Rama
V. Baru,Professor,
Centre of Social Medicine and Community Health, JNU and Honorary Fellow, ICS,
Delhi and Madhurima Nundy, Fellow,
Centre for Social and Economic Progress
Source: Hebei North University
The COVID-19
pandemic has disrupted both school and higher education across the world with
indefinite closure of institutions and online learning. For those who were enrolled or planning to
enroll in professional courses like medicine especially in middle income
countries like China and Russia, have faced the maximum disruption. According
to the data put out by the MEA, the pandemic resulted in a 55 per cent dip in 2020
with only 2.6 lakhs students having gone abroad compared to 5.9 lakhs in the
previous year. A small proportion of students travelling abroad is for medical
education and nearly 30,000 of them are in China. The pandemic and diplomatic tensions between India and China has
jeopardized the continuation of students studying medicine. The return of
Indian students due to the first outbreak of COVID-19 in January 2020 has
affected their study and career plans.
The rising anxiety due to this uncertainty is palpable. As Susan Ann Varghese of
Thiruvananthapuram and a
final year medical student at China, said that she “cannot go back as the
Chinese government is not allowing the Indian students to return and the
universities which had taken initiative to send us back home are not
responding”.
Meanwhile, students are
being instructed online by their respective Chinese medical colleges. But
online teaching is not recognised by the National Medical Commission (NMC) in
India and hence it creates concerns for students transacting classes in this
mode. The students recognise that online
instruction will be inadequate to complete their training since practical
exposure is critical for medical education.
They are also facing issues in accessing online classes since Chinese
apps are banned in India and students have to purchase VPN to access the online
classes.
As a result, the students feel that they have been left in a lurch by both the
governments. A union of students studying medicine in China have expressed
their anguish to the Indian government: “We are
25,000 Indian students studying in Chinese universities who have been forced to
participate in online classes for the past 17 months because of travel and visa
restrictions. Our medical study requires a lot of practical and group work, but
our entry to China and our respective universities have been banned for the
past year-and-a-half and we are suffering every day.” With little hopes of
returning to their campuses anytime soon, Indian medical students enrolled in
China are now looking at mid-course transfers to institutes in India and
other countries. However, this requires the NMC which is the apex administering
body for medical education in India to allow the mid-course transfer. The NMC
is silent on this matter for the moment.
The plight of students who
have returned from China and other countries is also filled with anxiety and
uncertainty since their employability is dependent on their clearing the Foreign Medical Graduate Examination. The pass percentage over the last few years
has been low and is demoralizing for the students travelling abroad for medical
education. The Covid pandemic could have utilized the services of the large
number of foreign medical graduates to supplement the shortage of medical
personnel but this was not done.
Clearly, the lack of policy engagement and direction
from the NMC and the Indian government
to address the concerns of continuing students and those who have completed
their course in China and other countries is unfair. There needs to be a review
of the FMGE process and some kind of parity with those who completed their
medical education from public and private medical colleges in India. It is
worth considering an exit exam for all medical graduates irrespective where
they were trained, as a pre requisite for employability. This is a reform that
has been suggested at various points in time but has received little attention
from the professional bodies. On the one hand there is a move to increase the
number of seats for the training of medical graduates and on the other there is
little effort to find ways to engage with the large number of foreign medical
graduates who are looking for employment. Clearly, this impasse cannot go on
for much longer since it affects a large number of young professionals who at
the moment are frustrated by the indecisive attitude of the NMC and the Indian
government.
Hemant Adlakha, Vice Chairperson, ICS and Associate Professor, Jawaharlal Nehru University.
This article was published two months ago in Modern Diplomacy under the same title. However, following the revival and fast spreading of local variants of Covid-19, including Omicron, first in Xi’an and then in Yuzhou city in Henan province, and now in the northern port city of Tianjin near Beijing, questions have been raised in China on the rationality behind persisting with “zero tolerance” policy. I hope to come up with the second part of the article with focus on resurging Covid-19 cases in China and the Beijing Winter Olympics.
Image: Where is the exit from China’s zero tolerance on Covid-19? Source: scmp.com
The world is again
at war with China. This time, the war is not about China’s aggressive “wolf
warrior” diplomacy; nor is it about China threatening to use force to reunify
with Taiwan. Instead, if one goes by what the global media says, this new round
of “war” is an ego clash between what China calls Covid-19 “dynamic zeroing”
and what the West is practicing – “living with virus strategy.”
Last year, Dr. Li
Wenliang, who raised an alarm about the coronavirus in the early days of the
outbreak, was forced by the police in Wuhan to write “self-confession” and was told
to immediately stop spreading false rumours. Within a few days, Dr. Li caught
the infection and was hospitalized, where he succumbed to the virus and died
three weeks later. Of course, Li was not infectious disease expert, he was an
ophthalmologist at the Wuhan Central Hospital. A little over a year later, when
Zhang Wenhong, a doctor in Shanghai who has been compared with the top US
health official Dr. Anthony Fauci, wrote on his Weibo blog indicating China
might have to live with the Covid-19 pandemic, he had to face vicious attacks
by the official media and the Chinese health authorities. For, Dr. Wenhong had
come in the cross hairs with China’s official “dynamic zeroing” strategy aimed
at eliminating the coronavirus.
It is important to recall, since early last year China has been strictly
adhering to a “zero tolerance” (Qingling in Chinese) policy for
Covid-19, under which authorities have imposed strict border controls, travel
restrictions, lockdowns and at times carried out mass testing as and when new
Covid-19 cases emerged. Furthermore, the success of “zero tolerance” policy which
resulted in long stretches of zero new cases was drummed up by the communist
leadership of the country as the secret for successful coronavirus pandemic
containment strategy. “China’s government attributed the effective virus
containment to the phenomenal leadership of the communist Party and its institutionalsuperiority over Western liberal democratic systems,” commentedThe Diplomat two months ago. (Emphasis added).
Image: China’s zero-Covid strategy risks leaving it isolated for years Source: Bloomberg.com
Rise in regional
flare-ups
However, more recently, China experienced regional flare-ups of the globally
prevalent delta variant, including in cities such as Beijing and Shanghai. As a
result, Beijing authorities were forced to postpone the capital city’s annual
marathon scheduled to be held on 31 October. A week earlier, on 24 October,
Beijing’s Universal Studios theme park also took preventive measures and
started testing all its employees after it was found out that a suspected case
had visited the Studios. At the same time, Shanghai Disneyland and Disney town
were temporarily shut down as part of the pandemic prevention drive. According to China’s English language newspaper,
CaixinDaily, the decision to suddenly close Disneyland followed
the emergence of a new Covid-19 case in neighbouring Zhejiang province, it was
someone who had visited the Shanghai attraction.
In fact, the recent flare-ups spread across over twenty provinces and
areas in China have been attributed to a cluster of Covid-19 cases in Ejin
Banner in the remote Inner Mongolia that is in the Gobi region. According to
reports, nearly 9,000 tourists who were visiting the Gobi Desert during China’s
National Day “golden week” holidays were trapped there, mostly in quarantine.
The Chinese tourists had gone there to spend time in the famous poplar forests
where trees turn golden yellow during this time of the year. An official
Chinese media outlet reported “the recent local Covid-19 outbreaks
that began in mid-October have spread to two-thirds of China’s 31
provincial-level regions, with more than 1,000 locally transmitted infections.”
Attributing delta variants as the cause for the country’s second wave of the
pandemic, one of China’s top epidemiologists, Dr. Zeng Guang, a former head of
Chinese Centre for Disease Control and Prevention (China CDC), opined China
must continue with emergency measures, including maintaining long quarantines
and vigorous contact tracing, until a “barrier of immunity” has been established.
Living with the
virus” is more costly
While acknowledging that the global challenges in containing the delta
variant will mean that society must learn how to coexist with Covid-19, Zeng
emphasized that “China will need to continue its ‘zero tolerance’ strategy
against Covid-19 with nationwide emergency responses.” Reacting sharply to the
last of few remaining countries which too have finally shifted from eliminating
strategy to trying to live with the virus – for example, New Zealand, Singapore
and Australia – China’s most celebrated infectious disease expert and “national
hero” Dr. Zhong Nanshan has strongly defended “zero tolerance” strategy on the
grounds that measures to deal with sporadic Covid-19 outbreaks are less costly
than treating patients after they have been infected. “The cost is truly high,
but compared with not managing it, relaxing (the zero tolerance policy), then
that cost is even higher,” Dr. Zhong Nanshan said in a recent TV interview.
