How India can steal China's thunder

Discussion in 'Defence & Strategic Issues' started by SpArK, Mar 1, 2012.

  1. SpArK

    SpArK SORCERER Senior Member

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    How India can steal China's thunder​


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    March 1, 2012

    A document titled "Nonalignment 2.0-A foreign and strategic policy for India in the twenty first century" -- the product of collective deliberations of Sunil Khilnani, Rajiv Kumar, Pratap Bhanu Mehta, Lietenant General (retd) Prakash Menon, Nandan Nilekani, Srinath Raghavan, Shyam Saran and Siddharth Varadarajan -- was released on Tuesday in New Delhi.

    The group's activities were administratively supported by the National Defence College and Centre for Policy Research, New Delhi.

    One of the chapters in the document titled 'Asian Theatre' has quite elaborate comments on China, and opines that India's China strategy has to strike a careful balance between cooperation and competition, economic and political interests, bilateral and regional contexts.






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    China will, for the foreseeable future, remain a significant foreign policy and security challenge for India. It is the one major power which impinges directly on India's geopolitical space. As its economic and military capabilities expand, its power differential with India is likely to widen.

    As is well known, India and China have long-standing disagreements on an agreeable border. Skirmishes and incidents have occurred across the Line of Actual Control. Our strategy should be to 'hold the line' in the north on the Sino-Indian land frontier, but maintain and, if possible, enlarge India's current edge in the maritime south.



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    This strategy takes into account both the superiority of current Chinese deployments and posture on the land boundary, and the unlikelihood of the border issue being resolved in the near future.

    Given that China has managed to settle many of its border issues (at least for the time being) with other, smaller neighbours, the dispute on the Indian border stands out quite prominently. It is significant that on his last visit to India, Chinese Premier Wen Jiabao stated that it would take a long time to settle the boundary issue.

    This is a departure from the earlier position that the mechanism of Special Representatives could try to achieve a political settlement of the issue, taking advantage of the fact that relations between the two countries had now acquired a strategic and global dimension -- which made the early settlement of the border issue, both possible and necessary. This has evidently changed.

    It is important that we accelerate the upgradation of our border infrastructure (especially in terms of habitation and supply lines) to reduce the asymmetry in our capabilities and deployments.

    At the same time we must put in place operational concepts and capabilities to deter any significant incursions from the Chinese side.



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    Currently India has the edge in terms of maritime capabilities but China is catching up rapidly. China's current focus is on acquiring dominance in the Yellow Sea, the Taiwan Straits, the East China Sea, and the South China Sea.

    The Indian Ocean falls second in the present order of priority. It is in our interest that China remains preoccupied with its first-tier, more immediate maritime theatre.

    The retention of strong US maritime deployments in the Asia-Pacific theatre, a more proactive and assertive Japanese naval force projection, and a build-up of the naval capabilities of such key littoral states as Indonesia, Australia and Vietnam: all may help delay, if not deter, the projection of Chinese naval power in the Indian Ocean.

    We need to use this window of opportunity to build up our own naval capabilities. Our regional diplomacy should support this approach by fostering closer relations with these 'countervailing' powers.

    This should include a network of security cooperation agreements with these states and regular naval exercises with them.


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    On the political side, our posture towards China must be carefully nuanced and constantly calibrated in response to changing global and regional developments.

    China's threat perception vis-a-vis India has both a local and a global dimension. The local dimension involves Tibet. Our Tibet policy needs to be reassessed and readjusted.

    Persuading China to seek reconciliation with the Dalai Lama and the exiled Tibetan community may contribute to easing India-China tensions. The initial soundings must be discreet and exploratory.

    And we must be mindful of the risk of hostile reaction, particularly from conservative sections of the People's Liberation Army. The situation vis-a-vis Tibet has been complicated by the transition to a democratically elected Tibetan government-in-exile.

