Author: ICS

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.

Party Influence in Chinese Economy

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 Arnav Batra, Research Intern, ICS

China has a unique role in the world economy, with it being one of the most attractive places to do business which is clearly indicated by its status as the world’s largest exporter, the second largest recipient of FDI and the second largest consumer market. On the other hand, compared to other economies that seek to attract foreign investment, the economic setup for conducting business is very different, as China’s economic system is called a ‘socialist market economy’ to which some academics have referred to as ‘state capitalism’ or even just an unstable form of capitalism. The rise of Chinese economy in recent decades was driven by open market activities, and the Chinese economy has  grown by a factor of several times largely due to becoming a ‘supply economy’, manufacturing goods meant for export, and also due to the burgeoning middle class in the country, and their rapidly growing consumer spending.

Since President Xi Jinping came to power, there has been a shift in the economy towards a larger role of the state, as has been evidenced by the central role of state-owned firms in the Belt and Road Initiative, and a growing shift of bank credit towards state-owned firms from private firms. This is also indicated by the assets of state-owned enterprises (SOEs) growing at double the pace of the national average pace of capital formation between 2012 and 2018.  

An important indicator of the state’s growing demand for influence on the economy has been the change of legislation to make it compulsory to establish a Communist Party organization for its workers in each company, whether state-owned, private or foreign. The purported purpose of these are to fulfil the role of a trade union, arguing for workers’ rights and fair wages. No management or governing role for these party organisations has yet been formally specified in the company law of the PRC.

In the last four years, many SOEs, and even those listed in Hong Kong with a combined market capitalisation of several trillions of dollars have changed their articles of association  to give key decision-making powers to these party organizations which are separate from the powers of the executives and the board of directors. At the end of last year, on 30 December, 2019, a landmark change took place, and a new regulation was put forward for the first time by the Central Committee of the Chinese Communist Party which formally requires every state-owned enterprise to recognise the role of the party organizations in its articles of association. According to the regulation, each important business decision must be discussed with the party organ before being approved.

At first glance, this does not seem like an alarming change, because it only strengthens the control of the state on the state-owned enterprises. But this is in contradiction of the Chinese government’s earlier commitment to implement a modern corporate governance system, which puts the board of directors at the helm, so that Chinese State Owned Enterprises can compete with foreign companies.

There are also some reports, mainly from Hong Kong that this change in the corporate governance of SOEs is against the wishes of private investors who even voted against these changes in the company meetings, and these changes in the articles of association of the state owned companies were approved only because the state holds the majority stakes. Some investors even say that the recent changes have just formalised existing party influence on the companies, which it had been exercising through channels such as private meetings with the company executives, and attractive financing for those companies which comply with the party wishes.

These changes hint at a growing tendency of the Chinese state to use companies as political weapons and take key decisions influenced not only by business strategies but also as geopolitical considerations, which has been evidenced in the recent tendency towards “debt-trap diplomacy”. In a prime example of this, Chinese SOEs have taken over Sri Lanka’s airport. These changes could lower the efficiency of Chinese companies, by forcing them to take decisions that they would not take on their own. It opens up room for discourse on the attractiveness as a place for doing business . It will be quite instructive to see till what extent the Chinese state is willing to give up economics for politics. The party’s push for control is not only isolated to SOEs, as some yet unconfirmed reports have suggested that the party is pushing for more influence even in private enterprises and foreign joint ventures by demanding an increased role of the party committees in internal decision making through changes in the articles of association. The attitudes of the Chinese officials indicate a growing desire for influence in private companies, and this implies that the Party Committees will eventually be instrumental in imposing Party will on the decision-making process in both private and state-owned companies. The role of the Party in the decision-making process of Chinese companies should be carefully considered by foreign investors who seek to invest in China, as they might find that their money is not directed towards their company’s best interests, but to further the cause of the state.

Diluting the One-China Policy: An Intelligence Alliance?

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Samanvya Hooda, Research Assistant, ICS

The Galwan clash can be a watershed moment for engagement with China. It is time for our polity to decide whether simply reacting to provocations will continue to be the state of affairs, or if a proactive approach can be adopted.

A simplistic analysis can attribute clashes along the Line of Actual Control (LAC) to an outstanding border dispute, which if fixed can bring about peace. This is inaccurate; the deaths of twenty Indian soldiers and an unknown number of People’s Liberation Army (PLA) troops are not the result of historical animosity, but the geopolitical currents guiding both countries. As some scholars have remarked, China’s desire to dominate the region means it wants the option to escalate at the LAC, and always will. A country with hegemonic dreams will seize every opportunity to exercise dominance. This is exacerbated by rivals building the capabilities to fight back – India’s border infrastructure was bound to evoke Chinese escalation. If India deescalates unilaterally, we should reconcile with being deferential to China’s expansionist policies for the foreseeable future. While developing collaborative strategies to deter China will prompt further backlash, it will also bolster India’s efforts to ensure its sovereignty. Policymakers worry about ‘strategic autonomy’, but ignore that consistently mollifying China’s concerns because of its hostility makes us even less ‘autonomous’.

