Economists generally agree that the cumulative economies of China and India will be larger than that of the G7 by 2030. At present, China’s GCP stands at $9.2 trillion, or nearly 5 times that India.
The two countries have taken very different economic paths. China has chosen to become an exporter of labor-intensive products while India still relies on agriculture and services, particularly in IT.
Russia’s GDP at $2 trillion in 2013, and expected to shrink by 3 to 5% in 2015, less than a quarter of China’s. Russia is a raw material powerhouse and a manufacturing dwarf. As such it should be a natural supplier of oil and gas to China – it is a closer supplier than the Middle East. However, the pipeline that will be built across Siberia will deliver its goods to Nakhodka, a port facing Japan. Russia seems to fear that it will become dependent on China for its gas exports and that China will consider Russia as a vassal state and sideline it on the international scene as the disparities between the two countries grow. China has also to date not given a definite reply to the role Russian gas will play in its energy policy. Price is also an issue since China tends to compare the price of gas with that of domestic coal.
While economists forecast that China’s GDP will overtake that of the US, it still has some way to go as US GDP stands at $15 trillion.
By building its extremely large dollar reserves, $4 trillion, the Chinese Central Bank has allowed the US to borrow at very low interest rtes and has created a situation in which banks have searched for higher yields through lending massively to the housing market. The risk on the currency and on the value of US Treasury paper is extremely large. It is estimated that China holds over 6% of the US debt.
China could, if it so wished, put pressure on the US economic system by buying less US debt, or even selling it, thus precipitating a fall in the dollar and an increase in interest rates. Reprisals from the US could come in the form of new barriers to trade for products made in China.
Should there be a major economic recession in the US, with a consequent loss of jobs, the country may well turn to protectionism. The idea that the globalization process has been essentially beneficial to China will be a driver to reduce imports from that country.
China is also worried that US government borrowing to cover its enormous deficit will lead to high inflation and that therefore the bonds held by the Central bank will lose value.
The US has been putting considerable pressure for China to revalue its currency, the RMB, and thus reduce its competitive advantage based on cheap labor. Some economists, however, believe that a revaluation of the currency may well lead to precisely the opposite effect as funds may then float out of the RMB and into other currencies, thus leading to a de facto devaluation.
The fall of the dollar has revaluated the RMB and thus made Chinese exports more expensive, hurting mostly privately-owned SMEs and halting the modernization process of the economy. The US could allow its currency to depreciate further, to the point where its goods would be significantly more competitive than they are today.
China could take advantage of a weaker dollar to acquire assets denominated in dollars, whether in the US or in other countries. It has thus become a major lender and investor in South America – particularly in Ecuador, Nicaragua and Venezuela where it has committed to invest $250 billion over the next 10 years. This might well be the reason for the US to have softened its stance towards Cuba.
China could also use its reserves to acquire major European corporations in the hope that they will out-compete US companies thus creating an economic war between the US and the EU. It could also use its vast financial reserves to hoard oil and uranium forcing prices of these products to reach new highs.
China feels that the US administration under President Obama has not delivered on its pledge of including China, and other emerging countries, into major economic decisions. Thus, the Obama administration has put pressure on its allies in the Asia-Pacific area to stay away from the Asia Infrastructure Investment Bank, one of China’s pet projects.
As of Japan’s GDP at $5 trillion stands also at four times that of South Korea.
Trade and investment
Asia is in a unique tradition with several world powers sitting on a nuclear arsenal and harboring resentments and old, deep rooted hatreds and territorial disputes. Military budgets are on the rise and economic growth has slowed considerably. Competition exists between the countries we have been considering in this series of articles – it exists in the industrial world, in cyberspace and in outer space.
Asia’s history is one of constant conflicts and long-seated hatred and there are too many potential conflicts that threaten to erupt into wars. There is also a seeming disdain of leaders towards their own people, the most flagrant case being North Korea.
There is also a major gender imbalance in favor of men and this situation has led to fears of a rise in militarism. There is contradictory evidence that unmarried men tend to be more violence-prone than married man.
