Although there has been marked proactivity and outreach from China, one doesn’t see the same adjustment when it comes to South China Sea or India.
Mr N Ananth Krishnan
Special Correspondent (Hong Kong), The Hindu
I spent the last ten days in the mainland China and had the chance to meet a fairly wide range of people, not just in the bureaucracy, but in the media—both Chinese and foreign journalists in China—businesses, entrepreneurs, and importantly, ordinary people as well. I saw a big change from 2022 and that is the opening up of the country. In March this year, it was still a very limited opening up. Because of zero covid policy, China’s borders were closed to the world for almost three years. This had a huge impact on the Chinese economy. It still hasn’t yet recovered from that. The focus now is on getting foreign investment, but they’re struggling to get that. While I was in China, they announced a unilateral announcement of visa on arrival for five European countries and Malaysia. The boost that they expected in 2023, from opening up, didn’t really materialize. It has sort of fizzled out.
The real estate sector is dragging the economy down. In driving around Guangdong, we saw lots of unfinished big real estate projects, with no signs of movement or any construction. There is genuine concern among private sector enterprises as well, even though the Xi Jinping government has taken a lot of regulatory actions targeting the private sector and trying to walk them back. But the sentiment is still very depressed. That partly explains why China in the last few months, has been trying to stabilize relations with the US, Europe, and Australia as well. The China-Europe Summit is happening in Beijing. The state of political developments in China, is a big black box. But we are fortunate to have three very sharp and astute observers who will help us make sense of what’s happening in China.
Mr Ashok K Kantha,
Former Ambassador of India to China
I recently visited China after a gap of four years and got the distinct feeling that we are dealing with a changed country, which is more inward looking, more walled in, more insular and struggling to open up and attract more foreigners and foreign investment. Chinese are also not travelling abroad in large numbers, as they used to do. It’s a country with a reduced level of engagement with the outside world. That’s the first point.
Secondly, China today under Xi Jinping is a very strange mix of hubris, big ambitions, paranoia and readjustment. Xi Jinping has taken the nation back to a vicious cycle in history and made it more vulnerable to future crisis over the succession, ideology and identity by quashing the countervailing factional forces. In the leadership lineup in the 20th Party Congress held last October, he has silenced the opposition. He has, in a way, condemned the party state to greater and covert infighting and factions don’t go away in CPC. China clearly had a difficult last three years, in different ways.
Zero Covid Policy and Protests
Is Xi Jinping losing the hearts and minds of the people, as some Western scholars have argued? My own assessment is that it is not happening as yet. But there were signs of disaffection. We witnessed fairly wide-ranging protests last November against the zero Covid policy, which contributed partly to the lifting of that policy. The sudden manner in which it was jettisoned in December last year led to human suffering on a very large scale. China was ill prepared for that. According to some estimates, there were more than one million excess deaths. This is an aspect no one talks about. It reflects how closed and opaque China remains, despite four decades of reforms and opening up. We have in fact, witnessed intensification of the surveillance state during the Covid period. Those trends will continue.
Given the multiple pressures that China is under at present, there were expectations in some quarters that there will be some loosening up of grip by Xi Jinping. In the last seven decades of CPC rule, we have seen this cycle of loosening and tightening up of grip by the premiers. But we are not witnessing any relaxation of controls. Indeed, government intervention in the private lives has gone up and there is greater regulation of activities of individuals and communities than what was the case earlier. Xi Jinping’s primacy, both on control of party state apparatus, as also ideological space remains unchallenged and unchanged.
Straws in the Wind
But there are some straws in the wind, which indicate problems. We are all aware of how, within a few months of taking over new assignments, the foreign minister, the defense minister and the top leadership of PLA rocket force were all sidelined. There are some unconfirmed reports that the foreign minister Qin Gang might have committed suicide. There is also some delegation of authority by Xi Jinping. One primary evidence is Premier Li Qiang being asked to chair the Central Finance Commission, which was set up last month, contrary to the earlier practice of Xi Jinping being chairman of everything.
Today, the primary challenge for Xi Jinping is restoring the growth momentum in the Chinese economy and dealing with the geopolitical pushback to China’s aggressive external policies. The country has undoubtedly lost some of the dynamic growth that was evident for decades. In fact, some economists suggest that China’s nominal GDP in 2023, might decline, which will be very unusual. It has kept up with the US GDP increase. China is one of the few economies suffering from deflation.