Image: How long can China chase COVID zero? Source: japantimes.co.jp
Remember, China has reported about 4,600 deaths due to COVID pandemic. In
comparison, the US with just a quarter of China’s population and a far more
expensive and superior health care system has lost over 755,000 lives. No
wonder China’s foreign ministry spokesperson has recently disdainfully
dismissed the US as an “inferior system” and a “total failure.” Defending the
Chinese government policy, Dr. Zhong Nanshan questioned all those countries
(mostly the developed countries in the West) that had relaxed their policies
amid a drop in Covid-19 cases only to go on to later suffer a large number of
infections. “The global mortality rate for people infected with Covid-19, which
spreads fast and continues to mutate, is currently around two per cent. We
[China] cannot tolerate such a high mortality rate,” the top Chinese
epidemiologist said.
The logic of China’s “zero tolerance” policy
Refuting the logic offered by Dr. Zhong Nanshan in defense of China’s
“zero tolerance” policy, i.e. it is more effective and less costly to contain
Covid-19 than treating patients after they have been infected, an overseas
Chinese scholar Zhuoran Li attributed China’s so-called success in fighting the
pandemic to the Maoist doctrine of massline and the CPC’s
Leninist identity, respectively. “The key to implementing this ‘zero tolerance’
is the CPC’s mass mobilization capability. The CPC has viewed mobilization as a
‘secret weapon’ throughout its history. After Mao’s Mass Line became a key to
the CPC’s victory in 1949, the Party continued to rely heavily on mass
mobilization to achieve its goal – social transformation between 1949 and 1956;
steel and food production between 1958 and 1961; or combating natural disasters
in 1998 and 2008,” Zhuoran Li argues.
At another level,
adding a different dimension to Zhuoran Li’s argument, another overseas Chinese
scholar, Yanzhong Huang, a senior research fellow with the Council for Foreign
Relations (CFR) has observed: “It’s becoming part of the official
narrative that promotes the approach and links to the superiority of the
Chinese political system.” Maybe true, however, from China’s point of view,
what is most disturbing is there is a lack of consensus within the official
narrative. Take Ruili for example, a southwestern city surrounded by Myanmar on
three sides and currently the center of the highest flare-up. According to
Ruili residents, they have been the worst victims of China’s zero-transmission
strategy as they have been subjected to multiple rounds of quarantine,
lockdowns and excessive Covid19 testing. The local city authorities have put
the blame for the plight of the 270,000 residents on the successive flare-ups
on “traders and refugees who frequently cross the border into China.” On the
other hand, the angry residents in the city have been complaining of the
escalating financial as well as social costs for having been left alone to cope
with the epidemic.
Image: China is keeping its borders closed, and turning it inwards Source: economist.com
Furthermore, foreign
experts and the global media have maintained that China either doesn’t want to
admit or the authorities in Beijing are yet to realize – as most or nearly all
countries have – that not only the virus is now permanent but also that there
is no chance in the long run that a zero-Covid strategy could work in terms of
achieving complete elimination. This confusion is the official narrative in China
has been best manifested in a public spat between the mayor
and the deputy mayor of Ruili. Last month, Dai Rongli, the deputy mayor posted
an essay on his personal social media blog highlighting the difficulties city
residents have been facing due to the pandemic prevention policies. “The
pandemic has mercilessly robbed this city time and again, squeezing dry the
city’s last sign of life,” the deputy mayor wrote. Within days, an infuriated
city mayor Shang Labian criticized his deputy in an interview with a Chinese
digital news platform saying: “Ruili does not need outside support and
sympathy.”
To sum up, it is
indeed true that most people in China support the country’s strict pandemic
prevention policies. Yet undeterred by what most other countries are claiming,
that is, “the illness will circulate in perpetuity and can only be encountered
with high immunization rates,” the Chinese leadership is standing firm on its
resolve that the zero-transmission strategy is less costly. Liang Wannian, the
head of China’s “leading small group” under the Ministry of Health to combat
Covid19, has refuted as baseless claims that China is persisting with its
zero-transmission strategy for political reasons such as holding of the Beijing
Winter Olympics in February 2022 and the 20th CPC National Congress
in October next year.
Image: The Delta Variant and China’s Need to Change its COVID-19 Policy? Source: nytimes.com
“Dynamiczeroing is not zero transmission, nor is it China’s permanent strategy. Whether to change the current pandemic prevention strategy depends on the trend of the global epidemic, the mutation of the virus, the change in the severity of the disease and the level of vaccination coverage in China and other factors,” Liang said. In other words, Liang Wannian almost confirmed what experts outside China have been claiming: “They [China] are not confident about the effectiveness of [their own] vaccines – the ability to prevent infections.” Therefore, China has been caught in its own trap of “zero transmission” or “dynamic zeroing.”
China and the United States have been explicitly at loggerheads in the past few years. However, issues of contentions in Sino-US ties have existed in the past as well. This research blog attempts to understand the US Policy towards China during three different administrations – Obama administration; Trump administration and Biden administration. Additionally, the blog also attempts to understand India’s position in the US-China conflict.
Obama Administration
Barrack Obama was the first African American to become the president of
the United States and he was also the first American president to visit China
in the first year of his presidency. However, Obama administration’s China
policy seemed inept as it faced several challenges one after another. On his
state visit, Obama was criticized by the media for “not displaying American values”
and being “lead by the nose”. Obama’s
unsatisfactory visit to China was further followed by ‘Failure to secure an ambitious Copenhagen deal’ at the Copenhagen Climate summit
in 2009. Additionally, the American spy apparatus
in China was being unearthed and assets were disappearing. Despite the
challenges, Obama administration leaned towards engaging China rather than
confronting it considering China’s rising economic stature globally. China
overtook Japan and became the second-largest economy in the world during his
presidency and the Obama administration was quick to realise and accept China’s
new reality as an economic heavyweight. Obama administration believed that it
was best to cooperate with China as was evident from Secretary of State Hillary
Clinton February 2009 remarks – “some believe that China on the rise is, by definition,
an adversary, but on the contrary, we believe that the United States and China
can benefit from and contribute to each other’s successes. It is in our
interests to work harder to build on areas of common concern and shared
opportunities”.
Further President Obama with his Chinese counterpart Hu
Jintao initiated the ‘U.S.-China Strategic and Economic Dialogue’ in 2009. The dialogue was aimed at discussing bilateral, regional, and global issues between
the two countries. On the trade front the US-China trade rose from $ 40.7 Billion in 2008 to $ 57.8 Billion in 2016.
The trade deficit in the same period increased from $ 268,039.8 Million to $
346,825.2 Million.
Table 1: U.S. trade in goods with China (Million US $)
Trump throughout his presidential campaigns was vocal about his
criticisms of globalization particularly in the context of the ills plaguing
the US work force. Donald Trump blamed China for taking jobs away from traditional
industries like iron and steel and
popularised the slogan of ‘America First.’ By the time Trump came to power,
China had clearly become a “competitor” as opposed to Hillary Clinton’s
“partner”. Trump was straightforward
in dealing with China as he termed it an
outright adversary, blamed it for stealing Intellectual Property from American
companies operating in China, and started the infamous trade war. In the trade war, Trump realized that China
was capable of countering trade sanctions and equal retaliation. It is
important to note that although aimed at China, Trump’s infamous trade war also
affected United States’ closest allies
in Europe and Canada. On the trade front,
the U.S.-China trade under Trump decreased from $ Billion 578 in 2016 to $
Billion 558 in 2020. Naturally, the trade deficit also decreased from $ Million
346,825.2 to $ Million 310,263.5 in 2020.
Table 2: U.S. trade in goods with China (Million US $)
YEAR
EXPORT
IMPORT
BALANCE
2016
115,594.8
462,420.0
-346,825.2
2017
129,997.2
505,165.1
-375,167.9
2018
120,281.2
538,514.2
-418,232.9
2019
106,448.4
450,760.4
-344,312.0
2020
124,485.4
434,749.0
-310,263.5
Source: Compiled using data from United States Census Bureau.
