Tuesday, December 21, 2010

Sino-Indian Relations: Growing Yet Fragile

China and India are divided over several issues like territorial sovereignty, regional security and global governance. The main issue in Wen’s visit was the strong Indian reaction to China’s practice of issuing stapled visas to the Indian citizens from Jammu and Kashmir. S.M. Krishna told his Chinese counterpart, Yang Jiechi, that Delhi expects Beijing to show sensitivity to Indian concerns on territorial sovereignty in Kashmir. India's concern is about the structure of the bilateral trade that is utterly skewed in favour of China, writes C. Raja Mohan in RSIS commentaries.

The visit of Chinese premier Wen Jiabao to India has reinforced rather than resolve a paradox that has taken hold of Sino-Indian relations—growing political fragility despite the increasing economic engagement. China and India remain deeply divided over the critical issues of territorial sovereignty, regional security and global governance.


Wen’s visit to India in 2005 was arguably the most substantive political exchange between the two countries. That visit produced the only negotiated document between the two sides on the boundary dispute that has hobbled bilateral relations during the last 60 years. In that year, Wen and the Indian prime minister Manmohan Singh also unveiled the aspiration to build a strategic partnership between the two countries. Wen’s visit generated a rare optimism in Sino-Indian relations and intense phase of all-round engagement between the two nations.


China objected to the Indo-US civil nuclear initiative and launched an effort to provide a matching deal for Pakistan; Beijing came in the way of India’s search for a permanent seat on the United Nations Security Council.

China began to raise the ante on the boundary dispute in both Arunachal Pradesh in the eastern reaches of their frontier and Jammu & Kashmir on the West. Talk of an armed confrontation became common as both sides stepped up their military activity all along their contested boundary. As bilateral ties headed south, it was Wen who stepped in to bring a measure of calm. In his two meetings with Prime Minister Singh at the end of 2009 on the margins of multilateral conferences in Bangkok and Copenhagen, Wen sought to arrest the slide.


Fixed at a relatively short notice, Wen’s visit raised hopes in Delhi that the spirit of 2005 in bilateral relations could be revived. The results, however, have been mixed. The main issue in the run up to Wen’s visit has been the strong Indian reaction to China’s practice of issuing stapled visas to the Indian citizens from Jammu and Kashmir. India suspended military exchanges in September 2010. A couple of months later, the Indian foreign minister S.M. Krishna told his Chinese counterpart, Yang Jiechi, that Delhi expects Beijing to show sensitivity to Indian concerns on territorial sovereignty in Kashmir. Krishna also reminded Yang that India has shown respect for Chinese sovereignty over Tibet and Taiwan.


On the question of terrorism -- another major concern for India -- the joint statement fell well short of the clear and unambiguous demands from other great powers that Pakistan should shut down terrorist operations on its soil. Wen’s unwillingness to support the Indian demand for speedy justice to those in Pakistan who plotted the terror attack on Mumbai at the end of November 2008 has only reinforced the deep- seated Indian concerns about the nature of Sino-Pak strategic partnership.


Meanwhile the news from the economic front during Wen’s visit to Delhi was more encouraging. Dr. Singh and Wen have now set a target of US$ 100 billion for bilateral trade in 2015. This is by no means ambitious. At the current rates of growth — about 40 per cent -- that landmark might be reached within the next couple of years. India's concern, however, is not about volume but the structure of the bilateral trade that is utterly skewed in favour of China. In 2010, out of a bilateral trade of US$ 60 billion, the deficit in Beijing’s favour is about US $20 billion.

On his part, Wen has promised to facilitate better market access to Indian goods and services. More broadly, Wen's visit has resulted in a number of agreements — from cooperation in green technologies to banking and from maritime security to the launch of a strategic economic dialogue. Wen's visit to India might have helped pause the recent downward slide in Sino-Indian ties. Wen and Singh, however, have much work to do to overcome the political fragility of their expanding economic engagement.

Monday, December 20, 2010

Wen Jiabao In India

In the Chinese Premier, Wen Jiabao's visit to India, there was an emphasis on developing closer business ties with India in different areas, which includes banking, finance and green technologies.The current imbalances are likely to persist as Indian exports are less competitive in Chinese Markets. Wen Jiabao’s visit facilitated closer integration of banking and financial sectors of the two economies. Crude oil imports played a role in enlarging the trade deficit,but they were not imported from China.However, both sides have committed to correcting the imbalance, writes Amitendu Palit.


The Chinese Premier’s recent visit to India emphasised on developing closer business ties with India in different areas. Several agreements were signed, including in banking and finance and green technologies. The paper argues that despite both countries deciding to increase bilateral trade and addressing the current imbalance, the latter might persist due to low competitiveness of Indian exports in the Chinese market and the Indian industry’s inability to compete with Chinese imports.

Chinese Premier Wen Jiabao visited India five years and eight months after his last visit in April 2005. Much has changed during these years. No change, however, has been as remarkable as the rapid acceleration in economic ties between China and India. Between the Premier’s two visits, Sino-Indian merchandise trade has increased from US$12.7 billion (2004-05) to US$42.4 billion (2009-10).2 Overall trade figures will be even larger by including bilateral services trade, on which, unfortunately, no official estimates are available. The almost fourfold increase in trade during the last five years has led to China becoming India’s largest trade partner and India becoming one of China’s major trade partners.


And business it was that dominated the visit. Both countries decided to lift bilateral trade to US$100 billion by 2015.3 Going by the rate at which bilateral trade has been increasing in recent years, the target might well be achieved before the chosen date. Both countries also decided to work together in infrastructure, telecommunications, investment, finance, information technology and environmental protection for achieving ‘win-win’ outcomes. Forty- nine Memoranda of Understanding (MOUs) were signed between Chinese and Indian business entities during the visit. Two key ones among these were between the Federation of Indian Chamber of Commerce and Industry (FICCI) and China Chamber of Commerce (CCC), and the Reserve Bank of India (RBI) and the China Banking Regulatory Commission (CBRC) respectively.


The Chinese Premier’s visit will be remembered for facilitating closer integration of banking and financial sectors of the two economies. The Industrial and Commercial Bank of China (ICBC) – one of the largest global lenders by market value – has applied for setting up branches in India, while other leading Chinese banks such as Bank of China, China Construction Bank and Agricultural Bank of China are expected to do so in the future.5 Existing Indian banks in China [eg. State Bank of India (SBI)] are likely to expand operations.

Contribution of crude oil imports in enlarging the trade deficit, hardly any of which are imported from China. Nonetheless, both sides have committed to correcting the imbalance.

The key to balanced trade is increasing India's exports. China has agreed to encourage Indian agricultural, pharmaceutical and service exports in its domestic market. These and other Indian exports will increase if non-tariff barriers (NTBs) in China's domestic market come down and they also become more competitive. While NTBs can probably be reduced by negotiating with the Chinese government, competitiveness of Indian exports in the Chinese market vis-à-vis similar exports from Southeast Asia and other competing countries cannot be increased in the same manner. Thus despite reduction in NTBs, Indian exports might not experience substantial increase.

On the other hand, Indian industry must also note that till now they have successfully lobbied against Chinese imports and precipitated anti-dumping measures largely because China is yet to be treated as a 'market' economy by the WTO. This will, however, change from 2016. It is important for the Indian industry to reconcile to the fact that Chinese imports will be as much a part of the Indian market as they are in most other markets of the world. Instead of clamouring for protection and lobbying against Chinese imports, it is more sensible to lobby for domestic reforms that will reduce production and operational costs, and make Indian exports more efficient and competitive.

As India struggles to analyse the pluses and minuses from the Chinese Premier's visit, it is clear that China wants to do business with India. Unresolved borders cannot and should not hold back two of the world's largest economies from exploiting mutual synergies. That is the message emanating from Premier Wen's visit. Will India play ball?

Tuesday, December 7, 2010

Ni hao: Indian calling China

The world's interest in learning Mandarin is soaring as the Chinese economy does the same. From April 2011 onwards students in CBSE schools will be introduced to Mandarin. Mandarin will be the 13th foreign language to be introduced in the curriculum. The popularization of the programme will face obstacles in implementation, reports The Financial Express.

As the Chinese economy soars, so does the world’s interest in Mandarin. India is the newest addition to the group of countries promoting Mandarin via schooling systems. CBSE has announced the introduction of Mandarin to its schools, starting April 2011, to acquaint young Indians with Chinese culture. Mandarin will be the 13th foreign language to be introduced in the curriculum, alongside French, German, Spanish, Arabic etc being taught in 4,000 schools across the country. Given China’s increasing weight in the world economy and that it is India’s largest trading partner, this step was in the offing. But its timing is nevertheless interesting.


