Articles,  Madhav Das Nalapat

Use of military in disputes causing economic shock in China

Madhav Das Nalapat
Editorial Director, ITV

 

 

 

New Delhi: The founder of the People’s Republic of China, Mao Zedong, was clear that the (Chinese Communist) Party controlled the gun (i.e. the armed forces). Over the past 16 years, this dictum seems to have steadily been reversed, with the CCP more and more adopting policies favoured by the PLA rather than the other way around. The consequence of the adoption of the short-term and aggressive stance favoured by the PLA generals towards ASEAN, India, Taiwan and even the US has resulted in a coming together of these countries in the face of such behaviour by China. The country was developed into an economic superpower by Deng Xiaoping, who never repeated the decision made in 1979 to use the military to try and settle a dispute, this time with Vietnam. The People’s Liberation Army (PLA) had its reins loosened during the period in office of Hu Jintao (2002-12), and this policy of giving leeway to the military has been strengthened under General Secretary Xi Jinping, who took over the leadership of the party and the country in 2012. Under the prodding of the generals within the Central Military Commission, China has brushed aside the lawful claims over territories and waters of countries ranging from Vietnam to the Philippines to India. Although far from the shores of the People’s Republic of China, the entirety of the South China Sea is being claimed by Beijing, with artificial islands getting constructed and military outposts set up to enforce a claim set aside by UN bodies and almost the whole of the international community, barring a few countries such as Pakistan. As a consequence, even so pro-China a leader as President Rodrigo Duterte of the Philippines has ensured that his Navy join the RIMPAC exercises this year, while Vietnam is reviewing its policy of not permitting linkages with foreign militaries.

A treaty between India and Vietnam for both militaries to access each other’s facilities may be an idea whose time has come. Similar treaties could be signed by Vietnam later, with the US and Australia in the first instance. Across the South China Sea, this PLA-inspired policy has resulted in a stoppage of several projects of ASEAN and other countries to exploit the mineral wealth of the waters of the region. Such projects need to be resumed with protection ensured by the Quad fleet present in the waters.

It was US President Donald J. Trump who fired the first salvo against the CCP policy of the gun controlling the policy of the party, by initiating a trade war in 2017 that has continued since then. The next major salvo was fired this year by Prime Minister Narendra Modi of India. This was the Apps Ban, in which 49 Chinese apps were barred from the Indian market. At that time, it had been estimated that the ban could shave off hundreds of billions of dollars from the value of Chinese corporates, and this is what is happening. The US has followed, and additional steps may get taken on the same lines as already active in India, such as barring Chinese firms from accessing US capital markets or even the banking system. The Apps Ban has the potential to sharply limit the growth of Artificial Intelligence (AI) skills in the PRC, given that users create more users, brand exposure generates more exposure, and contents spawn fresh content in an unprecedented manner. The rapid growth in user and value terms of TikTok or WeChat in just a few years shows the potency of such instruments of access to the vast amounts of data needed for AI to develop. Just as an app can shoot up, it can crash in a short time, as AOL or Mindspace have shown. TikTok is seeking to cobble together some cash from potential buyers in the US and India, but given the toxicity associated with the brand, it would be risky for corporates in the US or India to effect such a rescue of the brand. As for WeChat, if it were banned in the US and in other countries, Chinese users would need to shift to other means of communication, and as a consequence, authorities in China would need to lift the domestic ban on applications such as Facebook, Twitter or WhatsApp, so that their citizens can converse with those from other countries, especially in the major democracies. Should such bans remain in place within the PRC, communications between China and many other countries would be substantially affected in a world that is increasingly following India’s lead in banning Chinese apps. Among the heaviest long-term blows to the Chinese economy has been the ordered decoupling of supply chains from within the PRC, with manufacturing units and offices relocating to other countries at a steady and growing pace. At the same time, increased barriers are being placed on imports from China, many on national security concerns triggered by the aggressive stance taken by the PLA in theatres in South, Southeast and East Asia.