Biden Administration
Joe Biden came to power in December 2020. Biden’s policy has been the
same as Trump with one change – Biden is engaging with Washington’s closest
allies in Europe and Asia in countering China. Since coming to power, Biden has
prioritized building alliances and reinvigorating old ones. So far, Biden’s
China policy has been well received. In
March 2021, the European Union, Canada, and the United States imposed joint sanctions
on Chinese officials in Xinjiang. The
Biden administration also reinvigorated the QUAD grouping and hosted the first
leaders meeting of the QUAD countries namely Australia, India, Japan, and the
United States. India and Australia have engaged fully with QUAD owing to Chinese actions on its Himalayan borders and sanctions levied on Australia due to Australia asking
for investigation into the origin of Coronavirus. Since coming into power,
there have been two leaders’ summit of QUAD, the first one was held virtually on 9 March 2021 and the Second one i.e., the
first in person leaders’ summit
was held in Washington D.C on 24 September, 2021. To counter China the grouping is focusing on areas such as trade,
Artificial Intelligence, Quantum Computing, Infrastructure, vaccinations etc as
depicted from the formation of working groups during the two meetings.
Apart from QUAD the Biden administration also formed a security alliance
with Australia and the United Kingdom, popularly known as AUKUS. The group is
focused on countering China’s influence in the Western Pacific region by
providing Australia with eight nuclear-powered and conventionally armed
submarines. The aim of the pact is to modernize
the Australian navy by giving access to cutting-edge military technology to
Australia including artificial intelligence, quantum technologies, and undersea
capabilities.
India’s Role in the Sino-US Conflict
During the last great power rivalry between US and USSR,
India spearheaded the Non-Aligned Movement (NAM) with an aim to remain neutral
in the rivalry. During the Cold War neither Truman, Eisenhower, Kennedy,
Johnson nor Nixon wanted India as an ally. An economically weak India would be
an additional security burden for the US and for the American taxpayer because
as Eisenhower put it,
the US would have to defend “2,000 miles more of the active frontier”.
Unlike the Cold War, stakes are high and personal for India
in the US-China rivalry. India shares a long land border with China and there
have several border disputes. This time India cannot sit on the sidelines and
watch from far. As can be seen from the recent trends, India’s China policy
seems to be aligned with that of the U.S to a considerable extent. India has
engaged vigorously with QUAD since border clashes with China last year. India’s
role in the US-China rivalry will be of balancing and containing China with
other Asian and Oceania allies i.e., Japan and Australia. India is slated to
become the third-largest economy by 2030 overtaking Japan and Germany and
is already among the strongest militaries in the world. India has a significant footprint in the Indian ocean via
Andaman and Nicobar Islands and its partnership with France and Seychelles.
India, through the courtesy of Andaman and Nicobar Island can impede China’s
access to the South China Sea or the Indian Ocean by blockading Malacca Strait
during times of conflict.
Though there have been many areas of contentions between
India and the United States in the past, they are at present focusing on
cooperation both bilaterally and multilaterally. It is important to note that
China will not be contained just by security alliances but by economic and
technological alliances. The United States should actively look to decouple its economy and manufacturing and diversify into countries like India,
Bangladesh, and Vietnam.
The United States must accept the new realities of the world and
understand that the future of the world will be multipolar. The United States
through alliances and partnerships can counter China.
Image: President Xi Jinping with eight Pacific island countries’ leaders at the 26th APEC Economic Leaders Meeting Source: Getty Images
The People’s Republic of China (PRC)
is the third-largest aid donor to the Pacific Island Countries (PICs), spending
around US$1.76 billion in aid towards the region. In its aid
programme, the PRC emphasises on equality, mutual benefit and win-win
cooperation. On this note, the following paragraphs examine the benefits that
the PRC gains from its engagement with the PICs.
Scholars have identified the PRC’s
two main interests in the PICs as political and economic. Political or
diplomatic interests include decreasing Taiwan’s diplomatic clout and gaining
the support of the PICs at multilateral forums, mainly the United Nations (UN).
The PRC and Taiwan rigorously engaged in “chequebook diplomacy” in
the 1990s,
competing for diplomatic recognition from the PICs until 2008 when President Ma
Ying-Jeou of the Kuomintang government came to power in Taiwan and led to a
diplomatic truce. Before 2019, Taiwan had six diplomatic allies in the region,
but this was reduced to four when the Solomon Islands, followed by Kiribati,
switched to the PRC in September of 2019. There were several reports that the
PRC had baited both countries with promised aid: US$500 million for the Solomon
Islands
and funds for aeroplanes and commercial
ferries for Kiribati
Although the PICs occupy only 15 per
cent of the world’s surface, with a cumulative population of around 13 million,
they hold about 7 per cent of UN votes. The PRC’s membership in the UN Human
Rights Council (UNHRC) has often been questioned, and the PRC is often targeted
at the UN for its human rights record. The Xinjiang issue has been raised twice
at the UNHRC in the recent past-2019 and 2021. Both were led by countries from
the West. However, both times the PRC responded with greater support from its “Like-Minded Group”- a term used to describe a loose
coalition of developing states often led by the PRC, Russia and Egypt . In
2020, when the issue of China’s new national security law in Hong Kong was
raised at the 44th session of the UNHRC by 27 countries, Papua New
Guinea was amongst the 53 countries that backed the PRC. In 2021, when the human rights
situation in Xinjiang was raised at the 47th UNHRC session by Canada with the support of 44
countries,
a coalition of 69 countries led by Belarus responded in China’s support. The
PICs Kiribati, Papua New Guinea and the Solomon Islands were
included in the 69. Thus, the PRC has been successful at garnering increasing
support from the PICs on issues concerning its interests in international fora.
The
PRC’s economic interests in the region include the promotion of China’s Belt
and Road Initiative (BRI) and the hunt for raw materials. All the ten
diplomatic partners of the PRC in the region have signed up for the BRI. The
PICs’ total exclusive economic zones (EEZs) extend across nearly 7.7 million
square miles of ocean. This can be beneficial to China’s endeavours in
exploring and extracting natural resources. Some of
the PICs are blessed with abundant natural resources and raw materials in terms
of minerals, metals, fossil fuels, fisheries and wood. A global audit of Pacific resource
extraction undertaken by the Guardian’s Pacific Project revealed that China is
the largest importer of the region’s natural resources, importing resources
worth US$3.3 billion in 2019. In the mining industry, the PRC has invested in seven mining
projects across the region, with the largest one being the US$1.4
billion Ramu nickel and cobalt mine in PNG. PNG and Fiji have been the main
focus of investments in this field. Other major operations include the Porgera
gold mine and the Frieda River Copper project in PNG, the Nawailevu Bauxite
mining project and the Vatukoula gold mine in Fiji, and so on. These operations
are partly owned and run by Chinese SOEs such as Zijin Mining Group, Xinfa Aurum
Exploration and Zhongrun International Mining. In 2019, PNG exported US$2.3 billion worth of oil, metals and minerals to China
while Fiji exported US$4.8 million of the
same.
The Pacific region is the world’s most fertile fishing ground.
China imported US$100 million worth of seafood products from the region in
2019. However, Chinese vessels have also been involved in illegal, unreported
and unregulated (IUU) fishing, which has been threatening the region’s revenue
sources and food security. Even though the Western and Central Pacific
Fisheries Commission (WCPFC) states that China has around 600 licensed vessels
fishing in the area, various estimates of the
Chinese fleet range between 1,600
and 3,400 vessels. The major exporters of tropical logs in the
region are PNG and Solomon Islands, where forestry is a major industry.
According to the US Department of Agriculture report, in 2020, Papua New
Guinea was the largest hardwood log exporter to China, accounting for 21 per
cent of China’s total imports, followed by the Solomon Islands. The
Pacific region’s emerging potential as the ‘blue economy’ has also
caught Chinese interest. China has started looking into Deep Sea Mining by
conducting research projects through the China Ocean Mineral Resources Research
and Development Association (COMRA). They have identified polymetallic and
cobalt nodules, hydrothermal sulfide deposits and have also produced several
deep-sea mining maps in the Pacific. Furthermore, in 2017, China signed a
15-year exploration contract for polymetallic
nodules in the Clarion-Clipperton Fracture Zone in the Pacific Ocean with the
International Seabed Authority.
Although the gains from the Sino-Pacific engagement
may not be equal in quantity, Sino-Pacific engagement
can be considered a qualitative ‘win-win’. Certainly, China’s primary goals in the region are
being met to some degree on both the political and economic fronts.
