The Rise of China : Strategic Implications.

What does china fear most militarily and socially as a threat to its security and stability?


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Daredevil

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The China Bubble's Coming -- But Not the One You Think

The China Bubble's Coming -- But Not the One You Think

Forget about a Shanghai stock bubble. The whole Chinese economy's getting ready to burst.

BY VITALIY KATSENELSON | JULY 23, 2009

Financial commentators are obsessively debating whether the recent rise in the Chinese stock market means there's a bubble -- and if so, when it's going to burst.

My take? Who cares! What happens to the broader Chinese economy is what we should really be watching. It will have a far-reaching impact on the rest of the world -- much more far-reaching than a decline in stocks.

Despite everything, the Chinese economy has shown incredible resilience recently. Although its biggest customers -- the United States and Europe -- are struggling (to say the least) and its exports are down more than 20 percent, China is still spitting out economic growth numbers as if there weren't a worry in the world. The most recent estimate put annual growth at nearly 8 percent.

Is the Chinese economy operating in a different economic reality? Will it continue to grow, no matter what the global economy is doing?

The answer to both questions is no. China's fortunes over the past decade are reminiscent of Lucent Technologies in the 1990s. Lucent sold computer equipment to dot-coms. At first, its growth was natural, the result of selling goods to traditional, cash-generating companies. After opportunities with cash-generating customers dried out, it moved to start-ups -- and its growth became slightly artificial. These dot-coms were able to buy Lucent's equipment only by raising money through private equity and equity markets, since their business models didn't factor in the necessity of cash-flow generation.

Funds to buy Lucent's equipment quickly dried up, and its growth should have decelerated or declined. Instead, Lucent offered its own financing to dot-coms by borrowing and lending money on the cheap to finance the purchase of its own equipment. This worked well enough, until it came time to pay back the loans.

The United States, of course, isn't a dot-com. But a great portion of its growth came from borrowing Chinese money to buy Chinese goods, which means that Chinese growth was dependent on that very same borrowing.

Now the United States and the rest of the world is retrenching, corporations are slashing their spending, and consumers are closing their pocket books. This means that the consumption of Chinese goods is on the decline. And this is where the dot-com analogy breaks down. Unlike Lucent, China has nuclear weapons. It can print money at will and can simply order its banks to lend. It is a communist command economy, after all. Lucent is now a $2 stock. China won't go down that easily.

The Chinese central bank has a significant advantage over the U.S. Federal Reserve. Chairman Ben Bernanke and his cohort may print a lot of money (and they did), but there's almost nothing they can do to speed the velocity of money. They simply cannot force banks to lend without nationalizing them (and only the government-sponsored enterprises have been nationalized). They also cannot force corporations and consumers to spend. Since China isn't a democracy, it doesn't suffer these problems.

China's communist government owns a large part of the money-creation and money-spending apparatus. Money supply therefore shot up 28.5 percent in June. Since it controls the banks, it can force them to lend, which it has also done.

Finally, China can force government-owned corporate entities to borrow and spend, and spend quickly itself. This isn't some slow-moving, touchy-feely democracy. If the Chinese government decides to build a highway, it simply draws a straight line on the map. Any obstacle -- like a hospital, a school, or a Politburo member's house -- can become a casualty of the greater good. (Okay -- maybe not the Politburo member's house).

Although China can't control consumer spending, the consumer is a comparatively small part of its economy. Plus, currency control diminishes the consumer's buying power. All of this makes the United States' TARP plans look like child's play. If China wants to stimulate the economy, it does so -- and fast. That's why the country is producing such robust economic numbers.

Why is China doing this? It doesn't have the kind of social safety net one sees in the developed world, so it needs to keep its economy going at any cost. Millions of people have migrated to its cities, and now they're hungry and unemployed. People without food or work tend to riot. To keep that from happening, the government is more than willing to artificially stimulate the economy, in the hopes of buying time until the global system stabilizes. It's literally forcing banks to lend -- which will create a huge pile of horrible loans on top of the ones they've originated over the last decade.

But don't confuse fast growth with sustainable growth. Much of China's growth over the past decade has come from lending to the United States. The country suffers from real overcapacity. And now growth comes from borrowing -- and hundreds of billion-dollar decisions made on the fly don't inspire a lot of confidence. For example, a nearly completed, 13-story building in Shanghai collapsed in June due to the poor quality of its construction.

