Who’s More Powerful in Asia: US or China?

The Lowy Institute’s new Asia Power Index makes for intriguing reading. For starters, it offers a good definition of power.

“Power is defined as the capacity of a state or territory to direct or influence the behaviour of other states, non-state actors, and the course of international events. It is the capacity to impose costs and confer benefits that shape the choices of others.”

The authors then assess the overall power of 25 key Asian states based on their weighted average across eight specific measures of power. These are:

  • Economic resources
  • Military capability
  • Resilience
  • Future trends
  • Diplomatic influence
  • Economic relationships
  • Defence networks
  • Cultural influence

The findings offer much food for thought. For instance, while the US and China are neck-and-neck on the measure of economic resources, there is a serious gulf between them with regard to military capability. Add to that the fact that while the US tops the defence networks measure, China ranks a low eighth. This is indicative that despite China’s rapid military upgradation and attempts at projection of might, Beijing is a long way off from catching up with Washington.

The two surprising areas where China trumps (pun intended) the US, however, are diplomatic influence and economic relationships. While the latter in Asia is understandable, one wonders whether the former is merely about Donald Trump’s America First approach or is a systemic change underway.

China also does rather well on the measure of resilience, which includes threats to internal stability, scoring 85.9 to the US’s 91.4. In the short-term, I’d agree with the authors on that. But I’d contend that Xi Jinping’s personalised control over the Party-state structure poses a serious threat to long-term stability.

India, meanwhile, ranks 4th in the overall assessment, just a shade behind Japan. And there’s some very good advice being offered for New Delhi to rise up the table, i.e. focus on converting its sizeable resources base into strategic gains and improving defence networks.

India-China Collaboration on Railway Line in Afghanistan?

After the Xi-Modi Wuhan summit, there is a lot of buzz around the possibility that India and China might take up a joint economic project in Afghanistan.

This prospect has got many people excited. All prominent news agencies have reported this and yet there is little clarity on what exactly this project is all about. The MEA’s press release on the Wuhan summit in fact does not mention Afghanistan at all. The MEA spokesperson has been quoted in Times of India saying that the identification of this project is still in progress. The Hindu’s report vaguely mentions the possibility of a road link to Chabahar from Aynak via Hajigak.

But Praveen Swami in Business Standard has the most clear view about what this project might be. He writes:

Earlier this week, President and Prime Minister agreed to explore joint China-India work on a railway line in Afghanistan, with one spur carrying Mes Aynak’s ore to Torkham, and over the into Pakistan; the other in a great north-western arc, into Hairatan.

I created this google map to understand how this railway line might look like. Please note that this is only an illustration – I have no more details other than the above article.

Based on the May 4, 2018 report in the Business Standard [Click to expand]

Won’t such a project pass through Taliban-controlled areas? What is the security situation like in the areas that this railway line might pass through. To check that out, I overlaid the Jan 2018 BBC illustration showing areas under Taliban/government control over the route map. That looks as follows.

The speculated railway line pass through areas with Taliban presence [Click to expand]

The areas marked in brown are under full-Taliban control. Areas in grey are in full government control. The orange areas are government-controlled areas having open Taliban presence. The darker shade indicates higher risk (attacked at least twice a week). Lightest shade of orange represents areas that are attacked once in three months on an average.

As is clear from this graphic, India, China, and the Afghan governments have a tough challenge ahead of them if they are serious about this project.

The Chinese Leadership’s Prowess is Overrated

Earlier this week, we had the opportunity to meet one of India’s most experienced China hands. A diplomat by profession, he has served in China, speaks Mandarin fluently, and follows developments in China even after his retirement.

During his talk, he warned us:

Indian elites tend to see Chinese leaders as superheroes — as ten-feet tall men who can do no wrong. Such a view ignores the many grievous mistakes that the Chinese leadership has committed over the years. And bad memories stick for longer than the good ones.

According to him, the two big mistakes of the Chinese leadership are their treatment of the Uighurs and the Tibetans. I have two more to add to this list.

One, the treatment meted out to rural migrants in cities is fomenting a quiet unrest in several cities. The Economist has an article on the increasing discontent:

The younger generation are products of China’s one-child policy, which went into force nationwide in 1980 (although in the countryside, families were sometimes allowed two). They are among the first to suffer its unintended consequences. The one-child policy contributed to a drastic change in the sex ratio because female fetuses were aborted by parents who wanted their only child to be a boy. The ratio of boys to girls at birth soared in the 1980s, peaking in 2005, when there were 122 baby boys for every 100 baby girls, one of the most distorted ratios ever seen [..]

