When in a corner, show teeth

A chastened but sanctimoniously aggressive dragon

Qin Gang, China’s foreign ministry spokesman, made some eminently reasonable and sensible points yesterday. The Asian Development Bank’s approval of a loan package to India—which includes financing of a project in India’s Arunachal Pradesh state (which China calls ‘Southern Tibet’ and claims as its own)—he said, “can neither change the existence of immense territorial disputes between China and India, nor China’s fundamental position on its border issues with India…On China-India border issues, China always believes that the two sides should seek for a fair and equitable solution acceptable to both through bilateral negotiation.” (via Indrani Bagchi’s Globespotting blog)

In other words, ADB’s approval of a loan doesn’t change the positions of India and China with respect to the territorial dispute, and that bilateral negotiations (not multilateral economic fora like the ADB) are the place to sort the issue out.

So who were those unreasonable and insensible people who thought otherwise? None other than the representatives of the People’s Republic of China. None of their counterparts on ADB’s governing board agreed. Diplomacy being the art it is, it was left to Mr Qin to sound as if it was someone else who was flagrantly violating the norms of conduct at multilateral economic institutions.

The Chinese foreign ministry, however, does not stop at that. Mr Qin goes on the offensive. The ADB, he warns, “should not intervene in the political affairs of its members. The adoption of the document has not only dealt a severe blow to its own reputation but also undermines the interests of its members. The Chinese Government strongly urges the ADB to take effective measures to eliminate the terrible impact thereof.”

China’s entire approach to the ADB loan issue signals a dangerous portent for Asia. It would perhaps have been understandable if China had limited its protest to a symbolic pro forma objection. To transform the ADB as a forum to push its position in a bilateral dispute is an entirely different matter—and one that has serious implications for its relations with its East Asian neighbours, with whom it has unsettled disputes too. A charitable explanation is that it couldn’t back down without losing face once it had fired the first salvo. If you feel less charitable, you will see fresh signs of a deliberate strategy to flex its economic muscles for purely political ends. When zero-sum games are pursued at positive-sum arenas, the latter quickly become the former.

A Beijing editor takes his gloves off

China must be given a taste of India’s swing power

“Indian politicians these days,” says today’s editorial in the Chinese Communist Party-linked Global Times, “seem to think their country would be doing China a huge favor simply by not joining the “ring around China” established by the US and Japan. India’s growing power would have a significant impact on the balance of this equation, which has led India to think that fear and gratitude for its restraint will cause China to defer to it on territorial disputes. But this is wishful thinking, as China won’t make any compromises in its border disputes with India.”

This is in response to a recent announcement that India will beef up its military presence in Arunachal Pradesh, adding new troops and air assets along the border with China. The Global Times goes on to warn that “India’s current course can only lead to a rivalry between the two countries. India needs to consider whether or not it can afford the consequences of a potential confrontation with China.”

And as if stating a self-evident fact, it declares that India “can’t actually compete with China in a number of areas, like international influence, overall national power and economic scale. India apparently has not yet realized this.”

(This, in a newspaper that supposedly is less strident than its Chinese language counterpart. Why, Richard Burger, of the wonderful Peking Duck blog, is even its foreign editor.)

Here on INI, Pragmatic Euphony has criticised the India’s military moves for being unsophisticated. However, to the extent the announcement has acted as a truth serum, their mere announcement has already proven useful. It is hard to find a more cogent summary of what is in China’s mind—not inferred by Indian or western analysts, but stated by an organ, albeit a distant and distanceable one, of the Chinese Communist Party.

The editors at Global Times are unambiguously telling the doubting Rams in India that neither fear, nor gratitude will make China compromise in its territorial disputes with India. In fact, it won’t compromise at all. And yet it is India’s current course that will lead to rivalry between the two countries, and it is India that “will need to adjust if it hopes to cooperate with China and achieve a mutually beneficial outcome.” Such straight talk is welcome.

Although the editorial denies it, it does betray China’s big fear: that India can swing the geopolitical balance to China’s detriment should it side the United States and Japan. The foreign policy of the first UPA government failed to make China appreciate the value of Indian restraint. That’s why the second UPA government must not repeat that mistake. The consequences of a potential confrontation, after all, go both ways.

Indian knickers, Chinese twist

China, Arunachal Pradesh and the politics of an ADB loan

And now it is at the Asian Development Bank (ADB). A few days ago Financial Times reported that China had used procedure to delay the approval of ADB’s new multi-year financing plan for India. Because a small part of it, around $60 million, is for “flood management, water supply and sanitation” in Arunachal Pradesh (read ‘disputed territory of South Tibet’ in Chinese). This twisted the usual knickers: some commentators pointing out that China’s upstream damming of the waters of the Brahmaputra is one reason contributing to Arunachal Pradesh’s need for the water management project. Thanks to the elections, the politicians’ knickers remain untwisted. But what should you make of it?

First, it’s important to recognise that China’s actions are both pro forma and theatre. It is to be expected that China will signal the existence of the territorial dispute at every opportunity. At the ADB while it postponed a board meeting that was to have approved the financing package for India, it is highly unlikely that it will go to the extent of completely sabotaging it (expect the plan to be approved at the next meeting). To wreck it would be too direct, too brazen a signal that it puts politics before economics at multilateral fora. It can’t afford that at a time when the G-8 is making way for the G-20 and increasing China’s clout in global economic governance.

