Following RCEP “victory,” China’s CPTPP challenge to Biden

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

Straight from celebrating the signing of the world’s largest trade pact, the 15-nation Regional Comprehensive Economic Partnership (RCEP), Chinese President Xi Jinping surprised everyone when he announced at the virtual Asia-Pacific Economic Cooperation summit five days later that China will actively consider joining the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) trade agreement.

Why is Beijing suddenly interested in joining a trade bloc that was initially pitched as anti-China? China’s state-controlled media has been very candid in stating that Beijing’s desire to join the CPTPP is strategically timed and aimed at a possible reconciliation with the United States under President-elect Biden. In a commentary released just a day after Xi made the announcement, the state-owned CCTV’s English language news and current affairs channel, CGTN, said: “With the incoming Biden administration now on the horizon, China has decided the ‘strategic time’ is now right to actively consider joining the CPTPP.”

CGTN acknowledged that the agreement, first orchestrated as the Trans-Pacific Partnership four years ago under the Obama administration, was framed as a trade counterweight to China. Now, however, CGTN pronounced the biggest takeaway from Xi’s interest in the CPTPP is that China is serious about expanding multilateral free trade and that, ultimately, does not view the trading system as a zero-sum game, as it has been depicted by the Trump administration.

On the other hand, a report on November 21 in the “hawkish” pro-establishment Global Times was far more forthcoming on the political motives. The Global Times’ story, entitled “China’s interest in CPTPP membership seen as a chance to ease Sino-U.S. tensions,” posited that Beijing is gauging the headwinds in Washington by signaling to the incoming Biden administration that China is ready to evolve away from the tense standoffs of the Trump era. Citing Wang Huiyao, the pro-U.S. and influential president of the Beijing-based Centre for China and Globalization, the Global Times article emphasized that unlike RCEP, the “CPTPP represents the world’s highest-level free trade agreement, and China’s interest in joining it shows the country’s desire and determination for deeper, higher-level opening up.”

Xi’s comments were not the first time China’s top leadership has expressed a desire to join the 11-country trade pact. In May of this year, Premier Li Keqiang became the first top-ranking Chinese leader to publicly confirm China’s interest in the CPTPP. At a press conference at the end of the 13th National People’s Congress, in reply to a specific question by the Japanese newspaper Asahi Shimbun as to whether China had a plan to join, the Chinese premier said: “China has a positive and open attitude toward joining CPTPP.”

Although Li’s remark was widely picked up by the international press, official Chinese media, including the Global Times, were conspicuously silent about the premier’s reply. However, the semi-official authoritative financial Caixin prominently headlined Li’s statement as “Premier Sends ‘Powerful’ Signal for China to Join Asia-Pacific’s Largest Trade Pact.”

Interestingly, the second influential Chinese figure to publicly advocate for China to join the CPTPP trade pact was none other than the senior financial commentator Hu Shuli, who is also the chief editor of Caixin. Charles Finny, an international trade expert and a senior official in New Zealand’s Ministry of Foreign Affairs and Trade, cited Hu’s comment in an article he wrote for the Auckland-based Asia Media Centre in July.

But not everyone outside China is willing to yet take at face value what CGTN and the Global Times would want us to believe – that China’s keenness in joining the Asia Pacific trade pact “is a kind of ‘Chinese vow’ on promoting Asia-Pacific cooperation and globalization.” Earlier on, when Li first indicated in his low-key tone some interest in joining the CPTPP, skeptics outside of China had read Li’s remark as a slap in the face for the U.S., as both the Trump administration and the Democrats were generally opposed to Washington (re-)joining the trade pact. That was made apparent from the headline of one article published within days of Li’s remarks: “Trumping the U.S.; China could join CPTPP.” The author claimed that China’s membership in the CPTPP would also underline its growing position as the pre-eminent superpower in the West Pacific.

As the “repository” nation among the CPTPP members, New Zealand has denied receiving from China a formal expression of interest in joining the pact. This indicates that, riding on the success of the recent signing of RCEP, China is fully aware of the potential opponents to its entry among the CPTPP’s 11 member nations. For example, even if true that Japan’s newly elected Prime Minister Suga Yoshihide has clearly indicated interest in expanding CPTPP membership next year, when it is Japan’s turn to host the CPTPP leaders’ summit, it is not hidden from anyone that Japan is highly suspicious on trade matters. Remember, Japan has been negotiating a three-way free trade agreement with South Korea and China since 2002.

Besides, most of the Japanese business and political elite is convinced that China will never join the CPTPP, at least not in the near future. Miyake Kuni, in a recent article in Japan Today, argued that by announcing China’s willingness to consider joining the CPTPP, Xi is indulging in pure propaganda. Miyake is a former career diplomat and currently serves as special adviser to Suga’s Cabinet. Miyake, critical of Beijing’s role in negotiating RCEP, feels that the leaders of the Chinese Communist Party (CCP) might have been emboldened after RCEP to believe that China can join, change, and remake the rules of regional trade under a new TPP. “Based on my experience as Japan’s chief negotiator for trade in services at the World Trade Organization from 1994 to 1996, I don’t expect China to abide by the ordinary rules or regulations for joining the free trade agreement,” Miyaki opined.