Broad areas of collaboration

While groupings like the Quad (Quadrilateral Security Dialogue) and a closer US alliance are viable options to contain China, inherent issues in both might take them longer to operationalise. Many have suggested a relook at the One-China policy and improving our Taiwan ties. Attractive as it may be, India alone recognising the legitimacy of Taiwan would not worry China much, and offer very little by way of material gains. However, there are several options below this threshold that merit serious consideration.

India has conducted joint military exercises with the US, Japan and South Korea, but never with Taiwan. This matters as China reportedly has more than 1,500 missiles aimed at Taiwan. India and China both field Russian-origin equipment like Sukhoi jets and soon, the S-400 air defence system. Although the US provides Taiwan with most of its weaponry, India can offer the opportunity to study platforms that may be used against Taiwanese forces. There is room to work together at sea — on coast guard security and with Taiwan’s fledging submarine programme.

There is also an opportunity in the new frontiers of war. Taiwan government networks are reportedly subject to 15 million attacks a month from China, and India has only recently made fledgling steps in developing cyber capabilities. Taiwan’s limited space programme can be boosted by collaboration with the Indian Space Research Organisation (ISRO), and India can be a huge market for Taiwanese technology investments. These developments engender material gains and posturing benefits, both crucial for standing up to China. However, structural problems will cause them years to materialise fully. While India cannot credibly support Taiwan through a policy of ‘strategic ambiguity’, there are other feasible measures available in the short-term. An intelligence alliance with Taiwan would be relatively easy to achieve, vastly improve intelligence gathering/sharing, constitute unprecedented signalling of resolve, and be a significant step towards mitigating Chinese aggression.

Intelligence alliance

The leading intelligence alliance in the world today is Five Eyes, whose constituent countries – the US, the UK, Australia, Canada and New Zealand — share primarily signals intelligence. Its enduring success lies in the ability to divide limited resources on common areas of concern, while still ensuring complete intelligence coverage. A similar arrangement between India, Taiwan, and perhaps Japan would amplify each country’s intelligence capabilities exponentially.

Some reports indicate Taiwan and India have exchanged intelligence in the past. The covert nature of this cooperation necessitates negligible signalling, with material gains also affected by the lack of official communication channels. Taiwan’s security establishment is almost entirely focussed on the Chinese threat, and can relieve pressure on India’s intelligence network, overextended as it is over two hostile threats on its borders. India’s superior satellite reconnaissance abilities can significantly improve Taiwan’s intelligence network over China, with both countries combining resources in signals intelligence. By combining their intelligence assets and creating channels for a continuous exchange of communications, electronic, geospatial, and human intelligence, the two countries together can achieve better coverage of China than they can individually. By developing the infrastructure to share all China-related intelligence in real-time, a formalised alliance also avoids the bureaucracy and red-tape otherwise accompanying ‘informal’ intelligence sharing.

Japan will certainly be a welcome addition to this alliance, bolstering a united front against China. It would contribute an estimated 19 signals intelligence stations (possibly the third largest in the world) and an extensive underwater surveillance system, among others. India is inducting a variety of electronics intelligence, imaging, and communications satellites for better surveillance. Taiwan is understood to have some of the best human intelligence assets operating against China. While some areas will undoubtedly overlap, constant intelligence sharing between the three countries can result in near-absolute situational awareness of China.

All three countries are on the front line of China’s aggression, and face the brunt of its expansionist policies. Arguably having the most to lose from Chinese hostility, they should be the first to consolidate a containment policy. Why should there be any unwillingness to do so? They have no divergent national interests, or prevailing historical antagonisms. They all face a unifying, substantive threat to their national interests, and all three have a great deal to gain from an intelligence alliance. Other regional countries such as Singapore, Vietnam, and Australia should also be extended invitations in the future. In time, this alliance may even grow to be a third-party grouping to Five Eyes.

A formal and publicised alliance indicates a clear shift away from tip-toeing around policies to deter China. An alliance is more permanent than vague MoUs, and unlike initiatives like joint military exercises cannot wax on and off depending on the polity’s slightest whims (or under threats from China). Presenting a credible, united front also emboldens countries

otherwise struggling to hold China at bay. This trilateral can also be used to posture as a precursor to a possible military alliance, and hence be used to extract concessions from China. By stepping up the escalation ladder and threatening to step further, it would be among the few instances where India, Taiwan, and Japan will own the initiative, rather than only reacting to Chinese actions.

Arresting China’s hostility

Realising that China’s trajectory is inimical to India’s interests allows one to prepare for challenges in the future. Ignoring it and changing nothing may appear a more comfortable option now, but will encourage China to continue its grey zone tactics against India. Efforts such as diluting the One China Policy will undoubtedly draw China’s ire in different ways.India will likely see an escalation in border incidents, Indian Ocean troubles, and Pakistan also joining the fray. But by expanding the scope of possible actions against China, India has more options by which to escalate/de-escalate. This will vastly improve our negotiating position, which is abysmal at the moment. Instituting proactive measures like the intelligence alliance will provide us the tools with which to defend against China, and its constant and inevitable hostility.