This growth will result in a huge pile of bad debt -- as forced lending is bad lending. The list of negative consequences is very long, but the bottom line is simple: There is no miracle in the Chinese miracle growth, and China will pay a price. The only question is when and how much.

Another casualty of what's taking place in China is the U.S. interest rate. China sold goods to the United States and received dollars in exchange. If China were to follow the natural order of things, it would have converted those dollars to renminbi (that is, sell dollars and buy renminbi). The dollar would have declined and renminbi would have risen. But this would have made Chinese goods more expensive in dollars -- making Chinese products less price-competitive. China would have exported less, and its economy would have grown at a much slower rate.

But China chose a different route. Instead of exchanging dollars back into renminbi and thus driving the dollar down and the renminbi up -- the natural order of things -- China parked its money in the dollar by buying Treasurys. It artificially propped up the dollar. And now, China is sitting on 2.2 trillion of them.

Now, China needs to stimulate its economy. It's facing a very delicate situation indeed: It needs the money internally to finance its continued growth. However, if it were to sell dollar-denominated treasuries, several bad things would happen. Its currency would skyrocket -- meaning the loss of its competitive low-cost-producer edge. Or, U.S. interest rates would go up dramatically -- not good for its biggest customer, and therefore not good for China.

This is why China is desperately trying to figure out how to withdraw its funds from the dollar without driving it down -- not an easy feat.

And the U.S. government isn't helping: It's printing money and issuing Treasurys at a fast clip, and needs somebody to keep buying them. If China reduces or halts its buying, the United States may be looking at high interest rates, with or without inflation. (The latter scenario is most worrying.)

All in all, this spells trouble -- a big, big Chinese bubble. Identifying such bubbles is a lot easier than timing their collapse. But as we've recently learned, you can defy the laws of financial gravity for only so long. Put simply, mean reversion is a bitch. And the longer excesses persist, the harder the financial gravity will bring China's economy back to Earth.

Vitaliy N. Katsenelson, CFA, is director of research at Investment Management Associates in Denver, Colo., and the author of Active Value Investing: Making Money in Range-Bound Markets.
 

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This article gives a very good insight into the working of Chinese economy. Recommended read.
 

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How do you say 'bubble' in Mandarin?

How do you say 'bubble' in Mandarin?

Chinese stocks are on fire and banks are lending like there's no tomorrow. Sound familiar? But China needs to remain healthy. The U.S. can't afford for it to slump.

By Paul R. La Monica, CNNMoney.com editor at large
Last Updated: July 29, 2009: 2:37 PM ET
NEW YORK (CNNMoney.com) -- Is the Chinese economy in the same state as the American economy was in the summer of 2007? In other words, all pumped up and ready to pop?

If so, it might be time to learn how to say bubble in Mandarin. And that could be bad news for those hoping for a sustainable U.S. recovery.

The Shanghai Composite Index plunged 5% Wednesday, while Hong Kong's Hang Seng dipped nearly 2.4% on growing concerns that China's robust period of growth could soon stall.

The sell-off spilled over to shares of prominent Chinese companies listed in the United States, with sinking shares for firms ranging from oil producers CNOOC (CEO) and China Petroleum and Chemical (SNP) to Internet companies CDC (CHINA) and Baidu.com (BIDU).

China's economy is still growing rapidly. But some eerie similarities to the U.S. economy just before the credit markets started to unravel two years ago are starting to emerge.

Consider this. Before Wednesday's plunge, Chinese stocks had been racing higher -- the Shanghai Composite was up 16% in July alone. Last week, China State Construction Engineering Corp. went public and surged 70% in its first day of trading.

Now think back to July 2007 -- the Dow closed above 14,000 for the first time (it would peak in October).

Just as American banks once were, Chinese banks are being loose with credit.

According to figures from the People's Bank of China, China's central bank, banks made 7.37 trillion yuan ($1.1 trillion) in new loans during the first half this year.

By way of comparison, Chinese banks issued 4.91 trillion yuan in new loans during all of 2008. China's lending target for all of this year had been just 5 trillion yuan.

As such, there are reports that China's top banks may soon impose limits on new loans, which could lead to slower growth in China's economy.

The hefty loan volume is raising the specter of a potential bad loan bust in China, similar to the subprime nightmare that U.S. banks had to endure.

