Category: Bilateral Relations

China Myanmar Friendship: Implications on India

ICSLeave a comment

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.

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

ICSLeave a comment

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.

A Note of Pause on Chinese Manufacturing Dreams in Indian Terrain

ICSLeave a comment

P.K. Anand, Research Associate, ICS

Anticipation mixed caution prevails in the run up to the second informal summit between Chinese President Xi Jinping and Prime Minister Narendra Modi at the south Indian coastal town of Mamallapuram, in Tamil Nadu, this weekend. Given that the jury is still out on whether any substantive and tangible deliverables have been achieved from the first such exercise at Wuhan, in China, in May 2018, such an approach is understandable.

The optics of the meeting between the two leaders is expected to be political and strategic, even though economics looms as signifier for the relations of both countries in the background. Perhaps, it is a good time to analyse the economic capacity of China, especially the role of manufacturing sector, in powering the country and its positioning in the China-India dynamics.

The manufacturing base in China was largely the result of the invigoration of the economy after the 1978 reforms, with the focus on attracting foreign investments, especially in the coastal provinces. Along with the aim of getting foreign capital, the Chinese diaspora along with businesses based in Taiwan and Hong Kong, were also targeted of these investment policies.

Over the years, the rise of the Chinese economy was on the wings of the industrial production and development. While the bulk of heavy industry is under State-Owned Enterprises (SOEs), an increased proportion of manufacturing also falls in light and consumer-oriented firms, which are either private or joint ventures.

With deepening diversification, the industrial pace picked up in 1990s, with the development of automobile, electronics, and semiconductors, along with steel, cement, metallurgy and textiles. A cursory glance through the Indian market is enough to understand why the sobriquet ‘Factory of the World’ fits for China — such is the range of myriad consumer goods tagged as ‘Made in China’. Intricately connected with the global value chains, the manufacturing sector in China has often been considered robust.

This purportedly successful industrial development model has been offset with significant challenges. That the real essence of the Belt and Road Initiative (BRI) was to find a fix for industrial and infrastructural overcapacities, is a well-acknowledged fact. With the rise of labour costs in the mainland along with the increasing worker protests, mainly in south China — the industrial hub of the country — due to despotic labour regimes in workplaces, manufacturers are grappling with either automating labour-intensive industries or move them to newer locations like Southeast Asia.

Further, the US-China trade war over the last one year has compounded in the slowing of economic growthresulting in the shrinking of the manufacturing sector. In fact, the trade war has also impacted the Made in China 2025 project, at least in terms of its active pronouncements and projections. These need to be contextualised while probing the dynamics and possibilities for China’s manufacturing sector to make forays in India.

There has been a spike in investments by Chinese companies in electronics (mainly mobile phones), home appliances, and automobiles, along with the tech sectors. The lion’s share of Chinese investments in India are private companies, thereby highlighting the reticence towards big ticket SOEs, and dawning the realisation that a good amount of such partnerships take place outside the purview of government-to-government engagements. However, these partnerships and investments are not necessarily the markers for the whole manufacturing sector, as there exist multiple humps on the road for both countries.

The increasing clamour among sections of the Indian business and political elite —enamoured by the glitter of China’s advancement —to ‘transplant’ the Chinese model in Indian settings, is oblivious to the inherent problems on both sides. The avowed ‘win-win’ as often bandied by the Chinese doesn’t translate into reality when it comes to technological transfer or knowledge sharing. Doubts exist in the count on employment creation, as Chinese enterprises abroad mostly seek have technical and supervisory/managerial personnel only from the mainland, thereby hiring local workers only for other routine and auxiliary tasks. This is often justified in the name of ‘work culture’ and ‘efficiency’.

Further, they view the regulative environment, with complex labour laws, discouragingly. The suppression of labour rights, is an inherent part of the ‘Chinese model’, and is even visible in subcontracting firms, as illustrated by developments at this phone manufacturing facility  Delhi NCR; the export of this exploitative model is well documented in Southeast Asia. Clearly, there are enough warts are always cheek by jowl with the gloss.

Even as speculations continue on the enduring nature of China-India relationship amidst the Mamallapuram pit stop, we can be pretty sure that there is still a long way to go and multiple hoops to climb before the Chinese manufacturing sector can both meaningfully and substantively, shake hands with India.

Originally Published as Entry of Chinese manufacturing in India is a bridge too far in Moneycontrol.com, 9 October 2019

‘PRC Scholars React to India’s Contentious Kashmir Move’: An Analysis

One expert said that “Kashmir war escalation shows that India is a rogue state.”