Digging deeper into China’s real purpose behind indicating a desire to join CPTPP, a recent commentary in the Chinese-language version of the Financial Times claims that pushing for more globalization is Beijing’s latest mantra to tackle the U.S.-led China containment strategy. Written by Beijing-based scholar Cao Xin, secretary general of the International Opinion Research Center, Charhar Institute – an influential “liberal” think tank in Beijing – the article tried to explain China’s sudden interest in joining CPTPP, almost like a twin declaration following the RCEP, as exclusively aimed at the U.S. “China very well knows that developing closer economic and trade relations with other countries in the world is the most effective way to hit back at the ‘contain China’ policy being carried out by the United States and its allies,” Cao wrote.

Finally, in the two months before Biden the oath of office as U.S. president, China is going to be more and more aggressive in forging as many as multilateral and bilateral economic and trade agreements as possible. Chinese Foreign Minister Wang Yi recently visited Seoul after spending two days in Tokyo, trying to expedite the signing of the China-Japan-South Korea FTA. Recently, Chinese Ambassador to Germany Wu Ken assured business leaders and political elites that Germany and the EU stand to gain momentum from China’s “dual circulation” policy as China pushes an end-of-year goal for the China-EU bilateral investment pact.

But even Cao’s special column in FT Chinese notes the reconciliatory mood toward Washington that is currently prevalent in Beijing. With the prospect of Biden moving into the White House next month, the CCP leadership, it seems, is working out a two-pronged strategy. On the one hand, Beijing will seek to put the new U.S. administration under pressure from the very start by openly extending an olive branch. On the other hand, it will look to “encircle” the U.S. by developing economic and trade relationships with more and more countries that are American partners and allies.

Originally published as With RCEP Complete, China Eyes CTPTT in The Diplomat on December 1, 2020

North Korea’s Strategic Significance to China

Pritish Gupta, Research Intern, ICS

The Chinese saying ‘if the lips are gone, the teeth will be cold’ has often underscored the relationship between China and the Democratic People’s Republic of Korea. The standard perception that China has been North Korea’s natural ally and strategic asset never lost resonance. Geographical proximity and ideological similarities also played a significant role in the bilateral relationship. However, as Kim Jong-un came to power in December 2011 and North Korea’s nuclear ambitions began to be purposefully pursued, China’s North Korea policy evolved with a strategic orientation.

Under President Xi Jinping, as Beijing began to increasingly identify itself as a great power, it adopted a more pragmatic approach towards the Korean peninsula. With a sharp strategic competition with the United States over the years, North Korea has become an important vector in China’s evolving foreign policy in pursuit of Xi’s Chinese dream.

The 2017-18 crisis on the Korean peninsula sparked a debate in Beijing’s questioning its continued support to Pyongyang, though Beijing continued with its North Korea policy, which is based on the geopolitical calculus.

The question of stability on the Korean Peninsula

In terms of China’s interests in the Korean peninsula, North Korea acts as a variable in regional competition with the United States. It maintains cordial relations with the Democratic People’s Republic of Korea (DPRK) while maintaining its strategic influence in the region. Beijing is apprehensive about any conflict in its backyard as it may jeopardize its strategic advantage on the Korean peninsula. In case of an imminent threat to its regime, North Korea may resort to a conflict with South Korea, which would lead to instability and uncertainty in the region. Clearly, Beijing prioritizes a peaceful and stable Korean peninsula over the denuclearization of the DPRK. The collapse of the regime may invite all the stakeholders, the United States, South Korea, and China, to intervene militarily to stabilize the peninsula, which might prove to be detrimental to the Chinese interests.

Beijing opposes Pyongyang’s nuclear program but prefers peace and stability over a full-blown conflict. Beijing fears that a direct intervention from the United States and South Korea over DPRK’s nuclear program may result in a unified Korean peninsula. The challenges of a unified peninsula could also pose concerns for Beijing. China has stuck to its principle of ‘no war, no instability, and no nukes’ to avoid any conflict on its borders. North Korea acts as a buffer state for China against South Korea as well as the presence of US troops. It plays well for Beijing that the North Korean regime remains intact where it acts as leverage on the backdrop of US rebalancing to Asia.

Avoiding a refugee crisis

One of the main concerns for China will be dealing with a refugee crisis if there is a potential conflict across the China-North Korea border. Both countries share an 880-mile border. Given any escalation of economic stress in North Korea, there would be a significant number of North Koreans seeking refuge in China, which could result in a humanitarian crisis. It would be a herculean task for the People’s Liberation Army to prevent North Koreans from crossing the border. China’s northeast provinces would always remain vulnerable with the development of any future events on the Korean peninsula.

Economic Aid

Beijing’s potential leverage over Pyongyang is also important for the survival of the North Korean regime. China has been the source of continued assistance to the hermit kingdom. Beijing has always found ways to skirt the sanctions imposed by the United States in the wake of the nuclear program. China has been cautious in dealing with North Korea over denuclearization, which might instigate instability. It understands that any response from Pyongyang may have an adverse effect on the bilateral relationship, Chinese interests and may diminish Beijing’s influence.

US-China equation

The Korean peninsula is a strategic theatre for great power competition between the United States and China. China’s strategic priority has been to contain the US influence in the region. Talks between the United States and North Korea have stalled after the failure of the Hanoi summit between President Trump and Kim Jong-un. The Biden administration would vary in the fact that its foreign policy approach should push for normalizing relations with North Korea. The withering of the US’s multilateral trade framework in Asia favors China’s interests. North Korean leader Kim Jong-un visited China twice before the proposed US-North Korea summits, which strengthened Beijing’s position with respect to the negotiations between both the countries. Also, the possibility of a trilateral alliance between the United States, Japan, and South Korea against China is never ruled out.