Since the beginning of the COVID-19 pandemic, China
has continued to control the spread of the virus, successfully and effectively.
A country of 1.4 billion people, more than the combined the populations of
Europe and the United States, has been reporting some clusters of cases and has
been able to prevent widespread community transmission. Although much of this
success could be attributed to its experience gained from the SARS Epidemic in
2002, China’s disease control strategy featured a balanced combination of both
prevention and protection.
Soon after COVID-19 first emerged in December 2019, Chinese scientists were able to identify the virus
and share the genome sequencing data internationally. By the end of the January
2020, Chinese doctors had already categorised the clinical symptoms of COVID-19
patients, risks of person to person transmission, genomic characteristics, and
the epidemiology. This robust foundation of research was backed by political
commitment from the very top to use science to tackle the outbreak decisively.
For instance, China’s National Health Commission sent three groups of national infectious disease experts to Wuhan at
the beginning of the outbreak to investigate the risks and transmissions of the
virus, to which their recommendations for a lockdown immediately implemented.
The government was also quick to respond to the advice given by academic
scholars such as Cheng Wang, the President of the Chinese Academy of Medical
Sciences. His idea of Fangcang shelter hospitals, or temporary hospitals built by converting existing
public facilities like stadiums became a key strategy for promptly providing
large number of hospital beds and appropriate health care to patients suffering
from the disease. However, its prevention control strategy would not have been
possible without the broad range of community engagements and solidarity that
was seen at an unprecedented level during the COVID-19 outbreak. Control
measures that could curb individual freedoms like mandatory wearing of mask in
public areas and social distancing were readily accepted by the public, unlike
in the Western countries where anti-masking and anti-lockdown protests were quite common. Thus, after achieving the primary
objective of limiting the spread of the virus, China’s next strategic goal was
to successfully balance these immediate challenges with preventive measures,
namely, providing safe and effective vaccines for protecting the population
from further infections.
While the US and most Western countries followed a
market driven model based on advanced purchase agreements, China adopted a state driven model which leveraged both political mobilisation and the
use of economic instruments. Responding to an outbreak of a new infectious
disease by solely relying on market mechanism can be expensive, besides being
fraught with risks. Furthermore, market-based solutions could increase the
probability of slowing down vaccine research due to high levels of uncertainty.
For instance, despite having early access to the virus’s genome, several
Western pharmaceutical companies continued to dedicate greater share of
resources to develop lucrative treatments for existing chronic diseases such as
cancer than to counter this infectious disease which could have global
ramifications. Janssen and Pfizer’s COVID-19 vaccine research began only when large scale infection was imminent in
Western countries during late February.
With vaccine research starting as early as in January
2020, China’s Ministry of Science and Technology (MOST) had already launched
emergency research projects by February to accelerate vaccine development. It
went on to sponsor five technological roadmaps and 12 vaccine
candidates that included
private sector giants and nascent start-ups. In order to coordinate policy
goals across agencies and to mobilise resources promptly, the government had
also established a COVID-19 Task Force comprising senior officials from the
National Medical Product Administration (NPMA), the MOST and other concerned
departments. The Task Force was affiliated to the Joint Prevention and Control
Mechanism of the State Council and reported directly to the Vice Premier of
China. Under the Task Force’s direction and guidance, the vaccine research program featured
multiple players collaborating to maximise their joint performance. For instance,
due to the long-standing relationship that the MOST shared with domestic
pharmaceutical companies, the Chinese Government was quickly able to identify
enterprises that were capable of developing COVID-19 vaccines during the public
health emergency. These enterprises were then supported with efficient
allocation of resources required for vaccines development across the Chinese Academy
of Sciences, universities, the army and the state-owned enterprises. In
addition, the Task Force had also directed the NPMA to modify its procedure in
accordance with China’s Vaccine Administration Law to streamline the inspection
and review process for vaccines and accelerate market approval.
As of now, four vaccines have been approved in China
and in at least one foreign country. Sinopharm’s BBIBP-CorV, Sinovac Biotech’s
CoronaVac, CanSino BIO’s Convidecia and ZhifeiLongcom’s ZF2001 make up the most
of China and its allies arsenal in the fight to defeat COVID-19. The World
Health Organisation (WHO) had also given emergency approval to Sinopharm
vaccine in May and the Sinovac Biotech vaccine in June 2021 With the help of
government resources and institutions such as Chinese Academy of Sciences and
Academy of Military and Medical Sciences, Chinese manufacturers had already
started increasing production capacity when the vaccines were in early stage of
development. As early as in April 2020,Sinopharm had established production lines in Beijing
and Wuhan with an annual capacity of 300 million doses and with plans to
eventually export 300 to 500 million doses to over twenty countries. Similarly,
Sinovac and CanSinoBIO increased their production capacities to 300 million and
200 million doses respectively. This explains why Chinese companies have been
very optimistic about reaching an annual production capacities of more than a
billion doses in 2021. For instance, earlier this year both Sinovac and
Sinopharm had declared that they were capable of producing more than a billion doses annually.
This expanded capacity has allowed China to meet huge domestic demands as well
as to fulfil orders from abroad. With Chinese vaccine developers conducting
Phase III trials in various countries in Asia, Latin America and Africa, China
has emerged as one of the leading suppliers of COVID-19 vaccines in the world.
Such vaccine developers would usually collaborate with
local pharmaceutical companies or health departments which helped recruit
volunteers, coordinate physical and institutional resources and conduct trials
in return for preferential pricing, delivery time and technology transfer. This
led to China extending support to more than 80 developing countries. The government
has been actively encouraging companies to export independently to other
countries in its effort to ensure sufficient supplies of COVID-19 vaccines.
Some of the agreements entered into by Chinese companies included an additional
clause stating that if a local pharmaceutical company has hosted the clinical
trial, the country itself is designated as partner in manufacturing and distributing vaccines for
domestic use and export. This explains why China has been supporting overseas
production bases of its vaccines in countries like Brazil, UAE, Egypt,
Indonesia, Turkey Mexico and Pakistan. While UAE would be producing Sinopharm’s
vaccine under the name of Hayat Vax, Brazil, Indonesia, Turkey and Egypt have
been manufacturing Sinovac Biotech’s vaccines. Mexico and Pakistan have also started producing
CanSinoBIO’s vaccine
via an exclusive production line in their respective countries.
As one of the major producers of COVID-19 vaccines in
the market, China has reshaped its position as a supplier of affordable
vaccines to several developing countries in the world. By investing in research
and production capabilities right from the early days of the pandemic, Chinese
companies have not only taken major steps to mitigate the severe shortages of
vaccines in the developing world but has also provided a viable alternative to
expensive vaccines offered by pharmaceutical giants like the Pfizer and
Moderna.
The
author is thankful to his mentor, Dr. BiswajitDhar, Professor, Centre for
Economic Studies and Planning School of Social Sciences, Jawaharlal Nehru
University.The views expressed here are those of the author(s), and not
necessarily of the mentor or the Institute of Chinese Studies.
Image: Vaccine diplomacy and Nepal Source: Griffith Asia Institute
Nepal’s vaccination drive against COVID-19 began on 27January, 2021 with the Oxford-AstraZeneca vaccine manufactured by the
Serum Institute of India (SII) under the brand name Covishield. The campaign
was launched with the one million doses of Covishield that India had provided under
grant assistance in sync with its ‘Neighbourhood First’ Policy and ‘Vaccine
Maitri’ Initiative.
On 17 February, 2021, Nepal signed a contract with SII and
made the advance payment to procure two million doses of Covishield, out of
which only a million doses were delivered.
According to a report by Reuters, India
had put a temporary hold on all major exports of the AstraZeneca Coronavirus
shot made by SII to meet rising demands at home amid the raging second wave of
Coronavirus. The second phase of the vaccination drive that began on 7March, 2021 was left in
limbo, despite the country becoming one of the first in the world to launch the
campaign.
However, India denies that restrictions
were imposed on vaccine exports and maintained that it was trying to prioritise
the demand at home. “India has not enforced any restrictions on exports of
Covid-19 vaccines,”
said Arindam Bagchi, spokesperson for the
Ministry of External Affairs of India during the weekly press briefing on 2April, 2021. “We will export vaccines taking into account the domestic
demand”, he added.
