Saturday, December 26, 2009

China and India provide a glimpse of changing political climate in Copenhagen

Even before the much touted UFCCC had begun in Copenhagen, high level discussions had been taking place between China and India. While there were reports about the flurry of discussions, not many really grasped the significance of these encounters.

The world got a glimpse of the possible changes in the international political relationship that could significantly alter the prevailing world views.

Writing in the Business Standard, from Copenhagen, Pallavi Aiyar, noted on Dec 21, 2009,

Beyond the nitty-gritty of emission cuts and technology transfers, the broader significance of the two-week-long United Nations’ climate summit in Copenhagen lay in the manner in which it exemplified how the geostrategic contours of the 21st century are shifting.

These are contours in flux, not wholly settled but clearly discernable, nonetheless. The shaping and breaking of old and new alliances, and the multiple centres of power that the Copenhagen talks wound around, heralded the emergence of the kind of multipolar world that could have scarcely been imagined even a decade ago... ... ...

And in the end, the so-called ‘Copenhagen Accord’ that was the summit’s main outcome, was not the dreaded Danish draft by another name, but a US-BASIC (Brazil, South Africa, India, China) accord that surgically cut the Danish hosts of the conference right out of the final deal... ... ...

India’s strategy for the conference was to clearly pin its colours to the China mast. As Indian minister for environment Jairam Ramesh repeatedly boasted, India and China were meeting up to six times a day to coordinate their negotiating positions.

But while India may be part of BASIC, New Delhi would do well to keep it in mind that it is not part of the G2. It suited China well to have the backing of other emerging economies like India and Brazil in the context of the climate conference. Without this support, Beijing would have been isolated and found it considerably harder to position itself as the spokesperson for the developing world... ... ...

Whether or not the India-China strategic alliance on climate translates into any longer term partnership remains an open question. What is more clear is that the UN conference has demonstrated how the line diving the world into North and South, rich and poor, is no longer straightforward or even appropriate... ... ...

A few days earlier, in an earlier report, the same author had noted on Dec 16, 2009, that
India and China have gone into a huddle over the possible existence of a Danish text, which the rich nations may wield at the climate change talks.

“The Danish text does exist and we have information that the rich countries are going to go public with it,” China’s chief climate envoy Xie Zhenhua told environment minister Jairam Ramesh today at a closed-door meeting, to which Business Standard had exclusive access.

The Chinese envoy, who is also a Vice Chairman of China’s all-powerful National Development and Reform Commission, further told Ramesh that he had got information that Australia and the EU were planning to launch a surprise attack either late Tuesday evening or early Wednesday.

Ramesh, talking about the closeness between India and China at the negotiations, said the two sides were meeting up to six times a day... ... ...

Saturday, December 5, 2009

Economic growth is good for the world's climate

China and India have an opportunity to change the climate of negotiations, a week before the opening of the United Nations Conference on Climate Change (UNFCCC) in Copenhagen. Continuing economic reforms have been making the economy more energy efficient. Irrespective of whether the planet is warming, or whether CO2 is the cause, between 1992 and 2007, the carbon intensity of the economies of the two Asian giants have declined between 40 (China) and 21% (India) based on the EIA data.

Between 1980 and 2007, the carbon intensity of the Indian economy declined by just 2.3%. But between 1992 and 2007, during the years when economic reforms gathered pace, the decline in carbon intensity has been over 21%.

China, for instance, heads the league of major economies with the highest decline in carbon intensity at 67%, between 1980 and 2007. Although, China’s carbon intensity is 40% more than India’s at present, China’s reforms process started much earlier, and run deeper, consequently it has experienced this magnitude of improvement in carbon intensity.

Globally, however, decarbonisation of the economy has been going on since the past 400 years, as societies moved from fuel wood, to coal, oil and electricity, driven by economic needs, leaving a safer environment in its wake.

No wonder, there is a lot to be gained if China and India take the lead and stand together at the UNFCCC meeting starting in Copenhagen, on Dec 7, 2009. Both the governments have had a number of consultations in preparation for Copenhagen.

For a more detailed discussion on the declining carbon intensity of the economy, you may like to see this note posted on Challenging Climate.

Thursday, November 19, 2009

Conference on India China Financial Cooperation

India China Economic and Cultural Council (ICEC Council) and the Federation of Indian Micro and Small & Medium Enterprises (FISME) hosted the Roundtable Discussion on 'India-China Financial Cooperation' on 13th November 2009 at the India International Centre as part of the concluding session of the 3rd High Level India-China Finance Conference. (The conference this year was held from 10 - 13 November 2009 hosted by India China Economic & Cultural Council (ICEC) in partnership with Indian Banks Association (IBA) in Mumbai and New Delhi).
The Roundtable Session today addressed financial issues facing Small & Medium Enterprises (SME's) in India and China.

Dr. Abid Hussain, Chairman, ICEC; Mr. P. S. Deodhar, President, ICEC; Mr. Mohd. Saqib, Secretary General, ICEC; Mr. Sandip Ghose, Regional Director, Reserve Bank of India; Mr. Anil Bharadwaj, Secretary General, FISME; Mr. Dinesh Rai, Secretary, MSME; Mr. Paul Joseph, Principal Advisor, MCX; Mr. Arun Agarwal, President & Global Head (International Banking), Yes Bank and Mr. Ashwini Mehra Executive Vice President & Head, SBI were some of the prominent faces representing India. A twenty member delegation from China headed by Mr. Ma Delun, Deputy Governor of the People's Bank of China was here on a week-long visit to India for the conference. The Deputy Governor was accompanied by senior officials from other Chinese regulatory bodies and financial institutions, such as Deputy Governor Mr. Ma Delun, Dr. Yi Cheng, Deputy Director General Research Bureau, PBC and Mr. Li Xiangyang the Deputy Counsel General of China in Mumbai.

Dr. Abid Hussain, Chairman, ICEC Council, in his opening remarks noted that, there are striking similarities & experiences in economic growth of India & China. He also added that, both countries need to work together to foster mutual confidence and alley fears.

Mr. Dinesh Rai, Secretary, MSME, highlighted the role of entrepreneurs in pioneering the economic growth of the country. He stressed that the growth of the SME sector was very crucial since it provides a large employment base and were the roadmap for the future. There are several issues that SME's faced which needed to be tackled and he identified them as - labour issues; quality; taxation and exim policy.

Mr. Anil Bhardwaj, Secretary General, FISME, said that China has earned considerable experience in SME stock exchange. Innovative financial strategies have helped China to infuse equity in SMEs. In view of SEBI's recent decision to allow SME stock exchange in India, the need of bilateral cooperation can be easily understood.

Prof. Anwarul Hoda, Ex-Member, Planning Commission, pointed, that in view of the huge infrastructure finance deficit, India & China should consider strategies, to work together. Such cooperation will not only bring the investment but also the technology which China has used while developing its infrastructure.

Mr. Mohd. Saqib, Secretary General, ICEC Council, expressed that there were hiccups in getting the government to completely take on the responsibility of building roads and improving infrastructure and we had to work on the PPP model. He was very forthcoming and invited China to join hands with India and form an "India-China Infrastructure fund" that would function as a guarantor for both the countries to trade in finance and technology enabling the growth of modern infrastructure in India.

Mr. MA Delun, Deputy Governor of the People's Bank of China, outlined the key areas of bilateral cooperation between India & China. SME Finance, Rural Banking & Infrastructure finance are the areas where the two countries can mutually benefit, he added.
Mr. P.S. Deodhar, President, ICEC Council, in his concluding remarks, highlighted the cultural similarities in India & China and placed high importance of continued dialogue between the two countries.

Chinese delegates expressed their appreciation at the growing trade and socio-cultural ties between India & China and shared that they expected India-China trade to grow to US$60 billion by 2010 (it has already surpassed US$51.8 billion in 2008).

While both countries maintained that the financial crisis last year had a limited impact on their economies because of their prudential banking regulations, distance from the severely affected western markets and the culture of saving; they also agreed that post the financial crisis, regulations that balance innovation and risks needed implementation.

This report was filed by India China Economic and Cultural Council (ISEC Council).

Saturday, November 14, 2009

“Capital Freedom of China: Annual Report, 2009”

Chaoliang Jing of Cathay Institute for Public Affairs, Beijing, sent this brief report on the conference that was held on 11 Nov 2009.

Under the moderation of Profs Mao Shoulong and Feng Xingyuan, the conference has been carried out basically in line with the agenda except for some minor and understandable adjustment and it proved a success in the end.

Paticipating in the conference were many important scholars in China (such as Mao Yushi, LJN, Xia Yeliang, Mo Zhihong,etc.) and media persons (including Fang Gang, the vice president of which is a very influential Web portal in China); besides, more than sixty students and graduates from various universities or institutes were also present as audience, and some of them participated as commentators.

The conference is mainly about releasing two great books: one is “Capital Freedom of China: Annual Report, 2009” , co-authored by Feng Xingyuan, Mao Shoulong and Xia Yeliang; and the other is “Financial Logic” by Chen Zhiwu. During the ceremony, addresses were given, questions taken, and commentary provided. Despite any difference among speakers, for most of the participants, they believe in capital freedom rather than capital regulation. In particular, the scholars shed light on the definition, role, and other important aspects around capital. And of course, there were much more sparkles during the activity, whose detailed record would soon come on CIPA website.

