion

The citizens of Hong Kong have often voiced their concern over the ‘Mainlandization’ of the city and the waning of ‘One Country, Two Systems”. The passing of the National Security Law has caused a great amount of anxiety among the citizens and was termed as a “Death Knell” for democracy in Hong Kong. Every year, 1st July commemorates the anniversary of the British handing over of Hong Kong to China and the citizens take out an annual march on this day. On 1st July, 2020 the day which commemorated the 23rd anniversary of British handing over of Hong Kong, the citizens marched into the streets while National Security Law was already put in place. The day witnessed the actual implementation of the Law when the protestors were arrested under the new Law on charges of “inciting sedition and terrorism”.

While China received massive criticism over subversion of freedom and rights of citizen of Hong Kong from various countries including the U.S. and UK, HKSAR Chief Executive Carrie Lam stated that “the National Security Legislation will help restore stability in Hong Kong, and protect the life and property, basic rights and freedoms of the overwhelming majority of residents” and will not cause any harm to freedom possessed by the citizens of Hong Kong. China lashed out at the U.S. and UK, stating that while these powers have a National Security Law in place, they are against China for doing something similar. China’s current domestic politics including rising nationalistic sentiments, of which territory occupies a great portion and Xi Jinping’s aggressive foreign and domestic policies have a major effect on the implementation of the law. Besides, the 2019 protests and fading CCP’s patience to deal with Hong Kong together has also played a great role in panning out of the new Law. The Chief Executive elections which was due in September was very crucial to the Law. The Hong Kong government on 31st Aug 2020 announced the postponement of elections by 1 year. While the reason cited by the government was the pandemic, the pro-democracy opposition remarked that this was an attempt to prevent their winning which, according to them, is inevitable in the face of massive dissatisfaction among the Hong Kong citizens. 

Finally, the Law has also affected China’s relation’s with other countries, including the U.S and UK. While Sino-US relations have already been on a crossroad due to trade war and the outbreak of COVID-19, the implementation of National Security Law by China and retaliation by the State Department of the U.S., further deteriorated the relations. U.S. has massive investment in Hong Kong which includes over 1,300 companies and $82.5 million dollars as direct investment and the new Law have put into risk U.S. business interest as it will no longer be protected under British-style common law jurisdiction. Moreover, as American elections remain due in November 2020, Trump has hardened its stand on China. On the other hand, the Sino-British relations have been in its ‘golden era’ post- ‘Brexit’. As Hong Kong constitutes an important part of Sino-British relationship, the National Security Law, means much more for the UK than what it stands for the U.S. Thus, UK’s has been the most direct international response against the implementation of the law.

As it were, other countries’ reactions make it easy for China to blame foreign interference and play the nationalist card to go through with the plan of completely integrating territories under the roof of ‘One China’.

Chinese Commitments in Afghanistan: A Strategic Calculus

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Aadil Sud, Research Intern, ICS

Afghanistan has long been a country on the periphery of Chinese policy due to its inherent instabilities, the presence of foreign coalition forces and the influence of the West acting as a buffer against overt Chinese involvement. Well aware of Afghanistan’s reputation as a ‘graveyard of empires’, China has refrained from serious involvement with the country, supporting the Afghan-led, Afghan-owned policy propagated by the West instead. However, with the imminent withdrawal of coalition troops, China has found a security and diplomatic void it is suited to fill, adding to its pre-existing investments in the country.

Since 2014, the National Unity Government has lobbied China for their assistance on issues of security, economic and regional integration. The prospects of peace in Afghanistan has since motivated China to ramp up its commitment to the nation. China’s Central Asian policy has the possibility of replication here, with economic commitments under the Belt and Road Initiative (BRI), military aid through arms sales and training, and reciprocal security assistance – with China aiding in dealing with the Taliban, and the Afghani government working to mitigate cross-border Islamist influence in Xinjiang, helping them combat their ‘three evils’ of terrorism, separatism and extremism. These commitments have led many to question the future role of China in Afghanistan’s post-coalition future. Namely, can China effectively integrate their relations with Afghanistan, in line with their own goals in the region?

Economic Integration with Afghanistan

Over the past few years, China has initiated numerous projects in Afghanistan’s key sectors – mining, transportation infrastructure, and agriculture. While the country is seen as geographically strategic, the BRI initially bypassed it. However, since 2016, both countries have jointly promoted this cooperation. Afghanistan acts as a link between China and Southern, Central and Western Asia, with the countries being connected in north by the Sino-Afghan special railway transportation project and the Five Nations Railway Project, which aim to connect to southern Afghanistan via the China–Pakistan Economic Corridor (CPEC). Afghanistan is also home to massive resource deposits, such as rare earth metals and lithium, which have the capacity to reduce the dependence of Afghanistan on foreign aid if exploited properly.

China, Afghanistan’s largest foreign investor, is using this position effectively to increase their influence in the region. According to Arif Sahar, an Afghan security expert based in London, these resources can only be effectively exploited by close neighbours, because of geopolitics and logistics. Aware that their manufacturing sector would benefit massively from this access to resources, ‘China is signalling that it is the only country in the region with the financial and economic capabilities that can be relied on as a trustworthy partner’.

This takes on more weight due to China’s interactions with Afghanistan’s neighbours. While China and Pakistan are perennial, all-weather allies, and remain economically and politically integrated, the recent push in Iran has provided Afghanistan further incentive to remain aligned with China, that of coastal access through Iran. Pakistan has consistently blocked Afghanistan from using their territory; and being aligned with Iran through China and the BRI remains a position that the Afghanistan government could be willing to accept.

Political-Strategic Integration: Indifference to Engagement

Over the years, China’s regional policy has gone from a calculated indifference to active engagement, with China realising the best chance to achieve their goals is a strong, stable Afghanistan. As such, China has pushed to reconcile with, and build contacts with both the Taliban and the Afghan government. It also strives for greater cooperation between Pakistan and Afghanistan, by pushing for greater opportunities for trade and investment.