Although China itself has long kept away outside apps from entering its own market, Beijing reacted very sharply to India and the US following its own example, worried that countries in Europe such as Germany that have hitherto been very respectful of Beijing’s commands may stop such automatic acquiescence. In the Indo-Pacific, Australia has been the most notable in putting security before commerce so far as relations with China are concerned. In India, over the years, several businesspersons have made huge amounts of profit (much of it located abroad) by acting as channels for the takeover of markets in India by Chinese substitutes, but this policy is becoming more difficult under the watchful eye of Prime Minister Modi. In China itself, not only were foreign competitors barred from entry, but a few “national champions” were identified in key sectors and discreetly given assistance. As a consequence, whether it be ByteDance or Huawei, such enterprises have become global giants, and were on the cusp of eclipsing their European and US competitors when PLA adventurism caused the brakes to be applied on commerce from China in several markets. WeChat listens to every conversation made through it, just as Alipay or Huawei collects data that is invaluable in the development of AI, a field where China is already the global champion. Almost all communication between overseas customers and PRC suppliers gets done on WeChat, hence the deadly effect on the economy of a ban by countries on the use of the application. Among the most consequential decisions taken by the CCP on the advice of the PLA has been the manner in which GHQ Rawalpindi has been encouraged and empowered to carry out covert and other acts against India. This when access to the Indian market is crucial for China to maintain a high growth rate, besides prevail over competitors in fields such as AI and telecom. Earlier policy of delinking commerce from the boundary issue was reversed by Prime Minister Modi, who made it clear that any country trifling with the territorial integrity of India cannot expect to be allowed to rake in tens of billions of dollars in profits from consumers in this country. Several domestic lines of manufacture have been destroyed or are close to collapse because of the dumping of Chinese products and services by businesspersons who care little for India’s security and are focused only on their foreign bank accounts. The Galwan clash put an end to the free ride that such elements have enjoyed in policymaking circles in India thus far. In the years ahead, the ignoring of the interests and sensibilities of India in PRC dealings with Pakistan will be judged among the most consequential mistakes made by the CCP in its external policies.

Whether it be Xiaomi, Huawei or TikTok, users will have almost all her or his activities tracked by the remote controller, which is why a ban on 5G, for example, would have a severe effect on the ability of remote controllers to monitor activity in third countries. Given that India, Japan, the EU and the US are targets of the PLA and its allies, the national security case for banning such access is overwhelming, except that the business lobbies that have fattened on their role as purveyors of Chinese substitutes to domestic products were effective for years in preventing security concerns from interfering with their moneymaking. Once on 15 June the PLA took the lives of 20 gallant soldiers of the Indian Army including the Commanding Officer of a battalion, it became difficult for such interests to continue to act as facilitators of PRC dominance in the Indian market of the same brands that are assisting GHQ Rawalpindi establish control over restive populations in PoK and in parts of Pakistan such as the Pashtun territories, Sindh and Balochistan. India needs to ban any company from any country that invested in PoK from accessing the Indian market, and such a move has long been necessary. The CCP was under notice for quite a while that its policy of following the lead of the PLA in foreign policy would cause severe blowback on commerce, but such warnings were ignored. The consequence has been a US-India led counterattack on expansionist policies through the “soft underbelly of the crocodile”, which is commerce. Prime Minister Modi has been acknowledged as the global leader in the countermoves against intrusive and (till recently) dominant Chinese apps.

Prime Minister Narendra Modi has sought to ensure that the process of decision-making in government pass through far fewer (and more transparent) processes than has been the case thus far. Whether it be in the processing of passports or in the postal department, PM Modi has overseen a revolution in transparency, with citizens able to track deliveries and the rate of progress of requests made to government departments. Such changes are essential as the presence of too many layers and opacity in processes makes it easier for hostile players to subvert a few of those involved and cause either wrong decisions to be taken or right decisions to get blocked. A policy integrating geopolitics with commerce and security would ensure that India move into the high growth stage during Modi 2.0. The catalyst for this has been the PLA, which by its aggressive behaviour has alerted countries across the world to the risks of being dependent on PRC-based supply chains.

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