Dr Amitendu Palit could not deliver his speech, “On the Financial Freedom and Financial Development in India”. I’m sorry to let you know that he had a very bad cold that day, which stopped him from delivering the speech at all. As a result, the audience, including me, missed the valuable chance of listening to him talk.

Thursday, November 12, 2009

From the Berlin Wall to the Great Wall

This week the world commemorated the fall of the Berlin Wall, 20 years ago. That signaled the demise of communism in Europe. 1989 was also the year when China witnessed unprecedented upheaval in Tienanmen Square in the summer, which was forcibly ended on June 4. Not surprisingly, there has been lot of commentaries in the media looking at the events in 1989, and comparing fall of communism in Europe to the longevity of communism in China and its mutation adopting a lot of features of capitalism.

Here are a few interesting items that I would like to share with you. If you come across anything interesting, please do share it on this blog.

Wall Street Journal, Oct 29, 200: In a report from Berlin on the eve of the fall of the Berlin Wall, Mercus Walker asks in the in an article, "After the Wall: A debate over democracy's reach" Does China have a competing autocratic model? The collapse of Communism marked an ideological victory, but some wonder if China now has a competing autocratic model.
In the summer of 1989, American political economist Francis Fukuyama foresaw the "End of History" in a landmark essay, meaning that no credible alternative had survived to political and economic liberty as practiced in the U.S. and Western Europe. All that remained, he argued, was for other countries to catch up.

Today, history is back, according to writers such as Israeli military historian Azar Gat. In his new book, "Victorious and Vulnerable," he says that although democracy is the most benign system in history, it will have to demonstrate its advantages all over again in the face of its latest rival: authoritarian capitalism, as practiced by self-confident powers such as China and Russia.

In retrospect, 1989 led to the near-universal adoption of capitalism, but the same can't be said of democracy. Indeed, by switching from Communist economics to capitalism -- albeit a state-controlled kind that Adam Smith wouldn't recognize -- China and Russia have adopted "a far more efficient brand of authoritarianism" than they had during the Cold War, says Prof. Gat.

Other political scientists say it is too early to tell whether the two powers really represent an alternative path of development to the West.

"It is by no means certain that China can maintain its existing structure of power," says Niall Ferguson, an economic historian who teaches at Harvard Business School. What's more, today's Russia may be growing more assertive, but it's still a far weaker power than the Soviet Union that preceded it, while two of the major emerging economies -- India and Brazil -- are in the democratic camp, Prof. Ferguson points out.
Foreign Policy, Sept 29, 2009: Jeffrey Wasserstrom says that the fall of the Berlin Wall may have been the best thing to have ever happened to the Chinese Communist Party, in the article, "The autocrats' learning curve"
China, unlike the Eastern European states, had early warning that its regime was about to fall; the entire world seemed to know it. That sense of urgency made Chinese leaders avid students of the Soviet Union's downfall. The CCP charged official think tanks with discovering the keys to maintaining a monopoly on power, while avoiding the fate of erstwhile counterparts in Budapest, Bucharest, Prague, and Moscow.

What did the Chinese researchers learn? First, that Europe's 1989 unrest was fueled by patriotism -- a desire to rid their countries of regimes imposed from outside. Protesters in Europe also had a potent mix of economic and political grievances. Those in charge had claimed that Marxist regimes could compete with capitalist ones in material terms, but the night-and-day contrast between the creature comforts available on the two sides of the wall revealed the hollowness of this boast. Finally, Eastern Europe's movements spread quickly because nearly everyone -- regardless of their class -- felt they were in the same boat. The only meaningful social divide was between a small privileged coterie of corrupt officials and the rest. And the rest was pretty much everyone.
The Economist, Nov 5, 2009: The magazine revisits the confusion that prevailed in the echelons of power in China in the aftermath of the events in Europe in 1989. It credits Deng Xiaoping for guiding the party through the most severe challenge it ever faced, by advising the leadership "Keep calm and carry on".
In late 1989 China’s anxiety was so profound and its diplomacy in such confusion that it was difficult to imagine it would ever come to terms with the new world order. Fresh unrest seemed unavoidable. It was far from certain that Jiang Zemin, a little known leader who had been appointed party chief in the wake of the Tiananmen Square unrest, was on firm ground.

China’s dogged insistence that nothing untoward was happening in eastern Eur ope ensured that its awakening would be harsh. In early October 1989, even after thousands of East Germans had fled their country, China sent a senior leader to East Germany’s official celebration of four decades of communism (a “glorious” 40 years, the People’s Daily called it). East Germany’s 77-year-old leader, Erich Honecker, was a conservative much respected by China’s own gerontocrats, and a backer of the crackdown in Tiananmen. His resignation that October was appalling to them.

It was an appeal for cool heads by China’s 85-year-old senior leader, Deng Xiaoping, that helped China’s rulers weather the storm. In September 1989 he told them—in a speech only published years later—to be “calm, calm and again calm” and to carry on with China’s (mostly economic) reforms. Mr Deng’s advice, and its later elaboration, remains China’s guiding philosophy. Its central message is often summarised as taoguang yanghui, meaning “concealing one’s capabilities and biding one’s time”. Mr Deng wanted China to get on with building its economy and avoid ideological battles. The economy, in effect, would save the party.
The China Beat, Nov 9, 2009: This is a blog dedicated to things Chinese. It listed five interesting news items to mark the anniversary of the fall of the Berlin Wall
It quotes a review of David Shambaugh’s China’s Communist Party: Atrophy and Adaptation (University of California Press), in the Huffington Post
accounts of the regime ramping up of security measures to ensure that the 20th anniversary of this alleged non-event was not publicly commemorated in China (score one for paranoia). But there are also stories in June about how dramatically lifestyles in China and the countries place in the global economic order have shifted since 1989. In rapid succession, just before the highly charged June 4th anniversary date, the New York Times ran a piece called “To Shut Off Tiananmen Talk, China Disrupts Sites” (June 2), but just after it, the same paper carried one called “What Would Mao Drive? A Little Red…Hummer”(June 7).
In another item from “Chinese Netizens Leap Great Firewall of China to Mark Berlin Wall’s 20th,” by Aileen McCabe at Montreal Gazette:
They are flying over the Great Firewall of China (GFW) in exuberant numbers to send messages to an anniversary website in Berlin that was set up to allow people to share memories of the night the wall came down, or, recommend “which walls still have to come down to make our world a better place.”

“Ordinary people pushed down the Berlin Wall. Let us follow suit. No guilt falls on a crowd. If we are all anti-GFW, the result will be surprising,” Xiaoxiaoqiu wrote in Chinese at

Yet another mimicked Ronald Reagan’s famous plea to Mikhail Gorbachev and said: “Mr. Hu (Jintao) tear down this wall.”

The censorship slowed down Chinese netizens, but not by much.

Website co-ordinator Carsten Heins said in an interview Friday: “We have about 4,700 tweets, 2,200 are in Chinese.”

Another item on China Beats noted “No Celebrations for the Fall of the Berlin Wall in Beijing,” by Wang Zhicheng for AsiaNews:

As Europe and the world celebrate the fall of Berlin Wall and the end of the Cold War, in mainland China the anniversary has gone unreported. Prominent international public figures are in Berlin today to celebrate the start of a peaceful revolution that would see East Germany disappear, and by domino effect, bring about the end of Eastern Europe’s Communist regimes. However, no prominent Chinese will be there.

The main news item carried by Chinese newspapers and the Xinhua news agency today was the pledge made by Chinese Prime Minister Wen Jiabao to provide hungry Africa US$ 10 billion worth in aid. The second most important story related the meeting between President Hu Jintao and top air force brass.

In the last two days, Xinhua has only published photos of the Berlin celebrations, without any commentary.

Sunday, November 8, 2009

Looking beyond the 4000 km border.

Every now and then China India border attracts political and media attention. Today the issue of the border is in the news again because of Dalai Lama's visit to Arunachal Pradesh. But borders need not be looked upon as territorial boundaries, completely isolating the two sides.
Even recognising the border dispute, and working to find a peaceful solution to the actual coordinates of the border, it should be possible to open the frontier allowing not only greater exchange of goods, but also encourage an interaction between the people on both sides. The potential seems huge, not just in terms of trade, but more importantly in building trust and understanding between people living in these areas, and meet their developmental and cultural needs. Would a free trade zone, in the border areas, be more effective than a free trade agreement between the two countries?

Nimmi Kurian, explores some of the possibilities, in her article in Indian Express, Nov 9, 2009, titled "A forgotten 4,000 kilometres".
Some of this reductive logic is also more than evident in the fact that, even as bilateral trade is expected to surge to $60 billion by year-end, much of it has passed the borders by. Despite the fanfare that greeted the resumption of border trade at Nathu La after 40 years in 2006, two-way trade has not even reached a quarter-million dollars. India-China collective imaginations remain caught in a time warp with border trade struggling with an archaic list of items that hark back to another era. Yet another example of our continuing fascination with the symbolic over the substantive.

