A Chinese view of South Asia

A Chinese view of South Asia

Early last month, there was a major gathering of academics in the southern part of China, all scholars specializing in South Asian studies. There were at least 80 scholars there, perhaps a much larger number focusing on South Asia than there are in India focusing on China. We met several of the senior scholars at their institutes of strategic studies as well as universities. Since I was part of a delegation from the National University of Singapore, these interactions were far more open than, perhaps, if the delegation had been from India. Most of the institutes are funded by the state, and some are think tanks directly associated with the foreign ministry, assisting in the formulation of foreign policy and strategy.

It was interesting to debate perceptions and strategies on South Asia. Some of the views are well known, but there are others that were very interesting.

First, there is a significant confidence about their achievements, much more than there was even five years ago. India is not considered to be a rival at any level — neither military nor economic. Pakistan is openly considered a friend for all times, while relations with India are described as “strategic"—geography and size requires us to live together, and we should make the most of it, is the attitude.

The people we met were quite comfortable with China and India maintaining a long-run positive and friendly working relationship, without any desire to be concerned about the other’s performance or to worry about it. Even in respect of Japan, the attitude was that they would like to be friends, but if Japan decided otherwise, it was fine with them. In short, on all strategic matters, the view that came across was that they were clear on what needed to be done and did not wish to be antagonistic, but were prepared for it nevertheless.

On Arunachal Pradesh, they were clear that any settlement today would have to be based on current political realities on both sides—the two- or three-decade-old discussions would have little relevance today due to changes in leadership and politics on both the sides—they said much more about why, but putting it down here would be contentious.

There has been long-term thinking on the waters of the Brahmaputra as well. A study was commissioned to turn the river back, and to take the waters up the hills all the way to Tibet, and a detailed project report has been prepared. However, given current technologies, the project has been put on hold as it is considered to be too expensive and stretching technological capabilities—more expensive than even desalination of seawater. The decision is to revisit the project idea by about 2050. The current activities are reported to be “run of the river" projects, though there is no transparency about the quantities of water that would be diverted.

There has been deep and analytical study of the behaviour of international currencies by academics outside the central bank, and there is a determination to learn from history. Researchers are aware of what happened to gold in 1972, and to the dollar in the 1980s. The articulated strategy is to ensure that the dollar does not have a steep fall, while a medium-term declining trend of around 5-10% per annum is anticipated and predicted. The strategy is to ensure that the dollar remains dependent on their treasury holdings to a substantial extent—they expect fiscal deficits in the US to worsen over the next few years—while at the same time diversifying their foreign currency assets. As part of this strategy, the accretions to reserves are going less and less into dollars, without diluting current stock. Second, they have entered into currency swap agreements with a number of countries including Malaysia, Indonesia and so on, where the yuan would be the currency of trade. Third, there is aggressive use of foreign exchange assets to buy physical assets — commodities, companies and mining rights. There is a neo-colonization of Africa that is happening now, paid for in yuan. In several countries, hundreds of Chinese technicians and experts are assessing potential, advising how to exploit the reserves, and funding projects.

There are two important features of their strategies—first, the ability to look at long-term opportunities and threats, and to position them to wait for the opportunities. The scholarship, therefore, looks not just at the immediate future, but at a quarter century ahead.

Second, there appears to be a difference from the approaches of the US—the strategies are not intended to play favourites, to choose regimes or to threaten enemies—they are merely mature strategies that are in the best interest of China. They are also acutely aware of internal dissensions and problems, and also of the fact that income disparities are, in places, more severe than in India. They are also conscious of the advantage that India has due to English education and in the information technology sector—a gap they would like to bridge.

S. Narayan, a senior research fellow at the Institute of South Asian Studies, Singapore, is a former finance secretary. We welcome your comments at policytrack@livemint.com