Chinese motivations in Afghanistan vary. They remain wary of the country being used as a launching ground for Uyghur separatism (such as the East Turkestan Independence Movement), which it often claims could radicalise Uyghurs in Xinjiang province. It also aims to portray itself as an important regional and global player, with the potential to solve one of the world’s longest running insurgencies . China has hence embarked on numerous policies aimed at achieving these. It has portrayed itself as a point of contact between the government and the Taliban, acting as a facilitator in the Afghan peace process. It had also initiated a joint training operation with India for Afghan diplomats, as a gesture of goodwill. However, the future of this collaboration remains to be seen, due to renewed tensions with India following the Galwan incident. It has also aided Afghanistan militarily, helping build the military mountain brigade in the Wakhan corridor, with the primary goal of preventing infiltration by the Islamic State into China.

Afghanistan also hopes to use China as leverage against Pakistan. Quetta is widely believed to be the base of the Afghanistan Taliban leadership, and Pakistan has historically held some sway over the Taliban. Hamid Karzai was quoted as saying that ‘China is a close and strategic friend of Pakistan, and Chinese words with the Pakistani government carry weight… we believe that China can use that asset in a way that brings good relations between us and Pakistan and also leads to peace in Afghanistan’,  laying the groundwork for cooperation between the three countries. Preferring multilateralism over unilateralism in the region, China has also been examining using institutions like the UN to ensure regional peace and stability. Rightly so, any unilateral action in the region will face blowback from Afghanistan’s regional partners, as well as the international community.

The Way Forward

Over the past few years, China has steadily increased its involvement in Afghanistan, taking the form of military, economic and diplomatic commitments. However, these acts have not been without pushback, with China’s policy perceptions as giving pre-eminence to their own geopolitical and security concerns being the concern of many in the international community. As such, while the Afghani government views China as an important partner in Afghani stability, their impact so far has remained limited.

One last factor to consider is the influence of Russia. While not one to disrupt the coalition withdrawal, Russia under Putin has been steadily increasing its reputation as a great power with an international reach, as seen also in Libya and Syria. Additionally, Afghanistan is part of the erstwhile Russian sphere of influence, and any attempts by foreign powers to increase their influence in these regions have often been met by opposition. Some recent examples stem from accusations of Russian support to the Taliban, and allegations of state-sponsored bounties on US soldiers.

The force withdrawal provides China with an immense opportunity to increase their influence in the region – unilaterally through the BRI and its associated investments, or multilaterally through organisations like the UN. However, the viability of these projects largely depends on the confidence the international community and Afghanistan’s partners have in the Chinese leadership, which has taken a hit in the aftermath of the pandemic and China’s belligerent ‘Wolf Warrior’ diplomacy. China’s engagement in Afghanistan had started to take shape before this crisis, but the efficacy of such policies now remains to be seen, especially with increasing diplomatic challenges, such as with the USA, UK, Canada, and India. Without the support of the countries involved with Afghanistan, the expansion of Chinese policy remains a distant dream, which shall face numerous hurdles in implementation.

India-Taiwan Trade Relations in COVID-19 Era: Opportunities and Challenges

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Kannan R Nair, Research Intern, ICS

Image Source: Reuters

Recent skirmishes between China and India at Galwan Valley ignited debates in policy circles across New Delhi about growing importance of Taiwan in positioning India’s stance towards Beijing. Currently, Taiwan is India’s 35th largest trading partner, and for Taiwan, India is 17th largest trading partner. In 2019-20, trade accounted for US$ 5.7 billion, which is a decline of 17.54% as compared to the previous year. However, in the current strategic context, India’s appointment of seasoned diplomat Gauranglal Das as an envoy to Taiwan and virtual participation of two parliamentarians in Taiwan president Tsai Ing-Wen’s swearing-in ceremony indicates a shift in policy towards China.

Since the 1990s, there have been efforts to diversify Taiwan’s trade beyond mainland China. In 1994, Taiwan president Lee Teng-hui officially announced the ‘Go South Policy’ aimed to improve its trade and investment relations with ASEAN countries. India was also included in the policies owing to its growing economic importance after the DPP (Democratic Progressive Party) won the presidential election for the first time under the leadership of Chen Shui-Bian in 2000. The DPP government signed a Bilateral Investment Agreement (BIA) with India in 2002, which came into force in 2005. The agreement stressed on the need for protection and promotion of investments.

In 2011, China Steel Corporation (CSC), the largest integrated steel maker in Taiwan invested $178 million in Bharuch district of Gujarat. A rapport existed between the Indian state of Gujarat and its then Chief Minister Narendra Modi with Taiwanese firms. Informal deliberations for a FTA (Free Trade Agreement) between Taiwan and India were held when he later became Prime Minister of India in 2014,  the discussions for which are ongoing and not finalized and. India also signed a Double Taxation Avoidance Agreement (DTAA) and a Customs Cooperation Agreement with Taiwan in 2011. The BIA was updated by both of the countries in 2018 to ensure that Taiwanese businessmen’s investments are treated in synchrony with international standards. The COVID-19 spread raises generous challenges and opportunities to furthering India-Taiwan relations together.

Opportunities

China is Taiwan’s largest trading partner accounting for 30% of total trade. Tsai Ing-wen’s reelection exhibits the changing perception in Taiwanese people against Mainland China. According to a survey conducted by the Pew Research Center in 2019 among Taiwanese youth shows that about 85% of the participants supported close economic relations with the United States, at the same time, support for Beijing was limited to 52%. The New Southbound Policy (NSP) initiated in 2016, reoriented the prime focus of Taiwanese firms from China. Apart from NSP, there are several reasons substantiating the migration of firms from Mainland China. First, increasing intense competition from Mainland companies in the manufacturing sector. This adduced as the primary reason for the firms shifting their business to huge markets with similar traits. Second, rising labour costs and lastly the instability in markets caused by the US-China trade war.

According to Sana Hashmi, a Taiwan Fellow at the Institute of International Relations, National Chengchi University in Taipei, there was a dip in the trade figure last year. More than trade, Taiwanese companies see India as a vast market for investment. Foxconn is already investing US$ 1 billion in the Apple plant at Chennai. Therefore, the focus should be on attracting investment in the post COVID-19 period.