ICSLeave a comment

Dr. Hemant Adlakha, Honorary Fellow, Institute of Chinese Studies; Associate Professor, Centre for Chinese & South East Asian Studies, Jawaharlal Nehru University

Scholars in the P R China have reacted quickly and sharply to the Indian government’s sudden decision to remove Kashmir’s special status under Article 370 and reorganize the state into two centrally governed territories – Jammu and Kashmir being one, Ladakh the other.  In the views of most Chinese experts, India’s ‘unilateral’ move is not only ‘irresponsible and is source of tension in one of the most complex border disputes in the region’ but it (the Indian move on Kashmir) has the potential to ‘seriously derail’ the recent consensus arrived at between the president Xi Jinping and prime minister Narendra Modi.

Echoing Beijing’s official position on the status of the state of Jammu & Kashmir, the scholarly commentaries too describe the Kashmir region as internationally acknowledged disputed area between India and Pakistan; as also established in the 13 August, 1948 UNSC Resolution, 5 January, 1949 UN Resolution on India Pakistan Commission, and 1972 Simla Agreement etc. respectively.   

Interestingly, in sharp contrast with the section of the Indian English language national media – both the print and electronic – reports last Tuesday that “India and China (on Monday) seemed to have stepped back from allowing Kashmir to become an unmanageable irritant between the two countries,” just as the visiting Indian foreign minister, Mr. S. Jaishankar was holding talks with his counterpart in Beijing, op-ed columns in the mainstream Chinese media were screaming out with contradictory tones. Take a look at the sample: “As India scraps Kashmir’s special status, Pakistan’s dream lies shattered,” “India Revoking Kashmir Special Status is Violation of China’s Sovereignty: Don’t Expect Beijing to sit by idly,” “China will Never Let India’s Kashmir Power Grab Succeed.”

In addition, even as the Indian EAM was shaking hands with the Chinese vice president, Wang Qishan, a researcher at the Shanghai Institute of International Studies, SIIS, Mr. Liu Zongyi wrote in a signed syndicated column, “Due to India’s classification of Ladakh as a centrally administered area, the territory of the region, which was occupied by India in the western sector of the Sino-Indian border, will also have an impact on the stability of Sino-Indian relations.” Mr. Liu Zongyi also dons the position of a visiting research fellow at the Renmin University of China’s Chongyang Institute, an influential Beijing think tank on foreign affairs issues.

In another signed article on the same day, a Chinese scholar argued that India’s arrogant action has posed an increased security risk to the LAC in the western sector along the boundary between China and India. “China immediately and firmly opposed (India’s Kashmir move) not only because the Indian arrogant action will exacerbate regional tensions and pose a threat to China’s peripheral security, but also because the Indian action will render the LAC along the western sector of the boundary between the two countries increasingly vulnerable.” In the wild Indian imagination, the composition of the so-called Kashmir region includes the IOK – which includes Jammu, the Kashmir Valley, Baltistan and the China’s native land of Ladakh; the POK, the Chinese Aksai Chin as well as the Demchok region to the west of Aksai Chin – currently under dispute, the article claimed.    

Several Chinese commentaries view the controversial unilateral Indian push to change Kashmir’s status is aimed at fulfilling Modi government’s Hindu nationalist agenda. According to Liu Zongyi, “the Bhartiya Janta Party and its parent organization the Rashtriya Swayamsevak Sangh have always believed India has been at the forefront of resisting the Muslim invasion for 1300 years. The revocation of the Kashmir special status is the successful accomplishment of the BJP/RSS political agenda, i e, to strengthen Indian control over Kashmir, to alter Kashmir’s demographic nature, and to fully integrate it into the Union of India.”

The article, which first appeared on the Chongyang Institute website on August 12 and was quickly picked up by various Chinese news portals claims, the Kashmir move had been hatched based on a well-synchronized strategy, with keeping in mind both national as well as international factors. Speaking of the internal factors, the article contends that the Modi government wanted to fulfil its election promises to integrate Kashmir with India, which it had failed to implement during the previous five years on account of lack of majority in the Indian parliament. Likewise, several other Chinese commentators too have interpreted the parliamentary move on 5 August as an attempt by Modi, emboldened by the recent election victory, to have greater control over Kashmir, India’s only Muslim-majority state and the main source of conflict between India and Pakistan.