However, Mandarin’s coming of age in India is still a while away, given the underlying challenges, one of which is the paucity of teachers. Another will be the script—while French and Spanish, the more popular foreign languages written are in the Roman script, students will have to learn a whole new script to be able to read and write Mandarin. But the biggest obstacle to Mandarin’s popularisation is the implementation of this programme. Only time will tell whether the government will be able to get it together in time or tardy implementation will be the reason we miss the party, yet again.

Saturday, December 4, 2010

China and India need an ambitious agenda for engagement

Chinese President Wen Jiabao's will be visting India on 16-17, in the year when India and China will be celebrating the 60th anniversary of the establishment of diplomatic relationships, and both the countries have rediscovered each other. There are challenges as well as opoortunities. China is not only the neighbouring country of India, it is an emerging super power. Our borders are the most peaceful of all, though disputed, writes Nirupama Rao in a speech delivered to the Observer Research Foundation and republished in The Hindu.

This year saw India and China celebrating the 60th anniversary of the establishment of diplomatic relations. A couple of weeks from now, Premier Wen Jiabao will be in India and will participate in the closing ceremony of the Festival of China in India which will bring to a close the calendar of activities organised in both China and India to commemorate this occasion.

The six decades of the India-China relationship behind us have a record that is chequered. We became arbiters of our national destinies from the date of India's independence and China's liberation in the late 40s of the last century, inspiring many others in Asia and Africa to end colonialism and foreign domination. This was the time when India and China in a sense, rediscovered each other, understanding the potential of the synergy between two of the largest populated nations in the world on the global stage.


The leadership in both our countries understood the untenability of any sustained estrangement between us. The last three decades have been marked by well-intentioned efforts of exploration towards establishing the framework of a stable, peaceful, productive, and multi-sectoral relationship between India and China. Contradictions are sought to be managed, and our differences have not prevented an expanding bilateral engagement and building on congruence. There are elements of cooperation and competition that form the warp and weft of our relationship.

There are both challenges that the relationship confronts us with and also opportunities. As our Prime Minister has said, India and China will continue to grow, simultaneously, and our policies will have to cater to this emerging reality. For India, the situation is complex since China is not only our largest neighbour but also because China is today a major power in the world both from the traditional geo-political point of view and the more current geo-economic point of view.


China's rapid economic growth over the last three decades has been spectacular and riveting. It is now the second largest economy in the world with a GDP of roughly $5.5 trillion. China has begun to deal in the currency of global power, and its economic success is impacting its foreign, defence and security policies. The appellation of assertiveness is frequently applied to China's profile in global affairs today. The question that I am always asked is whether our relationship with China will be one dominated by increasing competition for influence and resources, as our economic needs grow.


It is true that divergences persist. We have a disputed border. There are legacies as well as lessons bequeathed to us by history. This is a complex problem and the cartographies that define national identity are internalised in the minds of people in both countries. At the same time, we are making a serious attempt at trying to arrive at a fair, reasonable and mutually acceptable solution to the boundary question as the recent 14th round of the Special Representatives talks will testify. The absence of a solution to the question is not due to lack of efforts but arises from the difficulty of the question.

What also needs to be appreciated is that the India-China boundary is one of the most peaceful of all borders. We have in place a well organised set of confidence building measures to ensure peace and tranquillity on the border.


Another issue of concern is the management of trans-border rivers. Many of the rivers nourishing the plains of Northern India and also areas in North-east India arise in the highlands of the Tibetan Autonomous Region and are a source of livelihood and sustenance for millions of our people.


There is, then, the question of the China-Pakistan relationship. India firmly believes that a stable and prosperous Pakistan is in India's interest, and we are not against Pakistan's relations with other countries. While I agree that relationships between countries are not zero-sum games, we do not hesitate to stress our genuine concerns regarding some aspects of the China-Pakistan relationship particularly when it comes to China's role in PoK, China's J&K policy and the Sino-Pak security and nuclear relationship. The need for mutual sensitivity to each other's concerns cannot be denied.


Our trade with China is growing faster than that with any other country and China is our largest trading partner in goods with trade likely to exceed US$ 60 billion this year. There is also serious discussion between the two countries on correcting the trade imbalance and we would like to see more Indian goods and services entering the Chinese market. Many Chinese companies are now well established in India and many Indian companies are also opening up in China. We in India have also worked to resolve hurdles that have sometimes been faced by Chinese companies to ensure a level playing field for all foreign investors.


The results of our policy of engagement are manifest in many areas and are not limited to bilateral trade and investment alone. Over 7,000 Indian students study in China, and the CBSE is set to introduce Chinese in the curriculum of schools from the next academic session. There is also an information gap that keeps our peoples from understanding each other better and which we need to bridge by concerted public diplomacy from both sides. There is much work to be done to improve perceptions within the media in both countries.

The global trend towards multi-polarity and a more even distribution of power has been accelerated by the recent global economic crisis. While the immediate financial aspects of the crisis may have been addressed, its structural causes in terms of global imbalances remain unsolved. This provides an opportunity to India and China to work together.


As India and China continue to pursue their interests, and so long as their overwhelming preoccupation remains their domestic transformation, and both understand that this goal requires a peaceful periphery, it is my firm conviction that the elements of competition in the bilateral relationship can be managed and the elements of congruence can be built upon. As our interests get progressively more complex, the costs of any withdrawal from engagement will rise. I believe this is a big relationship with the clear possibility of an ambitious agenda of mutual engagement that will be one of the most important bilateral equations of our new century. It is in our interest to view it in a more wide-angled and high definition manner than ever before.

Saturday, October 30, 2010

China needs to learn from India's legal system and protection of vulnerable groups: CASS study

Chinese think-tank, CASS, assesses national competitiveness, and finds China ahead of India on economic parameters, but says China needs to learn from India's legal system and protection of “vulnerable” groups, writes Ananth Krishnan in the article titled "Learn from India, says Chinese think-tank", published in the Hindu, on 27 October 2010.
A report on “national competitiveness” released by the official Chinese Academy of Social Sciences (CASS), which is China's leading think-tank, also forecast that China would become the world's second-most powerful nation after the United States by 2050, and overtake the U.S. to become the largest economy in 2030.

CASS publishes “blue books” ranking countries in terms of national power, which are widely read by academics and officials here. Many CASS scholars advise the government on policy issues.

The findings of this report, which measured economic factors, were published in many official newspapers on Tuesday. While the rankings are a subjective assessment by Chinese scholars, who assigned points on criteria ranging from progress in science and culture to technology and workforce talent, they are a reflection of how academics here view their country's position with respect to other nations.

The report ranked China 17th overall in terms of national competitiveness in 2008. India was ranked at 42, one spot below Bulgaria and ahead of Kazakhstan.

“China's overall national competitiveness is slightly stronger than India, but India is ahead of China in some areas,” said Ni Pengfei, the editor of the report.

The report pointed to the rule of law, protection of vulnerable groups and the preservation of traditional culture as areas where China ranked lower than India.

The study featured a detailed comparison of China's and India's respective advantages. It said before the year 2000, the two countries were “at a similar level,” but in the last decade China made “quick adjustments” that had resulted in a widening gap in competitiveness, since 2004.

India had “obvious advantages” in industrial structure, the report said, pointing to a services sector which accounted for 52.94 per cent of economic growth, compared with China's 41.89 per cent. It forecast “a more intense level of competition” for resources between “the world's two fastest growing countries.”

“China's comprehensive competitiveness has seen a leapfrog promotion over the past two decades, and it has huge potential and strong capability to catch up with and surpass developed nations in the future,” said Mr. Ni.

China, however, lagged behind the U.S. and Europe when it came to higher education, technological talent and cultural appeal. The report particularly stressed that China needed to do more to boost its soft power, amid increasingly negative perceptions of China's rise both in the West and among its neighbours.

“We should think of a country's cultural power when talking about its national competitiveness,” Chen Shaofeng, a scholar at Peking University, told the China Daily.

Friday, October 29, 2010

Soft power

"China’s state-led model of winning hearts and minds is no match for India’s private effort", writes Sadanand Dhume in "Likable India" in The Wall Street Journal (October 25, 2010). A few excerpts.
"Scholars and journalists alike tend to make much of China’s vaunted "charm offensive." It turns out, however, that when it comes to winning hearts and minds—at least democratic hearts and minds—China’s top down state-led model is not much of a match for India’s decentralized private effort."

"In terms of goodwill, India bests China in both Western and Eastern democracies. For instance, according to a poll released last month by the Chicago Council on Global Affairs, Americans place India in the same ballpark as long-term allies South Korea and Israel. China elicits only about as much warmth as Venezuela and Mexico."

"A recent BBC World Service poll of 28 countries says more or less the same thing. On average, more than half of Americans, Britons and Canadians feel "mainly positive" about India; only about one in six feel "mainly negative." With China the numbers are reversed. Barely one in three from the Anglophone countries feel mostly positive about the Middle Kingdom; for more than four in 10 the emotions evoked are negative. Similarly, more Japanese, Indonesians and South Koreans feel positively than negatively toward India; with China it’s the opposite."

