Saturday, March 28, 2009

When Opportunity Knocks

Jayadeva Ranade, the former additional secretary in the cabinet secretariat, writes in the Times of India

By the time the ongoing international economic crisis runs its course, it will have wrought significant changes in the global geopolitical landscape. While the US's strength or power projection capability will not have diminished and the country will continue to be a predominant world power, other centres of power and influence would have emerged. China will be one of these new centres. Unless the Chinese Communist Party's monopoly on power collapses, China will in all likelihood emerge wealthier and stronger. This will have serious implications for India and the region.

The global crisis has not left China unscathed. President Hu Jintao and premier Wen Jiabao, however, appear confident that their move in October 2005 to replace the policy of allowing 'some people to get rich first' with 'common prosperity' will pay off. Investments have since been channelled into schemes with long-term benefits such as rural health care, medical insurance and social security, targeted at the countryside where 70 per cent of China's population resides.

China recently unveiled a $587 billion (four trillion yuan) economic stimulus package and planned labour-intensive infrastructure projects. For example, 1,20,000 km of railway lines will be built by 2020 instead of 16,000 km. China's leadership now expects to maintain annual growth at around 7-8 per cent and weather the crisis without too much pain. China's huge foreign currency reserves of $2 trillion must contribute to this confidence.

China's leadership has traditionally been acutely conscious of the need to guard against social upheavals. After an unprecedented 87,000 'incidents' in 2005, party and public security authorities were trained in sophisticated crowd control techniques and security has been constantly tightened. As a result, the Chinese leadership considers any threat to internal stability or the Chinese Communist Party unlikely. It is now focused on achieving major national security and foreign policy objectives at a time the world remains preoccupied with the economic crisis.

China's major concern has been to secure assured supplies of natural resources essential for modernisation. Its quest for such resources remains unabated and the past few months have seen the biggest push since 2005 in investments in oil companies. China's policy has, however, shifted to investing in resource companies rather than outright purchase. China is equally active in investing in mineral and metal companies and, in the past few months alone, has invested over $55 billion. Most of these companies are strapped for cash and their share prices are down. But these will undoubtedly rise as construction picks up worldwide, enhancing the value of Chinese investments.

Earlier this year, China dispatched warships for anti-piracy patrols off Somalia ostensibly to safeguard its maritime trade, the fifth largest in the world, with 60 per cent of oil imports by sea. Chinese navy vessels have, for the first time in 600 years, sailed into action outside their territorial waters. The patrols will be a long-term feature and could use a Pakistani port for resupply. The next flotilla may include a nuclear-powered submarine. Significantly, Beijing took this decision when the rest of the world was otherwise preoccupied. The decision demonstrates the extended operational reach acquired by the Chinese navy right into the Indian Ocean and its determination to act to ensure the safety of its maritime cargo.

China's enormous wealth has given it a lot of heft in achieving major foreign policy goals. It secured a breakthrough when, in October 2008, the British foreign secretary jettisoned the concept of suzerainty as outdated and declared that Tibet is a part of the People's Republic of China. This was around the time British prime minister Gordon Brown made a pitch for infusion of Chinese funds into the IMF. US secretary of state Hillary Clinton, in Beijing recently, also downplayed references to human rights and Tibet. China will press this advantage further. On the Taiwan issue too, there was some forward movement when Clinton emphasised the role of diplomacy in settling the China-Taiwan dispute.

The Chinese leadership has sought to enhance its international profile in areas of its interest, including by disbursing financial aid in these difficult times to cash-strapped nations. Closer home, a Chinese military delegation visited Nepal and agreed to give aid. China has simultaneously positioned itself for a role in Afghanistan and the subcontinent. It has continued to maintain its investments in Afghanistan and links with the Taliban, and made clear that it closely watches developments in the region adjoining its troubled Xinjiang-Uyghur Autonomous Region.

The Italian foreign minister's mention that the G-8 would invite China for a conference on Afghanistan indicates that China is poised to play a larger role in the region. It has also consolidated influence in Pakistan, with the Chinese Communist Party signing an agreement with the Jamaat-e-Islami. This is the first time it has concluded an agreement with a political party with an avowedly religious orientation.

China is trying to assume a more assertive role in regions of its interest: Central Asia, South Asia and the Asia-Pacific. Picking up on a veiled suggestion Bill Clinton, then US president, in Beijing in 1998, Beijing will try and persuade the US to yield it a greater role in these areas. The implications of a stronger and wealthier China exercising such a role are far-reaching for India and the world.