On the other hand, the external factor which largely contributed to the timing of the Kashmir move was the rapid progress achieved by the US and Taliban recently. Leaving India not only marginalized and isolated in the renewed Afghan peace process but also pushing India face the risk of losing initiative on both Afghanistan and Kashmir vis-à-vis Pakistan.  Besides, Chinese commentators over time have been highlighting India desperately trying to win over the US support to isolate Pakistan/Taliban in order to strengthen control over the entire Kashmir region. It is in this context these experts see a close link behind the Indian unilateral action in Kashmir to two more possible external reasons: to alert as well as draw the US attention to the fact that India alone has the right to determine what goes on in Jammu & Kashmir; and that India will not tolerate Pakistan to make use of the Taliban militants to unleash terrorism in Kashmir.

Furthermore, typically least surprising, not one Chinese commentary so far has voiced concerns such as total clampdown on democracy in Kashmir, closing down of schools, tourists evacuation, cutting off internet connectivity, and putting some of the local political leaders under house arrest etc.; on the other hand, what is also noticeably absent in the Chinese commentaries are the worldwide heightened concerns of both India and Pakistan being the nuclear weapon possessing neighbours. Neither China’s leaders nor the experts/scholars have indicated worrying signs that any escalation might push the two South Asian hostile neighbours ‘over the edge’ and start a conventional war that might well grow into a full-on nuclear conflict. 

Finally, as already mentioned, the Chinese concerns are largely centred on how Pakistan is going to equip itself both diplomatically and otherwise to successfully thwart off the arrogant Indian move in Kashmir; whether the immediate counter measures the Imran Khan government has announced would exercise any impact on India – measures such as to downgrade diplomatic relations, to cut off economic and trade ties, to put a ban on the Indian movies, to deny air space access over Pakistan to the Indian air flights and so on. A few Chinese scholars did however warn India of serious consequences of carrying out ‘aggression’ over the Chinese sovereign areas in the so-called Union Territory of Ladakh. Likening India’s highly contentious move in Kashmir to the behaviour of a rogue state, one commentator questioned: India has been dreaming of becoming a UNSC permanent member, does India aim to achieve this by deliberately violating the UNSC Resolutions and by trampling on the authority of the UN and the Security Council?

Limitations of the New Intellectual Property Reforms

Though reforms in IP remain a strong demand of the Trump administration, there exists a significant gap in the Chinese understanding of US requirements and the actual reforms being undertaken by the Chinese government towards that end.

ICS1 Comment
Beijing Intellectual Property Court

Kuldeep Saini, Research Intern, Institute of Chinese Studies, Delhi

One of the major catalyst for the ongoing trade war between China and the United States is the question of Intellectual Property rights (IPR) protection to foreign firms in China. Even after months of discussions and negotiations, an agreement seems elusive. China recently imposed tariffs worth US$60 billion in retaliation to the tariff hike that had been imposed on Chinese goods by the US. The investigation report submitted by United States Trade Representative (USTR) Robert Lighthizer on 22nd March 2018 cited Section 301 of the US Trade Act of 1974[1] to discuss China’s engagement in policy of transfer and theft of Intellectual Property (IP) technology from foreign firms. Ever since, China has committed to enhance its IP protocols by 2020 through the attainment of high levels of IP regulations on utilisation, administration, protection and creation.

The latest step in this regard are the amendments made to the Trademark Law of the People’s Republic of China (PRC) on 23 April 2019 at the 10th session of the Standing Committee of the 13th National People’s Congress (NPC). Though reforms in IP remain a strong demand of the Trump administration, there exists a significant gap in the Chinese understanding of US requirements and the actual reforms being undertaken by the Chinese government towards that end.

This article discusses the constraints faced by the Chinese Government in deescalating the ongoing trade war with the US despite the it having undertaken three major intellectual property reforms. A discussion of the three reforms undertaken by the Chinese government follows.

First, the measures governing the transfer of intellectual property rights overseas were issued on 18 March 2018 by the State Council’s General Office. These reforms state the complete opposite of what the world understood by Trump’s claim of IP theft by China. The changes mandate the reduction in IP related theft by putting the onus on US firms that are in a merger with domestic Chinese companies. They fulfil the purpose of implementing the regulations and setting forth the procedures for overseas transfer of intellectual property for the foreign companies having mergers with the domestic companies. However, while China’s State Intellectual Property Office (SIPO) claims transfer of more than USD 4 billion intellectual properties from China, the numbers fail to reflect the home conditions for foreign companies. These structural changes fail to focus on the internal regulations of IP in China while considering the export of technology as a priority concern for the Chinese government.