"For many people, India is probably more likeable in part because it’s not nearly as threatening as a powerful, well-organized China."

Sunday, October 24, 2010

A tale of two Games: Beijing Olympics and Delhi Commonwealth Games were two very different beasts

Despite the surface commonalities, the Olympics and the CWG are not in the same league, just as, despite being hyphenated, India and China are not on par, writes Pallavi Aiyar, in the Business Standard, titled "A tale of two games". Here are a few excerpts.

In China, the years leading up to 2008 saw Olympianism emerge as the country’s new religion; any questioning of the Games, the equivalent of blasphemy. With traditional beliefs like Confucianism having been battered by decades of communist struggle and in turn socialism’s egalitarian ideals punctured by the increasingly single-minded pursuit of mammon, the authorities in Beijing used the Olympics as a legitimising ideology which helped justify unpopular decisions.

But nowhere was the discussion, so prominent in India, of the desirability of the Games in a country with millions of citizens still mired in poverty, in evidence. Beijing as a city was architecturally re-wrought, with hundreds of thousands of citizens relocated and displaced. Some committed suicide. None had proper legal recourse. Yet, these alternative narratives were absent from the discourse surrounding the Games. Those who spoke out against were censored, fired and in the worst case scenario, imprisoned.

There was something glorious, at least to someone with China-habituated eyes, about how Suresh Kalmadi, the chairman of the CWG organising committee, was booed during the opening ceremony of the Commonwealth Games. In Beijing the loss of face thus suffered by a senior official would have been unbearable to the authorities. In Delhi, it was part of the freewheeling, chaotic melee of Indian democracy.

That the Nobel Prize for Peace was given to Liu Xiaobo, a Chinese dissident currently in prison for 11 years for advocating democratic reform in China, as the Commonwealth Games wound down, only served to underline the India-China divide. Dispersed and polyphonic, India is from a Chinese standpoint almost incoherent. And if the ability for a government to mobilise its citizenry on the one hand and deliver on its promises on the other are seen as necessary aspects of ‘coherence,’ the Chinese perspective is understandable.

Tuesday, September 14, 2010

Chinese economist praise Indian economic growth model

World Economic Forum is hosting a meeting in Beijing this week. In this news item by PTI, filed from Beijing, report a side event, where Peking University economist Fu Jun said that  India has comparative strategic advantage in the value chain whereas China relied mostly on the labour and cost advantages. This is from the Times of India on 14 Sept. 2010, under the title "Indian model of growth wins praise over its Chinese rival".
BEIJING: Indian economic growth, often described as chaotic and weighed down by poor infrastructure, came in for praise from experts here, compared to more disciplined but highly autocratic Chinese model.

While Indian economic growth was more fuelled by high domestic consumption and services, the Chinese model relied heavily on manufacturing and exports, said Western and Chinese experts at the state TV debate, on the sidelines of of the World Economic Forum being held here.

Besides, India has comparative strategic advantage in the value chain whereas China relied mostly on the labour and cost advantages, said Fu Jun, professor of the Political Economy of the Peking University.

"India in comparison has done a better job", Jun said.

"What is interesting from now on is which one is more viable. I have to give credit to India. What India will do next is to continue the strategy and move into other areas. By comparison we (China) have to readjust our strategy into manufacturing. I do not see reasonable balance between supply and demand," he added.

Human resources development minister Kapil Sibal, who was participating in the debate, said, "Because our economy is based on domestic demand, there is much greater innovation and ability of the entrepreneurs to actually produce wealth. In the long run a lot of innovation and lot of wealth production is going to come from our part of the world."

Martin Wolf, associate editor of the Financial Times, who was critical of the Indian growth model said, however, "Indian development is working despite failure of organisation and poor infrastructure. It is clear that lot of successful multinational companies have good assets in India."

The debate, the first of the three was held on the side lines of the Geneva based World Economic Forum which was being held at Chinese port city of Tianjin, where over 1,400 political, business leaders and economists gathered to deliberate on "Driving Growth through Sustainability".

Besides Sibal, Karnataka chief minister, BS Yeddyurappa and a host of Indian business leaders are taking part in the meeting, which is inaugurated today by Chinese Prime Minister, Wen Jiabao.

Friday, September 10, 2010

Europe's crisis a win-win opportunity for China

The sovereign debt crisis of Europe has shaken the Euro, and exposed fissures in the European Union.Chinese demands for the lifting of an arms embargo have been publicly backed by Spain.There is massive public support for the euro. It is a smart political move as of the fact that China’s exchange rate policy is still vulnerable to international criticism, writes Pallavi Aiyar in Business Standard.


"While Europe’s sovereign debt crisis may have shaken the euro and exposed fissures in the European Union, one country’s hand in the region has been strengthened: China’s. It has converted Europe’s crisis into an opportunity to extend Beijing’s clout in the region."

"But in June, only hours after credit agency Moody’s downgraded Greece’s credit rating to junk, it was China that held out a financial lifeline, in the form of a multibillion euro investment package. While signing the deal, Chinese vice premier Zhang Dejiang gave the eurozone’s weakest link a public vote of confidence, declaring Beijing’s belief in Athens’ ability to overcome its fiscal problems, an announcement that moved markets positively, following weeks of turmoil."

"At the time, Greek deputy prime minister Theodoros Pangalos praised China in an interview, echoing sentiments often expressed by African nations indebted to Beijing. “They are not like these Wall Street people, pushing financial investments on paper. "

"The Chinese deal in real things, in merchandise. And, they will help the real economy in Greece,” he said."

"It’s not only debt-laden southern European countries that find themselves beholden to Beijing. Even power house Germany’s continued economic buoyancy owes much to its exports to China. Jonathan Holslag, research fellow at the Brussels Institute of Contemporary China Studies, notes that Germany’s economic recovery over the past year is due in substantial part to its exports of cars and advanced machinery to China."

"Access to technology is also increasingly being built into deals struck by Chinese corporations. For example, the Greek package included an exchange of know-how between China's Huawei Technologies and OTE, the Greek telecom organisation."

"While the commercial interest behind companies capitalising on the European downturn is clear, reasons for the Chinese government’s “goodwill” gestures are murkier. Holslag believes Beijing is motivated by the desire to ward off creeping protectionism in Europe, thus ensuring its most important export market remains open. In July, when German chancellor Angela Merkel visited Beijing, Chinese Premier Wen Jiabao was explicit in making the connection."

"In return, Merkel made a joint statement with Wen, vowing to oppose protectionism in Europe. There are other pluses for Beijing from its increasing influence. Chinese demands for the lifting of an arms embargo have been already publicly backed by Spain. Holslag believes with Beijing’s new leverage with certain EU member-states, backing for this and other issues like the granting of market economy status to China will intensify."

"Economic clout can translate into greater political influence, a lesson the Chinese know well and apply in their diplomacy across the world. Europe’s economic woes have opened room for these techniques to be used within the EU."

"In sum, the region’s economic fragility has allowed the Chinese government to project itself as a benevolent supporter of the euro, even as it acquires strategic leverage and Chinese companies sniff profitable deals. The kind of win-win situation that Beijing is partial to."

Thursday, August 26, 2010

Huang Jing: Managing Asian G2

India and China were really successful on nation-state building.In both countries nationalism arose against the defeats, humiliations and injustice these nations went through during the period of western imperialism. Both countries used western ideas to overthrow foreign domination.It is wise to avoid nationalism in India-China relations, as it is a double-edged sword.The AG2 framework will provide the institutional arrangements to secure the prevalence of wisdom over emotions in the bilateral relationship, writes Huang Jing in Business Standard.


"Despite substantial cultural and religious diversity in both countries, India and China have been largely successful in nation-state building, as evidenced by the strong and unshakable national identity and pride among the Indians and Chinese."

"However, unlike western nationalism, which was associated with pride and jubilance for the triumph of capitalism and industrialisation, nationalism in both India and China arose due to defeats, humiliations and injustice endured during the age of western imperialism — India was under the British Raj and China was a victim of gunboat diplomacy."

"Ironically, the leading elites of the national movements in both India and China embraced western ideas and adopted western political methods in their fight to be rid of “foreign exploitation and operation”. Subsequently, these leaders led their countries towards the western path of modernisation. This deep-seated love-hate mentality towards the West and the bitter roots of their national consciousness have made the Indians and Chinese especially sensitive towards national sovereignty and independence — after all, they were determined never to let history repeat itself."

"In India-China relations, a wise and astute leader would want to avoid involving nationalistic sentiments on the issues — border disputes, trust deficit, mismatched geopolitical concerns, and inconsistent interests in energy, food and water security — that have handicapped the bilateral relationship. Doing so would only deprive the leaders of both the states of the rationality and manoeuvring room necessary for achieving a mutually acceptable solution for, or at least the practical management of, the existing problems in bilateral relations. Furthermore, playing the nationalism card would have dire consequences on political stability at home, as a nationalistic approach would, more often than not, benefit the extremists in domestic politics."