Following the inability expressed by SII to provide
vaccine until the end of this year, the COVAX facility which is a vaccine
pillar of the Access to Covid-19 Tools (ACT) Accelerator in
partnership between Coalition for Epidemic Preparedness Innovations (CEPI), the
Global Alliance for Vaccines and Immunization (GAVI), UNICEF and WHO, suggested that Nepal should explore appropriate alternatives apart from
the Covishield vaccine.
Nepal began looking towards China to fill its vaccine
shortfalls amid uncertainty over COVID-19 vaccine supplies from India. China
had donated 1.8 million Covid vaccines developed by Sinopharm in two different
grants of 800,000 doses and 1 million doses. On 29March 2021, Nepal
received China-gifted 800,000 doses of vaccine as per the commitment of providing 500,000 doses made on 5February 2021 during a telephonic
conversation between the foreign ministers of China and Nepal. Later, China
decided to provide an additional 300,000 doses which increased the grant assistance of the COVID-19
vaccine for Nepal to 800,000 doses.
On 1June 2021, Nepal received another consignment
of 800,000 doses of Vero Cell vaccine developed by the Chinese state-affiliated
pharmaceutical giant Sinopharm, out of the 1 million doses of vaccine which were
earlier announced to be provided on a grant basis as per the commitment made
during a telephonic conversation between presidents of the two nations on 26May,
2021. The remaining 200,000 doses of the Vero Cell vaccine has been provided
to Nepal by the Government of the Tibet Autonomous Region of China, Nepal’s
Ministry of Foreign Affairs
stated in a
release.
Nepal has also bought four million doses of the
Vero Cell vaccine from China under an agreement with a non-disclosure clause,
of which 800,000 doses have been received on 9 July 2021. On
16July, Hou Yanqi, Chinese Ambassador to Nepal informed the
newly-appointed Nepalese Prime Minister Sher Bahadur Deuba that China will
provide additional 1.6 million doses of the COVID-19 vaccine to Nepal in grant
assistance. With this announcement, China has become by far the largest vaccine
donating and exporting country to Nepal.
Ashok Pandey, Associate Research Fellow in Policy Research
Institute mentioned in his Research Report that vaccine donations made by India helped to strengthened
Nepal-India relations but the delay in the procurement thereafter and news of
corruption in vaccine procurement began to reverse the gains. He also mentioned
that the gesture of one million vaccine donations from China was widely
appreciated in Nepal at a time when the country was in dire need of the
vaccine.
Beijing’s vaccine diplomacy
will benefit its competition for influence in South Asia where India has
traditionally been the dominant power. According to an article published in Voice
of America (VOA), analysts have
pointed out, “China moves in to fill the gap left by India, Beijing’s “vaccine
diplomacy” could give it leverage in the strategic Indian Ocean region, where
it has been pushing its Belt and Road initiative that aims at building
infrastructure projects across many countries”.
Michael Kugelman, the
Deputy Director of the Asia Program and Senior Associate for South Asia at the
Wilson Center pointed
out that China views its vaccine diplomacy as an image-building tactic and India’s
suspension of vaccine exports is a strategic opportunity for China.
In his article
published in The Himalayan Times, retired Nepali Army lieutenant colonel
Ashok Kumar Khand mentioned that the economic
giants like India, China and the United States are “trying to regain a foothold
in the countries of their interest or influence in the name of humanity through
vaccine donations”. According to him, “the vaccine donation gives China a key
to deter India’s monopolistic political influence over Nepal, counter the
Indo-Pacific Strategy of the United States and the QUAD policy, and push the
ambitious BRI project forward”. He added, “Winning the Nepali sentiment for
India, aligning the Nepali view with that of India against China’s expanding
influence in South Asia, including the Belt and Road Initiative (BRI), and
control of Nepali politics from behind the curtain could be the hidden agenda
behind India’s vaccine diplomacy”.
Prime Minister Narendra
Modi held a telephonic
conversation with Prime Minister Deuba on 19 July 2021 and assured
early supply of covid vaccine to Nepal but India’s
image as a vaccine-giving nation and its soft power gains has been dented and
could be further damaged if there is a long delay in exporting vaccines. As the
world’s largest producer of vaccines, India is expected to ramp up enough
capacity to resume vaccine deliveries to other countries in addition to meeting
the requirements at home. Michael Kugelman pointed out that New Delhi has the opportunity to reassert itself further down the road
and India has an inherent comparative advantage over China because it is the
world’s top manufacturer of vaccines. Another advantage India’s locally produced
vaccine has over Chinese vaccines is its affordability. Although the price of
the Chinese vaccine has not been disclosed owing to the non-disclosure clause, it
is said to be around $10
per dose whereas, Nepal bought the jabs from the SII at $4 per
dose.
India had an early movers
advantage because it moved in with the commitment of initial large supplies but
it lost ground due to the inability to provide vaccines either on a grant basis
or fulfil commercial commitments made by SII. Nepal gave priority
to vaccines produced in India because of reasons like, logistics, pricing, existing storage and transportation facilities in Nepal and India’s assurance to
facilitate procurement but India’s inability to provide vaccines have created a
vacuum that was filled in by China. According
to Harsh Pant, Director Studies and Head Strategic Studies program at
the Observer Research Foundation in New Delhi, “Given that this crisis will be
with us for the foreseeable future, certainly there is going to be a sense of
China becoming a very important player for many of these countries if India is
not able to pick up some slack after a few months once things stabilize”.
Nepal is
still far from achieving the required inoculation for its population. According
to the latest data (14th September 2021) of the Ministry of Health,
5243236 people or 17.4% of Nepal’s 30 million population have been fully vaccinated.
The lost ground could still be retrieved if India can ramp up its vaccine producing
capacities and resumes providing vaccines to Nepal. It will be in India’s
interest to prioritize inoculating the Nepali population because the two
countries share an open border and uninoculated people crossing the India-Nepal border on a daily basis could surge
the coronavirus cases in both countries. In addition, India should also take
lessons from the 2015 border blockade which pushed Nepal into China’s lap and
be cautious about China’s attempt to fill the gap in vaccine shortage.
************************************************************************The author is thankful to her mentor, Ambassador Ashok K. Kantha, Director, Institute of Chinese Studies and former Ambassador of India to China, for his invaluable guidance and support in writing this article. The views expressed here are those of the author(s), and not necessarily of the mentor or the Institute of Chinese Studies.
Image: Chinese State Councilor and Foreign Minister Wang Yi meets with Mullah Abdul Ghani Baradar, political chief of Afghanistan’s Taliban, in Tianjin, China July 28, 2021. Source: Reuters
As America’s war in Afghanistan comes to a tragic end and the country experiences widespread chaos following the abrupt and complete collapse of the Afghan army and government in the face of the onrush of Taliban forces, China, an increasingly assertive power in the neighbourhood, appears to have chosen to deal with the emergent crisis in an unusually pro-active though precarious manner. Shortly after the fall of the entire country to the Taliban, Chinese Foreign Ministry spokesperson Hua Chunying told the media that the Chinese have noted that the Afghan war has come to an end and the Taliban have said that they will “negotiate the establishment of an open and inclusive Islamic government”. Working in tandem with its “all-weather” friend – Pakistan, China’s endorsement of the totalitarian Taliban government has sounded an alarm around the world, particularly, in the West; however, this is not entirely shocking as China seeks urgent political stability in Afghanistan.
China perceives
the Taliban as more than just a religious extremist group and a
real political force. Over the years, China was never convinced that the
Taliban could be destroyed by military means, and in line with this
strategic calculation, China had cautiously engaged with the group keeping
future objectives in mind. Even though China has termed Afghanistan as the
‘graveyard of empires’ and never sought to entangle itself in the quagmire of
the ‘great game’, it has been worried about the presence of the United States
(US) on its Western border. As a ‘new great game’ begins, China has made its
intentions clear- it will pursue a relationship with the Taliban for achieving
its own ends. Thus, the central purpose of the present analysis is to explore
China’s relation with the Taliban along with an attempt to understand the
particular type of role China wants to play in Afghanistan.