"Lending from Chinese banks was high-powered stimulus, but the risk is that loans are being made in an environment where more of them are likely to go bad," said Andrew Busch, global currency strategist with BMO Capital Markets in Chicago. "Non-performing loans may soar."

Why China matters
Now you might be wondering why this is a problem for the United States to worry about.

Well, China just so happens to be the largest holder of U.S. Treasurys, holding more than $800 billion worth as of the end of May. Busch speculates that if Chinese banks are suddenly hit with a wave of loan losses, China could try and shore up their balance sheets by selling U.S. bonds.

So far, China has continued to be a big buyer of U.S. debt. But Chinese officials have expressed increased signs of frustration about the mounting U.S. debt load.

"The Chinese have been complaining since the beginning of the year about how the U.S is managing its fiscal house. They are very concerned that the U.S is going to issue and issue and issue more Treasury securities," Busch said.

At some point, China may move beyond just threatening talk and actually take action.

A China-led sell-off could cause bond prices to fall and interest rates to shoot higher. That could have disastrous implications on the U.S. economy since higher rates could cripple chances for a sustained recovery.

That's going to make it all the more imperative for U.S. officials -- most notably, Treasury Secretary Timothy Geithner -- to assure China that the United States is not going to dig itself too deep a debt hole. Geithner held talks with Chinese officials in Washington earlier this week about various economic issues.

Both Geithner and Chinese leaders said they are committed to global economic stability. That's a good sign.

"Talks were constructive. The best we could have hoped for is an agreement from China that the U.S. has done what it had to do and that we will get out of a deficit as fast as we can," said Carl Weinberg, chief economist with High Frequency Economics, a research firm based in Valhalla, N.Y.

What's more, Chinese Vice Premier Wang Qishan said that China would try and do more to boost domestic consumption of goods made in China so that it does not have to rely as much on exports to the United States.

That's a good sign since it should help to quash speculation that the United States and China could be headed toward a trade war.

"There were reassurances from China and the U.S. that they don't support protectionism. That would be bad and ugly and hurts everyone. Both are on the same side," Weinberg said.

Still, Busch is worried that the United States may not be able to exert that much pressure on China to do what it can to narrow the trade gap given that China has significant leverage with its Treasury holdings.

That means that the United States may have to put up with even more job losses in manufacturing to keep China happy. And that obviously poses its own problems for the U.S. economy.

"Allowing a large trade partner to be more competitive is in essence telling the manufacturing sector to take a hike. It's doing the opposite to encourage job creation," Weinberg said.

Weinberg argues though that China's threat to sell Treasurys is just a threat and that is not in China's best interests to do something that could lead to a prolonged U.S. economic slump. So he doesn't think the United States needs to appease China.

But at the same time, Weinberg said that it makes more sense for the United States to recognize that China is now a major part of the global economy. So the United States can not afford to have an antagonistic stance towards it.

"The most important thing we are learning is that China is a nation whose interests have to be considered. That's the new reality," he said.

Talkback: Do you view China as an economic ally for the U.S. or a growing threat?

First Published: July 29, 2009: 1:22 PM ET
 

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Can Bubbles Also Be Made in China?

Can Bubbles Also Be Made in China?

Mises Daily by Tim Swanson | Posted on 7/30/2009 12:00:00 AM

Despite all of the shimmering skyscrapers and industrial output, unless market forces are allowed to truly dictate economic exchanges, today's Chinese megacities and their residents will merely be facades and actors within a 21st-century Potemkin village, and growth will remain stagnant for years to come. This is due in large part to continual state intervention through centrally planned investment.

Roughly eight months ago, Premier Wen Jiabao announced a $586 billion stimulus package to combat a plunge in economic activity.

At the time, analysts such as James Pressler noted that the stimulus might simply be a rebranding of previously known spending packages rolled into a big fancy plan.[1]

Suffice to say, this is not the case. I was wrong.

Beginning in November, lending quotas have been scrapped and interest rates have been held at a four-year low: unsurprisingly, bank lending has surged.[2] According to the People's Bank of China, for the first six months of this year, new lending amounted to more than 7.3 trillion yuan (about $1.1 trillion) — which, according to the Royal Bank of Scotland, is equivalent to two years worth of credit.