    The Chinese had, in part, expected that the Tibetan community would continue with its traditional method of selecting the Dalai Lama -- a method that was amenable to manipulation by China.

    The Dalai Lama's popular legitimacy among his own people is a fact that the Chinese government must acknowledge.



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    On the global canvas, China looks upon India not as a threat in itself, but as a 'swing state' whose association with potential adversaries could constrain China.

    The challenge for Indian diplomacy will be to develop a diversified network of relations with several major powers to compel China to exercise restraint in its dealings with India, while simultaneously avoiding relationships that go beyond conveying a certain threat threshold in Chinese perceptions.

    This will require a particularly nuanced handling and coordination of our foreign policy, both through diplomatic and military channels.

    If China perceives India as irrevocably committed to an anti-China containment ring, it may end up adopting overtly hostile and negative policies towards India, rather than making an effort to keep India on a more independent path.

    India-China economic relations also present a complex and somewhat ambiguous picture. Bilateral trade is rising rapidly but asymmetrically, with a growing trade surplus in favour of China. We could respond by trying to limit Chinese penetration of our market, particularly our infrastructure market.

    Or, we could allow access but with various conditions that safeguard and promote Indian interests in other areas. Given the fact that India's infrastructure market is likely to be in the region of a trillion dollars in the next few years, China would obviously have a keen interest in expanding access to it.


    We should see this Chinese economic interest as a point of leverage for trade-offs favourable to us in other sectors, including political concessions in areas of interest to India.


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    One of the big concerns in our economic relations is the involvement of China's state-owned enterprises. Chinese banks are often able to offer preferential financing to Chinese companies because of their scale and because they are not driven solely by market forces.

    Many of China's premier manufacturing firms are also state-run, and thus have access to such financing. This means that when Chinese companies participate in competitive bidding for open tenders, they may actually have a big advantage over other bidders, which allows them to place stronger (lower) bids.

    However, such preferential financing could also be a useful asset in terms of the volume of infrastructure financing we need so there are multiple questions to be considered here.

    How India should systematically respond to such issues is an important, open question. There is the additional problem of the potential for espionage and intelligence gathering through software means, which was evidenced by the banning of import of Chinese telecom equipment.

    Given the asymmetry in the economic and trade relationship, we should not overestimate our bargaining power. It may be more realistic to link large orders to economic and trade concessions, including fixed investments in India-based facilities.

    It is also reasonable to expect that growing economic interdependence might help make the political relationship more manageable and less subject to oscillations.

    The growing trade surplus between India and China has been a cause for concern owing both to its degree and composition. Not only is the degree of dependence of Indian industries on Chinese imports on the rise. But India's main exports seem to be natural resources, whereas its imports are largely higher end manufactured goods.

    Given India's large services sector, it should be pushing for greater market access and presence in China to correct this imbalance.


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    One area where India may be able to bargain effectively with China is the domain of technology transfer. The ability to leverage access to our markets in order to secure access to sophisticated technology, and so develop domestic capacity is something India has not been able to do as effectively as it needs to, especially with developed countries.

    For example, when an airline company like Indigo signs a $16 billion (around Rs 83,200 crore) deal with Airbus, technology transfer should be a part of the terms of negotiation. Even India's defence offsets have been quite disappointing in terms of technology transfer, with only the lowest value addition activities being sourced domestically.

    China has managed to do this quite well, mainly because the government is able to coordinate the actions of various companies (many of which are state-owned), while India does not have this luxury. It may in fact be easier to negotiate technology transfer deals with China than other developed countries, which are intensely possessive about their intellectual property.

    Huawei, a telecom company from China, has recently agreed to set up a research facility in Bangalore to ensure that none of its imported devices contain any kind of covert listening technologies.

    India's China strategy has to strike a careful balance between cooperation and competition, economic and political interests, bilateral and regional contexts.

    Given the current and future asymmetries in capabilities and influence between India and China, it is imperative that we get this balance right. This is perhaps the single most important challenge for Indian strategy in the years ahead.