A
Historical Overview of China-Taliban Relations
Historically, Afghanistan was on the
periphery
of China’s diplomacy and China did not have a strong influence there. In
1993, one year after the Afghan communist regime collapsed, China
evacuated its embassy amidst the
violent struggle then taking place. China did not establish an official
relationship with the Taliban who had seized power in 1996. However, it is
interesting to note that efforts to establish a relationship with the Taliban
dates back to 1999. In December 2000, China’s
ambassador to Pakistan, Lu Shulin, even met the Taliban’s leader Mullah
Omar in Kandahar. It is speculated that Mullah Omar assured the Chinese that
the Taliban would not host anti-Chinese militants in Afghanistan. For the
Chinese, threats emanating from Uighur militancy and the East Turkistan Islamic
Movement (ETIM) have remained a primary security concern.
After it become clear that the US
military surge in Afghanistan in 2010 would not defeat the Taliban, the
Chinese gradually started developing ties with the group and seeking a greater
role in the peace negotiations that were to follow. In 2015, China
hosted secret talks between representatives of the Taliban and the Afghan
government in Urumqi. The next year, a Taliban delegation headed by Sher
Mohammad Abbas Stanekzai (then the group’s representative in Qatar) visited
Beijing and sought
the support of the Chinese for their position in Afghan domestic politics.
As Chinese efforts intensified, the next high-level meeting was held in June
2019, when the group’s deputy leader Abdul Ghani Baradar visited China to
discuss issues related to the Afghan peace process and counter-terrorism. In
seeking a deeper relationship with the Taliban, China has inherently relied on
Pakistan and Pakistani supporters of the Taliban, such as the late Maulana Sami
ul Haq, known as the “Father
of the Taliban”. In September 2019, when talks between the US and the
Taliban faltered, China
invited Baradar again to participate in an intra-Afghan conference in
Beijing. However, this conference never took place. Apart from these unilateral
initiatives, China was also a part of several multilateral initiatives such as
the Quadrilateral Coordination Group and the Heart of Asia-Istanbul process.
The heightened significance of the
Afghan war in China’s foreign policy is reflected in the fact that for the very
first time China
assigned a country-specific special envoy– since the creation of the post,
there have been four Special Envoys for Afghan Affairs with the present being
Yue Xiaoyong whose appointment on 21st July, 2021 comes at an
extremely vital time.
Chinese Development Ambitions in
Afghanistan
The highly publicized meeting of
Taliban leaders (including Mullah Baradar) with the Chinese Foreign Minister
Wang Yi in late July led to several crucial promises being made and Baradar
even invited China to “play a bigger role in future reconstruction and
economic development” of the nation.
Source: Stratfor
The unique geographical location of Afghanistan – as an important crossroad into Central Asia, Middle East and South Asia – makes it a primal factor in the success of China’s Belt and Road Initiative (BRI). The importance of Afghanistan was noted by the former Chinese ambassador to Afghanistan Yao Jing who stated in 2016, “Without Afghan connectivity, there is no way to connect China with the rest of the world”. Up until the 16th century, Afghanistan played a pivotal role as a regional trade and transit hub sitting at the meeting point of ancient trade routes, known as the Silk Road. In 2011, a new initiative known as the New Silk Road was envisioned by the then Secretary of State Hillary Clinton. However, this was later replaced by China’s BRI because the American initiative lacked the “Pacific-to-Atlantic scope”.
Afghanistan formally joined the BRI
in 2016. Several projects such as the Five Nations Railway, Sino-Afghan Special
Railway Transportation Project, Corridor 3 of the Afghan National Railway Plan
and the Digital Silk Road, specifically the fiber optic link with China through
Afghanistan’s Wakhan corridor, have been undertaken by China and the Afghan
government. Afghanistan also became a member of the Asian Investment and
Infrastructure Bank (AIIB) in October 2017 in order to facilitate cooperation
on infrastructure development under the BRI and Regional Economic Cooperation
Conference on Afghanistan (RECCA). In September 2019, China, Afghanistan and
Pakistan decided to officially extend the China Pakistan Economic Corridor
(CPEC), China’s flagship project under the BRI, into Afghanistan. In
China’s calculation, the planned extension of the$61 billion CPEC into
Afghanistan could be an essential solution to create a stable and
terrorist-free Afghanistan. However, until now Chinese investments in
Afghanistan have remained significantly low if compared with other nations such
as Pakistan.
Huge investments by China under the
BRI in Pakistan and the Central Asian nations neighbouring Afghanistan will in
time create a diplomatic pressure from all the stakeholders on the new Taliban
government in Afghanistan to ensure the stability of the country and to not
allow it to be a safe haven for terrorism.
Conclusion
The Chinese have three
complementary national interests and concerns in Afghanistan- first, they
cannot see the country turn into a safe haven for terrorism (particularly in
the form of ETIM); second, Afghanistan is geostrategically located within the
vortex of the BRI; and third, China would like to benefit from the rich mineral
deposits in Afghanistan. Moreover since distance matters
a great deal in trade and transit, China would be willing to invest in
projects to make condensed access a reality, provided the Taliban can guarantee
safety of Chinese personnel and assets.
It is vital to note that Afghanistan
has required external assistance in meeting not only its developmental
programmes but even its basic national budgetary funding requirements. As aid
payments from the West have been severely curtailed, the Taliban is looking
towards China. Recently, China
has announced a $31 million aid package for Afghanistan, in what appears to
be one of the first new foreign aid pledges for the Taliban-ruled country.
However, as Afghanistan is on the cusp of a humanitarian catastrophe and will
need billions in aid to avert the possibility of universal
poverty, it will be interesting to see if China is willing to enmesh itself
in the murky development aid politics of the country.
China has made two vital gains by recognizing the legitimacy of the Taliban: first, China can hold the Taliban accountable for any attack on its citizens or assets emanating from Afghanistan and since the Taliban will be dependent on Chinese investments to a considerable extent, they will have to mend their ways; and second, China’s BRI will inevitably profit from stability in Afghanistan. Thus, China has done a good job of walking the tightrope in Afghanistan. A lot now depends on the Taliban’s policies which will decide China’s future engagement in the war-torn nation. For the present, it would seem like the Chinese strategy of courting the Taliban is paying off; but, whether it actually does, only the future will tell.
The author is thankful to her mentor, Ambassador Vijay K. Nambiar, former Ambassador of India to China and UN Secretary General’s Special Advisor on Myanmar, for his invaluable guidance and support in writing this article. The views expressed here are those of the author(s), and not necessarily of the mentor or the Institute of Chinese Studies.
Image: Speculation is growing that the digital yuan will be launched soon. Source: Shutterstock
The
Central Bank Digital Currency (CBDC) race has begun to pick up pace and almost
all the countries are getting into it. Around 86% of the
world’s central banks are actively researching the potential of CBDC, which makes it evident that countries all over the world view it as an
important development in the monetary domain which they need to be up to speed
with. As of now, the Bahamas is the first as well as the only country to have launched a CBDC for nationwide use. Whereas among the major economies, China is at the forefront. China’s CBDC journey started early in 2016 when the Digital Currency Research Institute, the first official
institution in the world engaging in research and development of digital
currency was established.Early identification of
potential, active research of the prospects of CBDC as well as successive pilot
trials in major cities brought China to the forefront.
The
official name of China’s CBDC is Digital Currency Electronic payment (DCEP),
which is commonly known as e-yuan or digital yuan. During the pilot trials, it
has so far received a positive response from the public, mostly because of the
red packets containing DCEP which was distributed to the public on a lottery basis.
It helped create the much-needed hype among the masses and kickstart China’s
mission-CBDC. Platforms such as JD.com, Meituan and Didi Chuxing were roped in to participate in such trials as well in order to test the
integration of CBDC into different apps. Since its first pilot trial to the
integration into apps, the journey has been gradual and smooth. With the amount
of control that the Chinese government yields over its institutions,
integrating DCEP won’t be a challenge domestically. Getting people to use it
instead of their WeChat or Alipay wallets can be a challenge but incentives
similar to the red packets at early stages can help build that user base.
Recent clampdown on internet giants in China might also soften the resistance from Tencent and Alibaba and
make space for the digital yuan.
China
also has its eyes fixed on the Beijing Winter Olympics 2022 to showcase its
first major use case on a large scale and this may also serve as a gateway to
wider use of CBDC in the country. Although the PBOC officials claim that they
are looking more into the domestic use of e-yuan, many initiatives reflect
otherwise.