Keeping the market potential aside, the cheap labour cost in India, as compared to PRC, invited more attention. Soon after Foxconn’s announcement regarding their $1 billion investment to set up a factory in India, Pegatron, the second-largest assembler of Apple iPhones based in Taipei announced their interest to set up a plant in India. The availability of skilled labour, massive mobile user base and Indian government’s policy initiatives like Make in India and by latest ‘Atma Nirbhar Bharat’ has attracted foreign investments from Taiwan.

During the pandemic, China’s expansionism yielded more investments to India from Taiwan. Policymakers should endorse the role of Taiwan in addressing India’s technology deficits. Under the aegis of Make in India and Atma Nirbhar Bharat, India should work towards attracting more investment which will have an impact on the rising unemployment rates. As Taiwanese exports to India majorly concentrated on heavy machinery and engineering tools, India must make use of the current geopolitical/geoeconomic environment by inviting more firms.

Challenges

The first challenge is regarding the long-standing talks on FTA between India and Taiwan. To address this, both sides need to fast track talks and finalize an agreement by sidelining political difficulties. A two-year joint feasibility study was conducted by the Indian Council for Research on International Economic Relations and Chung Hua Institution for Economic Research in Taiwan during the 2011-13 period. The study suggested an Economic Cooperation Agreement (ECA) for promoting trade relations.  As stated by Taiwanese officials, India and Taiwan are also in the negotiations regarding allowing Special Economic Zones (SEZs) for Taiwanese firms. Currently, India has SEZs with Chinese and Japanese firms.

Source: Taiwan Ministry of Economic Affairs

The trade figures also affirm the fact that India is way back in terms of trade, as compared to other dominant countries. Here a contradiction in China’s actions is it’s exponential growth in trade with Taipei on one hand and restricting India to do the same on the other hand.

Source: Taiwan Ministry of Economic Affairs

The second challenge is regarding the unbalanced tax system. Recently Taiwan and Japan approached the World Trade Organisation (WTO) to set up dispute settlement panels against India owing to lopsided tariff structures on Information and Communication Technology (ICT) devices and mobile phones imported from them. Imbalance in this tariff structure restricts the prospective inflow of investments towards India.

Transparency in the legal system and effective utilization of decentralized governance can also trigger foreign direct investments. Open-ended support from local governments to a business-friendly environment can also help in this regard.

India and Taiwan share many commonalities such as belief in democratic values and similar economic potentials. In the current geopolitical scenario, India’s best option would be to enhance trade and people to people interactions with Taiwan. Both are gradually strengthening their bilateral ties. Tapping into Taiwan’s Taiwan’s expertise in healthcare, education and agriculture would help India in the future.

China’s Infrastructure Development Projects in Bangladesh

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Sayantan Haldar, Research Intern, ICS

Bangladesh’s Prime Minister Sheikh Hasina, with Chinese President Xi in Beijing, on 5 July, 2019.Image Source: AP Photo

On 14 October, 2016, Chinese President Xi Jinping created history by being the first Chinese leader to visit Bangladesh in 30 years. This visit bears great importance for the deepening of Sino-Bangladesh relations as well as China’s increasing outreach towards South Asia. Bangladesh is situated at the heart of the Bay of Bengal which makes it a strategically indispensible country in China’s growing network along the 21st Century Maritime Silk Route and the New Silk Road. China-Bangladesh relations dates back to 1976 when Beijing began diplomatic relations with Dhaka. However, President Xi’s visit to Dhaka in 2016 has been seen as an important development in the Sino-Bangladesh relations, especially after the onset of the Belt and Road Initiative (BRI). Bangladesh has responded positively to the BRI drawing some criticism from India which is a dominating factor in Bangladesh’s foreign policy, particularly in the neighborhood. Bangladesh is a developing country with major demand for infrastructure development which has largely inspired its engagement with China, while its strategic location has significantly shaped China’s outreach. Therefore, it is important to take stock of China’s infrastructure development projects in Bangladesh.

President Xi Jinping and Prime Minister Sheikh Hasina signed twenty-seven agreements worth billions of dollars and also elevated their relationship from ‘a comprehensive partnership of cooperation’ to a ‘strategic partnership of cooperation’ during the Chinese President’s visit to Dhaka in 2016. Earlier in 2015, China emerged as the top trade partner of Bangladesh replacing India. China’s growing engagement with Bangladesh has been based on steady economic linkages along with infrastructural assistance by China in Bangladesh. As a small country with a growing economy, Dhaka has positively embraced Beijing’s engagement. Even during Prime Minister Sheikh Hasina’s visit to China in July, 2019, the two sides agreed to enhance cooperation on trade, defense and infrastructure projects, which have further deepened China-Bangladesh ties.

The Padma Bridge Rail Link Project is one of the flagship projects undertaken by China in Bangladesh which aims to connect Dhaka with Jessore through the Padma Bridge. The estimated budget of the project is approximately BDT 40, 000 Crores jointly sponsored by the Exim Bank of China and Bangladesh government. The project began in 2016 and is aimed to be completed by 2024. The Padma rail project has been divided into three phases connecting Dhaka to Mawa, Mawa to Bhanga and Bhanga to Jessore. Rail connectivity is an important instrument for the bourgeoning market of Bangladesh. The Padma Bridge Rail project in particular is important to Bangladesh as it improve accessibility to Dhaka with central and south-western regions of the country and provides a shorter alternative to the Dhaka-Jessore-Khulna railway connectivity. It is also important to Bangladesh as it is expected to ensure socio-economic development and minimize regional disparity. China’s involvement in this project pertains to funding it. China is funding 85% of the project while the rest is funded by local contractors in Bangladesh. Interestingly the project was elevated to the ‘fast track’ status in Aril, 2016, emphasizing on China’s commitment of timely progress and delivery. This can be seen as an attempt by China to establish itself as a better alternative to India in the region, because one of the major issues flagged off by most countries in India’s neighborhood concerns New Delhi’s delivery deficiency. Infrastructure development in Bangladesh is also a strategically important sector for China to establish itself in, as it would increase greater dependence of Dhaka on Beijing. The biggest hindrance to the project so far has been the operational discontinuity caused by the Covid-19 pandemic. According to Bangladesh’s Road Transport and Bridges Minister’s briefing, the infrastructural progress of the project is 24.43% and the financial progress is at 30.52% until May.     

