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Business News/ News / India/  How India can crack the China puzzle

How India can crack the China puzzle

To understand China’s veto on the Masood Azhar ban, one must examine Xi Jinping’s motivations and concerns

Chinese President Xi Jinping (left) and Prime Minister Narendra Modi. (Reuters)Premium
Chinese President Xi Jinping (left) and Prime Minister Narendra Modi. (Reuters)

Gurugram: Not since Mao Zedong has China been in the grip of one man as it is today with Xi Jinping. Xi has made himself president for life, and is, for all practical purposes, an unchallenged dictator. His 14-point Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era (simply know as Xi Jinping Thought) was unanimously affirmed as the guiding ideology of the Communist Party of China (CPC) at the party’s 19th congress in October 2017. The Xi Jinping Thought was then enshrined in the party’s constitution.

Since then, dozens of Chinese universities have scrambled to establish research institutes for Xi Jinping Thought. Most of the 14 points seem fairly innocuous and obvious. Like “Improving people’s livelihood and well-being is the primary goal of development", or “Strengthen national security". But there are two issues here. One, in China, words are just the tip of the iceberg of meaning. And two, Xi Jinping does not seem currently too happy.

Take the 14th thought: “Improve party discipline in the Communist Party of China." In January, Xi summoned hundreds of officials at very short notice to Beijing. The party, Xi said, faces major risks on all fronts. According to The New York Times (NYT), he told the gathering, “The party is at risk from indolence, incompetence and of becoming divorced from the public." The second thought is: “The Communist Party of China should take a people-centric approach for the public interest." Says the NYT report, “(Xi) demanded stricter controls on the Chinese internet—which is already thoroughly censored—and more indoctrination to ‘ensure that the youth generation become builders and inheritors of socialism’."

Woes in the workforce

Obviously, as Xi’s anxiety increases, citizens will face greater policing, though how that is possible is hard to guess. After all, there are over 22 million CCTVs already operating across the country with the world’s most advanced face-recognition software, every social media post is being monitored, thousands of human rights activists and political dissidents are in prison or have disappeared, and a social credit system is set to be rolled out countrywide next year to create a nation of no-free-will zombies.

One source of Xi’s worry is that labour unrest has been growing over the last few years. In 1982, China removed the right to strike from its constitution and the only official union organization is the All-China Federation of Trade Unions, an integral part of the government. Workers can file cases through a dispute resolution mechanism. According to government statistics, in 1996, 48,121 labour disputes were accepted for arbitration. By 2015 (the latest year for which I could find figures), the number of cases had risen 17 times to 813,859.

The last few years have seen numerous strikes and attempts by workers to form independent trade unions, including in giant corporations like Foxconn Technology Group and Honda Motor Co. Ltd, over wages, pensions and working conditions. But the most significant case was perhaps that of Jasic Technology Co. Ltd in Shenzhen, where, in August 2018, hundreds of students from more than a dozen prestigious universities (supported by tens of thousands of students across the country) turned up to show solidarity with workers protesting non-payment of social security benefits, and trying to establish an independent trade union. The Jasic movement was quickly suppressed, but it could be a harbinger of more battles for social and economic justice from the bottom up, and the support of students may be one of the reasons for XI ordering his officials to further indoctrinate the youth.

Certainly, one of the causes of labour disquiet is mass downsizing. In December, even state mouthpiece Global Times reported widespread layoffs in the technology sector: “Industry insiders (said) that there are indeed significant layoffs in the internet industry… The internet industry has developed so well in China in the past 20 years with an impressive number of internet users growing year after year, but has hit a slowdown in growth levels at present."

Trouble is, China has more than 800 million internet users, and that number is not going to grow much soon. In 1979, in history’s most extreme example of population planning, China introduced its one-child policy. In 2016, faced with a looming demographic crisis—a growing aged population (11% of Chinese were above 65 years of age in 2018, while the UN definition of an “ageing population" is 7%) and a future shortage of workers, the government allowed all couples to have two children. But that has not worked. New births in China fell to 15.23 million last year, the lowest official birth rate since 1961.

There are several reasons for this. One, during the one-child years with state-encouraged abortions, many couples favoured male babies over females, so China is about 60 million women short. So, less babies. Two, women born in the years following the one-child policy are now reaching or have already passed their peak fertility age. Three, many young couples, with growing housing and education costs, and the responsibility of looking after two sets of aged parents (remember, neither husband nor wife has siblings), simply cannot afford to have children.

If this low-birth-rate trend continues, experts say China will soon enter a phase of negative population growth. And that is the last thing it needs. China’s population needs to expand to maintain economic growth. The government is now exhorting people to “have children for the country".

Control foreign companies

The first point of Xi Jinping Thought is: “Ensuring Communist Party of China leadership over all forms of work in China." Companies in China, including foreign firms, are required by law to establish a party organization inside them. Most foreign firms have historically seen this as something merely symbolic. But not since Xi Jinping Thought started kicking in. An August 2017 Reuters report says: “President Xi Jinping’s efforts to strengthen the party’s role throughout Chinese society have reached the China operations of foreign companies, and executives at some of those entities don’t like the resulting demands they are facing."