Avoiding war while attaining one’s goals is the most desired form of strategy, whether according to Kautilya, Sun Tzu, or Machiavelli. Former National Security Adviser Shivshankar Menon has hinted China might be “flaunting ambition” too early. Time will tell – but we can’t afford to wait and find out.

Originally published as ‘To check China’s hostility, India, Taiwan and Japan need an intelligence-sharing alliance’ in The Print, 26 June 2020

The Case of Rising Divorces in China amid COVID-19 Lockdown

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Bihu Chamadia, Research Intern, ICS

China announced a nationwide lockdown on January 23 to combat the Coronavirus outbreak. As soon as there was a visible decline in the number of reported cases of COVID-19 in China, the rules of lockdown were eased and many government offices started to function normally. While China tries to pull itself out of the pandemic, there has been another outbreak in the country: the rising cases of divorces.

After the government started lifting the lockdown in late February, marriage registration offices of various districts started receiving high number of divorce cases. The offices of many districts in Xi’an city of Shaanxi province received a record number of divorce cases. According to local Chinese sources, the incoming divorce cases in the marriage registration office in Yanta district in the city of Xi’an had surged to the point where the marriage registration office did not have vacancy till 18 March this year. The situation was similar in other parts of China including Beijing, Shanghai, Yunnan and Sichuan.

Even though an increase in divorce cases is a common trend in China after the Spring Break, according to a report in Global Times, compared to the same period last year, there has been a surge in the number of divorce cases this year. In Tongzhou district in Sichuan Province, the Civil Affairs office received 232 cases from late February till end March, while the number of divorce cases registered last year during the same period was 180.

Marriage as a social institution in China has been facing serious challenges since many years. According to the Ministry of Civil Affairs, there has been a significant hike in the rate of divorce since the reform and opening up era. But this trend witnessed a steep rise after the liberalisation of Marriage Law in 2003. Once considered a taboo, even the number of divorce cases doubled in the past one decade. In 2010, the total number of divorces in China stood at 1.96 million which has more than doubled recently. Recent figures mentioned by Ministry of Civil Affairs, shows that it stood at more than 4 million in 2019.

The  closing down of factories during the lockdown which had led to the laying off of workers and a dip in household income, was one of the primary factors that contributed to rising tensions between married couples during this period. Moreover, the gendered nature of household chores, where it was socially accepted that men who worked outside the household did not have time to lend a helping hand for household chores, was effectively busted during the lockdown when work happened from home; household work was still managed by the female partner during the lockdown. Women had to shoulder the entire burden of household duties including grocery-shopping and taking care of children with little to no help from her male counterpart. While these issues existed earlier, the lockdown period witnessed an overlapping of mental pressure along with problems such as inequality, gendering in roles and stereotyping of work which eventually accelerated divorce cases after the lockdown was lifted.

Infidelity was another major reason for divorce among married couples. The changes in the Marriage Law in 2003 allowed wives the right to divorce if the husband was abusive or had an extramarital affair. Many cases of infidelity were uncovered during the lockdown which otherwise would have remained under the veil during normal conditions. According to a 2016 report in Global Times, on an average 75% of the divorce cases filed are due to infidelity. In a speech made of 6 November 2019, Zhou Qiang, the Chief Justice of China’s Supreme People’s Court mentioned 74% of the total divorce filed between 2016-2017, were initiated by women.

While issues such as infidelity, financial issues and non-sharing of household burden have been the most common reasons for divorce in China, the lockdown aggravated these issues and exacerbated tensions between couples, and even led to a spike in cases of domestic violence. Divorce lawyers, in particular, have noted an increase in cases related to divorce and pointed that problems which would  have earlier been a cause of little strife in the household were now leading to divorces due to an increase in interaction between couples during this period.

A combination of better socio-economic status leading to new aspirations, increasing tolerance among the masses towards divorce have influenced this trend. But most importantly, the liberalization of the marriage laws in 2003 played a significant role in the rise in divorce cases in China. Changes in the marriage laws in 1981 and 2001  led to a gradual increase in the number of divorce over the years but it was after the amendments in the Marriage Law in 2003 such as lower cost of filing divorce, faster pace of granting divorce and non-requirement of employer’s approval for filing a divorce which made it easier for women to seek divorce leading to the number of divorce in China rise exponentially after 2003 (see graph below).