Another important project undertaken by China in Bangladesh is the Payra Deep Sea Port. The Payra shipping port is situated at the Patuakhali region of Bangladesh on the banks of the Bay of Bengal. This project will be given shape by China Harbor Engineering Company (CHEC) and China State Engineering and Construction Company (CSCEC). China’s interest in this project is not a matter of surprise as it is strategically situated and falls in line with China’s string of maritime bases across the Indian Ocean region. The total cost of the port is expected to be between USD 11 billion to 15 billion. For long, China has expressed its interest in building port projects in Bangladesh. The Payra port project was inaugurated in November, 2013, and started operating in 2016. This project holds great significance for Bangladesh as it is expected to facilitate internal development. The deep-sea port is vital for reinvigorating Bangladesh’s internal connectivity which will boost its booming economy. Bangladesh has however made it very clear that it is not meant to be developed as a Chinese naval base, as has been the experience with Gwadar and Hambantota in the past. Interestingly, China’s involvement in this project has not aroused suspicion in India as well, primarily because it does not follow the ‘field of dreams’ approach. The Payra port will also be complemented by the Padma Rail Link project, as the latter is expected to create opportunity to construct a second line in this route and connect Barisal & Payra Deep Sea Port. Even though there have been questions about the feasibility of this project, from China’s perspective, projects like this help Beijing engage its bloated state-owned enterprises and increase dependence of other countries on China.

While Bangladesh’s ties with China have been steadily growing, Prime Minister Sheikh Hasina has also maintained a balanced relationship with India. Notably, she described Bangladesh’s relations with India as ‘organic’ and ‘beyond a few billions of dollars of trade’ at the World Economic Forum in Dalian in 2019, reiterating her bonhomie with India. Towards this end, New Delhi and Dhaka have made progress in strengthening their connectivity linkages which have, for instance, manifested in terms of the shipment of the cargo vessel from Kolkata to Agartala via Chittagong for the first time in fifty-five years. However, participating in the BRI has been a strongly felt need in the Dhaka making China emerge as the seemingly perfect fit to alter Bangladesh’s infrastructure deficit. The two countries have increasingly shared more comfort in jointly developing infrastructure projects which have been beneficial to both. While Dhaka benefits with assistance in infrastructure development, Beijing also views this as an opportunity to expand its geo-strategic footprint in South Asia. It is important for Dhaka to draw lessons from fellow South Asian small-states like Sri Lanka and cautiously engage with China. However, Bangladesh has been firm on its view of engaging with China at a level that is mutually beneficial to both. Infrastructure development has been at the heart of this relationship, and is expected to strengthen further in light of the current Covid-19 pandemic. While the crisis has been a hindrance to the existing projects which were under progress, it has also opened a new avenue for both the countries to cooperate on health infrastructure. Bangladesh-s recent demand of priority for cooperation from China reaffirms their willingness to cooperate. Towards this end, Chinese Ambassador to Bangladesh, Li Jinming has reassured Bangladesh that China will remain its ‘most reliable’ partner.

Geopolitics of Tibet’s Rivers for Lower Riparian India

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Yash Johri, Research Intern, ICS
Shivi Sanyam, Advocate and former Judicial clerk, Supreme Court

Source: AsiaNews

Grave hostilities in Ladakh along the line of actual control (LAC) between India and China and actions on the part of government and business have dominated public discourse. External developments apart from those relating to Pakistan are rarely an issue in the domestic narrative but brewing anti-China sentiment amongst several parts of the populace has positioned our eastern neighbor in the national consciousness. While all eyes are fixated on the game of brinkmanship being played out on the LAC, it is an opportune moment to highlight another important area of contention: China’s management of Tibet’s rivers and the plausible impact on lower – riparian countries like India, this matter has arisen in the past and will certainly arise prominently, in the future.

We need to be better informed about this issue, therefore, it’s important to aggregate the cross-section of experience that exists on the issue from varying fields of business, government, law, climate studies, agriculture and others via analyses and interactions. As a student of China and Sino-Indian ties, one feels there are is a lack of dedicated efforts in the country to understand and prepare for the numerous complexities of our relationship with our eastern neighbor, especially with regard to the issue of management of the waters of Tibet. There is an urgent need to generate greater domain knowledge on this matter.

China in the present situation to deflect from the economic devastation that Covid – 19 has been inflicted on its economy and to divert the anger of its people with genuine grievances from the failures of the CCP, has kindled many of its rivalries. At this critical time, the mandarins of the middle kingdom have thrown caution to the wind and are acting unilaterally, disregarding norms and agreements, both bilateral and multilateral to further their agenda. There is a laundry list of enmities, many of these disputes are territorial and stem from China’s desire to maximize its economic and cultural influence.

It is in this political environment that there is a serious need for India to arouse consciousness nationally and build support at multilateral levels to put checks on China’s uninhibited dam building, water diverting and mining projects along the course of the Brahmaputra River (in China known as Yalung Zangbo). While the Chinese share hydrological data for the Sutlej and Brahmaputra, enabling us to anticipate water levels to prepare in time for flooding, they charge us a fee for that. It is interesting to note that, India does not charge its downstream neighbors- Pakistan and Bangladesh. Further, even though there have been numerous MOUs on sharing hydrological data, the latest being in 2018, they stop sharing data as and when they please, as was seen around the time of the Doklam crisis. There is little cooperation in addition to sharing hydrological data, while India has robust water sharing treaties with Pakistan and Bangladesh. It is estimated by Brahma Chellaney in his book, ‘Water: Asia’s New Battleground’ that until China has achieved its national objectives of power generation and river water diversion to its parched northern lands, it is unlikely to acquiesce to any agreement. India has on numerous occasions suffered from floods due to bursting of dams, polluted waters flowing into Arunachal due to upstream mining and construction activity and various other actions where the doctrine of ‘‘sic utere tuo ut alienum non laedas’’ (To use and exploit one’s sovereign property in such a manner so as to not harm the neighbor’s rights and interests) has not been followed.