Almost all the countries covered have strong economic interconnections.
India runs a major trade deficit with China which in 2013 was of over $ 30 billion, with India complaining that Chinese goods take advantage of a whole series of measures put in place by the Chinese government while Indian companies have problems entering the market.
Similarly, Indian companies have had problems entering the Japanese market, but due to quality issues.
With the opening of the Indian economy to foreign investments, Japanese corporations, catching up to a late start, are expected to invest $35 billion over the next 5 years in public-private partnerships. Japan is also expected to become a partner in a major public-private infrastructure partnership project, so large many knowledgeable observers of Indian politics doubt it can be realized, estimated at $100 billion, to create a high technology corridor – the Delhi Metro Industrial Corridor – linking Mumbai to New Delhi. Terrorist attacks have so far frightened would-be investors, however.
China has also been an important investor in India. A sustained economic cooperation between the two countries would make them less dependent on exports to the European Union and to the US.
China has regularly complained about the long delays for India to approve investments by Chinese firms and of a total ban in investments in infrastructure. Chinese workers also have difficulties in obtaining working visas.
Bilateral trade between India and Russia is much lower at $12 billion but after President Putin’s visit, ambitious targets have been set for 2030, essentially in infrastructure projects. Thus, Russia will supply four nuclear power plants.
India’s largest market is the US with bilateral trade between the two countries being of the order of $100 billion with plans to reach $500 billion. The US has thus displaced China as India’s largest trading partner in spite of India’s complaint that US subsidies to cotton farmers undermine Indian exports and that steel exports are unjustly submitted to high tariffs. In turn, the US complains at the difficulties companies face in attempting to enter the Indian market and at the limitations imposed on them when investing.
China and Japan are each other’s largest trade partners, China having replaced the US in that role. Japanese tourists are the main visitors to China. Japan is the major foreign investor in China, taking advantage of low labor costs. However, the tense situation between the two countries, and the increased cost of manpower, has led Japanese companies to sharply reduce their investments.
China is also South Korea’s main trading partner with two-way trade of $230 billion and the signing of a bilateral trade agreement that took effect in February of this year. Koreans are also large investors in China.
China and Russia, in spite of the fact that they are both export-oriented economies, are complementary in that the first is a big consumer of raw materials, primarily energy, while Russia is a major exporter of oil and gas. This has led China to increasingly see Russia as a petro-state with little technological capabilities and unable to pose any type of threat.
Hence, while in the years following the Second World War Russia saw itself dwarfed by the Western economies, the country is, today, overtaken economically by both the West and the East, the latter being represented by China, Japan and South Korea.
In the Chinese-Russian partnership, China appears to be the senior partner and it is safe to say that Russia needs China more than China needs Russia.
Russia sees China as a hedge of its European energy markets. This hedge, however, can only be fully operational in the future as building the right infrastructure that would allow Russia to move its energy exports eastwards is a long-term venture, particularly since Russia’s most productive wells are in the European part of the country while the bulk of China’s population is in the eastern part of their own country.
Two-way trade in 2014 was over $100 billion and while China is Russia’s second largest trading partner, trade with the EU is 4 times that amount. The value of trade is very dependent on the price of oil and gas. It is nevertheless expected to reach $200 billion by 2020.
On completion of the Eastern Siberian Pacific Ocean Oil Pipeline (ESPO), Russia could supply 20% of China’s imports and 33% of Japan’s on condition these two countries choose this dependency.
The two countries have launched the world’s largest joint gas project – the Sila Sibiri pipeline – which will deliver gas to the Russian Far East and to China. There are other joint projects, including in the Arctic, which have received President Putin’s blessing.
Since 2014 commercial contracts between the two countries intensified as Russia was looking for credit and investors in the face of the sanctions imposed by the EU and the US as well as the serious dip in the price of oil. The oil and gas contracts signed between the two countries are, respectively, of $270 and $400 billion over a thirty-year period with Gazprom deliveries due to start in 2019.