Parallel to these developments was the rising average income of the female population in China since the reform and opening up.  As average female income rose, the number of divorces also began rising. Earlier, job stability and owning a house were enough for a woman to ‘settle down’ but as women become increasingly educated and financially independent, their expectations also expanded. They no longer accepted to live in an abusive marriage or marriages where there was no compatibility. Moreover, while in the past, custody of the child was often given to the ex-husband after divorce and the wife was ostracized and faced difficulty finding a job – a major deterrence for women to seek divorce- this has changed today due to change in the level of income of women in China. Therefore, an already rising trend in the number of divorce cases witnessed an acceleration during the lockdown period when couples were forced to live together.

Although revoked, the demographic shifts caused by the One-Child policy is now causing a ripple effect both on China’s economy as well as the society. A rapidly ageing  population and a fall in the average age of workforce have become a major concern for the central government as it grapples with lower birth rates and shortage in cheap labour. In 2019, China’s birth rate fell to its lowest in seven decades causing massive concern of the CCP. China’s population dwindles and the rate of marriage also goes down, the Chinese government fears that the number of workforce, taxpayers and consumers will also witness a steep fall.

The growing concern of the government towards rising divorce cases is reflected in the measures taken to address to issue such as free counselling for couples and the introduction of a “cooling off” period to slow down the divorce rate. While earlier it was adopted only by a few local courts, recently, the 13th National People’s Congress that took place in May 2020, voted in favour of adopting ‘cooling off’ as a part of China’s first ever Civil Code. This has caused a massive outrage  among the Chinese population where the Party has been accused of abandoning progressive ideas of promoting gender equality. On the other hand, family planning policy which, in 2016, was amended to allow married couples to bear two children has been absent from the 2018 Civil Code draft. This has led to speculations of government further easing the restrictions on family planning or scrapping the bar altogether on the number of children a married couple could bear.

Despite government efforts to prevent any fissures in the institution, and its push to preserve “traditional values” for a stable and “harmonious society”, divorce cases in China continue to rise. The Covid pandemic has only acted as a catalyst that has unravelled the pre-existing fractures in the society and economy. Rising costs of social pension and shortage in supply of cheap labour have created a huge burden on the falling GDP of the country. As demographers warn that China’s population will begin to shrink in the next decade derailing China’s economy with far-reaching global impact, the need to preserve the institution of marriage has become even more important. The recent adoption of the Civil Code where marriage takes up considerable space in the text of the Code exhibit the gravity the case of rising divorces pose for Beijing.

Cross-Strait Relations amid COVID-19: Multilateralism with Chinese Characteristics

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Hariharan Chandrashekaran, Research Intern, ICS

COVID-19 has catastrophically emerged as one of the deadliest pandemics of the modern era, reshaping the dynamics of Cross-Strait relations, which has been characterized by limited contact, tensions, and instability. Although China managed to contain the virus, it was accused of a lack of transparency in communication. Meanwhile, Taiwan, with its proximity to China and an ideal destination for mainland tourists, was expected to have the second-highest number of imported cases during the initial stages of the outbreak. However, it was lauded globally for its swift execution of control, propagating the region’s perception in a positive light. Amid all the chaos globally, the World Health Organization (WHO) endured flak from critics for its approach towards the crisis and alleged remarks of being sympathetic towards the Chinese cause.

COVID-19, China, and the WHO.

Not ceding to a “Chernobyl moment”, after a prolonged period China successfully flattened the curve by effectively mobilizing its resources. It has since picked up the mantle to quickly restore its image through soft power measures such as formally dispatching medical equipment, ventilators and face masks to European nations such as Italy, Spain and other crisis-hit countries; now termed as “Mask Diplomacy”. Also, it maintained communication with the WHO,  providing updates of the virus and its transmission, contrary to the criticisms.

With early reactions being mainly positive from resource-strapped countries, including its African allies, a discriminatory racial incident within the Chinese mainland against African ethnicity hindered its progress. Additionally, claims of faulty equipment and its return questioned the candour of such measures.

Nevertheless, at the 2020 World Health Assembly (WHA), China pledged to contribute $2 billion to aid the WHO response towards the pandemic and the socio-economic development of the crisis-hit countries, especially Africa. Additionally, it called for global solidarity and collective mobilization of efforts against the virus by supporting WHO. But, mounting criticism resulted in the parallel emergence of the “Wolf Warrior” diplomacy. 

“Wolf Warrior” diplomacy refers to the growing assertiveness of Chinese foreign policy towards the West. COVID-19 has only amplified direct engagement of China through a battle of narratives against its critics, chiefly the US, condemning it for politicizing the issue. This development marked the Chinese contribution to the gradual shift of discourse from global institutionalism to hypernationalism. This new direction aims to portray China’s story – a country, attempting to “rise to the challenges of global leadership” by striving in a climate of declining multilateralism.

The Taiwan Cause

Harnessing its experience from the SARS outbreak, the Taiwanese government reacted quickly by entering a strict lockdown mode and enforcing stringent policy measures, gaining universal acclaim. Its technological capabilities tracked down the source of the virus within its area; additionally, it developed a range of testing kits to hasten the process of the containment of the virus. Taiwan succeeded in flattening the curve, showcasing a rare, strong well-executed response, even by WHO standards.