If these fractured geographies are to be restored, creative ways of thinking out of the territorial trap has to be a first. It will mean appreciating that there is more to borders than lines of control or establishing hotlines and holding flag meetings. These will call for recasting ageing agendas and releasing the borderlands from the freeze frame of securitised narratives. Unbundling the idea of cooperation will for instance mean looking at shared co-governance challenges that a shared neighbourhood brings. The India-China borderlands are witnessing a huge developmental thrust and China’s goal of developing its south-western holdings coincides with India’s own domestic imperative, rapid development of the Northeast. These raise larger questions of micro-level governance, livelihood and poverty — which find no place within politico-military frames of decision-making, that offer solutions suboptimal at best. It will also call for exploring a common analytic framework within which promising new ideas on trade, tourism, conservation, climate change and resource governance can be addressed.

This will also be an opportunity to decentre some of these debates since these are not challenges that can hope to be solved long-distance, from distant capitals.

Thursday, November 5, 2009

Prospect for China India FTA?

Sino-India trade has been growing at about 50% annually over the past decade. It is estimated to reach $60 billion by the end of 2009-10, growing from barely $2.3 bn in 2001. Since 2005-06, India's trade deficit has grown too, and put at over $20 bn, in 2008-09.

Suparna Karmakar writes in the Hindu Business Line newspaper, on Nov 6, 2009, about a study done at the Institute for South Asian Studies at the National University of Singapore, in an article titled "Wiring up Sino-Indian trade".
  • China accounts for 10.7% of India's total imports.
  • The top five Indian imports from China (at two-digit level) comprise electrical and electronic machinery, organic chemicals, iron and steel, mineral fuels, and waxes; constituting 2/3 of the total imports.
  • About 45.85% of the imports last fiscal comprised electrical and electronic machinery, comprising 30% of India’s total imports last fiscal.
  • In contrast, India’s exports to China are dominated by resource-based and labour-intensive products. Mineral products (for example, ores, slag and ash, salt and sulphur, and mineral fuels and oil) are prominent exports; ores comprise more than half of them.
  • India’s major exports to China are very different from its main exports to the rest of the world.
In this back drop, what is the prospect for an FTA? Ms Karmakar writes,
A quick analysis of trade data shows that the increasing trade deficit of India vis-À-vis China emanates in the very product categories which in value-terms are among India’s top five exports (at two-digit level) to the rest of the world. China is an important supplier in these key product categories, namely, mineral fuels, electronic and electrical machinery, iron and steel, and organic chemicals. Given the high intra-industry investment, production and trade in these key export industries, an FTA with China that assures reliable and assured supply of intermediate inputs may help boost India’s manufacturing efficiency and international competitiveness.
But she also notes two critical factors.
  • Indian industry associations remain extremely wary of the proposed Sino-Indian goods FTA.
  • In 2008, the Government also agreed that an FTA with China was not a ‘priority’.

Tuesday, November 3, 2009

The burden of being the Dalai Lama

Today, front page headlines in China and India report on the possible impact of Dalai Lama on the relations between the two countries. Can one man really cast such a large shadow on two of the world's largest countries, and oldest civilisations? China is opposed to Dalai Lama visiting the north eastern Indian state of Arunachal Pradesh, accuses him for trying to damage relations between the two countries, and yet affirms that relations will not be affected. Here is a sample from Chinese and India media. What is amazing is the fallout even in Dhaka! Reuters news agency is focusing on the tension between China and India this month, and list this among the five political risks to watch in India.

Hindustan Times: Reshma Patil writing from Beijing reports, "Dalai Lama damaging ties with India: China", on Nov 3, 2009.
While tensions between India and China spill over with visa controversies on both sides, Beijing has now blamed the Dalai Lama for trying to damage ties.
On Tuesday, Beijing labelled the Tibetan spiritual leader’s visit to Arunachal Pradesh a ‘separatist’ anti-China action. “The Dalai Lama often tells lies... he’s a national separatist. This attempt to damage relations between China and the relevant countries will not succeed,’’ said foreign ministry spokesman Ma Zhaoxu at a media briefing.
Indian Express: "China attacks Dalai Lama for hurting Sino-India ties", 4 Nov 2009
China on Tuesday accused the Dalai Lama of seeking to undermine Beijing's relationship with Delhi through a visit to a disputed border region, insulating India's government from direct Chinese wrath over the dispute. The exiled Tibetan spiritual leader has riled Beijing by arranging a trip week to Arunachal Pradesh, parts of which China claims as its own. The Chinese government has condemned the trip several times and asked Delhi to stop it going ahead.
Daily News & Analysis: Seema Guha reports, "China attacks Dalai Lama but spares India", on 4 Nov 2009.
China's opposition to the Dalai Lama was expected. What was not was the fact that at Tuesday's regular news conference in Beijing, while foreign office spokesperson Ma Zhaoxu lashed out at the Tibetan spiritual leader, he did not include India in his criticism.
CCTV: Provides a video footage of the spokesman of Chinese foreign ministry, with the headline, "Dalai Lama's scheme of damaging Sino-India ties "come to nothing": Spokesman" on Nov 4, 2009.
Chinese Foreign Ministry said on Tuesday that the Chinese government is deeply concerned by the Dalai Lama's planned visit to a border region between India and China.
Spokesman Ma Zhaoxu repeated an earlier condemnation of the Dalai Lama for separatist activities.
Ma said the scheme to harm China's relations with India would come to nothing.
Xinhua: The Chinese news agency reports, "China voices firm opposition to Dalai Lama's visit to China-India border region" on Nov 3, 2009
China firmly opposes the Dalai Lama's planned visit to a China-India border region, said a Foreign Ministry spokesman here Tuesday.
"China's stance on the eastern section of the China-India border is consistent, and we firmly oppose the Dalai Lama's visit to the region," said Ma Zhaoxu at a regular news briefing.
"This further exposes the Dalai clique's anti-China and separatist nature," said Ma.
Ma said the Dalai Lama keeps lying and being engaged in damaging relations between China and other countries, but his attempt "will not succeed."
Zee News: Earlier the tv channel had quoted the chief minister of Arunachal Pradesh as saying "Dalai Lama will be our state guest", on Oct 28, 2009.
Notwithstanding Chinese objection to the Dalai Lama's proposed visit to Arunachal Pradesh, Chief Minister Dorjee Khandu on Wednesday said the Tibetan spiritual leader will be accorded the honour of 'state guest' during his week-long tour beginning November 7.
Frontline: The cover story of this fortnightly news magazine, dated Nov 7, 2009, is on China. Sushanta Talukdar writes in "China Factor",
The elections in Arunachal Pradesh, which would have otherwise gone unnoticed owing to the small size of its voter population and of the State Assembly, got global attention because of the war of words and the subsequent diplomatic engagement between India and China over the latter’s claim to the border State. The dispute overshadowed the election campaign as well.
The New Nation: Headlines "Police stop photo exhibition on Dalai Lama in Dhaka", on Nov 2, 2009.
Drik Gallery from yesterday focusing on Dalai Lama, which was to have ended on November 7. Police stopped the exhibition as it was being held "without permission of the concerned authority of the government." Police described it as a "sensitive issue."
However, Tanvir Murad Tapu, one of the organisers, said such exhibitions had been being organised for the last 25 years without any interruption. The images portrayed the journey of Tibetans from their homeland to exile, said organisers.
After police locked the gate of the Drik Gallery Prof Muzaffar Ahmed of Transparency International Bangladesh, who was to have inaugurate the function, said such exhibitions could be shown even in China, but the government in their enthusiasm to please a powerful government injured censorship in their own country, a press release said.
Reuters: "Relations with China among Five political risks to watch in India", the news agency notes on 3 Nov 2009. Tensions between India and China are in focus this month at Reuters, with the Dalai Lama visiting the Indian state of Arunachal Pradesh, and another round of talks on a disputed border area set to begin. Under the head of external security, Reuter notes the India's relations with Pakistan and China, and says,
Ties between India and China have soured with the resurgence of a long-festering border dispute over the Indian state of Arunachal Pradesh. Reports of border incursions sparked unease. India also balks at Beijing's support for projects in Pakistan-controlled Kashmir and a separate visa policy for Indian Kashmiris, which New Delhi sees as undermining its claim over the region. There is little chance of war between the two countries but further disputes could sour their booming trade relationship.

Key issue to watch:
-- The Dalai Lama's planned trip to Arunachal Pradesh on Nov. 8 has already raised hackles. Beijing strongly opposed the visit, which it says is part of the exiled Tibetan monk's separatist scheming. India has dug in its heels, calling the Dalai Lama an "honoured guest" whose visit has no political motive.
-- The next round of talks over the disputed border with China in mid-November. Years of dialogue on the future of Arunachal Pradesh have made scant progress, but the talks open a window for both sides to diffuse tensions.

Why China Isn't Ready to Lead

I recently came across these two interesting articles by Prof Victor Shih. Mr Shih, an assistant professor of political science at Northwestern University, is author of “Factions and Finance in China:” (Cambridge University Press, 2008). He blogs at Elite Chinese Politics and Political Economy.