The significant change is the involvement of relevant governmental departments like Forestry and Ministry of Commerce (MOFCOM) and departments looking at technology and agriculture in a more orderly and legal manner. This increases the processing time in receiving the patent rights. As of 2017, the total numbers of patent applications received in China were 1.2 million out of which only 3,26,000 were approved. These reforms further discourage the trade incentives of foreign companies to establish themselves in the Chinese market.

Second, the establishment of the appellate-level intellectual property tribunal on 1 January 2019 by the Supreme People’s Court of China (SPC) reflects the concrete structural steps undertaken to strengthen the IP protection laws. According to Zhou Qiang (Chief Justice of SPC) there has been an increase of 41.8 per cent in the IP cases resolved in 2018 and the new IP court will add to these numbers. The major point of contention in the first quarter of the year highlights the lack of resources, enlisting of powers, persistence and professionalism in handling the IP cases of foreign companies. Another concern with the new IP court as stated is the unknown statistics about the IP cases of foreign firms that are currently under review. This creates an asymmetry of information for scholars and other countries attempting to analyse the efficiency of China’s IP Court.

The verdict of the first case in IP Court came out in just two trials embodying the idea of “protecting innovation innovatively”. However, the speed at which the decision was made led the foreign companies to fear that the verdict was pre-decided. This also raises the question of which court’s verdict has the final say in the IP matters as these cases are still being directed to the earlier SPC and not to the new IP Court. The development of a national level appeals court might prove to be insufficient to tackle the current situation for international businesses fear that their proprietary technology could be stolen at a regional level.

Third, the reforms in the Trademark Law and Anti-Unfair Competition Law issued on 23 April 2019 did not follow the usual process for public comments. The primary concern regarding these positive changes is whether they will be followed by the necessary laws on transparency of the enforcing and implementing agencies like National Intellectual Property Administration (CNIPA) that still awaits additional clarifications related to administrative procedure regulations. This concern arises due to the inability of IP related cases that involve technical, confidential or business information that are not reported on public databases. It is hard for foreign companies to comply with the requirements raised by the new NPC reforms resulting in the current slowdown of foreign related cases. The reforms further fail to restrict the fraudulent activities such as claims of trademarks (TM) with bad faith and no commercial usage. The use of language in the recent reform of Article 4 highlights the need for commercial use of the trademark while applying. Thus, the US government and firms see these reforms as a state encouragement for violating international intellectual property rights.

Overall, it can be accepted that China is firmly aiming to be the hub of technological innovation. But with the escalation of trade war with US (increasing tariffs to 25 per cent) has added heavy pressure on the Chinese government to negotiate the opening of the Chinese economy with effective protection to foreign technology. However, one has to agree that the current reforms fail to address the major US concern with respect to forceful technology transfers. The Chinese government needs to accommodate the international guidelines of relaxing contractual norms with respect to foreign companies in order to prevent the slowdown of its economy due to trade war.

[1] Section 301 authorizes the US President to take all appropriate action, including retaliation, to obtain the removal of any act, policy, or practice of a foreign government that violates an international trade agreement. Section 301 cases can be self-initiated by the (USTR). Thus, Trump initiated the tariff imposition on China.

Agricultural Industry amidst the 2018 US-China Trade War

This article discusses the current scenario of the two markets, with a particular focus on soybeans and associated businesses.

ICS1 Comment

VIDUSHI R SINGH, Research Intern, Institute of Chinese Studies

The US-China trade war of 2018 began with tariffs being imposed on core sectors, such as industry inputs (steel, aluminium tariffs by the US) and agriculture (grain and seed tariffs by China). These attacks on primary industries have led to huge outcries on both sides, with several calls for the hurrying up of ongoing trade negotiations so that the political agendas of the leaders do not hurt the ordinary people.

This article discusses the current scenario of the two markets, with a particular focus on soybeans and associated businesses. Both countries have faced losses and market instability as a result of tariffs being put on agricultural commodities this manoeuvre, but while neither of the countries have ‘won’ in this particular sector, China seems to have incurred a lesser loss than the US.

US Agricultural Industry

The first round of the trade war saw China putting a 25 per cent retaliatory tariff on several US goods. One of the most critical commodities in the Chinese list was soybean – produced in regions that were majority supporters of Trump in 2016. The cleverly targeted tariffs have wreaked havoc on the US soybean market, with prices falling by over 13.4 per cent (based on the author’s calculations and data from United States Department of Agriculture) since May 2018. The fall in prices has further been caused by an approximate 78.6 per cent fall in demand from Chinese importers as of April 2019, based on a year on year comparison. The trade negotiations between President Trump and President Xi have included promises by the Chinese government regarding buying of over 5 million tonnes of soybean from the US, but no deadline has been set. It is possible that the unreliability of the US as a supplier of essential commodities to China has encouraged the Chinese populace to look for substitutes elsewhere, and US farmers are unlikely to have the same access to the Chinese market as they once enjoyed. As of now, there has been an almost complete crowding out of US soybean from the Chinese market, due to its inability to compete with local and Brazilian substitutes on prices. If the Chinese tariffs stay in place, the USDA projections have concluded that US soybean exports will not be able to reach pre-trade war levels even by 2024.