Furthermore, Wei Jianing estimates that roughly 20% of the stimulus funds have ended up in the domestic stock bourses, creating a speculative bubble much akin to the previous dotcom and housing-heavy cousins. Another 30% of the funds are believed to have been shuffled into the ailing property markets.[3] [4]

In fact, residential property rates in places like Beijing are once again climbing at a spectacular rate — 6.5% in one week alone.[5] What was intended as a means to boost infrastructure improvements has been used instead to continue erecting villas and skyscrapers — with little productive value — in an already oversaturated market created by the previous boom.

For example, at the end of last year, roughly 91 million square meters of apartment space lay empty throughout China. This figure does not include the 587 million square meters of apartment space that has been sold but left vacant over the past five years or the millions more that are built but left off the depressed market.[6] More specifically, since 2006, roughly 152 million square meters of commercial office space has been built in Beijing — more than all of the office space in Manhattan — yet 30 million square meters is still vacant.[7] And in Shanghai, the vacancy rate for commercial space is estimated to have hit 25% at the end of last year.[8]

However, as an illustration of unintended consequences, during this new real estate boom, several investigations have discovered that real estate developers, desperate to offload nonperforming properties, have dumped mortgages onto state-run banks that are "facing enormous pressure from Beijing to rapidly increase lending to boost the economy."[9]

Thus, while market forces would have reallocated unused property, pushing prices down, the stimulus has catapulted markets such as Beijing and Shanghai into the top 50 most expensive globally, despite that the average resident earns a fraction of their industrialized peers.[10]

Raw Materials
Economist Andy Xie has arguably written the most concise case as to how the stimulus money has created extremely problematic unintended consequences for a developing China.

For instance, in its objective to jumpstart or simply smooth over the plunge in economic activity (primarily exports), Chinese state-owned industries have gone on a commodity buying binge that actually has worked against them:

But China's imports are mostly for speculative inventories. Bank loans were so cheap and easy to get that many commodity distributors used financing for speculation. The first wave of purchases was to arbitrage the difference between spot and futures prices. That was smart. But now that price curves have flattened for most commodities, these imports are based on speculation that prices will increase. Demand from China's army of speculators is driving up prices, making their expectations self-fulfilling in the short term.

The failure of Chinalco's investment in Rio Tinto has been costly for China. After watching its share price triple, Rio Tinto saw it could raise money more cheaply by issuing new shares to pay down debt. The potential financial loss to Chinalco isn't the point. Rather, higher costs will stem from a further monopolization of the iron ore market because Rio Tinto, after scrapping the Chinalco deal, entered into an iron ore joint venture with BHP Billiton. Even though these two mining giants will keep separate marketing channels, joint production will allow them to collude on production levels, significantly impacting future ore prices.
While the rest of his research is worth reading in length, in a nutshell he suggests that the current commodities boom is entirely unsustainable and counterproductive. How big is this commodity boom?

The NY Times recently noted that among other imports to China, iron ore increased 33% from a year earlier, crude oil increased 14%, aluminum oxide increased 16% and refined copper increased 148%. These jumps have corresponded with similar price increases in the commodities. And as Xie, the Times and others have noted, like all artificial bubbles, it will eventually lead to an unpleasant pop.[11]

Over the past year, both Yasheng Huang and Mark DeWeaver have noted that these soon-to-be-seen ill aftereffects are directly attributed to an economy that is still heavily managed by government planners.[12] [13]

While huge swaths of state-owned enterprises have been privatized, many more are owned or operated by government officials. Still worse, many companies, while nominally private, operate in markets that are currently being politically right-sized. For instance, over the next decade Chinese policy makers aim to shrink domestic automobile manufactures by forced consolidation.[14]

Furnaces Aflame
As an economy develops and becomes more productive, DeWeaver notes that investment in fixed-capital formation typically decreases as a percentage of GDP. In China the opposite has occurred — increasing from 33% to 42% between 1981 and 2007 — creating what many commentators label as "overcapacity."

Regardless of the debate over identifying what the "proper" level should be, China makes a lot of steel. China has roughly 700 steel companies that produce at least 100 million more tons than the sum total of the United States. In fact, while steel producers in other countries like Germany and Japan have cut back 20–30% due to global stagnation, Chinese producers have turned the dial to the proverbial "eleven," increasing output by 1.2% in the first six months, and breaking the previous record, which was also held by China. Full smelting ahead![15]

This is not due to more efficient technology, creative entrepreneurship or economies of scale, in fact, it is just the opposite.