"Indeed, fast economic growth amidst globalisation has brought about an unprecedented transition in both China and India, giving rise to new contradictions, dilemmas and challenges, or exacerbating old ones, in domestic politics as well as bilateral relations."

"Both Delhi and Beijing must make a conscious commitment to contain nationalistic sentiments in the bilateral relationship, especially when the interests of the two countries are inconsistent or in conflict. Political leaders have to realise that playing the nationalism card would produce no benefits. As history has taught us repeatedly, nationalism is always a double-edged sword and it could potentially produce a backlash on those who ride on it for short-term gains."

"The simultaneous rises of the two great neighbouring powers have brought about unprecedented opportunities as well as challenges. The AG2 framework is to provide the institutional arrangements to secure the prevalence of wisdom over emotions in the bilateral relationship, so that the two nations can optimise the opportunities and handle the challenges with a rational and cool-headed approach."

Wednesday, August 25, 2010

Save the tiger: Environmental dividend from economic development

This is the Chinese year of the tiger and people are interested in saving the tiger from extinction more than ever. Several conferences are being held, and a lot of money is being thrown at saving the tiger, but all this can't work if the Government can't mitigate the conflict between locals and wild animals. The lack of agricultural productivity forces farmers to encroach on the habitat of the tigers. This has to be resolved. China and India can save the tigers by cooperating with each other, writes Barun Mitra.

A shorter version of this article was published in The Wall Street Journal.

Asia’s economic potential was first demonstrated by the four tiger economies. In recent decade, the focus has shifted to China, India and others. While economies are growing, the real tigers in the wild are living a precarious existence. It is time to reap the environmental dividend from growing prosperity, and save the tiger from extinction.

This is the Chinese Year of the Tiger! Undoubtedly, the focus is once again on ways of saving the wild tiger from extinction. This coming weekend the international Tiger Forum will meet in the north-eastern Chinese city of Hunchun. Next month a tiger summit is scheduled in St Petersburg, Russia. Last month 13 nations - Bangladesh, Bhutan, China, Cambodia, India, Indonesia, Laos, Malaysia, Myanmar, Nepal, Thailand, Vietnam, and Russia agreed, at a meeting of the Global Tiger Initiative (GTI), to double the tiger count from about 3200 at present to 7,000 by 2022. Incidentally, the tiger numbers have halved since 2002, when the claim was 7,000. Many today believe that these numbers were grossly inflated due to faulty counting procedures.

In 1900, it is believed that there were about 100,000 tigers in the forests of Asia. The number declined to about 40,000 by the 1950. Today, billions of dollars are being spent to save one of the iconic animals in the world, but the future of the tiger continues to be bleak.

According to estimates used in draft documents for the St Petersburg Tiger Summit, the economic benefit of ecological services coming from forestry and wildlife estimated in 1997 to be as high as $ 33 trillion annually, and would be much higher today. But another estimate claimed that for the people living in tiger forest in countries like Cambodia, the annual economic benefit per household to be barely $675. The numbers don’t add up!

Over the past decade, just the central government in India increased its allocation for Project Tiger, from $ 16 million (Rs 75 crore) in the 9th five year plan, to $ 32 million (Rs 150 crore) in the 10th plan, and $ 128 million (Rs 600 crore) in the current 12th Plan (2007-2012). This is equivalent of about $ 25,000 per tiger per year, for a mere 1200 animals. Compare this with the flagship rural employment programme for the poor that promises about $ 70 per family per year.

There seems to be growing gulf between the prescriptions offered by many international, largely western experts, and what domestic policy makers in China, India, and elsewhere confront on the ground.

Many of the international experts agree on the need to commit larger sums of money, monitoring of the tigers and their habitat, and almost military style enforcement to keep people and poachers out.

But these old prescriptions don’t inspire confidence any more. Indian policy makers are increasingly aware of the rising aspirations of the people, and the demand for land, for agriculture and other developmental purposes. For some others, the biggest threat to tiger comes from the growing intensity of conflict between man and wild animals. They would not like to stake everything on counting tigers.

Just in the past two months, two people lost their lives in the vicinity of the famous Ranthambore tiger park. Typical compensation for a life lost is only $2200. This is barely 10% of the annual allocation by the central government for every tiger each year, at present. Just this week, in the same park, a forest ranger who was bravely trying to shepard a tiger that had strayed near a village, armed only with a stick, was mauled.

Last year Bangladesh reported 50 deaths from tiger attacks in the Sundarbans area of the Gangetic delta. In India, the annual death toll from wild animal attacks range from 200-300 each year, in addition to injuries, loss of property and crops. Tigers and other wild animals will have a future, only if this conflict can be diffused. Otherwise the beasts will stand no chance against the ire of man.

The problem in India, and some other tiger range countries, is not that there are too many people living in close proximity to wildlife. Typically, in such areas agricultural productivity is abysmal, poverty is endemic, and non-farm economic opportunities non-existent. Without resolving this human problem, neither a proliferation of conferences nor throwing cash will help the cause of the tiger.

But this need not be the situation. If India doubles its agriculture productivity the demand for agricultural land could fall by almost 40%. If non-farm opportunities are allowed to spread, dependence on subsistence agriculture will decline rapidly. One can already see glimpses of how the natural environment can recharge once the human pressure declines.

This is most dramatically visible in China. China’s agricultural productivity is almost double of India’s. The rapid movement of millions of people from rural to urban, and changing economic structure from agriculture to industrial, explains the rise in forest cover.

Between 1990 and 2007, according to World Bank database, China’s Per capita GDP increased 8 fold, from $ 314 to $2,566, while for India it just tripled, from $374 to $ 1,046. During this same period, China’s agricultural GDP shrank from 27% to 11%, and forest cover as a share of total area rose from 17% to 22%. It is this 30% increase in forest cover in 17 years, which makes it plausible for China to attempt to rebuild wildlife habitat, and reintroduce animals. In contrast, for India, agricultural GDP declined slowly from 29% to 18%, but forest cover stayed almost the same from 22% to 23%. This indicates that in India, there is a much higher pressure on forest from people who are not able to move beyond rural livelihood, and explains the continuing conflict between man and animal.

China and India, are neighbours and competitors in many fields. But in the arena of tiger conservation, they could greatly complement each other. China barely has 45-50 tigers in the wild, mostly near the Russian border in Siberia. India has among the best wildlife experts with capacity to manage tiger habitats.

India is already trying to reintroduce tigers in to two tiger parks where all the tigers were lost in recent years. India is also toying with an ambitious effort to reintroduce the Asiatic Cheetah, which had gone extinct in 1947. But today, India’s economic transformation is not yet deep enough to remove the potential for man and animal conflict. But it will happen. Working with the Chinese on tiger conservation would help build up Indian capacity to reap their own environmental dividend.

By cooperating with each other today, China and India would not only save the tiger in the wild, but redefine the meaning of “Asian Tigers”. Wildlife and forest are not mere intangible resources, whose values are only determined by creative book-keeping. For instance, in the US, the tangible economic benefit from wildlife and nature tourism, including fishing and hunting, was estimated at $125 billion in 2005. Asia could surely give the US a run for its money, if it manages the environmental resources better.

This will require a see change in thinking. Only when people profit from forest and wildlife, will they have any interest in preserving them, and then counting every tiger will become irrelevant. Tiger economies are better equipped to secure the future of the species too!

Sunday, August 22, 2010

China is moving beyond exports to meeting domestic demand

Last week, China was officially acknowledged as the the world's second largest economy, moving ahead of Japan, and second only to the US. While the news was on front pages in India, there was no jubilation in China. The Times of India, had a special feature to mark the occasion. Saibal Dasgupta, the Beijing correspondant of the newspaper, looks at some of the implications and challenges, in the article "The big Bite", on Aug 22, 2010.
Any exuberance about its slotting into second place after the US was limited to those remarks in the People's Daily. Instead, a commerce ministry spokesman cautioned against any sense of glee, pointing out that China still had 40 million people below the poverty line. "China remains a developing country. The quality of China's economic development still needs to be raised. It needs more effort to improve economic quality and people's lives," Yao Jin said.

It is a valid point and the Chinese authorities' public reiteration of their domestic challenges appear to indicate their focus. Overtaking Japan in terms of gross domestic product is not going to change the basic truth:

- China is 10 times the size of Japan

- it is a rapidly ageing country and its one-child policy shows signs of becoming a liability

- the ongoing property boom has the government caught between a rock and a hard place, ie should it keep the elite happy or extend its largesse to a wide swathe of poor and lower middle class people

In addition, President Hu Jintao's drive to develop the relatively backward western and central provinces instead of focusing on the more advanced eastern and southern provinces poses a serious political problem in itself...