Another factor creating problems for the US agriculture industry is the increased costs of farm equipment and machinery. The tariffs on steel and aluminium imposed by Trump have led to a rise in the production costs of farm machinery. This, combined with the low expectations farmers have for the coming planting seasons, has resulted in a situation where farmer bankruptcies are on the rise, and US agricultural trade surplus has hit an unprecedented low, the lowest it has been since 2007. The plantation of soybean has fallen by 5 per cent in the last one year and is anticipated to reduce further, as farmers move away from soybean to other, more profitable crops. While the US Department of Agriculture has promised aid to farmers adding up to USD 12 billion, they have also asserted that this will only be a one-time assistance to help farmers regain control of farm operations.

Chinese Agricultural Industry

As for the Chinese side of the agriculture industry, the scenario seems to be mixed, as opposed to the blatantly negative situation that the US agricultural industry is facing.

The Central Committee of the Communist Party of China and the State Council unveiled its Number 1 Agricultural Document on 19 February 2019. The document focused on agricultural and rural issues and outlined policy goals for 2019 and 2020. Its focus on the “profound changes in the external environment” and ways to mitigate the same highlights China’s wariness with regards to the rising tensions in the trade war. This announcement falls in line with China’s 2015 mission to achieve absolute food security by balancing production and environmental concerns. While the agricultural reforms and the shift to the household responsibility system have helped increase productivity of land, China’s reliability on foreign markets for soybean has become a cause of concern, bringing down the agricultural trade balance, which would otherwise have been positive.

The government has, however, acted commendably fast in the past year to shift all soybean imports from the US to Brazil, which has allowed Chinese consumers some protection from the increased prices of US soybean. This has been followed by government encouragement of increased domestic production of soybean and other feed grains. However, the lower profitability of cultivation of soybean over rice or wheat has created a new need for subsidy and minimum procurement schemes.

Another factor cushioning Chinese soybean market has been the outbreak of African swine fever in various parts of the country since August 2018. The hog population in China has fallen by an estimated 13 per cent, and this has created a consequential fall in demand for feed grains and seeds. Since swine feed in China is 20 per cent composed of soybeans, this fall in demand has allowed for market prices to stabilize at a lower level than previously anticipated.

These steps have also been accompanied by reduced quality restrictions on imports and increased incentivisation for agricultural investment, as announced in the latest Number 1 document. So while there has been an undeniable fall in supply and increased uncertainty in the market, the government’s response has been able to prevent the need for total abstention from the consumption of soybean and several other vital parts of people’s diets as well as livestock feed.

Conclusion

The attempts by the two countries to regain equilibrium in their respective agricultural markets have provided some comfort to the consumers and producers of the tariffed products. The Chinese government, however, seems to have leveraged its position better to create changes very quickly to shield its populace from the worst impacts of the trade war. The US government, on the other hand, has only implemented superficial steps to manage the impact of the trade war in its borders, instead choosing to leave the outcome to market forces.

Irrespective of these safeguarding attempts by the governments, the agricultural markets in both countries are doing worse than previous financial years. Falling demands and accumulating stocks have created an imbalance in the global market. In the absence of intervention, this may result in an economic crash, as US farmers find themselves unable to repay loans and Chinese livestock producers fall short of sufficiently nutritious feed. Relaxing quality controls and giving out aids are sure to help in the short run; however, given the inconsistencies in the market, long-term solutions are necessary.

China, Global Capitalism and the Future World Order

How reflections on Marxism, history and contemporary politics envision the future of the capitalist world order.

ICSLeave a comment

Vidushi R Singh, Research Intern, Institute of Chinese Studies

The reform and opening up of China in 1978 paved the way for the transformation of China from a planned to a socialist market economy. The decision to open up the economy was criticized by many leftist academics and economists. The reforms led to major disagreements between the government and the bourgeois elites.