Way forward

The global pandemic and fraught relations between the United States and China may impede the prospects of a resolution of the crisis on the peninsula. Though, China has expressed its willingness to play a productive role in the political solution of the issue along with other stakeholders. The targeted sanctions on North Korea have done little to contain its nuclear program. The resumption of the Six-Party Talks could lead to a breakthrough in the negotiations. The new US administration would have its hands full after taking charge with the issue of the Korean peninsula still unresolved and US-China relations at an all-time low. The coronavirus pandemic has led to North Korea being more dependent on Beijing as well. The normalization of relations would give an opening to the American policymakers to work towards the reduction of troops in South Korea, thus reducing the tensions in the region, but if denuclearization of North Korea continues to be a precondition by the Biden administration for normalization of relations and easing of crippling economic sanctions on North Korea, then chances of any forward movement towards peace are rather slim. Though, it is understandable that Beijing’s support for Pyongyang would continue for the foreseeable future, and Beijing’s role would be central in the resolution of the crisis.

Biden actually means more trouble for Beijing

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

The Communist Party of China has allegedly forbid state-controlled media from choosing sides between Trump and Biden. The leftist intelligentsia had hoped to see hostile “mad king Trump” continue for four more years. The “nationalist” left is also accusing the pro-reform, pro-market neoliberal “right” of pretending to be blind to the fact that “Sleepy Biden” will bring more trouble for Beijing.   

With president-elect Joe Biden not declaring himself winner yet and President Donald Trump refusing to concede defeat, China’s pro-US elite too appears to be confused and divided. Unlike what the international press would want us to believe, that is, overwhelming opinion in China does not see a “Red” or “Blue” White House would bring a turnaround in the worsening Sino-US relations. The truth however is the continuing unclear verdict of November 3 vote is causing ugly ideological spat in the open among the Chinese elites. In the ideological battle being fought on the country’s “lively” social media, there are the anti-US leftists on one hand and the pro-US rightists on the other. The two rival groups are popularly referred to as fanmei and qinmei in Chinese respectively.

From the outset, the leftists in China firmly maintain the American elite will never be friendly towards China. A blog post under the name Weile zuguo qinagsheng, or “For the Prosperity of the Motherland” recently declared, “Given the US imperialism’s aggressive character and its natural tendency to loot and plunder, the United States cannot be friendly with China. The United States will always look at China as an enemy and it can never cooperate with China. The US and China can never enjoy a ‘win-win’ relationship.” Therefore, most Marxist scholars in China uphold the view that a more internally chaotic America augurs well for China. No wonder several leftist commentators have welcomed the turn of events in the past couple of weeks making it clear that President Donald Trump is refusing to accept his electoral defeat and is actively engaged in a coup to overturn the elections and establish “individual” dictatorship.

A recent article in one of the country’s leading leftist current affairs and news platform claims, as compared to a stubborn, inveterate and incorrigible Donald Trump, the Democrats are out-and-out believers in exporting their ideological doctrine. “Scores of NGOs, public intellectuals in China are receiving funds from the US Democratic Party. For example, ‘Wildcat’ – a fake women’s rights blog on Weibo has fallen silent following the closing down of the US Consulate in Chengdu. Why? Because its source of funding has been cut off,” the article proclaimed. Further, the leftist commentators are also pointing out, with the prospects of Biden sure to become the 46th president of the United States, several Chinese public intellectuals – a euphemism China’s leftist scholars despicably employ to describe “pro-US” intellectuals – who had been quiet in past four years have suddenly resurfaced on the Chinese social media, thanks to Trump’s foreign policy of “isolationism” and massive funds cutting to pro-democracy intelligentsia abroad.  

China’s leftist intelligentsia, which disdainfully lambasts those pro-America Chinese who are keenly following this years’ US presidential election, broadly tags them into three types: first, large majority who look at the US election as a source of great amusement. They can easily switch sides from supporting Trump or Biden. It really doesn’t matter to them who eventually enters the White House. What they need to do is to pull a chair to sit, spread enough munchies and beverages in front of them and watch the election ‘drama’ being played out on TV. What they hope to see is Biden winning with a thin margin and Trump adamantly refusing to step down; the white supremacist Trump supporters thronging the streets wielding guns and swords, and Biden fan-followers not far behind. These Chinese are most happy to see 50-50 election outcome tearing the United States apart.

Of course, a small faction among this group would love to see Trump emerge as the winner. This group subscribes to the view that to oppose China has become the US national policy and to contain China is the consensus position of both Democrats and Republicans. But Trump being more blunt and ruthless, like the past four years have shown, another four Trump years will be a good wakeup call to all those “confused” pro-US Chinese. At the same time, there is another small faction who thinks the Democrats, under the curse of “not fully advocating anti-China policy,” will be relentlessly egged on by the Republicans and therefore will be forced to implement a more hardened “anti-China” policy. As a result, the pro-US Chinese will be forced to turn against whoever leads the US administration.

The second types are those who according to the leftists are big fans of President Trump. The leftists accuse them of “living in China but dreaming of America.” For these Chinese, Trump is almost a semi-god or a hero. They have no qualms in their motherland going to tatters while they worship the Unites States. Furthermore, they are in awe of Trump not only because he is being tough on China but because Trump’s protectionism and “isolationist” policies are helping America regain its core values and are rescuing both the United States which is already in decline and rescuing the humankind. In other words, Trump is the only saviour of humanity.