In recent months, with the global economic slowdown, there has been a lot of talk about the role of emerging economies, in particular that of China, in helping to put the world economy back on track. But Prof Shih says, in an article in the Wall Street Journal on 22 Oct 2009, "why china isn't ready to lead" the world,
To lay credible claim to a bigger global role, Beijing must show it understands the rules that make a modern economy work and how to play by them. The economic downturn has only shown how far behind Beijing is in this regard. China's market institutions clearly lag those in more advanced Asian and Western countries. Parts of the government continue to blatantly disregard property rights and contracts. Rules are conveniently bent to favor powerful state entities.
In an earlier article, again in the Wall Street Journal, on 22 July 2009, titled "China takes the brakes off". Prof Shih says,
The official Chinese press recently issued a series of stories celebrating an apparent recovery of the country’s growth rate to 8%. By all appearances, China has once again deployed its enormous state capacity, including state control of the banking system, to ward off a recession. However, unlike the last major stimulus program in the late 1990s, this stimulus relies on an unconstrained credit expansion and is generating much fewer marginal benefits to the economy. Quite the opposite: Out-of-control credit expansion contains the seeds of future financial problems.

Chindia trade solution

Economic cooperation can overcome border tensions, writes Amitendu Palit and Alec van Gelder in the Wall Street Journal, 2 Nov 2009.
This is the latest flowering of an ancient relationship. The busy Southern Silk Route connected the Sichuan basin in China and the Gangetic plains in India for almost 3,000 years, and it never completely disappeared. This promoted exchange of saffron and silk and the flow of Buddhist pilgrims and practices. Maritime silk trade further strengthened economic ties during the Middle Ages. India and China accounted for 48.9% of world output in purchasing power parity terms in 1820 before colonization and the rise of the West. Today, despite popular suspicions, ordinary Indians and Chinese again are discovering that trade turns enemies into colleagues... ...

Beneath fiery rhetoric from both sides on issues like the border and broader political influence, China has quietly emerged as India's most important trade partner, and India is an increasingly important partner for China. Since China joined the World Trade Organization in 2001, Sino-Indian bilateral trade has grown to $40.6 billion a year from $2.3 billion—an average 50% increase every year. Since 2003-04, bilateral trade has grown at almost double the rate of their trade with other countries... ...

China and India are an ideal match: India's technology and services-oriented companies complement perfectly Chinese manufacturing and infrastructure prowess. India also stands poised to benefit from the investments of cash-rich Chinese companies. India's telecommunications infrastructure has received a massive boost from Huawei Technologies' $100 million research and development facility in Bangalore, producing cutting-edge optical networks. Major Indian information technology companies like Infosys, Tata Consultancy Services and Satyam already have operations in China, as do pharmaceutical firms such as Ranbaxy and Dr. Reddy's Laboratories. Supply chains are now more likely than ever to run through both Chinese and Indian companies. One example is the far-reaching Lenovo production network, with both Chinese and Indian factories... ...

Politics is the greatest barrier to the continuation of these healthy trends. Hostility surfaces time and again over the disputed border regions and issues like Tibet. However, the meteoric rise in bilateral trade over the past decade could force Beijing and New Delhi to rethink their relationship—including the insight that renewed aggression would threaten each other's prosperity... ...
Please read the original article here.

Monday, November 2, 2009

Experiences from China and India: Enterprises’ Capital Freedom, Financial Logic, and Wealth Creation

Conference Hosted by the Cathay Institute for Public Affairs (CIPA)

Beijing, 11 Nov 2009


Session One: the Enterprises’ Capital Freedom Index in China : the Release Ceremony and Discussion on the New Book and the Latest Research Results Concerned

Moderator: Prof Mao Shoulong

Release of “the Report on Enterprises’ Capital Freedom, 2009”
Opening Speech by Feng Xingyuan

a brief time set aside for the Authors (including Feng Xingyuan, Xia Yeliang, Mao Shoulong, and ZhuHengpeng, et al.) to take the questions from media and the audience(20 minutes)

the Ceremony for Releasing “the Report of the Enterprises’ Capital Freedom,2010” as well as the Enterprises’ Capital Freedom Index of the Respective Provinces, Municipalities and Autonomous Regions in China

Announcement of the Scores and Rankings of the Enterprises’ Capital Freedom Indexes of the Respective Provinces, Municipalities and Autonomous Regions in China

A report delivered by Zhu Hengpeng: “the Capital Freedom Index of Chinese Enterprises: the Index System, Measures and Implications”

15:40-15:00 Comments and Discussion

15:00-15:15 Tea Break

Session Two: On The Development and Hindrance of the Enterprises’ Capital Freedom in China, Financial Logic and Economic Growth

Moderator: Feng Xingyuan

The Development and Hindrance of the Enterprises’ Capital Freedom in China By Xia Yeliang
Capital Freedom or Capital Regulation? By JN

Comments and Discussion

on the Essential Ideas of the Book “Financial Logic” and the Creation of Wealth in China By Zhou Ye’an

Comments and Discussion

On the Financial Freedom and Financial Development in India By Dr. Amitendu Palit, visiting researcher fellow in the Institue of South Asia, Singapore

Comments and Discussion
Concluding Remark by Mao Shoulong
17:35 End of the Conference

Contact: Chaoliang Jiang (

Sunday, November 1, 2009

Is Chindia a Chimera? Are the two Asian giants inevitably pitted against each other?

Omkar Goswami, a noted economist and opinion maker, in a recent column in the weekly magazine, the Businessworld, 31 Oct 2009, looks at the state of China India relationship, and says that China can not be a friend of India, and calls for rapid growth, strengthening of border, and ties with US, Russia and others.
The pro-China groups in India are barking up the wrong tree. They don’t, and won’t, understand that China doesn’t give a fig about India. It has a very simple two-fold view of itself: to be the most powerful and influential nation in Asia and, with the US, become the Club of Two that defines global polity. India has no place in this scheme; and China will never hesitate to put us down if there is the slightest hint of our questioning this dual mandate.
The Chinese politicians are also quite contemptuous of India. Since they care nothing about vox populi, they see no merit in our democracy and elections. Instead, they see great demerit in our inability to force a more rapid pace of growth. In their eyes, we are a second grade country with poor roads and highways, poor manufacturing, severe power shortages, horrible urban infrastructure and significant poverty that is demanding greater rights in global capitals... ... ...
China is no friend of India’s. It is, at best, an occasional bedfellow that can suddenly leave you in the lurch. China cares only for China, and if India helps in furthering China’s interests, it can tag along. Otherwise, it will be cut out. We can’t think of allying with China with any degree of permanence. Unfortunately, we still don’t seem to understand that. One day, we will. Hopefully, before it is too late.
The solution is to be real. To realise that we need to significantly strengthen our borders; call their bluff with credibility; focus on rapidly growing the economy; and build strong relationships with the US, Russia and certain key nations in Asia. And to never shirk from telling them to back off when they intrude into our affairs. That requires a strong state with a sophisticated veneer... ... ...
Historically, the two of the oldest civisilations in Asia, had never clashed, till 1962. While there were some trade and occasional contact across the Himalayas through Tibet, most people on one side of the mountains perhaps had little idea of those on the other side. Given this past, will the realpolitik of the present colour the future permanently?

Talking trade

Beijing Review, the influential and official weekly news magazine, has become the latest vehicle for public diplomacy between China and India. Just this attempt to talk about trade on a public platform is a very welcome step.

In an article titled, "Stumbling Blocks for China-India Trade", on 17 Sept 2009, excerpts from a report on bilateral economic relations by Economic Information Daily was published. Below is the response of the Indian embassy in Beijing, published on 1 Nov 2009.

While China India trade has grown rapidly, in the past seven years to over $ 51 billion in 2008, this is less than 2% of China's total foreign trade volume, and less than 6% of India's total. An article in the influential and official news weekly, Beijing Review, on Sept 17, 2009, outlines some of the problems on the economic and political front that it believes affecting relationship between the two neighbours. Statistics from China's Ministry of Commerce show that, in the past seven years, Chinese-Indian trade volume has enjoyed an average annual increase of 45 percent. Among all of China's main trade partners, India retains the highest growth rate in trade volume with China.
  • - Indian exports to China, it has been noted, are mainly primary products, with minerals and agricultural products representing more than half the total. By contrast, Indian imports are largely machinery products, chemical products, metal products, fibers and textiles from China.
  • - Indians export to China are resource-intensive, or labor-intensive products, while what they import from China are manufactured goods with high added value. This trade structure, in turn, leads to a limited market share of Indian goods in China and a great risk of trade deficit.
  • - When it comes to trade protectionism, India is a forerunner around the world. Except an average duty of nearly 30 percent on manufactured goods, India keeps a series of extra charges, coupled with complicated non-tariff measures.
  • - India's domestic investment atmosphere features onerous administrative interventions, excess formalities and low efficiency—factors that could hinder the further development of Chinese-Indian economic and trade relations.
  • - Anti-dumping investigations covered a wide range of goods, including industrial salt, iron and steel, auto parts, coal products, porcelain, textiles and rubber products, which led to a total loss of $1.5 billion for Chinese merchants.
  • - India imposed a ban on Chinese toys, and has also imposed safeguard tariffs on Chinese goods, such as aluminum shields.
  • - The sea route between the two countries is long and costly. While the land route, through Myanmar and Nathu La, are being reopened, the conditions are very poor.
  • - Bilateral understandings between Beijing and New Delhi are far from sufficient due to their limited exchanges, mutual trust is superficial and, in ways, fragile.
  • - Indian fear of China's rapid development, along with an aversion to Chinese products, has diminished the Chinese market in India.
  • - Some Indians are wary that China's cooperation with Pakistan, might be a threat, thus prompting them to hold a defensive posture.
On Oct 29, 2009, the Indian Embassy in Beijing, responded to the above article in "Striving for win-win solutions"
  • - The two countries should realize that each "has a vested interest in the success of the other" before they can jointly create a bright future.
  • - When it comes to political trust, few can dispute that the two countries have come a long way in the last two decades. The frequency of contacts at the leadership level is unprecedented.
  • - During Chinese President Hu Jintao's visit to India in November 2006, the two countries set themselves a bilateral trade target of $40 billion by 2010. This was reached two years in advance, in 2008.
  • - Trade imbalance between China and India is indisputable. Indian exports to China are mainly primary products while Chinese exports are largely manufactured goods with high added value.
  • - India manufacture value-added goods like electrical products, machinery, plastics, organic chemicals, chemical products and iron and steel, but it actually has penetrated the Chinese market in a very limited way in each of these categories. Restricted market access and tariff/non-tariff barriers have limited the scope for growth.
  • - Local content stipulations have also constrained India's ability to compete in the Chinese market.
  • - Sharp increases on import duties of completed equipment have obviously had their intended impact.
  • - On October 11, India decided to terminate safeguard investigations against the import of passenger car tires from China.
  • - Despite a memorandum of understanding on the application of phytosanitary measures concluded in 2002, China has provided India with market access to only three out of 17 varieties of fruits and vegetables that had been sought.
  • - The real limitation is the old mindset that views bilateral relations as a zero-sum game, rather than striving to create win-win solutions. It is when each country realizes that it has a vested interest in the success of the other that we can be truly confident of our joint future.