Investors say there has been a net outflow of capital. Even Chinese nationals are investing money outside China in large volume, including through acquisition of real estate, and shifting of funds to Singapore. After four decades of fairly rapid growth, China has entered an adjustment period, which is not surprising. Something similar happened in the case of other miracle economies like Japan, Korea and Taiwan, but in all cases, the adjustment turned out to be fairly difficult. In China too, this period is likely to be difficult and painful. Xi Jinping, since 2017, keeps referring to changes in the world unseen in a century, which is very different from the earlier projection of strategic opportunities for China. So clearly, there’s a recognition that China is facing greater headwinds.
A Sustained Slowdown in Store?
But I don’t quite buy in to the talking down of Chinese economy by many Western commentators. They are pessimistic assessments, which might be fashionable, but I find it difficult to subscribe to them. What is more likely, is the prospect of a sustained slowdown of Chinese economy, which is structural in character, rather than are cyclical. There are internal reasons which are well known, including the demographic decline, debt overhang, the private sector malaise of falling productivity, high youth unemployment which exceeded 21% in June—when they stopped releasing data; and internal stresses in different parts of the country.
China is faced with a more challenging external environment today. One can notice some signs of tactical adjustment by China in its external behaviour, especially in its dealings with the USA, EU, Japan, Korea, Australia, and Vietnam. There has been marked proactivity and outreach from China. But one doesn’t see the same adjustment when it comes to South China Sea or India. There is not much desire to show flexibility at this point of time.
Selling the China Dream
China is moving towards a new social contract, where a monopoly on political power of CPC is justified, not primarily in terms of performance legitimacy and delivering high growth rate, but other factors also kick in, including selling the China dream or the rejuvenation of Chinese nation, by affirming the nationalist credentials and sentiments. China today is not looking at outright conflict in various contested theaters, whether it be Taiwan or South China Sea, or India- China borders, but it’s trying to make tactical gains incrementally, through military and economic cohesion, while staying under the threshold of outright military conflict.
Likewise, after the meeting between President Xi and President Biden, in Woodside, California on 15th November 23, the degree of stability has been restored to their relationship which appeared to be in freefall earlier this year. At the same time, the outcomes of Woodside summit were relatively modest. What we witnessed was more a tactical truce, rather than any reset in ties, or breakthrough on structural challenges in the relationship.
China: A Competitor for US
Biden was unequivocal that US and China are in competition, whereas Xi Jinping doesn’t want to accept the framework of competition. He argues that a major power competition cannot solve the problems facing China, US and the world. US wishes to dislodge China from its perch in the global hierarchy. China is convinced that USA is out to contain China and slow down its rise. This is reflected in various pronouncements and comments made by Xi Jinping. There is no ratcheting down of US policies on the export control, technology denial, scrutiny of inward and outward investment and enhanced tariffs. All that is continuing and countermeasures taken by China are also in place. Those structural challenges remain undiminished.
Talking of Indo-China relations, China do not share the urgency and importance we attach to restoration of peace and tranquility in border areas. They do not accept our position that the state of borders will determine the state of relations, and that as long as the borders are abnormal, overall relations cannot return to the normal track. Indeed, there is a suggestion that we should accept the new normal in eastern Ladakh, post April-May 2020. Obviously, we do not accept it.
The second point is that the majority view in China today looks at India through the prism of its strategic rivalry with the USA, which is the most important concern for them. They believe that India has been co-opted in the US designs to contain China. A minority view still gives India the agency and believes that India will pursue an independent foreign policy to promote its own interest, but increasingly, the former camp, seems to be prevailing.
Thirdly, unlike the tactile outreach to the USA, Japan, Korea, Australia and Vietnam, that we are witnessing today, there is no such reaching out to India. Xi Jinping decided to skip G20 Summit in New Delhi. The post of Chinese ambassador in New Delhi is lying vacant since October last year, for 14 months now. This is obviously not accidental, but a deliberate message to us.