There are not many such people in China. They are easy to identify. They include pro-market “liberals” such as Caixin editor Hu Shuli, the Beijing-based think tank Charhar Institute, economist Justin Lin Yifu, and the author of Wuhan Diary fame Fang Fang, etc. and several other elites from culture and art circles. But they are harmless.

In the third category are those whose hope for the reversal of currently hostile US attitude towards China rests on Biden. In this group, one faction seriously thinks China’s national strength is lagging far behind the US. For they believe though China and the US are destined to collide but because the enemy is stronger it is only wise on China’s part to maintain policy of appeasement at least as long as China grows in strength. Another faction in this group of US supporters believes the past four years under the Trump administration have been rather “abnormal.” They consider the four years under the second term of Obama presidency – called “Chimerica,” as a normal phase in China and US bilateral relations.

Making a dig at the Global Times editor, Hu Xijin, the leftists claim he couldn’t even wait for the final outcome of the vote count and used a fake Twitter account to make an appeal to Biden to revive the Sino-US “marriage.” A couple of weeks ago, Hu Xijin found himself at the receiving end of a fury of attack by leftist scholars for inadvertently stating “Reform and Opening Up is Chinese people’s natural choice.” Besides, the so-called “US worshippers” – as the public intellectuals such as Hu Xijin in China are called by the leftists, are also drawing flak from the leftists because of their feigned “ignorance” of not seeing Democrats as the bigger devil as compared with the Republicans. Unlike Trump who ensured America’s global hegemony accelerates into eclipse for reasons too well known to all, Biden is both a true believer of “liberal multilateralism” and “Cold Warrior.”

Finally, convinced that Biden’s core foreign policy team comprises of Obama “old hands,” the leftist Chinese commentariat no doubt apprehends continuity of Obama administration’s legacy under Joe Biden, especially in the US policy toward China. China International Relations University Professor Chen Zheng, an influential foreign policy analyst recently wrote: “Although Obama administration did not openly declare China as the US strategic enemy, but Trump’s anti-China policy has been built on what he inherited from the Obama White House, that is, the failure of the US national strategy to continue to ignore ‘a rising China’.” In the last phase of the Trump presidency, the US not only openly and publicly started addressing the CPC-led China as the strategic enemy of the United States, but the Republican Party’s extreme right-wing elite was already pitching for US-China “decoupling” and pushing the world’s two largest economies into “Cold War,” Chen Zheng added.

To conclude, China’s leftist intelligentsia appears to be spot on in their assessment that in recent years – as also during the COVID era – the Republicans and Democrats as well as the US political establishment have struck consensus only on one issue, i.e., how to prevent China from rising. Joe Biden will be too happy to carry forward the consensus, the leftists in China are telling us.           

Originally published as Chinese Public Opinion Split over Biden by Nepal Institute of International Cooperation and Engagement (NIICE), Kathmandu on December 3, 2020.

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

Megha Pardhi

       Source: Marketwatch.com

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

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

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

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

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

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

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

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

Harnessing the untapped potential: India-Taiwan cooperation in education

Kannan R Nair, Former Research Intern, ICS

                                                Source: TaiwanToday

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

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

Education in New Southbound Policy 

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

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

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

The ‘Taiwan’ opportunity for India 

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

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

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

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

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

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

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

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

                        Pompeo with Jaishankar in Tokyo                        

                        Photo: wionews.com

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

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

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

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

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

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

“Quad” – Background and Past Trajectory

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

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

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

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

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

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

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

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

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

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

Book Review: Dexter Roberts, 2020. The Myth of Chinese Capitalism: The Worker, The Factory And The Future Of The World. New York: St. Martins Press

Yash Johri, Research Assistant, ICS

For years, China’s leaders have had an unspoken agreement with the people: they guarantee rising living standards, and, in turn, the populace tolerates control by a non-democratic and often unresponsive party… There are fatal problems with that equation today. Growing inequality means that a large proportion of the population decide that the party no longer is fulfilling its side of the bargain, and begin to demand changes.” (Pg. 179)

Dexter Roberts, Bloomberg Businesweek’s  China Bureau Chief in his recently published book, The Myth of Chinese Capitalism (St. Martins Press, New York) investigates how these aforementioned problems came to pass. Having spent more than two decades in China and having reported from every province in the middle kingdom, Roberts’ analyses span from the heart of corporate Beijing and Shanghai to the dusty roads of the Guizhou hinterland. In the introduction he states that the guiding motives for his work  “was to see how the party’s grand bargain was working for the Other China, of workers and farmers from lagging interior provinces – not the relatively well-off residents of its showcase coastal cities, where signs of material success were becoming increasingly apparent.” (Pg. XXIII) This holistic approach serves Roberts’ analysis of China well, especially at this moment in time. While in the early years of reform, China followed Deng Xiaoping’s trickle down economics formulation of the coastal areas becoming wealthy at first and a subsequent transfer of wealth to the rural inlands, there is now a targeted focus on programs such as ‘develop the west’ and the ‘rural vitalisation strategy’. Additionally, now that the Chinese economy has crossed its Lewis Turning Point[1] it faces the challenge of not only improving its total factory productivity with automation and a move to the digital world but more importantly in upgrading its social contract with migrant labour and rural persons upon whose toil the Chinese economic miracle has been built on so far.