Friday, October 30, 2009

China India border: Should we build barriers?

In a commentary in the Economist magazine on 29 Oct 2009, titled, "Himalayan histrionics", the article claims that the real problem between China and India lies in the unresolved border dispute. It points out that China has resolved every other major land dispute with its neighbour, except this one. What has changed in recent years is the situation in Tibet, with the unrest last year, the Chinese seem to feel vulnerable to the porous border.
In truth, the real problem remains the two countries’ long, shared border. Disputes over the western and eastern ends have been unresolved since a bloody war in 1962. In the west, India claims Aksai Chin, a high plateau controlled by China, as part of Kashmir. In the east, China disputes the McMahon Line, agreed by British India and a Tibet then under British rather than Chinese sway. The line is in effect the border today, but China claims a large chunk of the Indian state of Arunachal Pradesh, which it calls South Tibet. It includes a revered Buddhist monastery at Tawang, near the 17th-century birthplace of the sixth Dalai Lama.

In a “good neighbour” policy, China has now resolved every serious land-border dispute, bar this one. A solution had seemed within reach. In 2005 the two sides laid out the approach. Principles would be agreed, then compromises made, and lastly a line drawn. Only marginal adjustments were expected to the present border. But the prospects of such a deal have crumbled as China has hardened its position. Earlier this year Chinese soldiers crossed the presumed line of control in the west and sent a herder family packing. China has blocked a water project in Arunachal Pradesh financed by the Asian Development Bank. In October it grew shrill over an electioneering trip to the state by Prime Minister Manmohan Singh. China has also begun issuing different visas for Indians from Arunachal Pradesh and Kashmir.

What has changed the equation is restive Tibet. Anti-Chinese riots last year highlighted the vulnerabilities for China of the vague, porous Tibetan lands. The Communist government, borrowing its impulse from the reviled Manchus of the Qing dynasty, wants once and for all to hammer down the borders of its supersized empire. All the ambiguities of borderlands and the people who wander about them must submit to the central will.
Across the world, even while political boundaries between nations have remained, their character has changed, with increased flow of goods and people. France and Germany, two of the historic enemies in Europe, have not dissolved their border, but opened it to allow greater interaction, ensuring peace and prosperity on both sides. Borders need not be barriers. China and India need to resolve the border question, not by building barriers, but by facilitating people on both side of the boundary to freely interact and pursue their own interest in peace.

Thursday, October 29, 2009

The shadow of Dalai Lama

The Dalai Lama is expeced to visit Arunachal Pradesh next week. China has not only objected to Dalai Lama's visit, it has also claimed the state as its own. The Chinese and Indian leaders at their summit meeting in Thailand earlier this month, apparently did not raise this issue, and instead agreed to focus on the areas of mutual agreement. Yet, before and after the summit, the Indian government restated its position that the Dalai Lama is a respected guest and spiritual leader, and is free to travel to any part of India, and that he is expected not to engage in politics while in India.

The fact that the Indian and Chinese PMs did not raise the issue of Dalai Lama during their discussions in Bangkok, has been interpreted in two very opposite ways. One view is that Indian side has downplayed its commitment to Dalai Lama by not raising it during the discussions. The other view is that by refusing to make any commitment to China on Dalai Lama, India actually stood up to Chinese pressures both on Tibet and Arunachal Pradesh.

The Wall Street Journal in a recent editorial, "Dalai Lama Lesson", says that India used the issue of Dalai Lama's visit to Arunachal Pradesh to send a signal to China, and compared the 'strong' stand of Manmohan Singh on Dalai Lama, with Barak Obama's refusal to meet the Dalai Lama in Washington recently. In fact the news about Obama declining to meet the Dalai Lama, had come just 24 hours before the announcement of the Nobel Peace Prize to Obama!

How does the Dalai Lama, who has not been in Tibet for the past fifty years, continue to case his shadow over China, India, the US, and others? How should one look at the question of Tibet? Given the multi-ethnic and multi-identity nature of India, we can hardly support nationalist movement based on any specific identity? On the other hand, given the recognition for the diverse and multiple identities that all Indians have, it is difficult to endorse any attempt to subsume or suppress the different identities. Can one be Tibetan and Chinese, at the same time, as I can be a Bengali and and Indian?

With Arunachal Pradesh and Dalai Lama in the news, it is a good opportunity to discuss these and related issues.

Contrasting role of media in China and India

Over the past few months, there has been a lot items in the media, both in China and India, looking at various implications, and analysing the different possible scenarios in the relationship between the two. While public diplomacy is welcome, yet one has to note the different circumstances in which the media operates in the two countries. In India, the media is by and large free to comment any way they deem fit, consequently, there are newspapers which favour strong relationship with China. On the other hand, there are others who are very apprehensive about the impact of a more powerful China. Some publications may endorse the Indian government's approach to China, while others might urge the government to take a different course. There are those who would like greater restraint on the Tibetans in India, while there are others who call for stronger support for the Tibetans.

However, in China, the media is much more controlled, particularly when the issue is sensitive, or if it could be seen as criticism of official policy. As a result, there are always efforts to try and read between the lines on any major policy item that appears in major Chinese media. The belief being that nothing really significant would get published in the official Chinese channels, without official endorsement.

Two recent reports in Chinese media illustrate this point. A commentary in People's Daily on Oct 14, 2009, was titled "Indian hegemony continues to harm relations with neighbours".
Dating back to the era of British India, the country covered a vast territory including present-day India, Pakistan, Myanmar, Bangladesh as well as Nepal. India took it for granted that it could continue to rule the large area when Britain ended its colonialism in South Asia. A previous victim of colonialism and hegemony started to dream about developing its own hegemony. Obsessed with such mentality, India turned a blind eye to the concessions China had repeatedly made over the disputed border issues, and refused to drop the pretentious airs when dealing with neighbors like Pakistan... ... ...

To everyone's disappointment, India pursued a foreign policy of "befriend the far and attack the near". It engaged in the war separately with China and Pakistan and the resentment still simmers. If India really wants to be a superpower, such a policy is shortsighted and immature... ... ...

In another recent item, Xinhua interviews one of the senior editors of a major Indian newspaper on the issue of Tibet. The editor of The Hindu, N Ram is quoted in the report "Indian journalist tells Tibet's reality, slaps separatists' lies" on 23 Oct 2009, as
Speaking at the forum, Ram corrected distorted lens made by the propaganda of the so-called "Tibetan government-in-exile" in Dharamsala, the Dalai Lama and some Western media.

"A notable feature of recent Western media coverage of Tibet is the way journalism feeds off the disinformation campaign unleashed by the Dalai Lama's headquarters and the votaries of Tibetan 'independence,' without any attempt at independent reporting," said the senior Indian journalist, who paid three trips to Tibet.

The West demanded China "initiate" a "sincere" dialogue with the Dalai Lama to find a "just" and "sustainable" political solution in Tibet, he said.

"But this is precisely what China has done for three decades," he added.

These reports attracted quite a bit of attention among Indian analysts, not just because of their content, but because where they were published and when, given the nature of media in China. Being seen as a handmaiden of Chinese state, such reports are, on the one hand, dissected for its significance as official Chinese policy, and on the other hand discounted for being part of Chinese propaganda. Such an approach to media, not only undermines its credibility, but also devalues public diplomacy.

Wednesday, October 28, 2009

India beats China on prosperity

India ranked 45 Vs China's 75 on parameters of wealth & well-being

Roger Bate & Barun Mitra

Daily News & Analysis, 27 October 2009
(Please read the original article here.)

Together, India and China account for 40% of the world's population and about 16% of the world's economic output. China bests India in both categories. And as home to glittering cities like Shanghai and Hong Kong, it's generally considered more prosperous than the subcontinent. But is that really the case? Just as an individual's well-being is based on more than his bank balance, a country's prosperity depends on more than rote calculations of its gross domestic product (GDP). And on these less-celebrated, but no less important metrics of prosperity, India surpasses China, on all of them.