There are other problems too. With growing prosperity, more Chinese are learning English and with it a new philosophy — that it is man's right to be free and to have a democratic system of governance. The Communist Party is not ready to deal with this challenge...
In the second article, "Chance to be bigger than Coke in China", Sujit John & Mini Joseph Tejaswi, notes China's growing focus on domestic economy, and foreign investors are taking note.
China appears increasingly open to overseas investors willing to feed this demand. Chinese vice-commerce minister Chen Jian told the Indian delegation: "I hope you can tell Indian entrepreneurs that the Chinese government wants more and more products imported from India. I hope large enterprises from India will have a larger influence than Coca-Cola in China."

Some Indian enterprises have recognized the potential of the Chinese market and moved in aggressively. Mahindra & Mahindra has made acquisitions in China and has become one of the country's largest tractor companies. Automotive components company Sundram Fasteners' Chinese unit supplies both export and domestic markets.

Chennai-based Orchid Chemicals and Pharmaceuticals has a 50:50 joint venture with North China Pharmaceutical Corporation and is focussing on bulk manufacturing and marketing of drugs for the Chinese market. "In four years, we have clocked $50 million in revenues and more importantly, the operations were profitable from day one," says K Raghavendra Rao, CEO of Orchid Chemicals.

Rao says China can be great for Indian business. "The (borrowing) cost of funds is low. We have accessed funds at 6% per annum, which is impossible in India. Labour cost is less than half of that in India. We pay a third for power and fuel in China, when compared with that in India. And physical infrastructure is an intangible benefit for all investors."...

Friday, August 20, 2010

The Rise Of India

Excerpts from Asian Journal of Political Science, 20th August 2010 Edition:

"Compared to China Indian public policy still has a lot of room for improvements.
‘Maoists’ or Naxalites threaten political stability and economic freedom.
Geopolitics may explain India’s late, slow and incomplete reforms. The
rise of Asia, in particular of China and India, generates geopolitical challenges of its own.
Conceivably, the global expansion of economic freedom permits not only the rise of Asia,
but the peaceful management of the coming power transition between Asia and the West."

"China and India together account for almost 40 per cent of mankind. Once they joined the
capitalist market economies, capitalism became truly global.Mainland Asia is catching
up. According to Maddison (2007: 378, 381), in 1950 the Asian share of world
population was 54.7 per cent, but the Asian share of world gross domestic product
(GDP) was only 18.6 per cent. By 2003 the Asian share of global population had
increased to 59.4 per cent, but the Asian share of world GDP had more than doubled
and increased to 40.5 per cent. In 2003 the West still commanded 43 per cent of world
GDP, but contained only 12 per cent of global population (Maddison, 2007: 71)."

"From the 1950s to 1980 per capita incomes in India and China were fairly similar to
each other. Per capita incomes in both countries grew more slowly than globally
(Maddison, 1998: 40 41). Both of them pursued ‘leap-forward strategies’ which
focused on heavy industries in spite of capital scarcity and labour abundance.
Comparative advantage was neglected (Lin et al., 2003: chapter 2). It could not be
exploited until the focus on heavy industry and import-substitution was mitigated
or given up. Like China, India was afflicted with socialism and an emphasis on
planning.8 Of course, a comparative advantage defying development strategy would
have been impossible in a free and competitive market economy. A large involvement
of government makes big and persistent mistakes possible. Whereas China suffered
from the repressive and radical variety of socialism, India tried the democratic
variety. Both countries, even democratic India, more or less disengaged from the
global economy. In the late 1940s when India became independent, its share in
global exports was 2.4 per cent. In the early 1990s, it was only 0.4 per cent (Bhagwati,
1993: 58). "

"The poor performance of the world’s most populous countries was not inevitable.
In principle, both of them should have enjoyed the ‘advantages of backwardness’ and
should have benefited from ‘conditional convergence’ (Barro and Sala-i-Martin, 1995;
Helpman, 2004; Levine and Renelt, 1992; Levine and Zervos, 1993; Olson, 1996).
Although not all backward economies do converge, although not all of them exploit
the potential ‘advantages of backwardness’, in principle the followers of the global
development process enjoy some advantages over the pioneers. If they choose to do
so, they can benefit from the greater degree of economic freedom and development of
the more advanced countries (Weede, 2006). They may borrow technologies.9 They
easily find opportunities for productive investment and are less likely to run into the
problem of decreasing returns. They can reallocate labour from less productive
employment in agriculture to more productive employment in industry and, later, in

Thursday, August 19, 2010

China's rise in Africa: What kind of impact it would have?

China has been making inroads in to Africa at a rapid pace, over the past decade. This has triggered a debate on the qualitative differences between conventional western influence in Africa, over the past two centuries, and the implications of China's entry. James Shikwati, is an old friend of mine, and he runs IREN,one of Africa's few free market think tanks in Nairobi. Mr Shikwati has now weighed in on this debate in this article, "China's surge challenges Africa's worldview" published in the African Executive, the weekly newsletter. He says that China's surge on the world stage, might have a good impact on Africa, if only African's are ready to take advantage of this new opportunity. Another factor that explains China's appeal in African, he says, is China's apparent non-interference in domestic politics of African countries.

China’s economy now valued at $ 1.33 trillion has surpassed Japan’s $1.28 trillion to position her as the second largest economy in the world after United States of America. Of interest to Africa is the fact that China, still largely a developing country, is already a major power in global politics. Could China be building on its ancient infrastructure that has been dormant over the years?

One need not go far in search for an answer. Kenyans have been treated to startling news of Siyu village in Patte Island that has Africans of Chinese descent. The Chinese have already taken some of their “relatives” from this place for university education in their country.  Mzee Baraka Badi Shee, whose daughter Mwamka Sherriff currently studying in China, is said to be linked to some of Zheng He’s crew whose ship sunk off the coast of Kenya 600 years ago.

Recent reports by International Energy Agency based in Paris indicate that China has already surpassed U.S.A in energy consumption. China’s total energy consumption in 2009 was equivalent to 2.265 billion tones of oil compared to U.S.A’s 2.169 billion tones in the same year. China – Africa trade has surged from $55.5 billion in 2006 to $106.8 billion in 2008 largely in raw material imports from the continent.  In Kenya alone 44 Chinese companies have already invested in the country, 12 of which have joint Kenya – Chinese ventures.

China’s surge in global economic and political prowess is likely to impact on Africa’s world view and recorded history. Those who have visited the Kenyan coastal towns are treated to Arabic and Portuguese connection to East Africa. The ongoing excavations led by a team of archeologists from Peking University might turn around what schools have taught over the last century about East African history. Vasco Da Gama’s pillar that towers over Malindi coast might soon get dwarfed by that of Zheng He (1371 – 1433), who is reported to have arrived earlier than Europeans.

Historians might soon open another battlefront on China’s role in understanding the world’s geography. Already debate is ongoing on whether it was Ferdinand Magellan (1480 – 1521) who circumnavigated the earth first or the Chinese. For Africa, what is important is the point that China is not an ordinary “developing country.” China has a development infrastructure that predates some of the modern developed nations. Economists will have to grapple with China’s central command “market economy” and political scientists with its one party democracy among others. Unlike their Western counterparts that invest heavily in media-good-look drives; the Chinese move in hushed steps.

The Chinese could simply be “modernizing” their ancient power unlike Africa whose development script is largely not connected to the continent’s past. The African script is dictated by outsiders making it extremely difficult for individuals to strategize for the future.  African scholars and those in Diaspora that have attempted to connect the continent to its past for purposes of launching momentum for the future rarely get attention.

China is more appealing to Africa due to its “developing economy” status and its policy of non interference in internal politics of other countries. A little peep into Chinese history reveals just how Africa uses prejudiced scripts to judge its partners. Africans have a humongous task to seek to understand themselves, the Chinese and their traditional allies from the West. Unearthing Africa’s trade and political past; re-writing history books to help put geopolitics in perspective and pushing for the reorganization of the global market system among others are some of the steps to take. China’s surge in the global arena is good for Africa… only if Africans take advantage of the fresh air it offers.

Friday, August 13, 2010

Changing climate: Hope for the tiger?

Two crouching tigers, some hidden dragons

The winds of change between the two giants could impact not only the environment but also politics. In this article published in the special issue (July-August 2010) of the "India China Chronicle", I look at the possible implications of the cooperation between these two countries at the climate conference in Copenhagen, last year. I believe a much bigger opportunity lies in the field of wildlife conservation, particularly in saving the tiger. Following is the text of the article.

Over the past half century, relations between the two Asian giants have been on a roller coaster ride. In recent years too the two countries have seen sentiments swing wildly on issues ranging from trade to Tibet, coloured periodically by the border issue.