Today, under Xi Jinping’s rule, the CPC is debating the direction of growth which China should continue pursuing. In light of the US-China trade war, the calls for China to become a true market economy have reached a crescendo. Despite that, the rest of the world is shifting away from free market operations towards protectionism, with the Nordic model[1] of state-market balancing gaining immense appreciation. At a time like this, Lin Chun’s book, China and Global Capitalism: Reflections on Marxism, History and Contemporary Politics,[2] provides a critical perspective on how one can interpret the changing global scenario while considering the domestic realities of China.

The main thesis of the book questions the sustainability and moral desirability of capitalism in China and the world with regard to the evolving world order. Lin Chun attempts to decipher the past and present of the global capitalist order and its interactions with China, with a continuous call for China to revert to the pre-reform era. She ends the book by predicting the eventual and inevitable transformation of the global order into a ‘moral socialist economy’ (p. 152) with China as the leader.

Chun divides the book into three sections – a history of China and the global capitalist ideology, the present interplay between the two, and her predictions regarding the future of the world socioeconomic order.

In the first section, she emphasizes the dynamic nature of China, claiming that this has resulted in a secular, independent and socialist state with a commitment to the centrality of the people (p. 8). Chun also goes on to vehemently refute the Marxist claim of Asian societies being passive and as awaiting capitalist integration, claiming that this idea creates a tendency to ignore all possibilities of progress via other non-capitalist socio-economic models.

In the next section, Lin Chun discusses China’s shift from being a socialist bastion to a capitalist economy, and how it has impacted the nation and its people. She claims that the changing face of Chinese socialism has undermined the improvements that the socialist revolution had brought about, with the new reforms being the key drivers of this ‘peaceful evolution’ towards capitalist integration (p. 56). The fading boons of socialism, in her perspective, have created financial and structural deficiencies in the Chinese state, and have led to China becoming a vital part of the global ‘race to the bottom’[3] (p. 61). Her commentaries on the revolution carry a strong rosy note that seems to ignore the bleaker sides of the revolution and only focus on the positives. She attributes the current welfare and labour issues in China to the monopolization of decision making power in the country. This ‘proletarianization’[4] of the population, she declares, is against the Chinese vision and creates a need for ‘regime legitimization’ by the government by returning to its social commitments as stated in the Chinese constitution (p. 66-69). Throughout her narrative, there is a call for China to return to the pre-reform era. However, the author’s call to undo reforms in China trivializes several important arguments she makes against capitalism by taking away focus from them and pinning it to an impossible aspiration. It is not only impractical for China to undo years’ worth of reforms but also undesirable – it is because of the reforms that China has been able to capture the global power it enjoys today, and for a country that is highly dependent on trade, closing borders would be unreasonable.

On the topic of the existence and the need for a ‘Chinese model’ (p. 81), Lin Chun claims that any model that the government chooses to adopt will serve Chinese interests if it fulfills four prerequisites: a robust socialist state, a resourceful public sector, a focus on collective growth and development, and voluntary social organization, participation and power. She advocates the adoption of a sustainable approach to progress where urbanization, modernization and privatization are not standardized measures of development and instead there is a focus on achieving Minsheng.[5] She ends this section by asserting that the Chinese goal is ‘capitalization without proletarianization’ (p. 156) and the only way to achieve that is by creating a balance between the industrial and agricultural resources in the country, and by focusing on the ‘local’ needs of the people.

The last section of the book delves into the future she envisions for China and the world order. She declares that growing global sensitivity to human rights and ecological sustainability will inevitably result in an anti-capitalist world order. She highlights the insufficiency of the current Eurocentric worldview as a measure of development and holds the ‘moral socialist economy’ as a likely end to the global fight over socioeconomic models of growth. She ends with a call for China to reclaim its place as the leader of the global economic order.

Overall, the book comes across as intensely deterministic and ignores several shortfalls of socialism and the Chinese state. It also overemphasizes the perceived negatives of capitalism. Lin Chun has written a book with a coloured understanding of the socioeconomic models it talks about, and there is a unique sense of Chinese exceptionalism throughout the book. The flow of the arguments highlight Chun’s own New Left ideology[6] and robs the readers of a chance to formulate their own opinions. The chapters appear to be individual essays, with little logical linkages.

However, one attractive characteristic of the book is its use of Marxism and the dependency theory to formulate arguments for socialism. The book follows a clear theme about the origin, cost and durability of the Chinese model of development. The author attempts to relate China’s growth with the long term global trends and pushes for the adoption of a perspective of social justice and political righteousness instead of generic economic indicators as measures of progress. So, while the book has a biased narrative, it does develop a new understanding about measuring progress and creating new modes of development by focusing on value creation over accumulation.