Chinese investments in Russia are of the order of $10 billion and new investments have been earmarked for a large variety of projects. The largest investment is a partnership with Rosneft, valued at several billion dollars meant essentially for the Sakhalin-3 block. Rosneft has also secured a $35 billion loan from China in exchange for oil supplies. This envelope is to be used to purchase several smaller oil producers.
China will also invest in a high-speed train between Kazan and Moscow – a $25 billion investment, and other major infrastructure projects are being discussed.
Russia has, in turn, agreed to supply China with the know-how to produce uranium-enrichment facilities and to supply enriched uranium.
Economic ties between China and the US are also important and the interdependence between them appears to be growing rather than slowing in spite of constant mutual accusations of retreating from free trade. The US ran in 2013 a deficit of $318 billion for merchandise trade, one third of the total trade deficit. China is the US’ biggest supplier.
Imports by the US of cheap Chinese products – essentially manufactured goods, machinery, chemicals and transport products – has been of great assistance in controlling inflation and the US has thus transferred to China increasingly large amounts of dollars. Since China is a major supplier of goods to other Asian countries, in particular in South-East Asia, that assemble products for export to the US, the US’ importance to the Chinese economy is even greater than what the above figures show. The US has started a large number of cases against China at the WTO claiming the country is practicing illegally high import tariffs on US goods while simultaneously subsidizing exports. By limiting or banning exports of raw materials, such as bauxite, and allowing prices to climb, China has been accused of developing one more strategy of subsidizing its industry.
Chinese investments in the US are of the order of $50 billion but are dwarfed by the over $400 billion invested by US corporations in China, even though the investment flow has slowed. Statistics in this respect are not meaningful, as often these investments are not reported in US statistics as the flow of funds is channeled through favorable tax havens.
A large number of American firms have established manufacturing facilities in China, and this allowed the US economy to grow with minimal inflation. There is a generally shared belief that China has entered a period of uncertainty, that local competition is adopting a more aggressive stance that in some areas there is over-capacity, that intellectual property is not respected and that the country is increasingly adopting a protectionist stance. Nevertheless, an increasing number of US corporations are dependent on the Chinese economy for their profits and sometimes on products, such as tobacco, whose sales are dwindling in traditional markets.
Also, the US is attempting to sell, in China, alternative energy sources such as solar or wind power technology. This is a major market considering that the Chinese government has announced its intention of investing $200 billion in renewable energies by 2020. US companies, however, are loath to export their latest technology in a country known for closing an eye to the trespassing of intellectual property.
Chinese investments in the US could be even bigger if they were not met by obstacles – the most glaring example being that of Huawei, the telecommunications company, which was blocked from entering the US market.
The Chinese have also become very large buyers of real estate in the US, amassing a portfolio of $22 billion.
The relationship between Japan and Russia is more complex since the two countries have never signed a final peace agreement and Japan still lays claim on the Kurile Islands. Russia is ill at ease with Japan’s future involvement in a missile defense system and has proposed to join the initiative which is led by the US.
Bilateral trade is of the order of $33 billion with oil and LNG taken an important part of this volume, in particular from the Sakhalin deposits. After the Fukushima incident Japan has felt the need to diversity its sources of energy and Russia is a natural supplier. In Russia’s eyes, supplying Japan would counterbalance the increasing dependence on China. Several cooperation agreements to develop new gas and oil fields have also been signed between the two countries.
Total Japanese investments are small, with car makers have plants in Russia, but the most likely investments will target Russia’s Far East, particularly for infrastructures. Several joint ventures have been started in agriculture, energy and infrastructure.
Japan and South Korea are each other’s fourth largest trading partners. Russia has proposed building a railway that would link North and South Korea to the European markets via Russian territory – i.e. connecting to the Trans-Siberian Railway. Such an undertaking would allow South Korea to increase trade with Europe and reduce its dependency on the American and Asian markets.
Bilateral trade between South Korea and the US amounted to $115 billion in 2014 and represented a US deficit of $25 billion. In June 2007, the two countries signed a trade agreement that phases out all tariffs, on consumer and industrial products over a period of three years. Total investments from South Korea to the US is estimated to be $25 billion while US investments in South Korea are of $35 billion.