Despite its history of turbulence, the two neighbours together made history at the climate summit in Copenhagen in December 2009, for the first time, the world got a glimpse of the possible consequence when China and India join hands for a common cause. prior to the climate summit, there had been a flurry of high level exchange between the two sides. Both countries came up with evidence to show that carbon intensity of their economies had been falling over the past decades. Both made unilateral announcements to reduce the carbon intensity further over the next decade. They also underscored the need for equitable share of the planet's atmosphere to meet the developmental aspirations of the people, and finally, they proposed to focus on a target of temperature increase in the future, as an alternative to the carbon emission targets which had been the cornerstone of the global climate negotiations.

While much of this information was trickling out of Delhi and Beijing prior to Copenhagen, there was very little appreciation of the possible implications of all this at the UN climate summit.

That became clearer in Copenhagen, when it was acknowledged that China and India were in constant touch, developing their negotiating strategies together. Even the ministers on the two sides were meeting almost on a daily basis to ensure that issues were smoothened out.

Today, it is clear that this joint positioning was the most significant factor in the ability of developing countries to withstand the pressure mounted by the rich countries in Copenhagen. With all the hype that was built up prior to Copenhagen, hardly anyone could have believed that at an international event of this magnitude, at an European capital, would have led to the marginalization of Europe itself. It was the Americans who seem to have realised the tectonic shift that was taking place, and decided to cut the losses by striking a deal on the political statement at the end. European governments had banked on the prospect of an agreement in Copenhagen to infuse new life to the Kyoto protocol, which is to expire in 2012, and so the political statement left them quite shocked.

China has been a member of various developing country groupings, including the G-20. But hardly ever was China seen taking the lead at international negotiations. At the WTO meetings over the past decade, it was the Brazilian and Indian ministers who typically articulated the developing country perspective. Copenhagen has changed all that. It is likely that the 2009 climate summit will be remembered not so much for its failure to reach an agreement to go beyond Kyoto protocol, but for the impact that China and India, by cooperating with each other, had on the whole process.

The question that arises: Is this a new phase of India-China cooperation in Copenhagen an exception, or would that become the norm for the future? Will the climate of relationship between the two giant neighbours undergo a fundamental shift in the aftermath of the climate summit?

Needless to say the two countries have a wide range of issues confronting each other. They range from economics to environment, from the unresolved border to geo-politics. While political frictions do surface periodically, both the countries seem to have matured enough not to allow the political cloud to affect the growing trade and economic relationship.

But the wide convergence on different environmental issues facing China and India, could help the two countries to seek common grounds on these areas. Without the historic baggage that affects the political relationship, and the periodic tensions that surface in any trade relationships, the prospect of better relationship on environmental issues because of the convergence of interest seem much brighter. And the cooperation on environmental issues may help improve the level of mutual trust and confidence that could rub off positively on political relationship as well.

The two countries are already cooperating on conventional and non-conventional sources of energy. Other potential environmental areas where there could be complementary relationship are newer and greener technologies,     ship-breaking,     recycling of material, etc. But perhaps the highest political capital lies in the possibility cooperation in the area of tiger conservation.

Tiger is an iconic animal in culture and history of both China and India. There are perhaps two dozen tigers left in the wild in China, mostly along the Siberian border. India currently estimates that about 1400 tigers are roaming in the wild. But globally, tiger is a highly endangered species, and remains so despite many initiatives launched to save it over the past four decades.

India believes that the demand for tiger parts in traditional Chinese medicine is one of the major sources of threat to tigers in Indian forests. Others think that the pressure of poaching to meet demand in China constitutes a smaller threat, about 25%. The bulk of the threat to tigers in India comes from shrinking forest habitat and the consequent conflict between human and wildlife.

Tiger conservation is not primarily an issue of law enforcement. India has problem of protecting its tigers, just as China has problem in completely eliminating all trade of tiger parts.

Recently there were some indications that there is perhaps a shift from this mutual blame game. India recently recognized that protecting tigers is primarily India's responsibility, since the Chinese do not come to India to poach the tigers.

China, on the other hand, is exploring alternative conservation strategies. following its economic rise, increasing number of people are finding non-rural economic opportunities, as a result, human pressure on forest and wild areas in many parts of China have significantly reduced. In some of these parts, forests have made a dramatic comeback. Some of these old tiger habitats could be ready again to host wildlife.

China is seriously looking for ways of reintroducing tigers in a controlled manner, in a few areas where tigers once roamed. Hardly any country has as much expertise and experience of managing tiger habitats as India. With recent relocation of tigers into areas from where they had vanished, India is also grappling with similar problems.

China does not have wild tigers ready for translocation. so they have set up an ambitious effort to try to develop ways of re-wilding tigers that have been born in captivity. This is a very exciting scientific opportunity.

In both these aspects, preparation of tiger habitat, re-wilding and reintroduction of the tiger, China and India could cooperate, and if successful, it would secure not just the tiger, but generate huge amount of goodwill between the elephant and the dragon!

China poses an even more audacious challenge to old conservation mindset. It has almost perfected the art of breeding tigers in captivity. It has more than 5000 tigers in captivity in zoos and other facilities. It could initiate a controlled trade in tiger parts from its captive tigers, and that could lower the incentive to poachers to kill wild tigers.

Even if India does not wish to join in this effort to help the cause of conservation through commerce, it stands to gain if China is successful in meeting the demand for tiger parts from its stock of captive tigers.

From the history of world trade, it is clear that smugglers and criminals profit only when there is a restriction on trade, creating an unmet demand for goods and services. Naturally, when trade is outlawed, only outlaws trade! If China were to legalize trade in tiger parts from its breeding facilities, the poachers in India would have little chance of competing with the market forces. Consequently, threat of poaching will almost get eliminated in India. There are many examples from across the world where legal trade has eliminated illegal trade. Over a million crocodiles are harvested each year from farms, yet there is hardly any evidence of any crocodile being killed in India in order to meet the demand from the international fashion industry.

China and India need to find ways of building on the new climate they sought to create in Copenhagen. Their common position on climate was premised on the belief that economic growth would actually enable the countries to improve energy efficiency, reduce pollution, compete effectively and clean up the environment. And as economies improve, they de-carbonise, as the history of human development illustrates over the past 400 years.

This is the real potential of the changing climate between China and India - harnessing the power of commerce, benefiting people and improving the quality of environment. Today, economic potential of both China and India are now openly acknowledged by all. Now is the time to reap the environmental dividend from economic development

Wednesday, August 11, 2010

Success despite govt, courtesy jugaad

When an overwhelming majority of Chinese businessmen say that the main reason for their success is network connections (guangxi), especially with government officials, most Indian businessmen attribute their success to Jugaad, ability to get around prohibitive laws.Most Indian businessmen see corruption a problem when the Chinese success story is mainly Government led. China has been less resilient in dealing with the economic crisis and is likely to end up with a weaker workforce, writes Swaminathan Aiyar in Economic Times.

Read the whole article:

"No less than 93% of Chinese businessmen say the main reason for their spectacular success is network connections (guangxi), especially with government officials. Indian businessmen, however, have succeeded despite the government: 81% say the main reason for their success is jugaad, the ability to find innovative way round prohibitive rules and institutions."

"This is the key finding of a survey of 4,000 businessmen in the two countries by YouGov, a top online survey organisation, and the Legatum Institute, an independent think tank. "

"Most Indian business owners view the government as corrupt, wasteful and ineffective. They acknowledge major gains from liberalisation but see corruption as a terrible problem that merits top priority in the future."

"India's main successes are in the private sector, while its main failures are in the government sector. That is surely a major reason why India has lagged behind China for three decades. It may yet overtake China in the next decade because of its demographic dividend. In 2011-20, India's workforce will increase by 110 million, but China's by less than 20 million, according to a Goldman Sachs study. This advantage may translate into faster GDP growth."

"One-fifth in India and just over onethird in China believe the global financial crisis has made starting and running a business more difficult."

"This suggests that China has been less resilient than India in facing the financial crisis. This probably flows from China's greater dependence on exports."

"But the confidence now exuded by Indian and Chinese entrepreneurs shows that feelings of inferiority induced by the colonial era are almost entirely gone."

"Chinese entrepreneurs say the main reason for starting businesses is to make money. Indians give money a lower priority, and say their main motivation is independence, being one's own boss."

"Only a small fraction - 6% in China and 2% in India - sees philanthropy or volunteerism as the primary means for creating social impact. "

Tuesday, August 3, 2010

Inside the minds of Indian and Chinese entrepreneurs

There is no dearth of commentary on economic comparison of India and China. A new study by the Legatum Institute says that Entrepreneurs in both the country are bullish about the economy. When most entrepreneurs in India start on their own, for being their own boss, Chinese entrepreneurs do it for money. Many Chinese owe their entrepreneurial spirit to the state, when such is not the case in India. Chinese entrepreneurs are more dependent on banks, when Indian are dependent on family resources, writes Ryan Streeter in The Wall Street Journal.