A senior executive from a foreign firm told Reuters that some companies are under political pressure to revise the terms of their joint ventures with state-owned partners to allow the party final say over business operations and investment decisions (a significant number of foreign companies operate in China through joint ventures with state-owned enterprises).

Of the 13 executives that Reuters interviewed, all from different foreign companies, eight expressed concerns about increasing demands from the party or noted increased activity from party groups. If true, this will certainly make foreign companies jittery about further investments in China.

Xi’s “Party’s leadership over all" thought is also hurting the indigenous Chinese private sector. They are starved of capital to expand. Non-state companies, including foreign-invested enterprises, account for more than half of China’s economic output. But in 2016, they received just 11% of new loans issued by the official bank sector, while more than 80% flowed to less efficient state-owned enterprises. In 2012, the year before Xi came to power, private sector companies and state-owned enterprises received, respectively, 52% and 32% of new loans. But Xi wants bigger and more powerful state enterprises which will be directly under party control. So much for the third Xi Jinping Thought: “The continuation of ‘comprehensive deepening of reforms’."

But as the party penetrates deeper into Chinese businesses, foreign governments are beginning to see Chinese firms, even if private, as extensions of the party. Can they resist a party directive? In April 2018, US President Donald Trump banned US firms from doing business with China’s second largest telecom equipment maker ZTE Corp. for seven years and brought it to the brink of collapse (ZTE finally paid a huge fine and recovered). The ongoing Huawei affair is well-known. Expect more instances of corporate diplomacy.

Meanwhile, the International Monetary Fund expects that China’s gross domestic product grew by 6.6% in 2018, the lowest in 28 years. Shanghai’s stock index ended 2018 as the world’s worst market performer for a second year, falling 24.6%. Between Shanghai and the smaller Shenzhen bourse (which fell 33.2%), $2.4 trillion of market capitalization was lost. With the trade war with the US going on, dollar-denominated exports plunged 20.7%, and imports 5.2% for February from a year ago.

And despite Xi’s ninth thought— “Coexist well with nature with ‘energy conservation and environmental protection’ policies", China has eased pollution norms to help economic growth. Curbs on steel production and coal use have been relaxed.

Masood Azhar and more

Finally, the 13th thought: “Establish a common destiny between Chinese people and other people around the world with a ‘peaceful international environment’." The problem is that China wants to decide what the common destiny of the people of the world should be, and a “peaceful international environment" is one that is led by China and is built around Chinese values, which are quite different from the values that most of the rest of the world cherishes.

The most recent example of this is China placing on hold, in the UN Security Council, a proposal to ban terror group Jaish-e-Mohammed chief Maulana Masood Azhar. Given Jaish’s role in Pulwama terror attack, the Narendra Modi-led government was lobbying furiously to designate Masood Azhar as a global terrorist.

In general, the “peaceful international environment" bit is not going so well. US consultancy firm RWR Advisory has calculated that about 270 of the total 1,814 projects undertaken since 2013 under Xi’s globe-encompassing Belt and Road Initiative are “troubled". These represent about 32% of the total value of the projects. The reasons range from public opposition to projects, fear of debt traps, objections over Chinese labour policies, and performance delays to concerns over national security.

What about “soft power", the use of media, publishing, education, the arts, and sports as a way to create more positive discourses about China? China is spending a whopping $10 billion a year on extending its soft power across the planet. There are already more than 500 Confucius Institutes, which provide Mandarin language courses, and work to spread Chinese thought and culture, around the world. The state-run Xinhua News Agency and Chinese Central Television have become global media outlets. Yet, China ranked a poor 27th on the influential SoftPower30 index compiled by independent consultancy Portland and the University of Southern California for 2018.

According to the SoftPower30 report: “China’s political approach remains at odds with its soft power ambitions. China’s record in human rights and civil liberties reflects poorly among Western audiences and weighs on global public opinion of China. Closer to home in Asia, fears over military build-ups in the South China Sea continue to weigh on China’s soft power in the region. Additionally, while China is certainly becoming an innovator in its own right, relatively low scores in competitiveness, ease of doing business, and rule of law diminish its attractiveness as a global business hub of choice—rather than necessity."

You can’t build the Great Firewall around your internet, repress your own people, build militarized islands in the South China Sea, and expect the world to love you. Suspecting Chinese students of espionage and cyber theft, the US government has been putting the screws on Chinese student visas. The US State Department has shortened the length of visas for Chinese graduate students studying aviation, robotics and advanced manufacturing to one year from five, apparently to curb the risk of spying and theft of intellectual property in areas vital to national security. The US government has also introduced a series of special checks before granting visas to Chinese students.

This follows cases of espionage linked to former Chinese students of several US universities, and Federal Bureau of Investigation director Christopher Wray’s statement at a Senate hearing last year that his agents are seeing “non-traditional collectors (of intelligence), especially in the academic setting". Xi Jinping Thought may not be working as well as expected.

Sandipan Deb is a former editor of Financial Express, and founder-editor of Open and Swarajya magazines.

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Published: 15 Mar 2019, 07:02 AM IST
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