Furthermore, Taiwan took a page out of China’s policy of engagement by initiating its version of ‘Mask Diplomacy’. It was achieved by supplying masks (Taiwan is the second-largest producer of masks after China) and providing technological action frameworks to the affected countries, especially Western powers, thereby, emulating its ability to compensate the lack of its economic power. It had significant implications on its bilateral relations through further cooperation such as ongoing Taiwan – Danish cooperation to develop vaccines and the US amending its position by supporting Taiwan’s membership to the WHA, significantly denting the “One China” policy.

However, its achievements were unacknowledged categorically due to the politics of the WHA, which recognizes the region as part of China, leading former’s exclusion from WHO meetings. It resulted in the emergence of pent up anger amongst the nationalist groups who sought to move away from the Chinese identity. However, the government response was limited to castigating WHO by questioning its non-political nature.

Balance of Tide 

It was due to the Taiwanese cause for representation after a prolonged struggle that it finally received the observer status invite to WHA in 2008 Taipei’s observer status at the WHA exemplified a historic shift in Cross-Strait relations. Nevertheless, the Assembly revoked its membership since 2016, owing to the UN Stance on “One China” Policy. Since then, China has actively blocked the prospect, thereby resulting in the reversal of whatsoever gains for positive relations over the years.

In addition to actively blocking Taiwan’s membership bid since 2016, it was also a timeline of heated economic quarrels between the US and China. Also, the Hong Kong protests had a profound impact on Taiwan by significantly affecting the results of the Taiwan presidential and legislative elections in early 2020 favouring the incumbent party and raising its image as a democratic nation. The evolved imagery and the simultaneous allegations on China over lack of transparency immensely accelerated the US legislation of  TAIPEI Act – 2019 to make it US policy to advocate Taiwan’s participation in international organizations. However, it was strongly rebutted by China who described it as an “act of hegemony”.

Nevertheless, the battle of narratives between the US and China resulted in the former halting the financing WHO. Complementing it was the announcement of US terminating its relationship with WHO as an attempt to pacify its populace for its lack of preparedness. Moreover, Australia demanded an independent assessment of the performance of the WHO and China in handling the crisis. Both responses drew sharp criticism and rebuttal from China. Nevertheless, moderates such as Germany and France urged transparency for the global good, resulting in China ceding to the demand for investigations, albeit post-crisis, making WHO a battleground of politics.

Conclusion

In tracing the dynamics of Cross-Strait relations, the ongoing situation not only demonstrates the vulnerability of international institutions’ functionality amidst political crises but also marks a growing shift away from reliance on global institutionalism. However, for Taiwan, this development brought a temporary rejuvenated hope for the government to maintain its independent co-existential nature. In contrast, with China sticking to the “One China” policy, it expects other countries to reciprocate its policy of non-interference[*]. However, the pandemic has catalyzed its assertiveness as evident in the central leadership’s decision to enforce the “New National Security Law” in Hong Kong, creating similar potential implications for Taiwan’s cause foregrounding resistance from the US. To conclude, Beijing has exploited the shift by stressing cooperation over isolation under the umbrella of the WHO by providing a differing perspective of multilateralism with Chinese characteristics that calls for solidarity without interference – a perspective steered by the rising nationalistic Wolf Warrior diplomacy.

[*]This policy of non-interference is in direct contrast to the U.S. foreign policy of selective international engagement that interferes with domestic issues.

China’s Health Diplomacy in Africa during COVID-19: Discerning Prospects and Problems

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Dr. Veda Vaidyanathan, Visiting Research Associate, ICS

LI Nan, a South Africa’s Chinese Embassy representative, left, elbow bumps with Zweli Mkhize, South African Minister of Health, during the handing over for the emergency medical equipment for COVID-19 from China, at OR Tambo Johannesburg, South Africa, Tuesday, April 14, 2020.

Source: AP Photo

At the margins of the third session of the 13th National People’s Congress, as Foreign Minister Wang Yi fielded questions from the press, China’s role helping other countries fight COVID-19 was brought up and China’s assistance to Africa, in particular, found considerable mention. As is usually the case, high doses of morality and altruism accompanied stories of China’s health cooperation in the region. In Wang Yi’s words

“China is always willing and ready to help others. When our friends are in distress, we never sit by and do nothing. A case in point is our assistance to Africa during the Ebola epidemic. While some countries evacuated their personnel from the affected areas, China rushed to Africa’s aid despite risks of infection, sending in medical teams and badly needed supplies and fighting alongside our African brothers and sisters until victory was declared.”