"The past few years have seen no shortage of commentary about the comparative economic environments in China and India, where growth and the rise of enterprising classes have gone hand in hand. Yet we have very little data to help us understand how entrepreneurs in these countries think and what motivates their decisions and actions. A new survey of more than 4,000 entrepreneurs, business managers and aspiring entrepreneurs, conducted by YouGov and released today by the Legatum Institute, sheds light on the countries' respective enterprising classes—and raises some questions for policy makers and investors."

"Entrepreneurs in both countries share a high degree of bullishness. "

"Looking beyond the economic optimism, however, two different styles of entrepreneurship emerge. The differences start with why entrepreneurs launch businesses in the first place. Asked about their main motivation, the overwhelming majority of Indian entrepreneurs name "being my own boss," while the most popular response in China is earning more money. In this way, Indian entrepreneurs more closely resemble the Western model: American entrepreneurs were more likely to cite "owning my own company" than "building my wealth" as the main reason they launched a business, according to a Kauffman Foundation study last year."

"When asked about other factors inspiring their decision to start businesses, nearly half of Chinese entrepreneurs give answers related to the state's efforts to promote and manage enterprise. Compared to just 9% in India, 23% of Chinese entrepreneurs say what they learned in school or at the university prompted their decision, presumably a result of the government's strategy of using universities to promote entrepreneurship. Chinese business owners cite pro-business actions by the government or pro-business messages in the media (which in China are state-controlled) at three times the rate of their Indian peers."

"This difference in inspiration and motivation manifests itself in many ways. The relational Indian model of business start-ups is evident in enterprise financing, where 49% of business owners rely on family resources to start their enterprise, compared to only 25% in China. Chinese entrepreneurs are much more dependent on banks, with 49% taking out loans compared to 27% in India. Indian entrepreneurs use conventional financing through debt and investors at about half the rate of their Chinese peers. "

"In listing factors important for starting a business, Indian entrepreneurs place nearly as much value on internal personal qualities, such as creativity and the ability to take risks in the face of adversity, as they do access to finance. Access to information and knowledge, for instance, is more important to Chinese entrepreneurs than being creative. This suggests that Chinese entrepreneurs believe business success depends on external market conditions that can be known and manipulated, whereas Indian entrepreneurs regard success as the result of their internal ability to adapt to changing conditions."

"The survey results uncover an unfolding experiment on how best to foster business creation in developing countries. So far, our findings suggest entrepreneurship in India is marked by a kind of sustainability that is less evident in China. Because India's entrepreneurs have succeeded amid dysfunctional government and financial institutions by developing a kind of independent and experimental ingenuity, it stands to reason that the enterprising class would prosper even more were India to reduce barriers to business and clean up corruption. In China it is unclear what will happen if state efforts are no longer sufficient to entice and groom the entrepreneurs its economy needs. "

Sunday, August 1, 2010

Looking at the China India relations through the lens of the media

One issue which the media likes to focus on, quite periodically, is the Sino-India border problem, and it is true that the border issue has been simmering for a long time. But there is much more to the relationship between these two Asian neighbours, much beyond borders. Pallavi Aiyar, who spent six years in China as a journalist, speaks to Nitin Pai on how the media is shaped in the two countries, and how the media might impact the relationship between the two neighbours. The conversation also looks at the significance of soft power, and the fueling of nationalist sentiments. Pallavi Aiyar is the author of ‘Smoke and Mirrors: An Experience of China’. Ms Aiyar is based in Brussels, and is the correspondent for the Business Standard newspaper in India.

Here are a few excerpts from the interview, A lot more than a border”, is published in Pragati magazine, in its August 2010 issue.

Nitin Pai: There used to be—and there is to some extent—a perception in India that what comes out in the Chinese media is the view of the Chinese government. Certainly Mao Zedong was known to have vetted the editorials in the People’s Daily during the India-China tensions in the late 1950s and 60s. To what extent is such a perception still valid?

Pallavi Aiyar: The Chinese media landscape is an increasingly complex one and a far cry from Maoist times. A multiplicity of media operate today ranging from fully controlled party papers like the People’s Daily, to more independent and critical regional media like Nanfang Zhoumo (Southern Weekend) in Guangzhou, and racy, tabloid papers that operate as purely commercial enterprises. There are also a variety of specialist publications focused on finance, business or the environment that increasingly attempt an independent line and push the envelope against government censorship.
That said, foreign affairs and China’s international relations remains a subject that is strongly controlled by the government and independent writings on the topic are forbidden. Even today central and regional propaganda departments send weekly (and sometimes daily) instructions to all media outlets about subjects deemed taboo. Editors who transgress orders are, depending on the assessed severity of the violation, warned, demoted or fired.
Writings on India in the Chinese media therefore almost always have official sanction even if they do not always reflect the government’s official position. This is equally true of Party media and so called independent media like the Global Times (which is in fact controlled by the People’s Daily group).
Since the Party is not a monolith, differing opinions on India in the Chinese media reflect the differing shades of opinion within the Chinese government. However, although it is often claimed otherwise by the Chinese, they do not simply reflect the opinion of the author.
The internet and blogs are an altogether different kettle of fish. These are not routinely subject to propaganda department orders. If a blog is discovered to be overly transgressive the government is able to either shut it down or have the “offending” material deleted. However, there can be considerable gaps in time before the publication of an unauthorised article and its discovery. Moreover, the writings on a blog are more likely to reflect the personal opinion of the writer rather than that of the government or a faction of the government.

Nitin Pai: How about the other way around: how much do views expressed in the Indian media (by mediapersons and analysts) affect Chinese perceptions of Indian government policy?

Pallavi Aiyar: The Chinese monitor Indian media carefully and the coverage of Sino-Indian developments is seen as a key indicator of the strategic “pulse” in India. There is an awareness that media in India can often take a standpoint that is different or even contrary to the government line. On the other hand there is also the belief that media do not invent stories out of thin air and that they are usually based on leaks from within the government or military establishments. There is less understanding of the extent to which media in India, particularly television, is driven by the competition for ratings and the tendency towards sensationalism this generates. The idea that the media can create out of what might originally have been a “genuine” story, a run-away monster over which the authorities have little control, is not something the Chinese have an automatic grasp of. The danger of a misreading of Indian media is therefore a significant one and can create a backlash at the policy level.
The Chinese are also aware of the difference between news coverage per se and the comments and analysis that are usually written by strategic pundits. The latter are taken particularly seriously since it is known that the writers are often also strategic advisors to the government.

You may like to read the full interview here. A lot more than a border”, is published in Pragati magazine, August 2010.

Saturday, July 31, 2010

China is now the second largest economy in the world

Chinese officials have acknowledged that the Chinese economy has overtaken Japan's, and is now second only to the US.

Mr Yi Gang, China's chief currency regulator, mentioned the milestone on Friday, 30 July 2010. "China, in fact, is now already the world's second-largest economy," he said in an interview with China Reform magazine posted on the website (www.safe.gov.cn) of his agency, the State Administration of Foreign Exchange.

"China's economy expanded 11.1% in the first half of 2010, from a year earlier, and is likely to log growth of more than 9% for the whole year. China has averaged more than 9.5% growth annually since it embarked on market reforms in 1978. But that pace was bound to slow over time as a matter of arithmetic," Yi said.

"China is still a developing country, and we should be wise enough to know ourselves," Yi said, when asked whether the time was ripe for the yuan to become an international currency.

While China's economy has grown substantially over the past few decades, per capita income stands just at $3,800, which is a fraction of that in the developed countries.

A Reuters news report on this was published in the Times of India, on 31 July 2010.

Tuesday, July 27, 2010

Invitation for Launch of India-China Chronicle by Dr. Shashi Tharoor

India China Economic and Cultural Council

Cordially invites you to

Launch of India-China Chronicle


Dr. Shashi Tharoor

(Member of Parliament, Former Indian Minister of State for External Affairs and United Nations Under-Secretary General for

Communications and Public Information)

At 7:00 PM, on 12th August, 2010

Venue: Ballroom, Shangri La's Eros Hotel, 19 Ashok Road, New Delhi


Introductory Remarks and a talk on

"Current state of India China Relations":Dr. Abid Hussain, Chairman of ICEC

Launch of India-China Chronicle by: Dr. Shashi Tharoor

Address on "Public Diplomacy: The:Dr. Shashi Tharoor

Importance of Public Opinion in Bilateral Relations"

Panel Discussion on "Avenues of Deepening India China Relations: From Harmonious World to Vasudhaiva Kutumbakam"


v Dr. Shashi Tharoor, Member of Parliament

v H.E. Mr. Zhang Yan, Ambassador of India to China

v Sh. Gautam Bambawale, Joint Secretary (East Asia), MEA

v Mr. Wenmin Yao, Vice President, Huawei India

v Mr. Kiran Karnik, Former President and Current Trustee, NASSCOM *

v Mr. Xie Fei, Cultural Counselor, Embassy of China

v Sh. Suresh Goyal, Director General, ICCR

Moderator: Mr. Pramit Pal Chaudhari (Foreign Editor, Hindustan Times)*

Signing of MoU between: Institute of Chinese Studies (ICS) and ICEC

Vote of Thanks: Mr. P S Deodhar, President of ICEC

Followed by Cocktail and Dinner


Anchit Goel

India-China Economic and Cultural Council

K-19 (GF), South Extension-II,

New Delhi- 110049

Telfax: 011-46550348

M: +91-9555086554

Sunday, July 11, 2010

India looks to Chinese rice hybrid to raise productivity

This report titled "India looks to Chinese rice hybrid to raise productivity" was published in The Financial Express on July 11 2010.