However, being written in 2013, Lin Chun’s predictions of an anti-capitalist world order appear to be far from realization today. While the world does seem to be shying away from the snowballing externalities of capitalism, it is no closer to demanding a socialist revolution than it was when the book first came out. In this respect, the author seems to have missed the mark, being overly embroiled in her ideological aspirations, to objectively analyze the possibility of a change in the world order. Despite its shortcomings, the book comes out as a commendable assessment of the logic and crises of capitalist integration and raises crucial questions about how the global economy will address them in the coming years.

End notes:

[1] ‘The Nordic model encompasses a mutually supportive interaction of risk sharing and globalization. It is marked by a large welfare state, a particular set of labour market institutions and a high rate of investment in human capital’ in Andersen, T., Vartiainen, J., Tson Söderström, H., Holmström, B., Honkapohja, S., & Korkman, S. (2007). The Nordic Model: Embracing Globalisation and Sharing Risks. Yliopistopaino, Helsinki: Taloustieto Oy.

[2] The book was published on December 2013 by Palgrave Macmillan. ISBN: 978-1-137-30125-3

[3] For the author, ‘race to the bottom’ signifies the socio-economic phenomenon of countries exploiting labour and capital to reduce costs as much as possible, in an attempt to retain competitiveness in an increasingly unified global market.

[4] A Dictionary of Sociology, 1998. “In Marxism, proletarianization is the social process through which individuals from the middle class become absorbed into the working class as wage labourers, and producers are separated from the means of production through coercive and persuasive means”.

[5] Ancient Chinese principle of popular wellbeing, and development as freedom (p. 99-104).

[6] This claim is based on Chun’s participation as a writer for New Left Review, and her book ‘The British New Left’.

What will China do if there is an India-Pakistan War?

In a hypothetical scenario of a new India-Pakistan war, what would China, the ‘deeper than deepest sea and sweeter than honey’ friend of Pakistan, do?

ICSLeave a comment

Muhammed Kunhi, Research Associate, Institute of Chinese Studies, Delhi

As a total shift from its conventional approach towards Pakistan sponsored terrorist attacks, days after Jaish-e-Muhammed (JeM) attack on Central Reserve Police Force (CRPF) convoy in Pulwama which killed over 40 paramilitary personnel, India responded with airstrikes on biggest terrorist camp in Balakot in the Khyber-Pakhtunkhwa province of Pakistan.

Indian media reports stated that the retaliatory action for Pulwama, carefully planned with credible intelligence, occurred in the early hours of 26 February and killed more than 350 terrorists by dropping 1000 kg Israeli Precision Guided Munitions (PGM). Some of them claimed that India destroyed at least six terrorist camps inside Pakistani territory and Pakistan Occupied Kashmir (PoK) by employing 12 Mirage 2000 jets, made by Dassault Aviation of France.

In an official statement, government of India declared that Pakistan’s persistent denial of existence of terrorist training camps inside its territory had forced India to take a “non-military preemptive action” against JeM camps in the light of a credible intelligence on JeM’s plan for conducting “another suicide terror attack in various parts of the country”.

Though Pakistan rejected India’s claim of heavy casualties as its “self-serving, reckless and fictitious claim” in the context of its upcoming general election, Pakistan accepted that the Indian military aircrafts violated the Line of Control (LoC) and dropped some amount of payload inside its territory. The director general of Pakistani Inter-Service Public Relations (ISPR), Major General Asif Ghafoor, tweeted that the “Indian aircrafts’ intrusion across LoC in Muzafarabad Sector was 3-4 miles. Under forced hasty withdrawal aircrafts released payload which had free fall in open area. No infrastructure got hit, no casualties.”

India’s use of air power – unconventional

Whatever was the casualty and damage to Pakistani military, Indian Air Force’s breaching of LoC to attack a terrorist camp inside Pakistan is a total diversion from India’s conventional approach towards employing air power against terrorist threats from Pakistani territory. It is for the first time since 1971 war that the Indian Air Force has crossed the LoC to attack a target inside Pakistan. In the past, even during the Kargil War in 1999 and when Pakistan sponsored terrorists attacked Indian parliament in 2001, India exercised restraint in employing air power against Pakistan.

Many observers are arguing that India’s airstrike in Balakot will send a clear message to Pakistan that the continuation of proxy war against India would come at a price. Whether Pakistan is willing to learn that lesson is a major question. Definitely, Indian Air Force’s crossing of LoC is a declaration that there will be serious repercussions if Pakistan is planning to continue its proxy war against India.