The
first is the Multiple CBDC (m-CBDC) Bridge which the PBOC joined recently. It aims to develop a prototype for
cross-border payments with the Central Bank of the United Arab Emirates, BIS
Innovation Hub, the Hong Kong Monetary Authority, and the Bank of Thailand.The main objective is to study the feasibility of cross-border payments
using CBDCs and distributed ledger technology. Being the first-of-its-kind
initiative, this has huge potential to solve issues related to cross-border
fund transfers. Given the scale and timing, the results of the Proof-of-concept
work can perhaps contribute to setting international standards around CBDCs.
The
second is, Finance Gateway Information Services Co, a joint venture established by China National Clearing Centre of the
PBOC and the SWIFT, which aims to establish and operate local network of
financial messaging services to process cross-border Yuan payments through
China’s own settlement system. Both, m-CBDC bridge and Finance Gateway
Information Services Co. aim to challenge and change the current USD-dominated
payments system in the coming future.
There is
no doubt that both these initiatives aim to provide solutions and develop the
current cross border payment infrastructure but these will also make the
currently followed arrangement of Society for Worldwide Interbank Financial
Telecommunication (SWIFT) less relevant. Currently, international payments are
facilitated by the SWIFT. The dominant role played by the USD in SWIFT’s
payment system is arguably one of the major reasons for the USD’s status as a
global reserve currency. China is aiming to change that by trying to build a
parallel system. And when that parallel system gets up and running,
internationalization of the RMB could get easier by incorporating DCEP into
various forms of economic activity in which it participates through
multilateral and bilateral arrangements.
There
are many avenues through which China would want its CBDC to flow and gain a
grip over cross-border payments. From providing financial aid to BRI countries
to waiving off transaction fees on repayment of loans, there are a plethora of
options China has because of its trade links that make it the largest trading nation in the world. China’s growing integration with the developing world can
help China rally countries behind it to follow Chinese standards of CBDC.
DCEP’s
success internationally can tend to affect the dominance enjoyed by USD in
global payments. The brunt inflicted by U.S sanctions is largely because of the
USD’s dominance in international payments architecture. Hence, a parallel
network system based on m-CBDC holds the potential to soften that brunt of U.S
sanction policies which have increasingly been used against Chinese entities
and individuals. Even Hong Kong’s chief executive Carie Lam was left with a pile of cash because banks did not want to deposit her money and expose themselves to
the risk of U.S sanctions. This is an example of how strong and effective the
U.S sanctions are against companies and individuals. If China can circumvent
the sanctions through its system, it is likely to reduce the U.S hard power and
will allow China to act with much more flexibility without having to worry
about the aftermath of U.S sanctions. It can have far-reaching effects on how
China deals with the nations facing sanctions by the U.S.
But all
of this won’t be easy for China to accomplish. Cross-border usage of DCEP will
likely face headwinds because the U.S and its allies may see the increasing
acceptability of China’s DCEP as against their interests. On June 5, a communique issued by the G7 iterated the benefits and potential of a CBDC and underlined its
commitments towards transparency and rule
of law. It further stated that the G7 will
work together towards common principles and will publish conclusions later this
year. This communique reflects that the U.S and its western allies have
perhaps woken up to the potential threat of e-yuan and are now pooling efforts
to study its implications and ensure appropriate frameworks are in place.
There
are issues such as interoperability among CBDCs of different countries which
can prove to impede the goal of easier cross-border transactions. Another major
issue is the lack of digital infrastructure in other countries to transact in
digital currencies even if interoperability is achieved. But the single biggest
impediment could be the privacy issues related to the DCEP. DCEP follows what
has been termed as ‘Controllable Anonymity’ which allows the People’s Bank of China (PBOC) to have complete
oversight of the data collected from its CBDC. The idea of data collection by a
foreign government won’t go down well with democratic nations that have strict
privacy laws. Besides, it will likely lead to an increase in scepticism and
reluctance in foreign entities.
There are rapid developments taking place in the
CBDC domain with different countries moving up the ladder. DCEP, clubbed with
China’s trade links, growing influence and strategic long-term thinking has the
potential to counter Dollar weaponization but that will be a very long and
difficult road ahead. China is hoping that someday e-yuan can play a key role
in supplanting the U.S Dollar. But for that, there must be a system in place
that can be used to gradually increase the tempo when needed. With the consistent
pace at which China is developing and testing its CBDC, that system will likely
be in place in the near future.
China’s resilience has been typically observed from a
civilizational and culturist perspective, so far. Resilience as an organized
indigenous systemic concept has yet to be defined by China from an ecological
slant. Being an ancient civilisation, the idea of nature was restricted to
romantic and spiritual ideation – in literature, philosophy and art, as found
in the recorded history of cultural resilience. Often invested
in learning the ways of nature, Tao(天) is the dreaded god that cradles human
life. China jumped from being an agricultural civilisation into the
Anthropocene, spearheaded by industrial revolution. After learning the ways to
‘exploit nature’, it went on to narrowly focus on accumulating ‘economic
resilience’. China, by then had realized that it had reaped economic well-being
at the cost of nature’s ‘collateral’ devastation leading to continuous events
of natural calamities which became evident with the passage of time. As a
result of this, modern China initiates a vision of constructing a civilization
that promotes ‘harmony’ between ‘man’ and ‘nature’.
“弹性”(Tánxìng) or elasticity, “韧性”(Rènxìng) or toughness, or “恢复力”(Huīfù lì) or the power to recover. These are the direct
translations for the word ’resilience’ in Chinese which however lacks any
conceptual rendition or indigenous scientific framing, unlike the West. The
president of China, Xi Jinping, earlier this year in the 2021 Earth Summit, reiterated the
vision of Shengtai Wenming or Ecological civilisation. China’s ‘economic
resilience’ during the pandemic has led to several scholarly appraisals. In
2017, the withdrawal of the US from the Paris Agreement increased China’s
willingness to lead global environmental governance. Being one of the biggest
polluters in a climate hostile world and an economic power has put China in a
tight space for international scrutiny. Thus, achieving ‘ecological resilience’
might be the next big thing for China to prevent any major risk of regime shift
that will hurt the developmental state of the nation.
The conceptualisation of resilience in IR discourse began in
the West during the cold war period, emerging in various social and natural science
fields. As a consequence of rising environmentalism after industrial
revolution. Ecological resilience, got popularly defined at the time by
ecologists such as C.S. Holling as, “the time required for
an ecosystem to return to an equilibrium or steady-state following a
perturbation.” Around 1980s, environmentalists in Soviet Union were
the first to propose the term ‘ecological
civilization’ which was later incorporated by China’s CPC party. Scholars
in the West were conceptualising resilience around the same time. The 1972, the
Stockholm conference resulted in political effectiveness against environmental
issues in China. China’s evolution of political ecology has been marked since
then. Repercussions of Deng Xiaoping’s reforms and economic liberalism was
already showing signs of enviornmental issues. Leading Hu Jintao’s regime, to
push forth the idea of ‘Beautiful China’, specifically stressing on the
ecological degradation factor irrespective of significant industrial growth in
the sustainable sector. This unfolded the imbalanced socio-ecological systems
that was systematically observed after President Zemin’s leadership who
maneuvered China into becoming a major global producer and user of clean and
renewable energy technology. China, a developing nation has largely been a
reform and transformation-based society than just being induced by any strong
ideological standards. Especially after the cultural revolution in the post-Mao
phase where the focus was to ‘grow’ in the neocolonialist world, curating a
strong labor force with little to no tolerance for
traditionalism. Hence, the ‘laws of nature’ that were once preserved in
traditional Chinese literature were significantly discouraged until then. As a
rectification, Xi Jinping initiated the party’s intention to build a ‘community
life’ together that allows man and nature to co-exist based on the political
foundation of modern socialism with a brush of Chinese characteristics. This
had been surfacing reluctantly in the party’s political agenda for the past two
decades.
Remembering as David Easton once quoted that ‘scientism’ is
good, but the ‘mad craze’ for the same is bad that should be avoided. In the
past four decades, China had similar bout of lessons from impelling
an intensive industry built on the foundations of capitalism and growth-based
sustainability. Thus, choking the boundaries of the biosphere and opening
alternatives for energy-based industries. The Western resilience system
has been ‘empirically’ based on typical rational consciousness and minimal
‘value’ inclusiveness. China recognized it’s failure to balance the ecological
sphere along with its economic growth despite taking the best developmental
lessons from the West. Coercing them to think about creating a balance between
being less ‘yang’ and more ‘yin’ until a state of equilibrium is reached, referring
to an anti-waste-based society caused by intense
globalisation. The Chinese scholars thus, argues that the situation can be
altered by imbibing a socialist modern culture coupled with Chinese
characteristics while acknowledging the fall of communism in Soviet Russia.