China has a dual design on reigning in the Brahmaputra river with the future objective of not only generating power for the relatively underdeveloped region but also to divert waters of the Brahmaputra to their northern parts as the third phase of the South North Water Diversion Project (南水贝雕工程总体规划). The dam site they’ve chosen has been detailed by Chellaney in his book at Metog County, Nyingchi Prefecture, where they aspire to build a 38 GW(Gigawatts) generating facility (a capacity larger than the Three Gorges Dam), in comparison the Bhakra Nangal Dam generates a meagre 1.3 GW. Supporting infrastructure in the form of roads and railroads has already or are in the process of being constructed. This location near the Namche Barwa gorge is ideal for power generation given the steep natural fall that water takes before they enter India. Additionally, the point for the water diversion project is further upstream. This entire region is in the proximate area of Pemako, a region considered very sacred by Tibetan Buddhists – where there is vast virgin forests and varied flora and fauna. Further this region in particular is close to where the Indian and Eurasian plates converge thereby being prone to seismic risks.

It is now settled that China is the upper riparian power and reigns sovereign in these areas, following the NDA Government’s 2003 recognition of the Tibet Autonomous Region as a formal part of China. However, its exploitation of Tibet’s blue gold in the aforementioned megaproject and by way of numerous other projects such as the Zangmu dam (completed in 2014 with installed capacity of 500 MW), certainly affects the interests of lower riparian countries such as India and Bangladesh adversely. The NDA government’s action of course is only a cherry on top of the cake that was India’s concessionary foreign policy in the years post-independence. Other rivers such as the Irrawady, Mekong and Salween that also originate in Tibet have been heavily dammed leading to concerns in the countries of South-East Asia into which they drain. Given that many of China’s neighboring states have high dependency ratios (Food & Agriculture Organization data) relative to China for their water supply, with India (33.4%), Bangladesh (91.3% Including Ganga which originates in India), Laos (42.9%), Thailand (47.1%), Cambodia (74.7%) and Vietnam (58.9%), there is certainly a need for a mechanism to ensure a sustainable integrated river basin management. However, the Chinese style is to only deal bilaterally, if at all, as they have stayed away from any such multilateral arrangements, the Mekong River Commission being one of them. Further, China was one of three countries along with upper riparian Turkey that opposed the UN Convention on Non-Navigational use of International Watercourses in 1997, the resolution carried 103-3 with 27 abstentions.

Any questions pertaining to integrated basin management with China will in turn throw up our policy on Tibet, while as a rule – following country we must abide by past treaties and commitments but should certainly not leave any leverage we may have with regard to the land of the Dalai Lama of the table. The entire world is re-evaluating and taking a hard-look at their respective approaches to China, in the aftermath of the events in the Galwan valley, we must do the same.

The North-East of our country being a riverine civilization will feel the major brunt of China’s unilateral action in Tibet, which it refers to as its water tower. While the seven sisters are undoubtedly far away from New Delhi, and given our food surplus at the moment water security may seem like a distant concern. However if we are to act east, we must ensure our water security, not only for the purposes of agriculture, fisheries and the dependent communities but also to generate our own power.

Originally Published as The Great Sino-Indian Water Conundrum in The Guardian,15 July 2020.

Beijing’s SCS Dilemma: Nan zhongguohai or “Nanhai”

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

Speaking of foreign affairs, in the early days of reform and opening door policy, Deng Xiaoping once said, China must continue to ensure good relations with the US. All other outstanding issues, including Taiwan and the dispute with Japan and ASEAN nations about the Diaoyu Island and South China Sea, Deng was confident that future Chinese leaders “with cleverer minds” would be capable of settling.

Daily Express Photo

 

Recently, the South China Sea has become a flashpoint again. Why? To people who refuse to be labeled as pro-China or pro-US (though there really aren’t many such people around), the reason for waters heating up in the 3.5 million km2 sea is the showdown of strength between China, a continental rising power and the US, the world’s only dominant maritime power ruling the oceans for over a century now. While the mainstream media (MSM) – also the dominant view in the region, blames growing Chinese muscularity in the SCS, the non-MSM perspectives in the region and beyond, attribute further intensifying of the many-fronted aggression against China by the American Empire, especially during the ongoing Covid19 pandemic period, as the main source of the SCS again becoming a potential flashpoint.

As the battle of perceptions weighs heavily against the People’s Republic of China, it is intriguingly puzzling why three important aspects – crucial in the understanding of the prevailing venomous atmosphere in the SCS – remain hidden in the mainstream discourse. They are, namely: Asian nations since at least WWII have territorial disputes in the SCS but long kept them manageable, until America began targeting China as a primary foe and implemented its “Pivot to Asia” policy to contain China in 2011; the current, incendiary sovereignty battle in SCS is the result of four centuries of Western – American and European – colonialism which began with Spain and Portugal dividing the Philippines and Indonesia in 1529 and ended with the US and UK drawing borders separating the Philippines and Malaysia in 1930; finally and more importantly, the US maritime hegemony – an unchallenged Anglo-American sea power for over 200-years ensuring that 90 percent of global trade continues to use oceanic routes – cannot allow any country, especially a continental power like China, to change the international political order designed by the maritime world. 

The Brazilian journalist Pepe Escobar, a regular columnist for Asia Times Online and Sputnik News, has been following developments in the SCS since Hilary Clinton started navigating the US return to “Asian waters” as the 67th US Secretary of State under the Obama Administrationin 2009. In July 2016, when the Permanent Court of Arbitration (PCA) at The Hague decreed in favor of the Philippines and rejected China’s claim of “nine dash line” regarding the disputed Spratlys, Escobar wrote “the SCS is and will continue to be the ultimate geopolitical flashpoint of the young 21st century.” Needless to point out, Escobar’s pronouncement had much to do with China’s instant, disdainful dismissal of The Hague judgment as “null and void.” But in fact, Escobar was reminding us of the future retaliation by the US against the Chinese “saber- rattling.”