Challenges dominant discourse

Interestingly, India’s new airstrike on Pakistan, which is theoretically a ‘military action’, though India claims it is a ‘non-military action’ as it is not carried out against any military. The latest developments directly challenge the dominant discourse that India and Pakistan must refrain from challenging each other militarily given the imminent threat of escalation and nuclear war.

Former Pakistan President Pervez Musharraf’s recent statement that “if we would attack India with one atomic bomb, then the neighboring country could finish us by attacking with 20 bombs” clearly shows that the nuclear-war against India is not a popular option within Pakistani strategic thinking as many in India assume. They (Pakistanis) are well aware of India’s military capability and, now, also its willingness to take any risky military action.

Setting aside the nuclear conundrum, the important question is what would a humiliated Pakistan respond? Assessing the current mood of the nation and approach of the present government, it can be said that if Pakistan chooses any retaliatory military action for Indian airstrike on Balakot it would escalate the situation in the subcontinent. At the same time, India will not consider nuclear war as an option until there is a survival threat to it. Hence, we need not expect more than a conventional war, or perhaps a limited border war.

What would China do?

In a hypothetical scenario of a new India-Pakistan war, what would China, the ‘deeper than deepest sea and sweeter than honey’ friend of Pakistan, do? Expressing concern over growing tension in the subcontinent, various countries, including China and the United States, urged both India and Pakistan to “exercise restraint”. In his regular press conference, responding to a question of Chinese response to Indian airstrike on Pakistan, Chinese Foreign Ministry spokesperson Lu Kang said “we hope the two sides will exercise restraint and take actions that will help stabilize situation in the region and improve bilateral relations instead of doing the opposite”. He added that “terrorism is a global challenge that calls for cooperation between countries so as to create enabling conditions and a favorable atmosphere for necessary international cooperation”.

Past experiences tell us that unless there is a credible challenge to its core interests, China will not militarily intervene in another country’s war. In the past, even in 1965, when the tension between India and China was at its maximum, China’s military involvement in India-Pakistan war was limited to creating some disturbances in India’s Himalayan frontier. This time, China has enormous economic and strategic interest in Pakistan, which includes multi-billion dollar China-Pakistan Economic Corridor and Gwadar Port. Additionally, in terms of numbers, China’s trade with India is many times larger than its trade with Pakistan. Since India is not a grave threat to China, it would not consider harming a well-developed trade relationship with India by getting embroiled in the Indian subcontinent’s conflicts.

Considering the depth of Sino-Pakistan friendship and its strategic value for China, it may be assumed that China will not totally abandon Pakistan if the new tension in the subcontinent leads to a war, especially when a growing proximity between the United States and India is quite evident. It will not be a direct military involvement either. The Chinese help to Pakistan will be in the form of weapon-supply and in various other forms of non-military assistance. China will use the opportunity to increase its arms exports to Pakistan without risking its trade relationship with India.

Unlimited Xi Presidency in China: Implications for India

ICSLeave a comment

Jabin T. Jacob, PhD, Fellow, Institute of Chinese Studies

What does the removal of term limits for the Xi Jinping presidency in China mean for the developing world and, in particular, for South Asia?

One possibility is there could be a demonstration effect. China’s decades-long rapid economic growth has been a source of envy and inspiration for many countries in the developing world. Some like Vietnam, for instance, have used China as a model in launching its own opening up and reforms process. Other countries, including many in South Asia, have seen Beijing as an alternative to the West for financial resources and capital.

With Xi’s latest move, an ambitious autocrat could try to sell the idea to his people or elites that matter that he – and he alone – holds the solutions to a country’s problems.

And often, as in the case of President Abdulla Yameen in the Maldives, who has imposed a state of emergency in the island nation, they will do so with considerably less finesse than Xi. Continue reading “Unlimited Xi Presidency in China: Implications for India” →

India Becoming a Threat in Chinese Imagination

ICSLeave a comment

Hemant Adlakha, professor of Chinese at Jawaharlal Nehru University, New Delhi and Honorary Fellow, Institute of Chinese Studies (ICS), Delhi.

As the new year gets underway, and Chinese foreign policy analysts join their counterparts around the world in assessing the events of 2017, the emerging international relations (IR) discourse in Beijing is quite a revelation — at least to the Japanese and Indian strategic affairs community.

While most Chinese believe Japan to be the second biggest threat to China’s “peaceful rise,” according to a few Chinese experts, the rising global profile of India, especially under the “right-wing” nationalist Prime Minister Narendra Modi and his Bharatiya Janata Party (BJP), has gone unacknowledged. Continue reading “India Becoming a Threat in Chinese Imagination” →