From a political stability point of view, looking after the interests of migrant families who form a large portion of the Chinese middle class will be paramount. These persons now having lived in urban areas albeit without the benefits of urban residential status (Hukou) now desire further upward mobility within the cityscape, finding it difficult to go back to the village lifestyle. The author in the book also makes the point that migrants are no longer as docile as they first were, enough experience has been earned regarding their ability or inability to bargain for what they deem to be their due. There have also been a large number of persons who have returned home, largely spurred on by government schemes in order to rejuvenate the countryside in order to help China achieve higher levels of consumption required for it to reach its goal of becoming a moderately prosperous society. However the success of these schemes seems to be far from guaranteed as per Roberts.

Hukou – Household Registration System

The author views the continuance of this system as one of the biggest barriers to Chinese migrants joining the middle class and boosting consumption. This is because, only once citizens have an urban hukou can they avail benefits of state provided healthcare and education for them and their families. Given the higher costs to these vital services, most migrants leave behind their children in the villages or in state run boarding schools, earning these children the wintry moniker of ‘Left-Behind Children’, further for those who decide to migrate with their children non-aided private education is very expensive. This system was brought in to existence in 1958 before the Great Leap Forward to prevent internal migration among other reasons.

In the initial period of Gaige Kaifang (Reform and Opening Up) while internal migration was relaxed, the Hukou system remained. This situation has naturally created a large social and economic gulf in the cities and Roberts argues that even though the government recognises reforming this system as an important policy matter, one of the major constituencies against any reform are the well-entrenched urban residents themselves, unwilling to share already constrained resources. Other reasons are of course the high costs of accommodating this large population on the part of the various municipalities. The government is attempting numerous initiatives to address this issue, such as creating point systems to induct persons who meet the criterion for an urban hukou, granting hukou’s for Tier – 2 and Tier – 3 cities as well as large projects such as that of Xiong’an which aims to decongest Beijing of its various non-governmental functions and reduce pressures on the city’s own resources. However these efforts have translated into little positive change on the ground. Roberts, writes, “Ultimately, ensuring that migrants integrate into China’s middle class requires ending the rigid Mao-era policies of household registration and the collective-ownership system for rural land, allowing them to live and work where they wish while truly benefiting from the land they hold.” He goes on to state that the present government’s approach to increase restrictions as opposed to loosening them doesn’t really bode well for ending the Mao-era policies and integrating migrant labor into the Chinese Middle Class. 

“Rural Vitalisation Strategy”

With the rising costs of manufacturing coupled with the state’s desire to maintain its status as factory to the world via automation, there has been a large reverse migration to the hinterland areas as well as the West. One of the major planks of Xi Jinping to successfully achieve the goals of the Made in China 2025 policy, decongest cities and rejuvenate rural spirits is the aforementioned rural vitalisation strategy which aspires to devolve property rights (in the form of 30 year leases) to migrants. In Beijing the repopulation of the hinterland has been seen in a positive light, that persons with urban experiences would energise the countryside with their gained know-how and skills. However one of the challenges Roberts highlights to the enforcement of these newly devolved property rights that would serve as a catalyst rural vitalisation are two fold:

 1. Local Government and Real Estate Builder Nexus that ceases local land at low prices as has been illustrated by Roberts on Pg. 75-76 (Roberts further quotes a 2011 World Bank report that states that rural farmers have often lost their and been short-changed about $321 Billion); and

2. Continuing ideological commitment to land collectivisation, Xi Jinping at a speech in Xiaogang stated that the core of reform in the countryside is sticking to the collective ownership of rural land.

Therefore while the government often proposes policies to aid property rights in the hinterland, these two aforementioned factors act as countervailing pressures.

However eliminating absolute poverty is one of the paramount challenges faced by the incumbent government, and Guizhou being one of the most backward provinces has received a lot of political attention notes Roberts. Guizhou has in the recent past attracted a lot of investment as an important spot for data storage, numerous companies such as Apple, Qualcomm, Huawei, Tencent and Alibaba being investors. Additionally, given its natural beauty, the provincial and local governments along with companies and common citizens have made a bet on its tourism potential and have been building numerous hospitality retreats, from big five star resorts to small bed and breakfast places. However while the province has benefited from the hospitality industry in the recent past, numerous locals – some of whom have returned from urban areas and had plans to invest in the tourism industry – interviewed by Roberts in the village of Binghuacun continue to wait for the benefits to trickle down as well as demand for tourism arise.

China faces a number of challenges at this moment of transition, while its attempted shift to a technological superior society has catalysed the US-China trade war along with other related developments on the international front, domestic migrants who’ve not benefitted equally benefitted from China’s go-go years serve as a major challenge domestically. Dexter Roberts in his work successfully brings to light the domestic imbalances that are showing up at this time of transition, the disparities have only been accentuated by Covid – 19.


[1] The Lewis turning point is a situation in economic development where surplus rural labor is fully absorbed into the manufacturing sector. This typically causes agricultural and unskilled industrial real wages to rise. The term is named after economist W. Arthur Lewis.

The Lasting Effects of Hong Kong’s National Security Law

Aadil Sud, Research Intern, ICS

In early May 2020, China announced its plan to draft a new National Security Law (NSL) for Hong Kong, a move long required under Hong Kong basic law, but that too should have explicitly been written and enacted by the Hong Kong government. According to the South China Morning Post (South China Morning Post, 2020), the National People’s Congress Standing Committee unanimously voted to enact the law into power, taking effect the same day. This was a significant move as the law was passed weeks after it was announced, bypassing the Hong Kong legislature, with the text being kept secret from the public and even the Hong Kong government until it was enacted. It drew diverse reactions from around the world, most notably from the US, where Secretary of State Mike Pompeo called the decision the ‘latest in a series of actions that fundamentally undermine Hong Kong’s autonomy and freedoms’ and certified to congress that Hong Kong was no longer autonomous, with President Trump announcing that his administration would end Hong Kong’s trade privileges. The UK also announced that if passed, Britain would open a route for all Hong Kong residents born under British rule to apply for and become British citizens, numbering to almost three million people.