Another pertinent argument which generally is missing from the mainstream discourse is that stakes are very high in tension-ridden SCS not only for the future of Asia, but also for the East-West balance of power, as compared with the Middle East or even in Eurasian borderlands. To understand this, one must read Alfred Mahan’s seminal The Influence of Sea Power Upon History, 1660-1783, written over a century and quarter ago. Mahan essentially wrote the roadmap of US ascendancy to become the world’s most powerful maritime power, and therefore the dominant power. His core thesis is, the US should go global in search of new markets, and protect these new trade routes through a network of naval bases. “That is the embryo of the US Empire of Bases – which de facto started after the Spanish-American war, over a century ago, when the US graduated to Pacific power status by annexing the Philippines, Hawaii and Guam,” Mahan had envisioned.

Echoing the above, a recent article in Wn.com/Defensepost on the ongoing eyeball-to-eyeball contestation between the armies of China and India along the Line of Actual Control in India’s eastern Ladakh, draws interesting connection between escalating tensions simultaneously in the SCS and on China’s western border with India, respectively. According to the article’s two authors, current India-China border skirmishes should not be viewed in isolation from Anglo-American geopolitical plans to halt the Chinese from reaching the Arabian Sea through a much shorter route via Pakistan. “US maritime power is asserting its reach and range to let its allies know that the ‘maximum pressure’ game on China is underway. Offensive realism, consisting of assertive containment and deterrence, is America’s new theoretical and military mantra against China,” it said.

When speaking of allies, a former Indian ambassador believes the ASEAN countries – almost all former or current allies of the US, may appear to be bandwagoning with China. In an op ed piece in The Hindu a couple of weeks ago, Ambassador Jayant Prasad opined: “But in spite of their deepening economic ties with China, they (ASEAN countries) are seeking political insurance, strengthening their navies, and deepening their military relationships with the United States.” On the other hand, while sympathizing with Beijing’s “self-defensive” actions, Thomas Hon Wing Polin, Hong Kong-based veteran journalist recently observed, “The SCS is home to the world’s busiest and most important trade lifelines. Some 80% of China’s overall trade including vital oil imports, all pass through its waters. Keeping SCS shipping lanes open is a core interest of China – simply because it is matter of national survival.” Polin also cautioned that the ASEAN nations are fully aware the island disputes is not with China alone, but also between and among several ASEAN members. To the huge discomfiture of the US, not only China knows this, China has been successful in rallying most ASEAN countries round two initiatives Beijing can take credit for: to settle disputes bilaterally and to have a Code of Conduct between China and the ASEAN.

Emerging from the just concluded virtual meeting of the ASEAN+3 Senior Officials Meet (APT SOM) last Monday, the Chinese Vice Foreign Minister Mr. Luo Zhaohui exuded confidence in the solid economic and trade ties between China and ASEAN. In the backdrop of the ongoing pandemic and in the face of escalating tensions in the SCS, the value of China’s exports and imports to ASEAN increased by 5.6 percent in the first half of this year, he said. Luo displayed the same confidence in East Asia to lead the world to recover economy. A statement released by the Foreign Ministry of the P R China (FMPRC) next day claimed: “As epidemic prevention and control becomes a new normal, regional cooperation East Asia has been reinforced. All parties are looking forward to signing the Regional Comprehensive Economic Partnership (RCEP) within this year. East Asia economic integration has bright prospects.”

Now, let us turn to China to see how scholars and experts have been evaluating both the heightened presence of the US marine power in the SCS, especially since early June; and whether the PLA Navy (PLAN) is actually planning to take on the US might, which is literally knocking at China’s doors. The overall consensus in Beijing regarding the presence of USS Ronald Reagan and USS Nimitz in SCS seems to dismiss any real or potential threat of war associated with the US move. Song Zhongping, a well-known military affairs commentator said in a recent interview with the Global Times, “The US move aimed at enhancing its military presence in the West Pacific, is designed to show off that its hegemony in the region is unshakable.” The US is also attempting to deter PLA movements in the SCS and on the Taiwan question, Song said.

Perhaps encouraged by Deng’s confidence in the ability of future Chinese “cleverer” leaders, or an indication that Beijing is moving towards a more hardened stance – in line with its so-called “aggressive” external posturing during the pandemic period, a recent article in the Party-run online current affairs news platform Utopia is worth paying attention. On the one hand, the article disdainfully calls for “reset” in Beijing’s long-held position of defining the SCS as “peaceful sea”; and on the other it makes an appeal to China’s policy makers to have “no more serious engaging with countries in the region with which China has territorial disputes.” Both propositions sound too extreme to seem tenable. Yet the fact that a major “official” media outlet has carried the signed article is enough to raise eyebrows among China watchers and security analysts alike, especially in the Philippines and Indonesia, or even in Malaysia, and raise the question, what is China up to?

Well, many would agree with the title of the op ed piece by the former Indian ambassador: “More saber-rattling, more isolation.”  However, the moot question still remains, the SCS for   Beijing will continue to be China’s South Sea or become “trouble sea” (nanhai). For nan in Mandarin means both “south” and “trouble.”

The Business of Civilizations in Modern Times

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Asma Masood, Associate Member, Chennai Centre for China Studies (C3S)

“Let’s make America great again” or “The Chinese Dream”?

Xi Jinping’s “Asian Civilization” or Donald Trump’s “America First”?

As the spread of coronavirus ebbs and rises, waves of opposing political narratives and ideological clashes continue to flow. Civilizational contrasts are observed as American calls for liberty clash with Chinese assertions on non-interference. As US condemns Chinese treatment of Uyghurs by sanctioning high-ranking Chinese officials, Chinese officials also face visa restrictions over the US insisting on greater autonomy for Tibet. Chinese media did not hold back on coverage and op-eds on the race riots in US after George Floyd’s killing.