It is unclear if China’s neurotic reaction to the word Arunachal Pradesh was due to its ADB delegation playing safe, or indeed a well-considered position approved by the higher authorities in Beijing. If it is the latter, then it stands to reason that India, and the rest of the world, must recognise—and respond—to the politicisation of multilateral institutions like the ADB.

Second, for its part, the ADB must realise that it is, in the end, a bank. And a bank that bases its lending policy on the basis on non-prudential considerations—not least with its largest and best customer—is asking for trouble. This is something that the ADB’s governors must keep in mind at their future meetings.

Finally, there is the question why the Indian government needs the ADB to borrow $3 billion for development projects? One explanation is that borrowing comes at relatively easier terms. Fair enough: but to the extent that such terms act as crutches, weaken or rule out market discipline and crowd the private sector out, such financing is a curse in the longer term. Herein lies the tragedy—the UPA government not only frittered away five years of unprecedented opportunity, but actually crippled India’s public finances. If it had not done so, India would be less reliant on multilateral loans…and better resist unfriendly actions like the one by China.

Pro forma protests

Sit up and take note when China doesn’t protest, not when it does

There is no need to get too worked up about China registering its protests at President Pratibha Patil’s visit to Arunachal Pradesh. As long as the border issue is not fully and finally settled, China will hold on to its position that parts of Arunachal Pradesh are really Chinese territories illegally occupied by India. So registering a protest pro forma is part of the routine. Not protesting would have been unusual: and India would see it as a ‘concession’. Just why would China concede anything just like that?

Nothwithstanding China’s protests, both the Indian prime minister and president have visited the state in the last couple of years.

For a good overview of the dispute and the way forward on its settlement, check out India China Relations: The Border Issue and Beyond by Mohan Guruswamy and Zorawar Daulet Singh, reviewed in the April 2009 issue of Pragati.

But China might not want a settlement of the border issue at this time, for the dispute itself is a containment device.

One China Policy

There isn’t one.

This post was first published in November 2006. As it is pertinent to the current situation it is reproduced here, almost in its entirety

In the debate over China, many of those with any experience actually dealing with China on political issues had advised caution. Many of those whose primary experience of China has been through trade and investment advocated closer ties. The oversimplified question on everyone’s lips was a cliche: Is China a friend or foe? That, though, is a wrong question to ask. The inherent anthropomorphism in the framing of this question confuses the issue, for relations between states are not like relations between people.

The essential fact is that on a fundamental level two powers as large and as proximate as China and India cannot rise without competition. And in most spheres of this competition, it is India that is catching up.

Three games
There is competition for regional and global influence: China is taking leadership in regional groupings where it has been a member, and entering groupings where it has not. It is now the most important member in East and Central Asian groupings. It has secured a good foothold in South Asia. And it is knocking on the doors of Africa. India, on the other hand, has secured a greater role for itself in South East Asia, where it has been welcomed because it can help balance China’s influence. Japan too has recognised that India will be a necessary element of the balance of power in East Asia. [See Harsh Pant’s piece in the April 2008 issue of Pragati]

Then there is competition in the quest for energy sources and, soon, natural resources. Here too, China is ahead, but India has begun to up its game in energy diplomacy. The two are already competing in securing fossil fuels. With the India-US deal bringing India into the nuclear mainstream, the competition will extend to securing nuclear fuel too. This decade will also see the two countries on a worldwide hunt for natural resources as their economy develops.

And of course, there is competition for investment and trade, which will only intensify as China becomes proficient in the English language and India gets its manufacturing act together.

…three strategies
So yes, there’s a contest going on all right. This does not, however, call for visceral hostility. Each competition has its rules. They cannot be wished away. This is a moment of profound change in the global balance of power and India would do well to play the game according to what the rules are (and not, as in the past, according to what the rules ought to be). China’s objective—couched as it may be in the language of ‘peaceful rise’ and ‘harmonious world’—is to become the pre-eminent power in Asia. It is a game that requires China to improve its relative power. There are two strategies for winning: one, for China to develop its own power; and two, for China to contain its competitors. The principal challenge for India will be to counter this. Nuclear weapons have made it unlikely that the contest will escalate to war. It is necessary to invest in maintaining the conventional and nuclear deterrence to keep it that way. They may be important in their own right, but Tibet, Tawang (i.e. the border issue) and Taiwan are both instruments and shock absorbers in this geopolitical game.

On the surface, the energy and resources game is zero-sum, and for that reason, the prudent strategy for both parties is to compete with each other. There may be scope for co-operation; but such co-operation will not be in India’s favour until it is able to negotiate with China on a peer-to-peer basis. At this time, India should focus on closing the gap, though not necessarily taking the same route as China.

It is a matter of basic economics that greater trade and investment will leave both countries better off. The rules of the game here are entirely different from the rules of the geopolitical or the energy game. There is no good reason—not even ‘national security’—for restricting trade with and investment from China. Those concerned with national security must adapt to the contemporary era of information abundance. Although this is changing, the Indian government is playing the geo-economic game according to geopolitical rules (and perhaps, vice versa).

The upshot is that India will have to counter China’s geopolitical moves, keep pace in the quest for natural resources and engage China in trade. There is, in the end, no simple one China policy.