The agriculture ministry plans to replicate the Chinese model for hybrid rice production in the eastern states. The ministry has proposed a task force on promotion of hybrid rice and will push for private sector participation in the development of the hybrid variety.

A team led by minister of state for agriculture K V Thomas visited China in this regard. The team has submitted its report and a set of recommendations to the agriculture minister Sharad Pawar. While charting out ways to bring green revolution to the eastern region, Pawar has asked his ministry officials to look into the Chinese model and replicate that.

In India, rice productivity is 3.3 tonne per hectare. China’s productivity is almost double and is at 6.6 tonne per hectare. China has been able to produce 200 million tonne rice annually from 30 million hectare (ha) while India produces 150 million tonn rice from 45 million hectare.

The ministry has noticed that almost 63% of Chinese land under rice cultivation produces hybrid variety, compared with only 3% in India.

"A task force on promotion of hybrid rice should be created at the national level for more aggressive promotion,” Pawar said. The task force, to be headed by an additional secretary, will hold periodic meetings with the eastern states and work out a blueprint for increasing the area under hybrid rice.

The task force will devise strategies to create clusters of villages adopting hybrid rice so that procurement centres are opened to provide marketing support to farmers. “If proper guidance and support is given to the farmers along with proper price and storage facilities then the situation will change substantially in two-three years,” he said.

His ministry is also looking at possible public-private-partnership in areas like development of hybrid seeds. “There are almost 3,000 seed companies in China. A lot of seed companies have also come in India. We will only have to ensure that the quality of the seed is maintained. We are trying to encourage the private sector to venture through public-private-partnership model,” he said.

Need to boost production to achieve food security: FM

Finance Minister Pranab Mukherjee on Saturday said that the government will enact a legislation to provide subsidised wheat and rice to poor, but to make it a success there is a need to boost production and strengthen delivery system.

"We are committed to ensure Food Security Act and to make successful, we need to produce more procure more and strengthen delivery mechanism for making accessible and affordable,” Mukherjee said. The UPA government has promised to enact a National Food Security Act, under which it promises to provide 25 kg of foodgrain every month at Rs 3 per kg to families below the poverty line. Mukherjee said there would be no dearth of funds for the sector.

Friday, May 28, 2010

Chinese workers on strike at Honda plant

Labour unions going on strike is quite common in India. Just this week, a section of the state run airline, Air India, had gone on strike for two days causing huge disruption, and inconveniencing thousands of passengers. The government responded by sacking dozens of employees, and derecognising a couple of the unions, in an uncommon move.

In China, of course, labour unrest is generally not in the news, and the government rarely publicises such actions. But this time, 1900 workers in a Honda auto component factory about 100 km from Hong Kong, have gone on strike since May 21, 2010. . And this action seems to have affected Honda's assembly line plants in other parts of China. Recently, a few other MNCs have faced labour unrest as well.
The New York Times reported, "Strike Forces Honda to Shut Plants in China" on 27 May 2010.
According to state-controlled Chinese media, workers at the transmission factory earn $150 to $220 a month and are demanding to be paid the same wages as Honda’s assembly plant workers, who earn $300 to $370 a month.
The official China Daily newspaper described the strike at the transmission factory as “the largest industrial action ever reported in China.” More workers have walked out in strikes at other Chinese factories, but the authorities have typically hushed up these events and have discouraged the official press from reporting on them.
Workers have sometimes complained that companies violate labor laws, but the strike in Foshan appeared to be a push to increase wages.
The newspaper cited a municipal official in Foshan as saying that the local government had investigated but had not found labor law violations by Honda at the transmission factory. The minimum wage has nearly doubled in the last five years in the factory cities of coastal China, to about $130 a month in cities like Foshan, with 11 provinces having raised their minimum wages by 10 to 20 percent so far this year.
Another report in the Financial Times, on May 27, 2010, says
The company confirmed that the industrial action had disrupted operations at car assembly plants in Guangzhou, the provincial capital, and Wuhan in central China.
The Foshan facility closed on Monday, with Honda’s three car factories following suit on Wednesday. According to the company, the stoppages could continue into next week, pending a government-led effort to resolve the dispute.
The workers appear to be acting independently and without support from the country’s only officially recognised union, the All China Federation of Trade Unions. “They have organised this themselves,” said an executive at the Foshan factory’s union office, who declined to give his name.
While the ACFTU has been more aggressive in establishing chapters at multinational companies, notably Walmart, it shies away from confrontation with management. The union’s website lists “the building of a socialist harmonious society” as one of its “primary tasks”.
Strikes are also rare at multinationals, which tend to pay higher wages and offer better conditions than their Hong Kong, Taiwanese and domestic counterparts. Jiangsu province began the trend in February when, after a two-year freeze, it raised the officially mandated minimum monthly wage by 13 per cent to Rmb960 ($140). Honda employees in Foshan earn about Rmb1,500 ($220) per month and are demanding an increase to Rmb2,000-Rmb2,500.
Foreign investors are under pressure to increase wages as the country’s manufacturing sector shakes off the effects of the global financial crisis.
Honda is the second high-profile multinational investor confronted by a serious labour crisis in recent weeks. Foxconn, a contract manufacturer for Apple, Dell and Hewlett-Packard, is struggling to contain a spate of suicides at a sprawling plant in Shenzhen employing 300,000 workers.

Wednesday, May 26, 2010

Why India Must Swing

This article by Nitin Pai was published in Yahoo on May 25th 2010. You can read the full article here.


Part due to the wishfulness of the rhetoric surrounding Barack Obama's campaign and part due to the economic crisis it sunk into, it became fashionable in the United States to ignore geopolitical realities, and instead engage in a fresh bout of fantasising about China. Influenced by intellectuals such as Zbigniew Brzezinski it became fashionable to believe in the existence of a tidy bipolar world where the United States and China, the G-2, would sit together and shape the twenty-first century. Tidy and familiar as this world may be to Cold War-era strategists, it does not even begin to mirror reality: it took, for instance, no less than a Group of 20 countries to co-ordinate economic policies to combat the global recession.


... If the United States has the capacity to project power globally, China has nurtured proxies like Pakistan and North Korea to tie it down both indirectly and inexpensively. If the United States outguns it in traditional areas of warfare, China has sought to gain an advantage in cyberspace and outer space. The waters of the Indian Ocean therefore, are merely one of the several theatres where China and the United States will challenge each other.

To be sure, the United States military establishment is aware, concerned and preparing for a confrontational relationship with China. However, even at the best of times Washington-like New Delhi-finds numerous domestic vectors pulling in different directions to be able to fashion a focused strategy. Worse, at this moment, the Obama administration is not only confused by the dissonance between its beliefs and reality. It is also constrained by a weak economy, fiscal pressures and a mountain of debt that it owes to its geopolitical rival.

What does this mean for India?

First, despite irreconcilable differences in the way India and China view international relations, the high Himalayas prevented large-scale military conflict between the two civilisations for nearly two millennia. ...

Second, given the relationship with China, it is in India's interests for the United States to remain the predominant power in the world....

If strategic sense were to prevail in Washington, the United States would do everything to woo India into a tight alliance. There was a period during the much-maligned George W Bush administration that it appeared that the United States had chosen just such a course. No longer-given its bipolar fantasies, the Obama administration has substantially abandoned the project.


To paraphrase Henry Kissinger, India's options toward the United States and China must always be greater than their options toward each other. It serves "our purposes best if we maintained closer relations with each side than they did with each other." ...

... ...

The reason why India is unable to get the swinging right is perhaps because our political leaders and much of the strategic establishment are wedded to their pet dogmas. Prime Minister Manmohan Singh, for instance, is committed to improving relations with the United States. And it was Mr Ramesh, after all, who popularised-if not coined-that ghastly word, "Chindia". Now turn on your television or open the op-ed page of a newspaper, and you'll spot their opposite numbers, forever opposed to the United States or China or both.