Dr Srikanth Kondapalli
Dean, School of International Studies, JNU
When we mention about the emerging world order, we also need to factor in the old world order that we inherited since 1945, especially the United Nations-led world order, where we have the UN Security Council, of which China is a member since 1971. We also have G7 and G20 countries, influencing the world order. We have alliances—NATO Alliance, which is quite busy nowadays in Ukraine, and the US-Japan and US-South Korea alliances. There is the China-North Korea military alliance since 1963. Nobody talks about it. But I think that is very crucial. It has not been abrogated, contrary to the speculation that there is some distance between Pyongyang and Beijing. So, forming alliances is one of the features of this new world order.
In the financial and economic spheres, there is IMF and World Bank. We have ADB, AIIB and WTO. These are also new forms of influencing the world order. China enhanced its voting rights in the IMF. It is now around 6%. India’s is about 3%. Special drawing rights are given to the renminbi Chinese currency. The international order that we inherited also includes the arms control and disarmament- that includes NPT, CTBT, FMCT and MTCR. China is not a member of the MTCR but has ratified other international arms control and disarmament measures. China’s position here is a little bit conservative. As we look at India’s membership in the NSG, China wants membership given to Pakistan, regardless of its WMD proliferation issues.
Washington vs. Beijing Consensus
Then, there is positing of Washington consensus with Beijing consensus. These are well known positions on regime change, structural reforms and unipolarity. Although Biden now—and Obama earlier—mentioned about multilateralism and other issues, Beijing consensus is seen as the preferred order by the Chinese. They want non-interference, no structural change and no criticism, if you’re employing child labour or involved in human rights violation or environmental degradation issues. The Washington consensus has some goals, especially the Paris Club of Donors. However, last year, soon after China had unveiled the GDI, GSI and GCI (Global Development Initiative; Security Initiative; and Civilizational Initiative), the Chinese ambassador to Ethiopia has gobbled up the different factions within Ethiopia. It is seen as interfering in the internal affairs of Ethiopia and Kenya. We may possibly see Beijing consensus being tweaked. We need to watch on what exactly the Chinese posture in the future will be.
In the emerging world order, the real dynamics would be the rise and fall of states. And here, the 19th Communist Party Congress in China is very important, because it laid down a roadmap till 2049 for China’s rejuvenation. They call it Socialist Modernisation by 2049. We do not know what exactly is at the end of the tunnel, but it appears that Xi Jinping’s statement in the 19th Communist Party Congress is that China is moving towards the center stage. Speculation is rife on China replacing the United States as the global hegemon. But for that, China needs to tweak the global order.
Influence in the UN
Not surprisingly, we see that China is now heading several United Nations bodies or its candidates have become deputy secretary generals, occupying the second rung of leadership, such as in WTO, UNIDO and till recently, in the Human Rights Council and others. China is involved in dynamic diplomatic efforts between Saudi Arabia and Iran. They also have a Middle East envoy. There is some initiative in Africa through FOCAC (Forum for Cooperation between Africa and China). In this backdrop, we need to see the events related to Taiwan, South China Sea, India-China border, Australia and the Senkaku Island conflict with Japan. We need to factor in the Chinese military modernization and increase in its hold over various regions in the recent times.
There is contestation at the global domains, maritime cyber space and electromagnetic spectrum. China, for instance, is the leader in 5G technologies. They’re also making efforts at 6G technologies. They launched a quantum satellite recently. The cyber domain has been contested. In the BRICS countries, China and Russia push for certain restrictions on the cyber domain. Cyber sovereignty has been invoked. This points to an emerging contest with democratic countries whose constitution emphasizes individual freedom.
Back to the Middle Kingdom?
Yan Xuetong and other scholars in Tsinghua University and other universities keep mentioning about China’s preferred order for the Middle Kingdom that was abolished in 1911 revolution when Qing Dynasty collapsed. In the Security Council, China had 17 veto exercises, mainly related to Taiwan, and also Iraq, Libya, Syria and Zimbabwe. These are issues which are not the minimalist foreign policy goals, but also in relation to the maximalist—that is, China becoming a global power.