Under the law, acts of secession, subversion, terrorism, and collusion with a foreign country are all seen as endangering national security. The law has been met with criticism by activists domestically as well as internationally. According to human rights organisations such as Amnesty International, ‘Endangering national security’ remains a very vague term that can be used to refer to anything and everything. The terms are so broadly defined that they can become catch-all offences used in politically motivated prosecutions with potentially heavy penalties. The law gives central, as well as Hong Kong governments the power to oversee and manage schools, social organisations, media, and the internet in Hong Kong. Additionally, suspects can be removed to Mainland China, with cases being tried within the Mainland criminal justice system and under their laws, which is of major concern, as China has an estimated conviction rate of 99% in Mainland courts.

This move has caused massive changes within the legal capacities of investigating authorities, allowing them to search properties, restrict travel, freeze assets, and engage in covert surveillance without a court order. Authorities can also require information from organisations and people even if it is self-incriminating and have the power to levy fines or imprisonment for failure to comply, a gross dilution of human and internationally agreed human rights. The passing of the law has acted as a death knell to the Hong Kong democratic movement. One of the more high-profile arrests was that of Jimmy Lai, the publisher of the pro-democracy paper Apple Daily, who was arrested on suspicion of foreign collusion. Additionally, as the law does not differentiate between Hong Kong citizens and overseas activists, the police have issued warrants for democracy activists living abroad as well, the first time that people not living in the city have been targeted. This has led many legal experts in Chinese law to state that the re-evaluation of extradition and legal assistance agreements is a necessary move that foreign countries must make, to be able to protect their people in exercising their rights to free speech and expression.

The law has purposefully been left vague, which prevents people from understanding how and when they are in violation of it. This has led to the shutdown of numerous social media accounts run by activists and organisations, the removal of banners and stickers in support of the protests by shops and restaurants, and even moves such as libraries sorting out books on ‘sensitive’ issues (and those critical of the government). Many leaders of Hong Kong political groups and student-led movements have since resigned, citing the new law as the causative factor behind them. This has resulted in the disbanding of important groups such as Demosisto, over fears of being labelled as ‘colluding with foreign forces’.

Legal aspects aside, the new law has also had a massive impact on academic freedom. According to a Global Times article, a large majority of the anti-extradition bill protestors were students. Carrie Lam has been quoted as saying that the arrests of teenagers and children at protests showed how city campuses had been influenced by forces hostile to both local and central governments. With this move, children as young as kindergartners are to be taught about this new law and the consequences it entails. While defenders of the law have argued that student freedom would remain untouched, they have reiterated that free speech comes with limitations. Most notably, Regina Ip, chairperson of the New People’s Party stated that ‘You can’t just allow teachers to talk, and impose their views, free for all’, and that ‘critical thinking does not mean training people to criticize or attack.’

There has been a commensurate impact of the policy in China studies in universities and colleges abroad as well. To try and safeguard students (especially those from China and Hong Kong) from the danger of frivolous litigation, Students in Chinese Politics classes at Princeton plan to use codes instead of names on their work to protect their identities. At Amherst, professors are considering anonymous online chats so students can speak freely, without fear or repercussion. Similarly, at Harvard Business School, students may excuse themselves from discussing potentially sensitive topics if they are worried about the risks. Another option put forth is to use codes to refer to sensitive events such as Tiananmen Square or Xinjiang. Such code switching is not dissimilar to what already happens on WeChat in China. As prestigious schools such as those in the Ivy League have thousands of Chinese students, and major donations from China, they aim to protect both their students, as well as their donors from prosecution by Chinese authorities.

Conclusion
The standards of free debate and parlance in academia and Hong Kong society have been sent into a tizzy following the passing of this law, and institutions worldwide are working to come up with methods to protect their students, especially ones from mainland China and Hong Kong, from any danger of litigation or arrest. It can be gauged that the CCP’s goal is to create a new generation of ‘loyal’ Hong Kong youth, aiming for a strategy of institutional and social control that could undermine Hong Kong’s reputation for academic freedom. The NSL is aimed towards strengthening the stranglehold China is attempting to establish over Hong Kong and is a slap in the face of pro-democracy activists and citizens alike. In line with the expectations of the ‘One Country, Two Systems’ ideology, China must proceed to properly clarify how and when the law would apply, and to whom it should apply. The potential for misuse of this law is immense. Any effort for a nation to stifle democratic dissent against it (potentially around the world), especially for those most affected by it (those who reside in Hong Kong itself) by threat of prosecution is immensely condemnable, and should be of utmost concern for activists, governments, and citizens of a globalised world.

Experience of Chinese Technologies and Products for the Industries of Eastern India

Amitava Banik, Research Intern, ICS

Source: Indian Industry Plus

China’s progress in manufacturing

China is considered as the world’s manufacturing powerhouse. China had been successful in building infrastructure supporting world corporations to make their products in the country. Over time, the world’s leading companies have shifted their manufacturing assembly lines to China. Also, the home-grown manufacturing industry in China is itself quite big. China is successful in manufacturing and exporting a whole range of products from simple electronics to complex machineries.

