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Why China’s economic rise is an opportunity for India

China has so far belied all predictions of an economic apocalypse but a combination of factors can be disastrous for not only the country or the region but for the world economy.

opinion Updated: Nov 21, 2017 15:28 IST
India,China,Chinese President Xi Jinping
China's President Xi Jinping at the APEC Summit in Danang, Vietnam, November 10, 2017(REUTERS)

The Preamble of the new Constitution of the People’s Republic of China adopted at the Fifth Session of the Fifth National People’s Congress and promulgated for implementation by the Proclamation of the National People’s Congress on December 4, 1982, has a line tucked away in the second last paragraph: “The future of China is closely linked to the future of the world”. Chinese President Xi Jinping would have liked to amend it and say, “The future of the world is closely linked to the future of China”. He has, of course, stopped short of saying that.

China’s constitution was amended twice, in 1988 and 1993. Both amendments were economic in nature. Xi Jinping has made the third amendment. The top man in China requires courage, absolute power, unbridled authority, command unquestioned loyalty and above all profess zero-tolerance for dissidence. The 19th People’s Congress has established Xi Jinping has all these.

Though Jiang Zemin and Hu Jintao added their trademark ideas, it was only Xi, after Mao, who added his thought and name to the Constitution. The implicit significance of this move is enormous. It was not a mere platitude when Xi remarked about the beginning of a new era in his opening address. Xi left nothing on his agenda to the imagination when he vowed that he sees China “moving closer to centre stage.”

Xi’s idea of a strong China, moving closer to the centre stage of geopolitics, is not only about replacing the US from that position but it also has a strong universal economic agenda and internal political dynamics. That vision has domestic and foreign elements. Under his supervision, the army constructed floating armada in and around the South China Sea, caring little for world opinion and protests by countries in its periphery. He gave a green signal to building ports all along the Indian Ocean, fit for civilian as well as military operations from Africa to Malacca Straits. It is another matter that many of them are economically unviable but serve the strategic interest of Beijing. His ambitious Belt and Road Initiative is focusing on investment, infrastructure, communication systems and cheap loan, thereby tying the local political establishment into a debt trap, thus forcing nearly 60 countries in Asia, Africa, and Europe to integrate their respective economies with the Chinese economy. All this is now part of the Constitution, consequently binding not just this Congress but future generations to “Xi’s Thought”.

As we look at the regional dynamics in Indo–Pacific Region there are clear trends of strategic balance incrementally shifting away from America. The emergence of China as an economic superpower and a strategic fulcrum of the world is a reality. As the largest exporter of manufactured goods to the US, China-US trade could cross $800-billion mark. China is also the largest trading partner of the EU and Japan. It is estimated that China will account for nearly 40% of the global GDP by 2030, provided, as they say in economic theory, other things remaining constant.

What are the options for New Delhi after the 19th Congress?

Evidently, maturity prevails in our relationship and both sides are constantly looking to increase confidence-building measures. Meanwhile, New Delhi is also busy strengthening its side of the scale in the balance of power equation.

There have been political exchanges at the highest possible level in the past three years. The Modi-Xi meeting and other engagements in Beijing and Moscow have paved way for a clearer understanding of the intentions of the two leaderships. This could be one reason for the amicable resolution of the Doklam issue with no alarming fallout so far. As was expected, Doklam was not discussed in the 19th Congress. But the PLA’s statement welcoming the de-escalation and patting Xi in the back amplifies his control over the PLA and tells the world who calls the shots in Beijing.

While there are indications that Washington expects New Delhi to toe its line on China and the Pacific, India has kept the US at a distance while recalibrating its foreign policy and strategic outreach. The Logistics Support Agreement (LSA) was vetted thoroughly and signed as Logistics Exchange Memorandum Agreement (LEMOA), much to our advantage and with an emphasis on a reciprocal basis, more on the lines of ACSA that the US has with some of its NATO allies. This has helped allay Beijing’s apprehensions of India’s shift towards the US as LSA was touted as part of Washington’s ‘contain China’ policy.

Needless to say, China is not all strength and no weakness. The decade-long increase in household savings due to people’s lack of faith and participation in economic programmes, huge and practically unmanageable NPAs, rampant corruption at all levels of the party and the PLA, unrest in Uyghur and Tibet and above all the mounting internal debt ratio are some of the issues that will give sleepless nights to Xi in his second innings. China’s debt service ratio, the proportion of interest and principal on loans that businesses owe against a country’s GDP, is now 38.6% which means more than $3.2 trillion of the GDP goes for debt repayment. Coupled with this is the inability of the economies of some of the countries in Asia, Africa, and SE Asia to repay the infrastructure debt.

China has so far belied all predictions of an economic apocalypse but a combination of factors can be disastrous for not only the country or the region but for the world economy.

But there is no use waiting and wishing for doomsday predictions. China’s power trajectory and influence in India’s extended neighbourhood is both a challenge and opportunity for New Delhi to engage more with neighbours, firm up the Make in India programme and prepare the economy to deal with the emerging situation, be it economic growth or doom.

Seshadri Chari is a member of the BJP National Executive Committee and comments on security and strategic issues

The views expressed are personal

First Published: Nov 21, 2017 15:28 IST