    MUST READ! How India can steal China's thunder - Rediff.com News
     
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  3. SPIEZ

    SPIEZ Senior Member Senior Member

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    Why do I find Nandan Nilekani's name everywhere :facepalm:
     
  4. Mad Indian

    Mad Indian Proud Bigot Veteran Member Senior Member

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    I think there is always one thing to keep in mind when dealing with the PRC, Never ever trust them, unless you are a masochist and want to be stabbed in the back like in the 1962!!!
     
  5. no smoking

    no smoking Senior Member Senior Member

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    "Stabbed in the back?", I would say "stabbed in the chest" since you were excuting your "forward policy". India was not innocent in 1962.
     
  6. Bhadra

    Bhadra Defence Professionals Defence Professionals Senior Member

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    Second photo of the article : what are the Chini doing on Indian soil at Bum La?
     
  7. Bhadra

    Bhadra Defence Professionals Defence Professionals Senior Member

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    Chinies are not capable of stabbing in the chest. They can only stab in the back. That is what Tsun Tsu said.
     
  8. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    China's $22 trillion time-bomb

    China's growth model is based on the oldest rapid economic growth hormone available: debt
    Shankar Sharma & Devina Mehra / Mar 02, 2012, 00:08 IST

    For years, a wispy, gossamer dream has been spun by economists working for Wall Street investment banks about how China has managed the impossible: high growth with a very low debt-to-GDP ratio. The dream has been so aggressively sold that almost everybody believes it, including editors of this newspaper who have written glowingly about China’s growth, how far ahead it is of India, how India should give up this race once and for all and so on.

    Like all things churned out by Wall Street, this romantic story is also complete rubbish. Regardless of the level of education, we all behave the same way when we analyse countries: we land at the airport, see multi-lane highways, gleaming skyscrapers in the city centre, massive infrastructure development, teeming shopping malls, tall apartment blocks and golf courses. And immediately jump to the conclusion that this country has done it. It has made it. If you are an Indian, you say this country has left India behind by 100 or 200 years.

    But it is instructive to remember what a crafty villain in an old Hindi movie said: “Har badi kaamyabi ke peeche koi gunaah chhupa hai…” (Behind every great success, lies hidden a great crime).

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    Just as behind nearly every rapid economic growth story, lies hidden, debt. Usually lots of it. Just like Ireland that went from being a really poor country in the 1980s to getting to the top of European Union’s per capital GDP league tables — all within 20 years or so.

    China is no exception. The common wisdom is that China runs a very low debt-to-GDP ratio of around 30 per cent (this ratio was in the low 20s till 2007 but jumped sharply during the 2008 crisis), which gives it lots of firepower to keep reflating the economy and to keep recapitalising its banks. The reality is that this ratio is plain wrong. China’s growth model is based on the oldest rapid economic growth hormone available: debt.

    China has debt at various levels and pockets. Let’s add to this central debt, the local government and provincial debt figures. This figure is around $1.9 trillion. Let’s further add the obligations of the Ministry of Railways. That’s $360 billion. And finally let’s also add 80 per cent of outstanding bank credit. This adds $6.3 trillion. We add bank loans to national debt because unlike most countries, China uses banks for nearly all of its directed, policy lending programmes. For example, the stimulus of 2008-09 was financed largely by banks. By pushing its lending via the banks’ balance sheets, China creates the impression of a country that has very low budget deficits and, of course, very low central debt. We take 80 per cent of bank debt into the national debt figures under the assumption that 20 per cent goes towards consumer and private sector credit.

    Now let’s total up the few trillions we have unearthed. As of 2011, this figure amounted to a tad over $10 trillion! And the ratio of total debt to GDP becomes a more ominous 149 per cent. Mind you, there may be other debts that are obligations of the central government that we don’t know about since reliability of data in China is suspect, to say the least. It is eminently possible that debt is understated and GDP overstated.