According to Yue and Evenett (2010), China attracted huge FDIs between 1979 to 2007 of which 70 per cent went to the manufacturing industry. The concentration and development of the global value chains of all industries, including the high-tech industry, on the eastern coast of China have boosted the country’s exports, resulting in the “Made in China” phenomenon.

Multinational corporations such as Siemens have set up facilities for assembly and manufacturing of many of its products including high-end medical equipments such as CT Scanners for their South Asian market in China, taking advantage of low manpower cost and good connectivity networks. A world-renowned instrumentation company such as Yokogawa of Japan, manufactures and exports their meters and oscilloscopes from China. The Chinese are considered to be good with reverse engineering capabilities, which have helped grow a lot of domestic manufacturers across industrial sectors.

China’s market for capital goods and spares in Eastern India

The Chinese machineries and capital items occupy the top of India’s list of imports from China valued at US$ 19,103(2019-20). Unlike China, the global multinationals are more focused on making India a marketing hub for catering to the huge domestic market of India and South Asia rather than India being a global manufacturing destination. Thus, India’s manufacturing capacity for capital goods like other high technology products is low.

In Eastern India, where there is dearth of both capital and new industries, China has successfully filled the vacuum to some extent with its cheaper and competitive products and industrial solutions. According to a survey conducted by the author, traders and businessmen are of the view that there could be further enhancement of Chinese market in this part of the country if the Chinese companies could set up manufacturing and assembly lines for their products – both capital goods and spares in Eastern India. China has made considerable inroads into the industrial market in Eastern India both for high value capital goods as well as low value tools and spares. However, there is dearth of specific data on import of capital goods and spares parts from China by the industries of Eastern India, so this assumption is based on practical experience and field survey as illustrated in Table 1. According to some of the users interviewed from these industries, the satisfaction level of the industrial customers and the value for money proposition is good for Chinese products and their installations. The traders interviewed are of the opinion that easy loan and financial credit facilities are available for buying Chinese machineries. Companies such as Donfang Electric Corporation doing power projects have also set up offices in Kolkata to oversee their projects, marketing, and customer services, etc. The traders are vocal about dealing with China’s ease of doing business. According to them, it is easy to get dealership of Chinese companies and start doing business with them, and Chinese manufacturers are also prompt in responding to trade or dealership enquiries.

Eastern India is primarily a mineral rich belt of India producing steel, ferroalloys, power, etc. Earlier, most of the installations in old plants had been of Russian, US or German technology, but now most of the plants, particularly those built on private investments are using Chinese technologies (Refer Table 1). Even in many of the tenders called by the central and state PSUs*, Chinese companies are the lowest bidders and many of them are ordering Chinese products.


Just like industrial installations of capital goods in Eastern India, Chinese manufacturers have made considerable penetration into the market for low-end manufactured products, tools and spares. The trading communities in Kolkata and other places import Chinese products at lower price and sell them in the market at a premium and make considerable fortune. The result of the survey of a leading bearing trader in Kolkata is put up in Table 2.

Present Situation

The military standoff situation like the recent Galwan Valley clashes and its aftermath creates anxiety among the trading and industrial community, which affect business sentiments. As the Chinese influence is currently highly embedded in Indian economy, trade and commerce, complete decoupling may be expensive for India especially in the present Covid-19 pandemic scenario. However, though decoupling is tough, at the same time it is not possible to entirely ignore border and security issues in the face of economic or business considerations. Thus, India needs to look at economic growth with leverage on China.

Conclusion

Chinese economy (about US$ 14 trillion) is much bigger than that of India (about US$ 3 trillion). India is home to 1.3 billion people (17 per cent of world population) but has only 3-4 per cent of the world GDP. Although the two countries try to co-operate on several international forums such as WTO, BRICS, G20 etc., strategic rivalry is visible. This shows that while there is an understanding on many common matters of concern, the two economic giants sharing a common boundary and geopolitical and historical landscape are often at loggerheads on issues of diverging interests, geopolitical and economic ambitions.

In view of the evolving world order during the pandemic, several multinational companies are looking to relocate their manufacturing facilities out of China. It may be an opportunity for India to pitch in and fill the void by offering incentives to these corporations as well as to Indian corporates for setting up more manufacturing facilities in east and northeastern parts of India, and other untapped industrial belts. This may also help in developing these deprived regions as new industrial pockets. If this happens, it would lead to overall growth and development of these regions and augment the value chains for the industries.

Made in China 2025: Dead in Letters, Alive in Spirit

Megha Pardhi, Research Intern, ICS

Source: Bangkok Post

The Made in China 2025 (MIC) policy was launched in May 2015 as an umbrella policy to develop ten high technology focussed sectors and convert China into a technological powerhouse. This came after increasing worries that China would lose its competitive edge over developed economies due to rising labour costs. A state led plan for ten years was released by Chinese Premier Li Keqiang to develop 10 key sectors: New information technology, Numerical control tools, Aerospace equipment, High tech ships, Railway equipment, Energy saving, New materials, Medical devices, Agricultural machinery, and Power equipment. It contained key performance indicators like R&D costs, patents, Manufacturing Competitiveness, Broadband penetration etc. to measure the performance of various sectors from 2015 to 2025.