During the 1950s, as part of Mao's Great Leap Forward to out produce Western capitalists, many provinces and counties subsidized and encouraged the creation of iron smelters. According to Maharshi Patel, between 1958 and 1961, Mao oversaw a policy which encouraged "every commune and neighborhood" to build furnaces. Whereas Roman politicians promised a chicken in every pot, and modern-day American politicians promise suburban houses with white picket fences, political careers in China became intertwined with the construction of smelters and ancillary industries. As Patel noted,

Like the auto industry in North America, steel in China came to be considered an essential industry, too big to fail. It directly employs 3.58 million people. Millions more live off it in support roles. As of 2007, it contributed 4 per cent of China's gross domestic product and 9 per cent of industrial profits.
And realizing that something has to be done, as part of the never-ending crusade to right-size, Chinese planners finally announced in May that they would begin to try to shut down certain refiners and "actively guide" others into merging.

Back to the Future

While Yasheng Huang and others argue that the decentralizing reforms of mainland China in the '80s were reversed during the '90s, in the past decade Chinese policy makers have emulated many of the same export-centric programs of other "tiger" economies like Singapore, South Korea and even Japan.[16] Their neo-mercantilist, export-centered preferential policies involved three primary forces: an artificial devaluation of domestic currencies, large inflows of FDI, and most importantly, Western consumers with insatiable appetites.

Unfortunately for most of the East Asian economies, this model was unsustainable and, to paraphrase Mohd El-Erian of PIMCO, this current low is the new normalcy.[17]

Roughly 40% of China's GDP is accounted for by exports, which was not a problem during the boom years. However, in May alone, exports dropped more than 25% from the year before. This drop was not a statistical outlier, as each preceding month for nearly a year had had double-digit drops as well, including a 21% fall last month. And foreign direct investment has also dropped like a rock, nearly 18% alone in the first six months this year compared to last.[18]

Acknowledging that consumption levels in Western countries will not rebound to previously seen highs, China's policy makers have begun executing contingency plans aimed at boosting domestic demand.[19] However, these are unlikely to replace spendthrift Joneses anytime soon.

The War Chest

Surely there is a bright light on the horizon? After all, the government does sit on large holdings of foreign assets.

Nope.

Gordon Chang recently noted that unfortunately for policy makers in Beijing, the large foreign reserves that China holds cannot be used to any large degree to fend off the ill effects of the current financial order. Chinese agencies such as SAFE are at the complete mercy of the United States, because there is no exit plan with Treasuries.

Despite the recent flurry of eye-popping headlines, if the Chinese unloaded their foreign reserves, they would destroy their own currency, which is pegged to the US dollar. In the event they continue gobbling up commodities, they will simply "inflate" those asset prices too.[20] Furthermore, because their currency remains pegged to the dollar, any yuan appreciation will squeeze exporters that are already reeling from the large drop from overseas.

Thus in order for them to sell any substantial portion of the Treasuries, the Chinese will have to wait until real growth begins to take place in the United States.

Uncertainty and Unpredictability

Over the past 30 years, China has changed dramatically. Despite all of the interventions and misallocations, real, inflation-adjusted growth could still take place. [21] Areas like Yunnan and Guangxi will presumably benefit due to free-trade agreements with ASEAN participants. Previously isolated rural communities will benefit from modern infrastructure links as they can finally develop and participate in China's industrial revolution.

Low personal debt and high personal savings can also be a positive factor even if depositors receive very little in return.[22] Furthermore, if the policy makers allows land-owners to actually sell land or use it as collateral, there will be some huge dividends there as well.[23]

However it is the unseen details, the unseen consequences, the unseen opportunity costs that currently dictate and bedevil the economic growth of the world's most populous country. And despite the three decades of reforms, the effects of socialist planning, even the "lite" variety, will still generate business cycles — with prolonged corrections and purges
 

Daredevil

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The Chinese are learning the hard way that the brute force approach doesn't work in market economy, especially when you are shooting for high growth rates. I think they will end up constructing more empty buildings which will remain vacant.
 

Yusuf

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Just one thing. The author of the first article says Cuina cannot afford to sell dollars as it will appreciate it's own currency the RMB. But the RMB is artificially pegged at 6 RMB to a dollar. China is not worried on that front. It's only worried about the dollar declining as it will reduce the value of the reserves it's holding.
 

masterofsea

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Why you indian people don't like facing the reality.You deleted replies adverse to your argues,only left the replies have advantages for yours.
 