However, this does not take away from China’s multifaceted contribution to the African region in its fight against COVID-19. Actors including the state, provincial governments, companies and entrepreneurs have been contributing to different countries in varied forms. The Chinese government sent medical expert teams to Africa’s 5 sub regions while the resident medical teams based in 45 African countries have also been very active and have held over 400 training sessions for medical workers. On the 18th of March, the first teleconference of experts was held between China and countries in Africa. Over 300 people including representatives from over 23 African countries, the African CDC, officials from the WHO posted in the region attended the meeting with experts from the Chinese Academy of Sciences, the Chinese CDC, the first hospital of Peking University. Since then over 30 video conferences have been held. China has also been upgrading health infrastructure, like a $500,000 donation to the Wilkins Infectious Diseases Hospital, the main Covid-19 centre in Harare, Zimbabwe. Provincial actors like Chongqing municipal government sent supplies along with a delegation to Algeria and a team of 12 medical experts from Hunan province brought medical supplies to Zimbabwe.

Chinese media houses have also been critical to its ‘Corona diplomacy’ in the continent. A website hosted by China Daily called “Fighting COVID-19 the Chinese Way” is used to share facts, updates and stories about managing the virus. Another platform called “COVID-19 Frontline” by CGTN is an online live show for medical workers and officials to share information. One of the shows hosted was titled “Fight as one: Exchange of COVID-19 treatment experiences between China and Zambia” where Doctors from the First Affiliated Hospital of Xi’an Jiaotong University, who served on the frontlines in Wuhan shared their experiences with their Zambian counterparts. Similarly CGTN invited experts from Jiangsu Province who worked in Wuhan to share their experiences with colleagues in Tanzania. Links to such platforms have been advertised in the websites of Chinese missions in various African countries. In addition to the Chinese State, Alibaba’s Jack Ma and the Alibaba foundation have also contributed to the African fight against the pandemic by providing thousands of detection kits, PPEs, face shields, infrared thermometers, extraction kits, surgical masks, swabs and gloves among others. Other Chinese firms active in the region have also been donating to local charities.

However, Chinese assistance during the pandemic has not always been received positively in the region. There is an increase in xenophobia and this has resulted in several unpleasant exchanges. One of first reports that came out in this regard saw several Africans in Guangzhou being discriminated against, evicted from their homes and forced into quarantine. This attracted an unprecedented and strong response from a group of African ambassadors in Beijing who “immediately demanded the cessation of forceful testing, quarantine and other inhuman treatments meted out to Africans”. A few weeks later news broke that three Chinese nationals were murdered in Lusaka. According to the Zambian police, the suspects killed the victims who were working in a Chinese clothing company and set their warehouse on fire. While many commentators have discussed how deep-rooted racism is a longstanding issue in China-Africa relations, officials like Zambia’s ambassador to China doesn’t seem to be too perturbed; stressing that “Sometimes, our people or your people make mistakes out of anxiety. It is not good to amplify these small negative points. We should pursue cooperation under a bigger picture”.

Nonetheless, one of the major expectations from China, beyond knowledge sharing and supply of medical equipment, is to forgive loans and ease debt repayments. As several countries in the continent are struggling with weak health systems, rising domestic dissatisfaction due to unemployment and cessation of economic activity, they are not in a position to make repayments on debt. Considering that China has been the largest trading partner of the region ($208 billion in 2019), one of the largest investors ($110 billion stock) and holds a fifth of Africa’s sovereign debt, this takes centre stage. A case in point is Kenya: by March 2020, Kenya’s total national debt reached an all-time high of Sh6 trillion ($57 billion), very close to its 70 per cent national debt ceiling of Sh9 trillion ($90 billion), of this its debt to China stood at Sh660 billion ($6.6 million). While China has supported the call of the World Bank and IMF and will join the G20 nations to forgo repayments, officials have stated that they will also conduct bilateral meetings to discuss further debt relief. It is very likely that China will forgive significant African debt, not only because there is a precedent, but also due to the fact that in the post pandemic world, where investigations looking into the origins of the virus are underway, African support will be critical to China.

Similarly, Africa could also gain tremendously from China’s close engagement. As global supply chains are hard hit, intra Africa trade could increase, kick starting the African Continental Free Trade Area, and major economies in the region including Kenya, Nigeria and South Africa could start supplying to other countries and Chinese cooperation in this regard would be vital. There have already been several instances of states turning to domestic production to meet demand. The Ugandan President for instance, launched two production lines at a Chinese firm in Uganda, Lida packaging Products Ltd, that employs over 300 people and has the capacity to produce 560,000 masks a day. Similarly, the tech, digital and e-commerce spaces that have been growing rapidly – including coming up with home grown solutions to problems posed by the pandemic – stands to benefit from close cooperation with Chinese actors. Like many other geopolitical equations, China-Africa relations in the ‘new normal’ will also undergo a reset. A narrative is already building around Africa’s unwavering loyalty to China, especially during the pandemic. For instance, the Chinese ambassador to Zambia, Li Jie, stated that when the pandemic broke out in China, Zambia was one of the first countries to call and extend support and therefore Beijing will provide substantial support to Lusaka in this trying time. It would be prudent therefore, that other actors engaged in the region, like India, pay close attention to the myriad forms Chinese assistance to the continent is taking and how they are received, because it will not only influence Africa’s fight against the pandemic but will also help shape a narrative that projects China as a ‘voice of reason and judgement’ in a landscape that is seemingly devoid of global health leadership.