Among Chinese men generally, a common response to the shortage of women is for prospective grooms to buy an apartment and car before marriage—a sort of reverse dowry. One survey found that three-quarters of young women in big cities took this into account before accepting a man’s offer. Alas for migrant swains, they cannot afford such a bride price, especially in expensive cities such as Beijing and Guangzhou. It is usually difficult for people without a city’s hukou to buy government-subsidised housing there. Young migrants are therefore at a threefold disadvantage. There are fewer women of marriageable age. Those who come from their own background tend to marry richer rivals. And the men cannot compete in the marriage market by buying property.

The earnings of the youngest ones have deteriorated the most. Mr Tian looked at earnings by age. He found that the highest earners are those in their mid-30s (between 32 and 36). That remained constant in all his surveys. But there was a significant change among workers in their mid-20s (22 to 26). In 2008 these younger migrants were earning almost as much as the best-paid. By 2015, they were earning much less.

Mr Tian’s survey includes a question about where respondents place themselves in society on a scale from top to bottom. Between 2006 and 2015 the migrants he questioned gave, on average, ever lower assessments of their social position. Initially, the younger ones (aged between 22 and 26) were the most likely to describe themselves as being in the top half of society. By 2015 they were more inclined than older migrants to put themselves in the bottom half. Mr Tian concludes that those born in the 1990s are the most disappointed of the migrants he has studied [The Economist, 3rd May 2018].

The second mistake is the way China has treated its neighbours. Its arrogant conduct has turned away even potential partners over the last few decades. Nitin Pai had written how alienating a young India has been one of the biggest mistakes of the Chinese leadership.

It is widely accepted that China was the victor of the brief border war of October 1962. While Beijing did achieve its political and military objectives – of teaching the Indian government of Jawaharlal Nehru a lesson – that was a strategic self-defeat for China. Why? Because it turned a country of young people (in 1962, half of India’s population was less than 19) into believing that China is the enemy.

Unfortunately, in the past few weeks, official statements from the Chinese government and commentary appearing in official media are taking us close to another 1962 – even if no shots are fired over the Doklam region. Contrary to what Beijing might think, threats of war and reminders of 1962 strengthen India’s national resolve to stay firm. The more strident the rhetoric from Beijing , the stronger is the public opinion in India to confront China.

Half of India’s population is under 26. Almost 70 per cent of the Indians surveyed in the above-mentioned poll were already “quite concerned” about China’s growing military power and its territorial disputes with India. Whatever the stakes on the remote Himalayan slopes, they are likely to carry an imprint of China as an adversary and an enemy well into the rest of their lives. Is it really in China’s interests to alienate half a billion people across its borders for the next several decades? Will it be easier or more difficult to achieve President Xi Jinping’s “China Dream” under these conditions? How does it help China if India is pushed into a tighter embrace of the United States? [SCMP, 25th July 2017]

These four mistakes need to be kept in mind when we discuss China’s out-of-ordinary development feats. Far too often, we tend to see China through a “rational actor model” lens, to borrow Graham Allison’s landmark classification.The reality is far more complex. The four mistakes show that Chinese leaders have not always made consistent, value-maximising choices. Perhaps it is our lack of knowledge about China that makes us ascribe rationality to every decision of the Chinese leadership. 

Trade Policy as a Tool for Coercion

The ongoing trade war between the US and China has highlighted, once again, how trade policy can be deployed as a tool of coercion. Whether it will be effective is not something that I know enough about. But what interests me is this: what are the conditions under which bilateral trade policy can be used as a tool for coercion?

The zeroth condition is that there must be a substantial trade relationship between the to-be-coercive state and the to-be-coerced state. Failing this condition, trade can at best be used as a tool for inducement but not coercion. For example, India cannot use trade as a tool for coercion with Pakistan because there is barely any trading relationship between the two states.

The next condition is that the coercive state must be an overwhelmingly large market compared to the coerced state. Product bans and raising tariffs can be potent tools only if the losses incurred to the coerced state are significant. It is precisely because of this condition that helped imperial China intimidate many of its small neighbours. The message to all its tributary states was clear and consistent across centuries: we have everything in abundance here. It is you who needs access to our market. So, pay tributes and kowtow to the Emperor or you shall never have trading rights.

Robert Blackwill & Jennifer Harris have earlier described how Russia has repeatedly used trade as a tool for coercion against its smaller neighbours.