Yusuf

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Non sense rant is deleted. If we did not want to hear from you or debate with you, you would not have been allowed here in the first place.
 

hbogyt

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99.99% is concocted. I mean there are lots of places in the west of China to fill rather than to invade other countries.

By common sense, even if they did say so, however unlikely (but quantum mechanics suggests everything is possible), it must be in complete privacy. Then how could he quote?

The part about the Chinese race sounds more like a rant by an adolescent, like Hitler, who did nothing much as a leader (even in 1944, he spends an hour or so daily to talk about how stupid his French teacher was). For the Chinese elites, managing the livelihood of the people is enough trouble. I don't think they have the time for that.

Epoch Times is incredible.
 

S.A.T.A

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Move of over you Nazi cretin vermin's, here comes the Mighty Ming's army of million marching midgets out to conquer the world.

Nazis are such a passe anyway :)
 

AkhandBharat

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China should break up India: Chinese strategist

Almost coinciding with the 13th round of Sino-Indian border talks (New Delhi [ Images ], August 7-8, 2009), an article (in the Chinese language) has appeared in China captioned 'If China takes a little action, the so-called Great Indian Federation can be broken up' (Zhong Guo Zhan Lue Gang, ÖйúÕ½ÂÔÍø_´ÓÓ°ÏìÖйú¿ªÊ¼£¬¸Ä±äÊÀ½ç, Chinese, August 8, 2009).
Interestingly, it has been reproduced in several other strategic and military Web sites of the country and by all means, targets the domestic audience. The authoritative host site is located in Beijing [ Images ] and is the new edition of one, which so far represented the China International Institute for Strategic Studies (www.chinaiiss.org).

Claiming that Beijing's 'China-Centric' Asian strategy, provides for splitting India, the writer of the article, Zhan Lue (strategy), has found that New Delhi's corresponding 'India-Centric' policy in Asia, is in reality a 'Hindustan centric' one. Stating that on the other hand 'local centres' exist in several of the country's provinces (excepting for the UP and certain northern regions), Zhan Lue has felt that in the face of such local characteristics, the 'so-called' Indian nation cannot be considered as one having existed in history.

According to the article, if India today relies on any thing for unity, it is the Hindu religion. The partition of the country was based on religion. Stating that today nation states are the main current in the world, it has said that India could only be termed now as a 'Hindu religious state'. Adding that Hinduism is a decadent religion as it allows caste exploitation and is unhelpful to the country's modernisation, it described the Indian government as one in a dilemma with regard to eradication of the caste system as it realises that the process to do away with castes may shake the foundation of the consciousness of the Indian nation.

The writer has argued that in view of the above, China in its own interest and the progress of Asia, should join forces with different nationalities like the Assamese, Tamils, and Kashmiris and support the latter in establishing independent nation-States of their own, out of India. In particular, the ULFA (United Liberation Front of Asom) in Assam, a territory neighboring China, can be helped by China so that Assam realises its national independence.

The article has also felt that for Bangladesh, the biggest threat is from India, which wants to develop a great Indian Federation extending from Afghanistan to Myanmar. India is also targeting China with support to Vietnam's efforts to occupy Nansha (Spratly) group of islands in South China Sea.

Hence the need for China's consolidation of its alliance with Bangladesh, a country with which the US and Japan [ Images ] are also improving their relations to counter China.

It has pointed out that China can give political support to Bangladesh enabling the latter to encourage ethnic Bengalis in India to get rid of Indian control and unite with Bangladesh as one Bengali nation; if the same is not possible, creation of at least another free Bengali nation state as a friendly neighbour of Bangladesh, would be desirable, for the purpose of weakening India's expansion and threat aimed at forming a 'unified South Asia'.

The punch line in the article has been that to split India, China can bring into its fold countries like Pakistan, Nepal and Bhutan, support ULFA in attaining its goal for Assam's independence, back aspirations of Indian nationalities like the Tamils and Nagas, encourage Bangladesh to give a push to the independence of West Bengal [ Images ] and lastly recover the 90,000 sq km territory in southern Tibet [ Images ].

Wishing for India's break-up into 20 to 30 nation-States like in Europe, the article has concluded by saying that if the consciousness of nationalities in India could be aroused, social reforms in South Asia can be achieved, the caste system can be eradicated and the region can march along the road of prosperity.