If prosperity is defined as a mix of wealth and well-being, India is streets ahead of China, ranking 45th worldwide, while China lags far behind at No 75. In Legatum Institute's recently-released Prosperity Index, which assessed 104 nations comprising 90% of the world's population, prosperity is defined through 79 variables sorted into nine overarching categories.

A growing number of world leaders are rethinking the conventional barometers of prosperity. French president Nicolas Sarkozy, for instance, has charged a commission whose members include five Nobel laureates — including Amartya Sen and Joseph E Stiglitz — to come up with a more accurate measure of a nation's level of advancement than GDP. The blue-ribbon panel recommended a range of new variables to capture not just the cash value of a country's output, but its quality of life as well.

That is precisely the rationale behind the Prosperity Index. So, while it's true that China outperforms India on several economic indicators, including the level of foreign direct investment, the population's savings rate, the unemployment rate and even entrepreneurship, India bests China in critical non-economic categories. These categories demonstrate how citizens benefit from freedom, sense of community, and governmental integrity that a democratic system fosters.

These characteristics put India in a much better position to deal with economic challenges in the future. Take "democratic institutions," a category which evaluates everything from the civil and political protections afforded a citizenry to the relative level of power and independence granted to the executive and judicial branches of government. On this metric, India ranked 36th — 64 places higher than China, with its repressive regime.

Or consider "personal freedom," which encompasses freedom of speech and religion, national tolerance for immigrants and ethnic and racial minorities, and the amount of satisfaction that a country's citizens express with their level of freedom. Once again, India scored far better, ranking 47th, compared to China's 91st.

Indians also demonstrate more confidence in their country's governance. The index measured levels of political participation, citizen approval of elected officials, and popular perception of government integrity and corruption. Again, India outpaced China, ranking 41st - 52 spots higher. India especially excels in the "social capital" category. The index considered the
percentage of the citizenry who volunteered, gave to charities, helped strangers, felt they could rely on family and friends for support, or were otherwise active in community organisations. While China hovered in the bottom third of nations, India ranked a stellar fifth, behind the wealthy western countries New Zealand, Switzerland, Sweden, and Australia.\

"A growing economy is necessary, but not sufficient, for national prosperity," concludes the Legatum report. "Without additional factors such as an accountable government, healthy citizens, strong social capital, and respect for civil and political liberties, a nation cannot achieve sustainable prosperity."

China may enjoy economic supremacy over India at present. But given its strong and free political and civil society, India's citizens are much better positioned to enjoy not just marked levels of economic growth, but also a level of prosperity unattainable in authoritarian China.

Roger Bate is the Legatum Fellow at the American Enterprise Institute in Washington, DC. Barun Mitra is a founder and director of the Liberty Institute, a non-profit, independent public-policy research and educational organisation based in New Delhi, India.

The 2009 Legatum Prosperity Index released on October 28. It is the world’s only global assessment of wealth and wellbeing; unlike other studies that rank countries by actual levels of wealth, life satisfaction or development, the Prosperity Index produces rankings based upon the very foundations of prosperity – those factors that help drive economic growth and produce happy citizens over the long term. The summary of the report can be read here.

The Economic Times newspaper also carried a news item on the index, titled "Indians beat Chinese at prosperity game" on 27 Oct 2009.

Wednesday, October 7, 2009

China at 60: Mao, Marx, and Military

China marked the 60th anniversary of Communist rule on Oct 1, with a big parade in Tiananmen Square in Beijing. Almost a week after, analysts across are still trying to decipher the significance.

2009 is also the 20th anniversary of the student protests in Tiananmen Square. This is also the 20th year since the fall of the Berlin Wall, which signalled the beginning of the collapse of Soviet Union and the Communist empire.

With protests in Tibet last year, in Xinjiang province this year, and the drastic drop in Chinese exports due global economic slowdown, it was perhaps not a surprise that the Chinese leadership sought to return to their roots.

"Only socialism can save China and only reform and opening up can ensure the development of China, socialism and Marxism," said President Hu Jintao, who swapped his dark business suits for the charcoal-grey button-up tunic favoured by Mao Zedong, reported the Financial Times.
In the Olympics opening ceremony last year, film director Zhang Yimou was able to inject style and imagination into this tradition to fashion a vision of a modern China - a sort of hi-tech and creative authoritarianism. In contrast, Thursday's parade represented a retreat into Communist slogan and kitsch. Many of the floats looked like relics from the 1950s, with mottos such as "Socialism is Great".
The commemoration of the Communist revolution was an annual feature in the first decade after Mao took power. After the Party marked the occasion in a big way only on the 25th and 50th anniversary. No doubt China today is very different from the days of Mao. At the same time, while showcasing the power and glory of the revolution, the parade also ended up highlighting the deep undercurrents. The People's Republic, celebrated the occasion, sans its people!
central Beijing was completely deserted after unprecedented security measures kept the public away and ensured no unexpected incidents ruined the parade. Ordinary citizens were told to watch the show on television and blocked from getting anywhere near the festivities.
I could not but think of all the official parades in India, during various times of strife and conflict, where either people came to fill the stands despite security threats, or on other occasions, officials went out of the way to try and get people to attend.

The contrast was particularly glaring, when one remembers the modern, high tech, and synchronised brilliance that was on display at the opening of the Beijing Olympics just one year ago.
The celebrations began with a military parade of goose-stepping soldiers that showed off 52 new weapon systems, including what the state new agency called the "trump card", an anti-ship ballistic missile. Chinese fighter jets flew over Beijing in bright blue skies free from the thick smog of the past two days.
The military were followed by a civilian procession of 180,000 performers, grouped around floats representing all the country's provinces, its important industries and key concepts such as 'socialist democracy'.
The content of the pageant was a visual reminder of the contradictions inherent in modern China, as it moved swiftly from paeans to Marxism, Mao Zedong thought and socialism to lauding the nation's economic rise and the unleashing of market forces over the past three decades. (Reported the Financial Times.)
Another report in the Financial Times, reminded the readers
Sixty years ago, few would have believed Mao Zedong's Communist party could have come so far. It owes its survival to its ability to adapt. Mao took the country down several blind alleys. Millions died through famine in the Great Leap Forward or were brutalised in the Cultural Revolution. Deng Xiaoping loosened the state's hold on the economy, unleashing China's extraordinary potential. But the party never loosened its grip on power. When students demonstrating in Tiananmen Square threatened to spark widespread rebellion, Deng had no hesitation in sending in the troops.
Xingyuan brought these two items from Financial Times to my notice.

Saturday, October 3, 2009

India: Learning To Live With China

The 60th anniversary of Communism in China, has coincided with a lot of items in Indian and other international media, looking at various flash points in the relationship between the two of the largest countries in the world. Here is the latest by an Indian journalist.

Indrani Bagchi, the diplomatic editor at the Times of India, has written a detailed analysis in the Crest, the weekend paper, titled "CHINESE CHECKERS: Learning To Live With China". She quotes some of the strategic experts as follows:
  • "With neighbours, China has been trying to prevent clashes, but that seems to have changed with India recently.” (Susan Shirk, China specialist).
  • “The steady emergence of India as a powerful player is not looked upon favorably by China. China’s strategic culture is to distrust strong, powerful neighbors and prefer small, weak, subordinate or client buffer states. A theme dominant in all Chinese commentaries over the last few years is that India’s growing power — backed by the US — would bring about a shift in the Asian balance of power detrimental to China.” (Mohan Malik, professor Asian security at the Asia-Pacific Centre for Security Studies, Honolulu).
  • "China has generally been muted with the countries on its periphery. Except India. China’s response has been atypical." (Ashley Tellis, Influential American strategic analyst).
  • "India’s 1962 burden stems from the fact that the defeat of Sela-Bomdilla was papered over and the nation never had the chance of a catharsis." (K Subrahmanyam, Strategic affairs expert, former National Security Advisor, India).
Following is an excerpt from the article.

There was a surprise in store this week for those who chose to brave Arunachal Pradesh’s damp cold and the three-hour rough ride from Tawang up to Bum La Pass, on the border with Tibet. They were greeted by “happy” arches erected by Chinese soldiers on the other side, to commemorate the 60th anniversary of the Chinese Communist Party in power. The Chinese were preparing to receive Indian soldiers for a celebratory lunch — and some unfinished business on border management.

Most of this bonhomie is likely to evaporate in just over a month’s time when the Dalai Lama reaches the 400-year-old Tawang gompa (monastery) to offer prayers. Historically, this region has had a close relationship with the Tibetan people. The sixth Dalai Lama, Tsangyang Gyatso, for example, was born in Tawang. So, it’s not unnatural for the current Dalai Lama (the 14th) to want to pay obeisance at the Tawang gompa. Still, anything that’s seen to accommodate the breakaway Tibetans gets Beijing’s hackles up, especially when it’s on land claimed by the Chinese.

And so it alternates — blow hot, blow cold — in the uncertain relations between India and China: one day, it’s jaw-jaw, another day it’s claw-claw. The inscrutable Chinese and the argumentative Indian find each other equally indecipherable. It’s not surprising, therefore, that India’s China policy rides a trough-peak roller coaster.