The ‘Internet Plus’ policy launched in 2015 by Chinese Premier Li Keqiang compliments the goals of MIC2025. The ‘Internet Plus’ policy aims to integrate the internet with traditional industries and manufacturing sector. Some scholars in China have also touted the ‘Internet Plus’ policy as a key to handling overcapacity in Chinese manufacturing sector.

MIC2025 is believed to be inspired from Germany’s Industry 4.0 initiative. ‘Self-sufficiency’ is among the primary motivators behind this policy. Regulatory changes, state led financing, developing industry standards, industry-academia collaboration, international brand awareness, etc. are its other salient features.

The MIC2025 policy garnered significant international attention within geopolitical and economic circles mainly on account of it being representative of China’s ambitions. A host of concerns were voiced including discriminatory treatment of foreign bustiness, unfair trade practices, forced technology transfers, intellectual property theft, and security. For example, the 2017 IP Commission report estimates the cost of Chinese IP theft to be around $225 million to $600 million. The US also started investigations into technology transfer allegations and considered banning some Chinese companies over allegations of IP theft.

These fears are not new. Author Mara Hvistendahl in her book, ‘The Scientist and the Spy: Chinese industrial espionage and the atmosphere of fear in the West’ tells an intriguing story of industrial espionage by ethnic Chinese scientists in the US. Moreover, MIC2025 was not the first of China’s policies viewed with suspicion. More than a decade ago, China’s “The National Medium- and Long-Term Plan for the Development of Science and Technology (2006-2020)” was also criticised as “a blueprint for technology theft on a scale the world has never seen before.” The ambitious nature of the MIC2025 complimented with growing assertiveness in Chinese foreign policy under Xi Jinping added to the heightened insecurities of the Western countries.

The anxiety in the West, especially in the United States over this policy stems from multiple reasons. First, currently the US is a world leader in the high technology industry and innovation. The MIC2025 not only aims to move China up in high technology manufacturing ladder, but also aims to make China a world leader in research and innovation. Second, China’s rise to great power status does not bode well with the interests of the US. In 2018, National Security Strategy of the US termed China as a ‘revisionist state’. The Belt and Road Initiative (BRI) and the MIC2025 are key pillars of China’s ambition to become a great power on par with the US. Third, the strategic technology development aspect of this policy means China would be self-sufficient in the advanced strategic technologies. This in turn would strengthen China’s position in Asia and world as a security provider over which the US has had a practical monopoly since the end of the Cold War. Hence even though the MIC2025 aims primarily to develop high tech manufacturing, its geopolitical implications cannot be ignored.

In recent years, there have been reports of the Chinese government toning down the rhetoric on MIC2025. As a result, the MIC2025 does not appear much in official documents and media anymore. However, this does not mean that China has abandoned the project completely.

It can even be argued that the US-China trade war which began in 2018 was a manifestation of discontent frothing beneath the surface. The targeting of Huawei, which is also identified as a key company under the MIC2025, was perhaps not a coincidence. Perhaps due to these setbacks the Chinese premier Li Keqiang omitted to mention ‘Made in China 2015’ in his address to the opening session of National People’s Congress in 2019.

Does this mean MIC2025 is dead? Even if direct references to the MIC2025 have reduced, the spirit of the policy is still alive. Various aspects of the MIC205 policy are still active and the targets are being pursued.

First, a media analysis of Beijing’s response to the US pressure during trade war by Eliot Chen noted that “the fact that MIC2025 is being directly linked to Reform and Opening Up suggests that Beijing continues to attach significance to the plan, if not in name then in substance and spirit.” The author goes on to explain that even though the references to MIC2025 in media have almost vanished, the idea and inspirations behind the policy has not. To analyse this, he uses the two terms relating to MIC2025 ‘Indigenous innovation’ and ‘Core technology’. His analysis shows that there has been a significant spike in the in the use of term ‘core technology’ in second quarter of 2019.

Second, the 2019 speech of Li includes many aspects of the key industries envisioned for development under MIC2025 without mentioning the policy directly. The references to the “high quality manufacturing” and “boosting technological innovation capacity” point indirectly towards the goals envisioned MIC2025.

Third, the Ministry of Industry and Information Technology (MIIT) which is responsible for the overall implementation and coordination of the MIC2025 is still working towards the goals of the policy For example, the documents released by MIIT since 2019 till now include range of initiatives like “formulation and revision of 10 national standards” in communications industry, “Strengthening the Construction of Quality Brands to Support the High-quality Development of Manufacturing Industry”, “Declaring the Cities (Prefectures) with Stable Industrial Growth and Transformation and Upgrading in 2019”. Moreover, the newly appointed head of MIIT, Xian Yaquing is a technocrat who is expected to have control over licensing of new technologies like electric cars and 5G. Also, in the aftermath of COVID19, China aims to increase the domestic consumption to revive the economy. For example, in June 2020 Li Keqiang presented a work report to National People’s Congress (NPC) which refers to the push towards consumption including e-commerce facilities in rural areas. Tapping these previously untouched regions can provide a boost to the China’s manufacturers. These examples indicate the slow and steady move towards the larger goals of developing a high-tech manufacturing industry in near future, if not as envisioned under rhetoric and timeline of MIC2025

In conclusion, reducing the rhetoric on MIC2025 seems to be a strategy to pacify the US and divert the media attention from the overall goals of the policy. The post COVID19 world seems more determined to face the China challenge, whether it is the US or developing countries such as India. It remains to be seen whether China’s ambition to gain leadership in technology will survive these challenges.