When we look at the sovereignty principle and the UN Charter, there is certain reluctance on the part of China to accept the 2016 arbitration ruling and ADIZ (Air Defense Identification Zone). The Chinese counter piracy operations in the Indian Ocean have some air defense missions. That is likely to indicate a contest between India and China in the near future. In the multilateral field, they have the SCO, BRICS and recently the Himalayan Forum, where they have been teaming up with other countries. Belt and Road Initiative is one, where there is a lot of investment and this is how China would like to influence the continental and maritime order in the near future. On water issues, there is a unilateral approach that China follows with respect to all the rivers flowing from China to other countries including to India.
While China sports a victim kind of mentality on a century of humiliation, there is now a concrete plan to tweak the international order by China dream; China Rejuvenation and most importantly, the Community of Common Destiny. There is a fresh thinking in China related to the emerging world order. Multipolarity has also been mentioned in the party congresses, but it is essentially related to conquering the United States or other countries. There is the United Front, a political strategy that they adopt on climate change, WTO and developmental issues. The recent focus on GSI and GDI points to their desire for a global role.
On the maritime order, China has come up with a new concept called comprehensive maritime strength, in which they have identified several issues- not just about naval vessels in which they top the US now with about 348 vessels compared to 296 of the United States. They project that it be 460 vessels by 2030 and wish to be a preeminent power in the Indo Pacific in the near future.
QUAD: A Chinese Concern
China is concerned about the QUAD, which is influencing the emerging world order. China’s prediction that it will be a seafoam has not happened. China’s irritants include the blue dot network (an initiative of the US) and AUKUS. China is contesting the world order in technology, AI, swarm drones, hypersonic glide vehicles, lithium, electric vehicle technology, 5G, 6G, telecom, rare earth metals and germanium. It is also influencing the outer space. China considers space as fourth frontier in battlefield.
In economy, China is making the 14th five-year plan, in which they want to be superpower in 11 fields—high tech manufacturing, quality products, cyber domain, education, talent, science & technology, transportation, trade, maritime, cultural and even in sports. The question, finally is, whether China is a status quoist or a revisionist, if not a revolutionary state? My reading is that China is hanging between status quoist and a revisionist state in the international order and would like to dominate the emerging international order. China is a major contender for the emerging world order. The 19th Party Congress and 20th Party Congress have very explicit programs for that emerging world order.
Ms. Indrani Bagchi
CEO, Ananta Centre
The former US President Donald Trump’s decision to mark China as a strategic rival, set off a series of actions and realignments in the world. That is still ongoing, and it will make the world a lot more difficult place to navigate as we go along in the future. Not only did he raise tariffs against Chinese exports, but also took a number of actions against China, particularly in the technology sector. All those actions were retained by the Biden administration, indicating that there is a strong domestic push in America to a more confrontational or a competitive relationship with China.
The biggest multilateral organization, the United Nations, is frozen, because the UN Security Council is frozen. China and Russia are on one side; the US and the Western powers are on the other. There is no global office that can take decisions on peace and security questions in the world.
The multilateral system is fragmenting into plurilateral arrangements—small alliances and specific interests-based alliances. Not all of them are anti-China or anti-America, but certainly slowly solidifying into definite spheres of influence. Quad is at the apex of such plurilateral efforts, which has India, Australia, Japan and the US. After 2019, it became a high-level organization. You can’t really call it an organization because it doesn’t have a secretariat or rules of business. But it has been driven by a high-level political interest in all the four countries. They don’t all come together as an anti-China Alliance, although China does feature largely in their worldview. A lot of what the Quad is doing is a mirror of what China is doing in a different sphere. It is trying to set the rules of the road for a future in technology, biotechnology, defense and other areas. There are about 23 or more working groups in the technology domain.
No to Chinese Investments
Post-Galwan, one of the things that India did was to restrict Chinese investments in India’s technology sector. Chinese investments hitherto used to be cheap capital and it was very attractive. India has taken a national security approach to it. India now vets investments in products, technologies, imports, and in critical sectors. In telecommunication, India weeded out China from its 5G system and it is now a largely indigenous system. We are in the race for a China plus one strategy. We have a long way to go, because India has not done manufacturing in the way that China did.
But there have been a number of steps that have already been taken. The Chips and Science Act that was passed by the Biden administration last year, has put the brakes on China’s own technological development. Even Japan and South Korea have been affected by this act. Unlike the cold war binary situation, we are now walking into a world which has two competing technological systems.