COVID-19: Chinese Dominance over Global Supply Chains under Threat?

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Akshit Goel, Research Intern, ICS

Since the beginning of the COVID-19 pandemic, nations around the world have scurried to contain the spread of the pathogen which has left the global economy in shambles. The physical measures put in place to ‘flatten the curve’ such as travel bans, lockdowns and social distancing norms have revealed the fragility of global economy. The lockdowns have severely affected the economies at home due to loss in production as major industries and factories are shut down. Further, there is also a dent in consumer spending as households are burning through their savings with their incomes impacted. The combination of these factors spell disaster for the world economy as the International Monetary Fund (IMF) predicts the recession due to the pandemic may be worse than the 2009 global recession.

Prospects such as availability of cheap skilled labor and advancements in technology has increasingly moved the production and assembly chains of major corporations from their countries of origin to nations abroad. This trend of overseas production has left the global economy far more integrated and dependent on each other. This model of production outsourcing has been one of the driving forces that has transformed the Chinese economy into one of the manufacturing hubs of the world. China is part of some of the most important supply chains in the global economy. Availability of cheap skilled labor as well as a well-developed supply chain network alongside an integrated infrastructure which cannot be easily replicated elsewhere has helped China solidify its position as a lucrative source of cheap and steady manufacturing for many large firms around the globe. As income of individuals grew due to privatization and rapid economic growth, private household consumption also rose. This led to the creation of large domestic consumer markets in China which further incentivized manufacturers to move production here. Moreover, these supply chains fuel a major portion of the industries in South-east Asian nations such as pharmaceuticals, automobile, garments, and many more by supplying them with machinery and components which are imperative for their sustenance. The electronics industry is one of the most important industries which is dependent on the South-east Asian supply chains. Therefore, with the outbreak of COVID-19, not only is the Chinese economy affected but due to the shutdown of industries, supply chains across the globe have been disrupted.

The epicenter of the corona pandemic, Wuhan is a major manufacturing hub located in Hubei province. According to a report by Dun & Bradstreet, a business think-tank based in US, 51,000 companies have one or more direct suppliers in Wuhan, while 5 million companies have one or more tier-two suppliers in the region. This supply shock is not only going to affect the South-East Asian nations but rather a major chunk of the globe as supply disruption appears more widespread. Moreover, as per a report by Institute for Supply Management, nearly 75 per cent of companies have reported some form of impact on their business due to disruption of global value chains. Further, around 44 per cent lack any contingency plan to combat this sudden drop in supply as lockdowns chokes production. Wuhan is a major supplier of electrical components and assembly of smartphones for some of the biggest firms in the world such as Apple, which were some of the worst impacted by the disruption. Although the company has invested to diversify its assembly chain into Vietnam and India, it is still highly dependent on China in maintaining its inventory.

Moreover, China is highly integrated in the supply chain of auto parts around the world and with the onset of lockdown, the automobile industry around the globe has suffered. Fiat had to temporarily suspend production in its plant located in Serbia. This was due to a shortage in supply of auto parts from China. This was not a unique occurrence as automobile firms around the globe are facing the same issue. In a similar bid, Hyundai, world’s fifth largest automobile company had to halt production in South Korea. Wuhan supplied the world with auto components worth over USD 2 billion in FY 2018-19. India, although self-sufficient in its supply, still imported auto components worth USD 4.5 billion in FY 2018-19 from Wuhan.

This economic disaster revealed how overdependence on China, simply put, having all the eggs in one basket, could pose a problem. There is now a resounding demand in the global economy for the diversification of supply chains to nations other than China. Some of the main contenders, who could fill this supply vacuum left by China are Vietnam, Cambodia and India. The trend to move out of China gained traction just before the outbreak, in the wake of the trade war between US and China. With the imposition of tariffs, many Multi-National Corporations (MNCs) which had relied on China for manufacturing, had already started to look for alternatives to China. Apple had been, for a while, trying to move its assembly to Vietnam and India. But this is easier said than done as most of these nations themselves depend on China to fuel their industries. Vietnamese manufacturing is dependent on China for the supply of heavy machinery, components and electronic equipment that are required in manufacturing industries. Moreover, these nations still lack the skilled manpower which is required to take on any surge in demand from the US which makes them a lesser reliable supplier. Since the beginning of the lockdown in early February, China has got its grip on the spread of the virus. Factories and industries in Wuhan, and rest of China, are back online with production. But as the supply of manufactured goods begins in China, the rest of the world still grapples with the pandemic with the lockdowns in place which in turn led to shortage in demand for the Chinese industries. Although economists around the world were hoping for ‘V- shaped’ recovery, the reality seems far from it as the pandemic continues to unfold and the scope of the economic damage done by it slowly comes to light.