New Delhi has been playing down media reports of Chinese “incursions” in an apparent bid not to ruffle feathers in Beijing. Almost simultaneously, the ministry of external affairs was lashing out at China for stapling not stamping visas to the passports of Kashmiri Indians, a signal that J&K was disputed.

The rise and rise of China represents one of contemporary history’s tectonic shifts. For an India that fancies itself as an emerging superpower, learning to live with an assertive China is one of its greatest foreign policy challenges, especially as its ambitions are sometimes aligned with the Chinese and sometimes at odds. A People’s Daily commentary (Sept 15) points out, “India is still a lesser power than China in terms of its economic and military might, both conventional and non-conventional.”

How can New Delhi and Beijing achieve a steady state of equilibrium that gives both sides the comfort of predictability, and a resultant confidence in each other? That’s a question nagging not just India’s foreign policy mandarins, but students and practitioners of diplomacy worldwide. As one of the architects of India’s China policy (who will be unnamed as will be many interviewed for this story) says: “For India, coping with the rise of China is not a luxury; they’re right next door.”

Indian policy makers find China’s approach to India quite mystifying. On the border, China has vastly superior military machinery. Its economic muscle is much bigger. And yet it appears keen to avoid any confrontation along the 4,056-km undemarcated border. But on many issues of bilateral import, China takes a far more belligerent stand — like seeking to nix India’s bid for a place at the UN Security Council; mounting a last-minute scramble to stop the nuclear deal in Vienna; trying to keep India out of an Asian economic community; blocking ADB from giving Arunachal money for a water project; and denying Arunachal residents Chinese visas.

Please read the full article here.

Friday, October 2, 2009

Time for India to play hardball with China

Jude Blanchette, of Atlas Economic Research Foundation, USA, sent the following note:

A new piece appearing in Foreign Policy magazine by Indian journalist Kapil Komireddi argues that India must begin playing "hardball" with China. Komireddi only hints at what this entails (something about the Dalai Lama).

"Indian democracy vexes Beijing. If India can guarantee fundamental rights to its diverse citizens while managing a growth rate not far from China's, why, someone is bound to ask, can China not do the same? For many in the West, China's economic prosperity is a precursor to political freedom for its people. But this theory, as China scholar Minxin Pei has argued, ignores the important fact that an authoritarian state is less likely to loosen its hold on a wealthy country than it would be to forego the control of an impoverished one. This accounts for China's censorship at home and the promotion of secessionism abroad. But it also means that it is China, and not India, that is more fragile and insecure. The Dalai Lama is India's trump card. All India has to do is play hardball."

Read the complete article, "Time for India to play hardball with China" by Kapil Komireddi in Foreign Policy magazine, 2 Oct 2009.

Challeges for China at 60: Change at home

Frank Ching, a Hong Kong-based writer whose book, “Ancestors: 900 Years in the Life of a Chinese Family,” was republished few months ago in paperback, writes in Yale Global on the Challenges for China at 60. Ching says that while cagey about its internal affairs, and always warning foreigners of interfering in China's internal affairs, be it Tibet, human rights or media freedom, China does not hesitate to tell others to restrain their sovereign rights.
China, a significant beneficiary of globalization, is happy to go out into the world, but seems less willing to let the world come in, according to writer Frank Ching. In fact, China, which asserts that it does not interfere with the internal affairs of other countries, appears to do the exact opposite, especially with regard to issues surrounding alleged separatism in China. Notably vocal whenever a foreign leader meets with the Tibetan spiritual leader Dalai Lama or a country grants him a visa, Beijing claims that such actions “grossly interfere” with China’s internal affairs and “hurt the feelings” of the Chinese people. For a country that prides itself on having signed more human rights treaties than the US – certainly a mature approach to international affairs – such a reaction seems oddly truculent. Indeed, as Ching argues, globalization is a two-way street where the benefits hopefully compensate, even outweigh, the loss of sovereignty. Rightly or wrongly, China seems yet to agree with such logic. – YaleGlobal
Read the complete article here.

Wednesday, September 30, 2009

China at 60: Taking stock

Here is an assessment of China, by Kent Deng, who is the chair of China studies at the London School of Economics. The article "How far has China come?" was published in the Indian Express newspaper on 30 Sept 2009.
The history of the People’s Republic so far can be divided into two periods of about 30 years each: Maoism from 1949 to c.1979, and the post-Mao period from 1979 to 2009.
Maoism, 1949-79
  • Seen in a positive light, Mao made China diplomatically independent. China succeeded in building its modern arsenal with nuclear weapons.
  • Seen in a negative light, Mao spent about 80 per cent of his time and energy purging Chinese society. No social stratum or individual was left untouched.
  • Cultural Revolution alone cost China 800 billion yuan, equivalent to China’s total capital stock of the state-owned enterprises in 1979. Mao’s rule left China with a third of its population officially illiterate (as in 1979).
  • During the 1959-62 Great Leap Famine, about 30 million people died. There was no record of effective famine relief by the Maoist state. In 1965, on the eve of the 10-year long turmoil of Cultural Revolution, China’s infant mortality rate was as high as 165 per 1,000 births.
Post-Mao, 1979-2009
  • When Deng Xiaoping took over the party and state, he faced the carnage of 30 years of Maoist practice. Deng’s rescue plan, known as “socialism with Chinese characteristics” had the following goals:
    • To re-build law and order,
    • To resume supply of well-educated bureaucrats,
    • To resume economic incentives and freedom for ordinary people,
    • To ease tension with foreign powers,
    • To promote foreign trade and FDI,
    • To build “comfortable material life for all” in exchange for the party’s legitimacy to rule
  • In rural China, farmers were re-incentivised, by the state’s permission to keep some of their output, through legal contracts (“the Household Production Responsibility Scheme”). This was a great success. China’s per capita food consumption soon returned to the 1930s level at around 3,000 kilocalories per day.
  • In urban China, Special Economic Zones were set up, fully compatible with Western capitalism, to attract foreign capital, technology and market sales.
  • In 2004, with over US$ 60 billion of foreign capital invested, China surpassed the United States and became the largest FDI recipient in the world.
  • From 1978 to 2000, the total value of China’s foreign trade increased 110 times.
  • But there is a downside to the post-Mao growth: environmental damage and social inequality.
  • China is now one of the most polluted countries in the world. The estimated damage to China’s soil, air and water systems is worth US$ 60 billion, the same as China’s total FDI intake.
  • In terms of energy efficiency, to produce per unit of GDP, China used 2.5 times as much energy as India, 4 times as much as the US and 7 times that of Japan (as in the 1990s).
  • The greater problem is income inequality between the urban and rural sectors, and between the coastal regions and the interior. China’s Gini coefficient has jumped from 0.28 (as in 1983) to an alarming 0.48 (2000), which has made contemporary China one of the least equal societies in the world.

China marks 60 years of Communism, India needs to rethink

As China celebrates the sixtieth anniversary of the founding of the People’s Republic this week, India must take a deep breath and begin a fundamental rethink its strategy towards the rising giant north of our borders, writes C Raja Mohan, the Henry A. Kissinger Chair in Foreign Policy and International Relations at the Library of Congress, Washington DC, in the Indian Express, "The middle path" (30 Sept 2009).
If our China debate during last few weeks was mostly about attributing hostile intentions to our northern neighbour, it said little about India’s own policy failures.

Take for example the situation on the border. The single most important change there has been the dramatic modernisation of transport infrastructure across the frontiers in Tibet and Xinjiang. This change did not, of course, take place in secret. Beijing announced its ‘go-west’ strategy with great fanfare in the mid 1990s.

Some the major projects of this strategy — such as the South Xinjiang Railway line to Kashgar just north-west of Jammu and Kashmir and the construction of the Tibet rail to Lhasa just north-east of Sikkim got massive international attention.

Yet, Delhi slept through the 1990s and in the early years of this decade. When it finally woke up a couple of years ago, Delhi did announce major road construction all along the China border. But the UPA government seems to have no capacity to follow through even when the projects are of such paramount importance for national defence and security.

The same holds true for the question of Chinese advances in our neighbouring countries. We can call it Chinese ‘encirclement’ till we go blue in the face. The problem, however, is rooted in Delhi rather than Beijing. So long as India refuses to imagine and implement policies that make economic cooperation with India attractive to our neighbours, Chinese economic penetration of South Asia will continue unimpeded.

For all the talk about the China threat, there is little expertise in India about the world’s second largest economy that shares a 4000 km of land border with us and will soon be our maritime neighbour in the Indian Ocean. As China rises, India needs deeper and broader engagement with China.

Neither our government nor our civil society has devoted the resources necessary to understand what makes modern China tick. The number of Chinese scholars studying the subcontinent and the reporters based in India is far higher than the pitiful Indian resources devoted to understanding China. When ignorance is combined with anger and incompetence, we have the makings of a perfect self-induced crisis.

Tuesday, September 29, 2009

Musical telling the story of Indian films touring China

Old Indian films were widely screened in China in the late 1970s, and were said to be quite popular with its larger than life characters, and mixture of emotion, drama, colours, and song and dance. But subsequently, censorship and limited quota for foreign films reduced the flow of India films to China. Yet, it is quite common place to find VCDs and DVDs of new and old Indian films on the sidewalks of major Chinese cities. Presumably, these pirated copies of Indian films have sufficient viewership. Now there is a more concerted attempt to renew interest among Chinese audiences of Indian films and music. After successfully touring Europe and Australia, a new musical is being staged across 10 cities in China. The following item, "Musical rekindles China's Bollywood affair" appeared in The Hindu on 27 Sept 2009.