The Chinese article in question will certainly outrage readers in India. Its suggestion that China can follow a strategy to dismember India, a country always with a tradition of unity in diversity, is atrocious, to say the least. The write-up could not have been published without the permission of the Chinese authorities, but it is sure that Beijing will wash its hands out of this if the matter is taken up with it by New Delhi.

It has generally been seen that China is speaking in two voices -- its diplomatic interlocutors have always shown understanding during their dealings with their Indian counterparts, but its selected media is pouring venom on India in their reporting. Which one to believe is a question confronting the public opinion and even policy makers in India.

In any case, an approach of panic towards such outbursts will be a mistake, but also ignoring them will prove to be costly for India.

D S Rajan, is Director, Chennai Centre for China Studies.

D S Rajan
China should break up India: Chinese strategist: Rediff.com news

:rolleyes:
 

Yusuf

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They are forgetting Tibet and Xinjiang.

Its absurd.
 

AkhandBharat

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Yes, this guy seems like their Bharat Verma. However, they are forgetting that if India finds China supporting ULFA or Kashmiri separatists, we can create havoc in Xinjiang.
 

natarajan

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since china dont allow religious rights we can easily break up china into number of pieces but india is always a secular country no one has the right to doubt it as not even a single country is secular but only majority will be ruling with religion as main propaganda
 

johnee

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While many of the alleged assertions of the chinese strategist are absurd and preprosterous, the broad strategy itself of breaking India is very good one(Indeed it was succesfull last time British tried and broke India into two parts, which further broke away). The reality is that a united India would have been a great threat to dominance of any world power. And here I refer to all those parts that were under british in sub-continent or Indian kings when I say united India.
Once, India was broken, it took India many years to move on, infact, even today the greatest hindarences to India's development are those parts that were broken at that time(Pakistan and Bangladesh). So, if it worked once, then it can work again. If I were a chinese strategist, I would try the same. Break India further and weaken it for another century. Meanwhile, China can directly conquer some parts and spread influence on others. Thereby, controlling virtually entire sub-continent. A master stroke indeed.

The verbal diatribe of strategist about caste system, India never being a true nation, hinduism...etc, I pressume, are either his own prejudice or playing to his audience. But the grand strategy itself is quite sagacious.

Now, India must do exactly the opposite of what Chinese strategist wants. India must stay united. Not just that but regain all those parts that were divided by British to keep India crippled. That would mean taking over Pakistan, Bangladesh, Sri Lanka, Nepal, Afghanistan. Now, this thought may seem really absurd to some. But regaining our lost ground must be a long term strategy. Perhaps for next half-century, we can try and achieve this goal. This would be beneficial for all. Right now the existance of states like Pakistan, Bangladesh, Sri Lanka, Nepal, Afghanistan, etc help no one. Not even their people. The only people who benefit are those who rule these places and those who use these to control India.
Throughout the history, once India lost control of Kandahar, then delhi was threatened.
 

AkhandBharat

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Well said Johnee. As Yusuf said, ULFA and Maoist groups in India are purportedly supported by China morally and materially. But as Yusuf pointed out, we need to fuel the Xinjiang fire and create another Kashmir in China. This will create a havoc in China and their government's authoritarian attitude towards the Uighurs will ensure that China is shown in a negative light in the world and will cause further resentment in territories that potentially can break off from it, (tibet, Xinjiang and Taiwan) Throughout history China's borders have been volatile and India needs to ensure that they are busy solving problems in their own country and for that we need to be actively involved in supporting discontent amongst non-han chinese population in that country.

Also, I disagree from the govt's statement that a stable pakistan and bangladesh is in India's interests. We need to ensure that pakistan collapses as a state and gets divided into three nation states, which can then be reintegrated into India. Other satellite nations of India will not merge back until pakistan is reigned in.

We cannot allow religious extremist nations like pakistan to be stable at any cost. We need them to disintegrate and then merged.
 

Daredevil

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What a cr@p!. He definitely doesn't understand how India works and how India is united, what keeps it united. If hinduism was the driving force for keeping India together, then why did right-wing hindu party BJP lost last 2 general elections. He needs to get his brainwashed head checkup.
 

Yusuf

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We need them to disintegrate and then merged.
Once you amputate a gangrene affected body part, you cannot think of stitching it back on. Forget about merging any of the areas separated during partition. We have enough on our plate. We dont need more by having to do with any of that region across the border.
 

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