China has been striving to defend its integration of a constantly transforming
domestic socio-ecological system against the
West-inspired, ‘universalism’. Their value system is predominantly based on
Confusion philosophy. It promotes the idea of ‘relational self’ in a way where
one does not limit oneself to evolve just as an individual entity but transcend
that very evolving-self to the extended
virtues of the community. “What you do not wish for yourself, do not do
to others?”, quoted Confucius. Only then one can achieve a harmonious community
life together. Thus, trying to align with the traits of socialism by building
communal responsibility along with the self. This ideation of China’s
‘harmony’ towards establishing a political nation based on eco-socialism
certainly signals a new wave of resilience thinking that diverges from the existing trends
of liberal environmentalism governmentality.
Internationally many critics are however, skeptical of how China is
likely to achieve the ambitious dream of stable economic growth as well as an
Eco-civilization, simultaneously. As they argue that continuous growth is
detrimental to the ecological crisis. To which, Xi remains hopeful
especially after observing its ‘triumphant’ pandemic situation in comparison to
the rest of the world, further encouraging growth over 6%, in the post-pandemic
phase. Green development (one of Xi’s 6 developmental policies), is likely to
induce a possible alternative including green economic reform that shall be introduced along with several other structural
changes to suit the 2050 vision of ‘ecological civilization’. Chinese scholars,
meanwhile are speculating about the possible challenges the government will
have to tackle with the emergence of the upcoming reforms. Uncertain outcomes might spark social
contestations and disruptions – to which, however, the government prefers authority and
not democracy. Successive transformation in the past couple of decades has been
slowed down and stalled due to various challenges of such kind. The risks
looming around in the post pandemic world will thwart China’s growth in the long
term if it does not adapt to the situation and take control while it can.
Especially as the industries experience a paradigm shift. Irrespective of Xi’s
ability to achieve the ambitious political agenda, it will be refreshing to see
how China brings about a new holistic system of green transformation that might
stimulate a lot of other developing countries in the future while adhering to
the international and domestic standards and stresses.
Image: Property-hungry Chinese millennials and shadow banking could fuel a financial crisis Source: South China Morning Post
The
Chinese economy, due to the strict measures adopted by the government to curb
the spread of the Covid-19 virus, is
back on track, with output back to pre-pandemic levels and a surge in credit
activity. China’s financial regulators are having a hard time
containing risks at home while limiting disruptions from abroad as the economy
is opening to foreign investment. The fear of missing out has stoked the investors’
expectations and many people are now buying property for investment or
speculative purposes, which Guo Shuqing, chairman of the China Banking
and Insurance Regulatory Commission, termed as “very dangerous”. The household debt in China had reached 150
percent of its disposable income in December 2020 driven by a rise in property
prices and seems to be concentrated among the millennials. The youth of China
is clearly banking upon the government to sustain this growth in real estate
prices, but a major portion of this debt is financed by shadow banking.
People’s Bank of China (PBOC) defines China’s shadow banking as “credit
intermediation involving entities and activities outside the regular banking
system”.Since this sector is outside the formal banking sector, it lacks a
safety net that comes from being financially backed by the government through
deposit insurance publicly guaranteed or ‘lender of last resort’ facilities by
China’s central bank. This raises an important question: Is China on the verge
of a financial crisis like the one faced by the US in 2008-09?
China escaped the 2008 financial crisis primarily because of its
booming domestic market and little exposure to the overseas market for
wholesale funding. But the contraction in capital inputs through foreign direct
investment during the crisis and fall in exports made the government announce a
$586 billion stimulus package to provide a boost to the
economy. Major infrastructural activity, constituting 72 percent of the package was undertaken, and only 30%
percent of this was financed by the central government. The rest had to be
funded by the local governments, and since they couldn’t borrow funds
themselves, local government financing vehicles had to take on debt on their
behalf from banks. But banks had severe restrictions in terms of lending such as caps
on lending volumes imposed by the PBOC, mandatory bank loans to deposits ratio,
restrictions on lending to certain industries, reserve requirements, among
others. Due to this, shadow banking activities grew along with an increase in
fixed investment, driving economic growth but at a high cost, so much so that the corporate
debt to GDP ratio reached a record 160 percent in 2017 as compared to 101
percent 10 years prior to it.
The
Chinese leadership claimed that it had successfully defused the housing bubble
that had formed in China by the end of 2014 due to these shadow banking
activities. So, in order to uplift the dampening economy in 2015, it eased
restrictions on second-hand home purchases and the property market since
then has been booming, with more households buying houses and property
developers borrowing more to engage in construction activities. There are many
factors causing an increase in shadow banking activities, which in turn
contribute to the growing real estate bubble. Firstly, Chinese authorities are
trying to sustain high GDP growth rates through credit
borrowing which puts strain on financial institutions of the country. Secondly,
zombie companies that have little to no productive use, are borrowing more and
more simply to meet their current obligations. Thirdly, many state-owned and
private companies in China have property subsidiaries, and property loans made
to these subsidiaries are sometimes presented in the
books as going to the parent company. This results in the share of
property-related debt being much higher than what is available in the official
data. The overall impact was
that the amount invested in Chinese housing hit $1.4 trillion in June 2020, while
the total value of houses and developers’ inventory, according to a Goldman Sachs report, had reached $52 trillion in
2019.
Image: Shadow banking in China has ballooned into a $10 trillion ecosystem that connects thousands of financial institutions with companies, local governments and hundreds of millions of households. Source: Bloomberg Quint
The
shadow banking system in China works independently of its monetary policy,
amplifying increases in the money supply but working opposite when the
restrictive interest-based policy is imposed. Thus, it can be inferred that in
spite of the Chinese policy changes to curb the real estate sector, the
negative role of shadow banking is why the bubble continues to build. President
Xi Jinping’s statement in 2017 that “houses are built to be
lived in, not for speculation” clearly
indicates that the PLA government is sensitive to this issue. The government in
China has adopted stringent measures to stop the rise in
property prices over the past few years, and the latest mandate in August 2020,
restricted credit supply to both developers and investors. These new
regulations that mandate all lending institutions to decrease the quantity of
loans given to this sector are going to stay in place until the real estate
cools off. There are two forms of shadow banking in China, one is the
channel business of Chinese banks that hide some of their lending activities to
keep them outside the purview of the auditors and regulatory bodies. The other
is P2P(Peer-to-Peer) lending platforms like trust companies,
factoring companies, etc. In
order to contract both these forms, the Supreme Court in China has lowered the interest rates on microlending, which will
make it unprofitable for lenders while the CBIRC(Chinese Banking and Insurance Regulatory
Commission) has forbidden trust companies to finance developers that do
not meet the necessary requirements of shareholders and capital or lack
necessary licenses.
The
PBOC has significant control over lending activity in China as compared to the
independent decision-making possible in the U.S. markets, which implies that
the situation in China is more stable. There are many structural differences between the shadow
banking systems in China and the United States, such as in China, market-based
financial instruments do not play as significant a role as they do in the USA.
Also, in China, smaller banks went off-balance sheet as they were constrained
by liquidity requirements as compared to the larger banks in the US that were
constrained by capital requirements. All these factors
considerably lessen the chances of a financial crisis like that of 2008-09.
Also, the Chinese real estate market has higher-than-normal down payments, sometimes as
high as 40-50 percent of the transactions as compared to the 10-20 percent in
most western markets. This implies that the debt to transaction price ratio is
low, which discourages people from the lower socioeconomic strata of Chinese
society to purchase high-priced properties, thereby reducing the risk of
defaults.
The PBOC and the CBIRC stepped in to take over the Baoshang bank when it collapsed in 2019,
whichhas both positive and negative
implications. On one hand, it indicated
that the Chinese government may intervene in case of any crisis-related
situations caused by defaults in the shadow banking sector, but on the other
hand, it may also encourage risk-seeking behaviour from
creditors depending on the government to back the financial system. The Chinese
government is caught between trying to curb shadow banking activity in order to
reduce system risk in the country due to the real estate bubble and ensuring
liquidity in the economy. Thus, although the possibility of a financial crisis
is low, China does need to reduce risks posed by its shadow banking sector and
ensure financial stability.