In the recent past, Georgian wines, Ukrainian chocolates, Tajik nuts, Lithuanian and even American dairy products, and McDonald’s have all fallen afoul of sudden injunctions… While dealing a significant blow to the Ukrainian economy, Moscow’s geoeconomic moves served, first, to remind Ukraine— and others in the region— of the consequences of decreasing ties to Russia in favour of the European Union; second, to reinforce Russia’s role as an economic regional hegemon; and third, to prevent the continued expansion of the North Atlantic Treaty Organisation to Russia’s borders. Facing Russian threats on countless levels, Ukraine halted its plans to sign deals with the EU at the November 2013 Eastern Partnership summit in Vilnius. [War by Other Means, Blackwill & Harris]

The third condition is that the coercive state should have a bilateral trade deficit with the coerced state. This is counterintuitive — most people regard trade deficit as a liability rather than an asset. But it is this deficit which lends a dimension of intimidation to trade policy. This is precisely the reason why the US could use this tool in the first place against China. There are a range of goods on which the US runs a bilateral deficit with China.

My contention is that the presence of all three conditions is necessary for the use of trade policy as a tool for coercion. Seen from this lens, the US trade war against China satisfies conditions one and three but does not meet condition two. Hence, its effect on China is likely to be limited.

In general, trade policy’s effectiveness as a coercive tool additionally depends on what is being demanded from the coerced state. It also depends on the ability of the coercing state to incur the losses resulting from retaliatory actions by the coerced state. 

PS: Read Anupam’s piece that warns about the economic losses emerging out of protectionist policies.

Who made Xi move half-way across the country?

Ananth Krishnan points out that Xi Jinping’s decision to travel halfway across his own country to meet Narendra Modi (who had travelled completely out of his own country) for an informal summit in Wuhan is remarkable, and no one in Beijing expected it. It’s been quite a journey for their India policy, from threatening to order military attacks to perhaps ordering a six pack for a chillout session between the two leaders this month.

Were they really impressed by India’s resolute stance of not backing down at Doklam, of not signing up for the Belt and Road Initiative? Perhaps. What really made Xi travel halfway across his country is a man halfway across the world. A certain Mr Donald Trump. Washington is putting extreme pressure on Beijing on two counts: North Korea, and more importantly on trade.

It took Trump to remind Beijing that their projection of power ultimately relies on their economy, and that in turn relies on the goodwill of China’s trading partners. Most importantly, on the United States. A trade war will not only have unsettling effects on the Chinese economy in the short term, it can take the wind out of China’s economic sails in the longer term. The wise men in Beijing ought to have expected this. If they didn’t, then their wisdom is overrated. If they expected this, then they ought to have cautioned Xi Jinping against getting all on the front foot and antagonising India, Japan and Vietnam all at once. If they did and Xi didn’t heed their advice, then his astuteness is perhaps more limited than is made out to be.

In any case, India must expect that Xi’s front-footedness is China’s long-term strategy. Trump’s mercurial policy positions have caused Beijing to buy time and space by reaching out to India and Japan. The moment the pressure is off — for Trump can as quickly change his mind — it’s likely that Beijing will resume pushing the envelope again. New Delhi can certainly hope that Beijing has learned that it is not a good idea to antagonise your neighbours as you set out to confront your distant adversary. Yet if you were sitting in Beijing you might reckon it’s important to suppress your neighbour’s power to create trouble, before you confront your main adversary.

It is in India’s interests to have better relations with China and the United States than they have with each other. So the chillout at Wuhan is a good thing. Modi, however, must be keenly aware that a China reset in Delhi does not mean a India reset in Beijing. There’s nothing to indicate China’s fundamental approach towards India has changed. Or that it will change. For now all the chilling out is contingent on the extent and duration that the United States maintains pressure on China.

 

India’s China Reset ≠ China’s India Reset

Global Times carried an op-ed on 12th April applauding India’s reported China Reset policy.

With regard to their ties in the past three years, many Indian media outlets and scholars believe New Delhi has gone astray with its China policy. Following a misjudgment of China’s development and the international landscape, the Indian government chose to confront China and consequently damaged India’s own development.

In typical Global Times style, the op-ed didn’t miss a chance to take a dig at India:

The rise of China actually constitutes an opportunity for India instead of posing a threat. China’s GDP is nearly five times that of India, so the two are at different levels of economic development. New Delhi can hardly expect to exert powerful leverage against China. The primary priority for India is mulling over how to take a ride on China’s development and realize its dream of national rejuvenation.

The bluster aside, what should be clear to us is that a China Reset in New Delhi does not imply an India Reset in Beijing. In fact, China’s recent foreign policy conduct shows that the reverse is likely to be true. With every Indian acquiescence to China’s aggression, China will escalate provocations.

Ask Philippines, Indonesia, and Vietnam, if you are still in doubt.