Can Taiwan’s COVID-19 Diplomacy Help It Make Permanent Friends?

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Sanjana Krishnan, Research Intern, ICS

The world today is full of uncertainty due to the outbreak of COVID-19. While the rest of the world is still in the grip of COVID-19, one small island, namely Taiwan has been successful in flattening the curve. This was made possible by the proactive measures it took immediately after the first news of  the outbreak emerged from China. In a way, Taiwan was already in a state of readiness after the outbreak of SARS in 2003.  It was able to respond quickly by integrating the working of various ministries and employing advanced technologies to achieve good results. It implemented measures such as on-board quarantine, 14-day home quarantine, health declarations, fever screening and so on. The travel details of people are stored in their National Health Insurance cards to alert the concerned authority about any spread of the virus by using the GPS technology. This has helped in curbing individual and community spread.

Taiwan, a self-ruled island that has been denied entry into the World Health Organisation (WHO), is not only setting an example to the world by the way it has handled its internal situation but also through its help to other states by exporting medical equipment, especially medical grade masks. The territory is now the second largest producer of masks after China. According to its Economic Affairs Minister, Sheng Jong-chin (沈榮津), Taiwan produces 15 million masks every day. In March, it had relaxed the ban on export of face masks  and in April, shipped PPE and masks to its diplomatic allies and the worst hit countries in Europe. Taiwan  also announced that it would donate 10  million masks to the most needy countries and 100,000 masks per week to the United States. It has also promised to share its electronic quarantine system that employs big data analytics.

These measures helped raise considerably the profile of this self-governed island but, in turn, has attracted Beijing’s anger. Even as Taiwan received praise from various parts of the world for its effective measures and the help extended, China termed these a political game played by Taiwan to gain admission into the W.H.O and the acceptance of the world community. This accusation was made while also pointing out that Taiwan had banned its mask export when China was in its most vulnerable state with respect to the Corona virus outbreak.

China considers Taiwan a part of its sovereign territory, awaiting reunification even by force, if necessary. Today, there are only a handful of nations in Central America and the Oceanic region, that recognise Taiwan. Taiwan has even been kept out of most of the international organisations such as the United Nations, W.H.O and so on. The island is in a geo-political absurdity owing to the fact that even its most important ally, the US does not recognise its status as an independent state, its territory is under constant threat as it is claimed by a powerful state such as China and its sovereign status slowly erodes with both states and MNCs withdrawing their engagement with it due to the threat of upsetting China. In this context, the latest engagement of Taiwan holds significance.

The world is now forced to recognise the advanced healthcare and technological capability of Taiwan. The helping hand extended by the island definitely aids the improvement of its image globally. It has made Canadian Prime Minister Justin Trudeau, Japanese Prime Minister Shinzo Abe and U.S Secretary of State, Mike Pompeo call for greater inclusion of Taiwan in the work of the W.H.O. This move however, is sure to be blocked by China even though it marks a departure in spirit from the 2009 arrangement that China had agreed to for Taiwan’s participation at the annual World Health Assembly from 2009 to 2016 as an Observer. There has been a change since then. Taiwan has rejected China’s main condition for the former to be a part of the W.H.O, i.e, to accept that it is a part of Mainland China in May this year.

Taiwan today faces an opportunity to strengthen ties with other states and improve its international standing. Beijing has sought to strengthen its relations with Europe by sending them medical equipment. However, this has not meant necessarily that member countries of the E.U. have succumbed to Chinese pressure on Taiwan. Many of these states have accepted help from the island and openly acknowledged this help through Twitter.

Both China and Taiwan have been able to curb the first wave of the virus. But what brings praise to Taiwan is the fact that they did it without any support from W.H.O. Taiwan also shared COVID-19 related data with W.H.O. Although China is trying to bring in a narrative of it being helpful to the world, reports of suppression of news of its early outbreak from the media as well as export of faulty equipment has adversely affected these efforts. This has in turn been a supplementary factor in improving Taiwan’s image. While both China and Taiwan engaged in mask diplomacy, Taiwan has had more apparent and immediate success. Thus, exporting medical equipment, especially masks, has also become a tool of political expression.

Taiwan’s mask diplomacy has chances of increasing the support it gets from other states. The important question here is, how long this support will last and how far it will extend. Supporting Taiwan means directly going against Chinese interests. While such support may appear today as a necessity, this cannot last for long. States often behave differently under normal conditions and under emergencies. The common determinant here is national interest. While it might be in the national interest to accept Taiwan’s help and show acceptance towards it, it might not appear so in the future when such a policy will mean locking horns with a formidable power such as China. As the world gathers more knowledge and experience in handling the pandemic, its dependence on Taiwan will decrease. In international relations, there are no permanent friends or permanent enemies. There are only permanent national interests. Some alliances last only as long as some issues do. Therefore, the effect of ‘mask diplomacy’ by Taiwan may last only as long as the pandemic lasts.