Trust: The New Normal
That brings in a very important element in the foreign policy of the major powers. That is the element of trust. It is countries that you trust, where you will share your technology, supply chains and developments in the future. We are looking at a US led—not US dominated—world. China’s closest partners now are Russia and North Korea. Certainly, Russia is a technological partner. China has obviously protested against the Chips Act and is against the economic and technological sanctions. China itself is a fairly advanced country in technology. It may not be long before China plays catch up or even overtakes the US and that is a distinct possibility.
For the moment, however, a large part of the advanced technologies, advanced materials and advanced systems that were available to China from the west may no longer be available. That has implications for India, certainly. While we like to stretch our space in the strategic autonomy sphere, we are also conscious of the fact that we do not want to play second fiddle to China in a technological universe. We have made a strategic choice to move with the Western world- that is with Europe, the US, Japan and Taiwan. There is a steady progression of Taiwanese companies moving to India, rather than to Vietnam.
Uncertain Waters
India, as we all know, is not very hospitable to new businesses, especially advanced manufacturing, because we haven’t done that before. India has semiconductor and quantum missions. We have the US-India initiative on Critical and Emerging Technology (iCET) in place and that governs the defense technology development with the US. All this will take a while to develop, to solidify and to be able to be interoperable with western systems. What we are looking now is a world that is in flux. We are entering fairly uncertain waters.
There are two wars occupying the world right now. The Russia-Ukraine war certainly divided the world into two blocks of countries, the West, which condemned Russia, China, and North Korea, which supported Russia; and a big swathe of countries like India, which are neutral. China has announced itself to be the champion of the global south. India has done that too, by bringing the African Union into the G20. An important development is that every Western country is now interested in how the global south perceives them. They want to attract the global south.
There are a number of members of the new BRICS plus. The UAE and Saudi Arabia, two countries which could have been balancing factors and Argentina and Indonesia, decided not to join the BRICS plus at all. A little noticed agreement was signed between India, Brazil, South Africa—all members of BRICS—with America on the sidelines of the G20 Summit in Delhi. It just tells you that the world that we have occupied today is a deeply contested world. We cannot predict who will come out ahead. But certainly, it opens the world to greater opportunities for countries like India, if we play in both sides. This will continue as we go along and we will have interesting times ahead.
Ananth Krishnan: How should India approach China’s initiatives in our neighbourhood?
Indrani Bagchi: China has been pushing for its influence in our neighbourhood for a long time. For Sri Lanka, it didn’t matter whether we gave a $4 billion bailout earlier this year. The Chinese exploratory ships are still wandering around Hambantota and Sri Lankan waters. Sri Lankans have hinted that they are playing their own little hedging. In Maldives, the new government has said, ‘India out and China in.’ Five years ago, it was ‘China out and India in.’
With a large neighbour like India at the doorstep, these countries will always hedge their bets with an even bigger power, who is willing to be a godfather to them. To Bangladesh, our closest neighbour yet, we’ve given a line of credit of $500 million for defense purchases. Bangladesh hasn’t used it. They take almost all their weaponry from China. Sheikh Hasina is playing her own games there. We have to be nimble and responsive. But I’m not sure at which point, we should decide to be tough. We have tried being tough at different points and it has not always played out well for us. Certainly, the carrot and stick approach will be in play by India in its neighborhood for a long time.
Ananth Krishnan: When our neighbours are signing on to Chinese tech initiatives like the 5G networks of Huawei, how will that affect our relations with them?
Prof Kondapalli: The Chinese made a lot of progress in technology, courtesy the United States and the European Union, Japan, Korea, Taiwan, and other countries. They learned a lot from these western countries and graduated into a high-tech nation, specifically in 5G technologies, shipbuilding and a host of other high-tech manufacturing. Despite the US ban on Huawei, the Chinese have unveiled the Huawei new model and also announced that they have now reached the nine-nanometer length of the chips compared to the global average of 24 nanometers. They have made progress but it appears it is to mainly showcase or create a wow-effect. The Huawei 5G is quite popular in South Asian countries. India definitely needs to keep in mind the Chinese dominance in the South Asian region’s telecom segment. We must take some countermeasures in this regard.