    But the story gets worse from hereon. China’s growth model is highly capital or, more accurately, debt intensive. We have calculated a ratio called DIG (debt intensity of GDP), that is, the amount of debt needed to generate one unit of GDP. This ratio started out being in the 0.9 to 1.2 range in the first half of the nineties. During the Asian crisis, this ratio worsened to around two as China again threw loads of debt to come out of the slowdown. The ratio subsided a bit to below one in the boom years from 2003 to 2007. But it jumped dramatically to over four in 2008 as China threw a huge amount of money at an unprecedented slowdown. The trouble is that given the overall low growth environment globally and the worsening trade situation for China, generating a unit of GDP growth now requires higher and higher doses of debt. And, in hindsight, we will look back and say this stimulus of 2008-09 was a colossal mistake.

    So what does the DIG ratio lead us to? See the table.

    As we can see, each crisis leads to a worsening of the DIG ratio and, concomitantly, a sharp worsening of the total debt-to-GDP ratio as China starts building bridges and roads to nowhere in order to reflate.

    The bigger problem lies ahead. Given this inclined treadmill model, if China grows faster, the bigger the debt problem becomes. For the sake of calculation, let’s assume the DIG ratio goes to 1.7 over the next four years till 2016 and that China wishes to grow at eight per cent. The total debt-to-GDP ratio at the end of 2016 becomes 180 per cent, up from the 150 per cent of 2011! In absolute terms, China’s total debt will reach $22 trillion. Coupled with a worsening demographic picture, this high total debt-to-GDP ratio becomes a trap from which there is virtually no escape. To compound the problem, China’s private consumption expenditure (PCE) to GDP has declined sharply to 33 per cent from 55 per cent 20 years ago. The ratio of net exports to GDP has fallen to 3.9 per cent in 2010, from 8.8 per cent in 2007. It’s only the ratio of gross fixed capital formation to GDP that has jumped to over 50 per cent in 2011 from 25 per cent a few years ago. As is clear, if China has to maintain its pace of growth, it has to pile on more debt. If it slows down, its social powder keg starts getting incendiary.

    We are not even counting the burgeoning, widespread non-performing loans problem that is looming large and will, in all probability, lead to China’s fourth systemic banking crisis in less than 25 years. If this is a growth model, then it is even worse than the Western growth model.

    So, the bullets China has in order to emerge from this rock-and-a-hard-place situation are few, if any at all. China is indeed riding the tiger. In contrast, India’s is the Toyota Prius of growth models. India should simply avoid the trap of excessive public spending on infrastructure. That’s where almost every country in Asia, including Japan in the nineties to China and Dubai now, has run into problems. India’s growth model is infinitely more robust and time will prove this to a world bedazzled by China.

    The authors work at First Global

    Shankar Sharma & Devina Mehra: China's $22 trillion time-bomb

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  9. no smoking

    no smoking Senior Member Senior Member

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    But India was capable of moving FORWORD, which means india and china were standing face to face in 1962. The only problem was that indians' arrogance make them think that chinese dare not fight back.

    By the way, show me the proof that Sun Tzu said "Chinese only stab in the back".
     
  10. Bhadra

    Bhadra Defence Professionals Defence Professionals Senior Member

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    Read Sun Tzu carefully. His Art of War talks only of "How to stab in the back". How Chinese are treacherous and unreliable in their conduct.
     
  11. ice berg

    ice berg Senior Member Senior Member

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    Sure, According to your internet warrior doctrine. A war is conducted by telling your enemy how you gonna fight them and preceed exactly like what you said.
    You tell your enemy where your troops are, then send in the same number as them. Oh oh , let us draw a circle around them too, ok. Everyone who steps outside is considered forfeit. Does that suit your worldview of how a war is conducted?

    If the only thing you get from the book is "stab in the back", then I feel sorry for you. Maybe stick to marvels? Can I recommand the amazing spiderman?
     

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