While political and strategic analysts ponder on the above, queries also arise on how cultural contours have merged with commercial aspects and the significance of this interlinkage.

Cultural curiosity is no longer a forerunner to new market ventures, as was in centuries gone by. Instead, trade with upcoming markets has been leading to enhancement of cultural linkages since recent decades. Nevertheless, inquisitiveness about lifestyles in Western countries is a major factor in determining consumer behaviour in many developing states. This in turn helps drive international trade ties. However, there are occasions when these linkages fall short of translating into mutual success, as demonstrated by two scenarios. It is important to understand such shortcomings, as they offer a peek into how international relations can be managed in the coming decades.

Take the case of when Aung San Suu Kyi’s National League for Democracy (NLD) won the 2015 elections in Myanmar. At the time, there was global interest in the scope for the country’s fledgling industries such as finance, telecom and hospitality. Myanmar subsequently sought to develop cultural realms such as tourism. Fast forwarding to 2020, and the ongoing Covid-19 crisis, pressures from USA due to the Rohingya issue and a shaky outlook for the government have reverted Myanmar to uncertainty, with foreign investors stepping back. The US views that Myanmar’s conceptualization of democracy is not all-inclusive as in the case of the Rohingyas, hence leading to USA’s ‘financial distancing’ from the country.

While Western historians and cultural scholars keenly study ancient Persian culture, they would face challenges in carrying forward this interest into the Iranian ethos today. Geopolitics block not only prospects for commercial forays into Iran, but also shape perceptions and impede communication pathways. Intriguingly, this has not dampened Iranians’ appetite for American goods. This is in spite of strategic tensions with the US, current American sanctions and an influx of Chinese goods.  The US is scoring domestic points in alienating the Iranian leadership, however, Iran’s common citizens continue to complain of narrowed access to American supplies, including medical supplies for treating coronavirus.US sanctions also led to Iranians losing access to electronic goods fromJapan and South Korea.

In either matrix, it is clear that China is gaining an edge. The country is ensuring that its energy needs are met, while it exports not only goods to Iranian and Myanmarese markets but also its own cultural manifestations. One cultural component is coaching in Mandarin, which is also an essential business tool. This will be increasingly sought after, especially as Iran and China cemented their strategic and trade partnership in July 2020. In Myanmar, although the government is looking to balance China’s overwhelming presence by focusing on India among other countries, the military which has high stakes in the country’s commercial sectors, has strong ties with China. This acts as a gateway for increasing popularity of Chinese language and entertainment productions among Myanmar’s population. 

While Iran and Myanmar are within Chinese spheres of commercial and cultural influence, the West proclaims that China is facing challenges from various other fronts. These include tensions with the US over trade, the pandemic crisis, and the status of Hong Kong. Other fissures are visible as seen in the UK’s rejection of Huawei, Japan largely diverting automobile manufacturing from China to Vietnam, and the Indian rethink on Chinese investments before and after the recent border stand-off. The spread of coronavirus is another reason for widespread criticism of China.

However, a parallel narrative is emerging, that of China moving closer to Russia and reiterating relations with Iran, as well as its economic growth after containing the pandemic within its borders. This means that it is attempting to balance its economic losses on one scale with gains on the other. China also continues to maintain relations with other energy exporting states and markets worldwide. It is clear that state economies worldwide are intensely intertwined with China, and these ties cannot transform overnight.

On a parallel note, American nationalism is rising, but not diluting US commercial presence across the globe. Private companies are well aware of the consequence of ignoring American and Chinese realities. Evidence of this is apparent in the New York Times shifting its Hong Kong staff to South Korea in light of the US stand on the HK status. It mirrors an entrenched tendency among private players to adapt to the laws of both the homeland and wherever they hold shop.

Consequently, the demand for key language skills will remain, as will the interest to imbibe cultural etiquette while dealing with American and Chinese businesses. It is easier for the US to draw strength from the international knowledge base of the English language and know-how of American customs. On the other hand, China’s Confucius Institutes (CIs) were shut down in Sweden and in the US. For now, these are isolated incidents, which are not reflected in the rest of the CIs across the world. Similarly, rivalry between leadership in China and other countries has not changed the existing social linkages between them, be it in Japan or ASEAN member states. The Chinese government realizes this, and has long established a ministry dedicated to cultivating relations with the country’s diaspora who are also crucial investment channels for China.

The ‘Chinese takeaway’ from these facets is that Xi Jinping wants to match, if not outrace, the US in global cultural influence. ‘Pepsi culture’ which may sound cliched, is a stark reminder on the success of American brand values. Incidentally, the hit US beverage brand has reinvented itself for Chinese consumers. A slow march lies ahead for China in the quest for equal prominence of its cultural symbols and brands. Meanwhile, Beijing will attempt to employ the umbrella of geographical commonalities as a binder via the ‘Asian Civilization’ dialogue. Calls of global unity are promoted under the banner of ‘community of shared future of mankind’. One cannot help thinking that the key is the packaging. The US markets its services and products in internationally appealing cultural wrappers. Chinese goods have to depend on the lower priced tags to push sales. The ‘Chinese Dream’ is ambitious, but it is a dream for China. The American Dream which inspired millions of immigrants until recently is losing shimmer. But the world still ‘needs’ iPhones as much as Xiaomi mobiles. It is not immediately clear whether the US and China will outmanoeuvre each other in the political realm or find a way for co-existence. Until then, consumerism will stay as the cross-continental culture of our times.

Incubation Systems for Start-ups in China and India: A comparison of the two ecosystems.

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Hrishikesh Kayshap, Student, IIM Indore & Former Research Intern, ICS

China and India, home to the largest and the 3rd largest number of Unicorn (privately-held start-up valued at over $1 billion) companies globally, present an interesting case-study for a comparative analysis of start-up ecosystems. With 21 unicorns, India is 3rd in the list of countries with the most unicorn companies; China has around 206, which is more than 41% of the global no. of unicorns. As start-ups offer immense opportunities for economic growth and employment generation for almost all economies, it is imperative we study the ecosystems that encourage start-up creation and incubation. Incubation systems refer to business incubators(private) or government incubators(public), companies that help create and grow young businesses by providing them with support in the form of financial, technical and logistical services among others.