BEIJING: For the first time in decades, hundreds of theatregoers across China are swaying again to the beats of Bollywood.

In the biggest attempt yet to bring Bollywood to the Chinese public, the ‘Merchants of Bollywood,’ a musical that chronicles the film industry’s history, has been making its way across China’s interiors to rave reviews.

Billing itself as the first “authentic” Bollywood musical, it was conceived by Australian Tony Gough and choreographed by Mumbai-based Vaibhavi Merchant. The show has already travelled across Europe and Australia, but its current foray into 10 cities in China promises to be the most engaging, given the unique history of the country’s experience with Indian cinema.

Indian films from the 1950s were among the first foreign films to be shown in Communist China after the country’s “opening up” in the late 1970s, and were wildly popular. But subsequent Chinese censorship laws restricting the number of foreign films that could enter the country has seen the interest wane to what, at present, can best be described as mild curiosity among young Chinese and fading nostalgia in their parents’ generation.

The success of this musical could change all that. ‘Merchants’ is touring 10 cities, from remote Yantai in northern Shandong province to Beijing and Shanghai, and for the first time in decades is again providing Bollywood a mainstream platform in China.

“We are in an unchartered territory as the first ever Bollywood show in China,” the show’s Australian producer Mark Brady told The Hindu before the show’s Beijing debut on Friday. “More than in other markets, we were very curious to see how the Chinese public would react to it. And we have been amazed by the response. Even in small cities like Yantai [in Shandong province] and Wuhan, we have been getting standing ovations, which we are told is not common in Chinese theatres.” ... ... ...

Bollywood is the popular name for the primarily Hindi film industry in India, that is mainly based in the city of Bombay (now called Mumbai). Although Bollywood does not have a physical presence on any map, it was derived from the internationally renowned Hollywood, the base of the American film industry. Since the 1970s, more films are produced in Bollywood each year, than Hollywood. Today, in India, foreign films generate just about 5% of the revenues.

Having failed to lure the Indian audiences in any substantial way to their own productions, Hollywood has been trying to make its own attempt to make "Indian" films, for the past few years. Without much success so far. The New York Times had an article titled, "Can Hollywood make a Bollywood film? in 2007.

China too has a large film industry. Would be great to hear what our Chinese friends think of the possible reentry of Indian movies in to China.

Friday, September 25, 2009

China Review comments on the India media

China Review looks at the current hot topic of China-India relation. This was shared by Chaoliang, a Chinese friend, who also summarised the article in English. The original Chinese article can be found here.

The governments of both sides hopes to enjoy peace around the boarder. Especially, although there have appeared storms of propaganda about Chinese aggressiveness inn Indian media, the prime minister, the national security advisor, and the foreign minister in India have all dismissed the alarmism. These were aroused by the helicopter event, paint event, or .shooting event, which have been denied by Indian department of defence.

Despite the efforts made by government and military authority to clarify the rumours, media seem to become more anxious to create an air of panic with too many negative reports about China, covering the 1962 war between China and India, the cooperation between China and Pakistan, Chiinese opposition to Indian possessing nuclear weapons and its permanent member state of UN security councile, trade gap, and competition over energy, etc.

BBC once gave an surprising reason for the deluge of bad news against China, that is, so doing would promote the media’s market share.

Meantime, the situation also has something to do with the political conflits in India. The opposition parties, such as the People’s Party and the Socialist Party would like to take the unwarranted Chinese threat as an excuse to blame the ruling party.

And somebody embracing revengeful mind over the failure in 1962 war would of course like to see the bubble blown huge about the Chinese brute hostility.

And the factors helping making the matter. Worse also include Dalai Lama’s purposeful words and some irresponsible experts' agitating remarks.

In conclusion, the so-called tension highlighted so far actually derives from an arbitrary conspiracy among media, individual politicians, and other interest groups.

These reports I hope will provide a glimpse of the thinking in China, and the undercurrents, particularly, in the official circles.

China and India: Idiosyncratic Paths to High Growth

Kaushik Basu, Chairman, Department of Economics and Professor of Economics and International Studies at Cornell University, has just been appointed Chief Economic Adviser to India’s Finance Ministry. In a recent article he looks at the parallel and contrasts between China and India. Here are a few key points.
  • The mainsprings of development in these nations are widely different, even though their trajectories of growth are converging.
  • Industrial recession in the US, Europe and Japan has caused big hardships for the export-oriented Asian economies. Serious though this crisis may be, it does not alter the longrun prospects of China, India and the other Asian economies.
  • Thinking in terms of broad categories, such as socialism and capitalism or big and small governments, and trying to link these to growth is the wrong way to approach the problem. Markets and incentives play a critical goal for development to occur, and, as long as the government has the intelligence to weave these into the policy fabric, the stage is set for economic take-off. Further the Chinese government has intervened in macroeconomic markets by keeping tight controls on capital and has kept its exchange rate deliberately undervalued in order to break into global markets with its exports.
  • With the growth spurt that occurred over the last five years and the rise of the Indian corporations as global investors – on this India’s rise has been more striking than that of China – India’s medium to long-run prospects look very good. In addition, one development of the last five or six years that augurs well for both India and China, and especially the former, is the growth of trade and the flow of foreign direct investment between the two countries.
  • One common feature of both China’s and India’s growth experience is the salience of the savings rate and the investment rate. China has always had a fairly high savings rate -- the rate never dropped below 30% from 1977 onwards and, as we know, China’s growth rate showed particular robustness from 1978. For India the sharp rise in savings in the early 1970s did not immediately translate into growth. I believe that there were some infrastructural bottlenecks that held back the economy. And, in any case, by the late 1970s and certainly the early 1980s it was evident that the economy was growing faster. Interestingly, India has witnessed another very sharp rise in its savings rate over the last four years. The rate climbed up from 24% to 34% – according to the latest Economic Survey, the savings rate is 37.7% (Government of India 2009). For the first time India is saving and investing at rates which have been associated with the Asian tigers. This is so recent that this has not yet been analysed sufficiently. But this augurs extremely well for the country.
  • Despite the market-oriented reforms of 1978-80, which were significant in comparison to the draconian control of the Chinese state previous to that time, in China the “socialist planning system still operates, ….the labour responsibility system determines where a person can work legally and where it cannot, … all land is owned and controlled by the State,” and the Chinese Communist Party continues to vet all senior appointments in firms and “even if the CEO is not a party member, there will be a party member (or group of members) ostensibly junior(s) in the organisation who can over-rule him on ‘ideological’ grounds, …in China banks are not intermediaries but instruments of the State… .” These quotes are from Virmani (2006), who in his comparison of India and China has repeatedly stressed the importance of free-market policies.
  • India’s big problem now is that its government is in the wrong places. It is not a problem of size as much as location. In terms of the fraction of the national income that is produced by stateowned enterprises, India is not an outlier in Asia; and compared to the communist and former communist nations, India is a very privatised economy. While the output emerging from stateowned enterprises in 1990 in India was 14.1%, the figure for China in 1985 was an astonishing 70%. Though state-ownership has been declining, even today it is around 50% in China, which is way higher than other Asian nations. It is not just that, as Huang observes, “As late as 1998 much of the Chinese officialdom held private ownership in utter contempt”. In 1978, South Korea had a larger share of output coming out from the state-owned sector than India. The ranking had changed by 1990 but that gap was not large. Indonesia looks similar to India; Malaysia has a distinctly larger share of state production and the Philippines is the most privatised economy – with a large part of that, at one time, in the firm private grip of Marcos.
  • Where government is needed and inadequately available in India is in the provision of infrastructure and in the social welfare sector. On infrastructure the awareness is now high in government and there is reason to expect large changes over the next five years. On social welfare the situation is still bleak. Poverty is still very high with around 250 million people below the poverty line (and India’s poverty line is quite a bit below one dollar a day). If the poor and the dispossessed develop some other identity – for instance, based on caste or regional origin, then this can be politically destabilising. Government needs to do much more in eradicating poverty.
  • The risk of political destabilisation is there also for China and may be even greater than what India faces. These risks manifest themselves in different ways in China. I have attributed a large part of China’s success, despite its government’s overtly interventionist behaviour vis-à-vis the market, to the fact that it was intelligent intervention. Contending with the same argument Yao argues that China succeeded because it has had a “disinterested government”, meaning it has not played one group against another but has been a neutral referee. This is a valid argument. But what stands out even more is that China has had the luck of an intelligent government. It has cleverly held back damaging intrusions into the market. This, however, always has the risk of changing. As argued, when an agent is as powerful as China’s government is, it can easily fall prey to the temptation of exercising that power in the interests of itself or a small group. This can also be not a response to temptation but self-preservation in times of turmoil. China’s excessively pliant civil society could cease to be that under times of stress, for instance, a period of growing unemployment or inflation. Its attempt to dislodge those in power can easily result in a siege mentality on the part of the government, whereby it becomes impossible for it not to exercise the vast powers that it already has.
Read Prof Kaushik Basu's article "China and India: Idiosyncratic Paths to High Growth" published in the Economic and Political Weekly, Sept 19-25, 2009.

A shorter version of the article is published in the Hindustan Times newspaper, "Use your head".