Incubation in China as described by the “China Business Incubation Development Report 2019” indicates there are around 11,808 business incubators in the country serving a total of 620,000 startups (206,000 of them were technology-based), employing around 1.514 million people. In 2018, around 62.18% of these incubators were private enterprises with business-oriented operations and around 15.9% of the total incubators were state-owned. This report also states that in 2018, the working income of start-up incubators was around $ 9.43 billion and that in the period 2016-18, China’s incubators achieved profitability for three consecutive years. It is important to note that out of 11808 incubators, 4789 were technology-based, the overall focus being on electronic information, advanced manufacturing, and cultural creativity. Also involved were bio-pharmaceuticals, artificial intelligence, new energy and upcoming industries. The Incubation 2019 report is an integrative report on the huge number of incubators, social enterprises, educational or job training centres and non-governmental organisations (NGOs) etc. As a diverse range of new businesses are now classified as start-ups, the number of Chinese start-ups and incubators seem to be relatively higher than other countries.

Incubation in India is primarily documented through Government of India’s “Start-Up India” programme which has recognised around 32,849 Startups, with 52,326 entities registered in the Start-up India scheme. While incubators under the Start-Up India programme have flourished with several tinkering and innovation labs being established, there are around 200+ business incubators in the country. In addition to them, the central government is establishing 7 new research parks to aid R&D for startups, adding to the existing 11, while twenty-six Atal Incubation Centres (AICs) have also been set-up. The Central Government has also scaled up the existing Established Incubation Centres (EICs), while each state has its own start-up policy and facilitator system, ranked under the “States Startup Ranking 2018” report. Examples of such incubators are T-Hub by the Telangana State Government, incubators in academic institutions like NSRCEL, CIIE, CIE and corporate incubators hosted by NASSCOM and SAP Labs.

IndiaChinaIsrael Singapore JapanUSA
Total no. of startups(approx.)10,00010,0004,752N.A.N.A.83,000
Tech-based startups(2016 figures) 4,3003,4004,000N.A.N.A.48,500
Non-tech based startups(2016 figures) 5,7006,600750N.A.N.A.34,5000
Set up a new business (days) 179122116
Corporate tax rate (2019 figures) 25%(plus surcharge of 7% and 12% if income exceeds INR 10 million and INR 100 million respectively and a cess of 4% in all cases) 25%23%17%(100% tax exemption for startups) 31%27%
Other taxes payable by 10.1%8.0%1.5%1.1%4.1%6.1%
Businesses (% of commercial profits)
No. of Tax Payments by businesses (per annum)1392851411
Bank Lending rate (2018-20199.5%4.3%3.5%5.3%1.0%3.9%
R&D spending as % of GDP0.8%2%4.2%2.2%3.4%2.7%

Source: IMF, World Bank, KPMG, PwC and UNESCO.

Startups in India (upto 7 years since the date of their incorporation) that register with the Startup India Programme can avail benefits like self-certification, no taxation for upto 3 years, fast tracking of patent and IPR protection, exemptions on Earnest Money Deposit (EMD) among other benefits. However, this doesn’t extend to older startups, even though most startups take a considerable amount of time to become viable businesses. Unlike India, China does not have any nodal agency for startup registration or promotion and all companies including startups register with the State Administration of Industry and Commerce (SAIC) equivalent to the Registrar of Companies (ROC) under the Ministry of Corporate Affairs in India. In India, start-ups and business incubators are taxed at the same amount as other companies, translating to 13 number of payments and multiple direct and indirect taxes, and a corporate tax of 25% (plus surcharges amounting to 7% if income exceeds INR 10 million and 12% if income exceeds INR 100 million along with a cess of 4% in all cases). This is in contrast to the number of tax payments by businesses (p.a.) in China (9) and a corporate tax rate of 25% (10% or 20% for small scale enterprises, 15% for new/high technology enterprises), lower bank-lending rates for businesses and the integration and upliftment of business incubators, where private capital has become a major source of investment for entrepreneurs. These favourable conditions are what have resulted in the incubation/start-up boom. Incubators in China grew by an average of 20% annually in 2016-18 and in 2010-2014, new businesses grew by almost 98% in China. 

Entrepreneurship and Incubation have emerged in China prominently along with the internet boom and even traditional manufacturing industries, finance, medical and agriculture sectors are now targeted to be integrated with technology and the internet through policies like ‘Internet Plus’ and ‘Made in China 2025.’ The impetus provided to startups and the incubation system, especially in emerging sectors like Artificial Intelligence, Biotechnology, New materials etc. puts the entire startup ecosystem at an advantageous position, where we can anticipate further growth.

Apart from the few incubators in India supported exclusively by the private sector (Venture capital funds, angel investments, other private companies, etc) a large majority receive some sort of government support but are still mired in strict qualifiers and regulations. A majority of these incubators remain solely tied to government academic institutions and conjoined-research parks, where private capital by citizens and investors from India have not significantly forayed into the incubation space. Chinese provincial governments’ direct investment in resources, capital and land result in partnerships with incubators and new businesses alike, where it is difficult to draw the line between state-owned companies and privately-owned enterprises. In China, there is now a new cultural acceptance of risk-taking owing to local government hand-holding in each step of the way, in what can be termed as provincial push.

Start-up India mimics China in the way Indian states have their own start-up nests. However, the centre’s role vis-à-vis provinces is very different from that of India. Chinese provinces have their own rules for funding, incubation and promotion of start-ups not directed by a central start-up body like in the case of Start-Up India. Examples for this include the city of Chengdu in Sichuan province which launched the Venture Tianfu-Jingronghui Project that aims to attract 100,000 startups by 2020.  Additionally, despite this state-support, there seems to be a healthy influx of private capital fund in China. In the Indian ecosystem, the scarcity of funds, ideas and teams venturing into entrepreneurship, related incubator systems and the overall upliftment of the incubation would only work with a more business-minded approach and an influx of attention, awareness and investments from private bidders and citizens as a whole.