Bilateral trade between the US and Russia was, in 2014, of $34 billion with a US deficit of $13 billion. Russians are big investors in New York – particularly Manhattan – real estate particularly since the sanctions and the decrease in the price of oil led to a collapse of the ruble. US investments in Russia stand at around $15 billion and are rather diminishing, again in view of the sanctions.
Economic growth has not eradicated poverty in East Asia and estimates of the extremely poor are of the order of 250 million persons. Although continuing economic growth should lead to a reduction in poverty, this should still touch 15 to 17% of the population. The imbalance stems in part by the fact that there is an imbalance between skilled and unskilled labor as well as regional imbalances due to the rapid industrialization of certain areas.
East Asia is today’s the world’s fastest aging. Projections show 20% of the population over 60 by 2050, or two-thirds of the world’s seniors. Already by 2040, the number of people over 60 will be higher than the people under 15.
Just as China is the world’s most populated country, India is the world’s largest democracy. They are the only two countries with a population larger than 1 billion. It is forecast that sometime between 2015 and 2025, India’s population will have overtaken China’s as the former’s population is growing at twice the rate of China’s population. Furthermore, India’s population has a low average age while China’s is aging. Therefore while India may be considered to have an infinite supply of cheap labor, this will not be the case of China in the mid-term future. Thus, while India’s dependency ratio will improve, China’s will worsen.
China’s population is aging rapidly, partly because of a vastly improved health system. This expanding health care system will require substantial additional funding. So will the pension system even though traditionally, children support their elderly parents.
Both China and India suffer from a growing ratio of males to females. The devotion of the children to their parents, when these age, will be difficult to maintain if single men, due to absence of the brides, migrate in search of employment of opportunities.
As the economies of both countries expand at a similar rate, they will need trained engineers and scientists. China graduates 600 000 engineers per year and India 350 000. However, China has a qualitative advantage due to a better educational system.
Japan’s economy is to a large extent driven by demographic change. Birthrates have collapsed with a total fertility rate dangerously approaching 1. With a life expectancy of 88 years, it has today the world’s oldest population, with the largest number of centenarians, but may well cede this place to China by 2050. By 2025 its population over 80 years of age will be equal to that under 15. Thus, two persons of working age will have to support one retiree. On the other hand, they will be a reduction in supporting children.
Older persons invest very conservatively, and therefore the economy might lack the dynamic financial markets required to fuel growth and entrepreneurship.
To a large extent, the same analysis applies to South Korea. North Korea is faring slightly better with a total fertility rate of nearly 2.
Russia has a population of 142 million for a country representing 19% of immerged land. There has been a small rebound in birth rates, but it may not be sustainable. The percentage of the population over 60 is low compared to China, Japan and South Korea, and is of only 20%. The imbalance between women and men – 1 160 women for 1 000 men – and the fact that women in rural areas are unable to find husbands who are not addicted to alcohol, contribute to a low level of marriages, and consequently low fertility. With life expectancy expected to rise in the coming years, while fertility is expected to remain at its present level, the old-age dependency ratio is expected to double by 2050. This would mean that spending on allowances and pensions would rise from the present figure of 9% to 12% by 2030 and 16% by 2050.
The situation in the US, while not as bad, is worrying. Its population of 316 million is growing at the rate of 0.7% and is expected to reach 400 million by 2050. 22% of the population will be over 65. The life expectancy is slightly higher than 78 years but the total fertility rate at 1.9% is below replacement. The reduction in birth rate applies also to immigrants, usually an important component in US demographics.
India’s demographics are quite different. Its population is only slightly below that of China, at nearly 1.3 billion, and it has the world’s largest number of young people since two thirds of its population is under 35, and the average age of the population is 27. But in India too the population is aging and is expected to reach 37 by 2050. At that time 300 million people with be over 60. The total fertility rate is 2.5. It should therefore still enjoy a demographic dividend compared to the ageing societies we have reviewed.
There is a large Tibetan diaspora in India where the Dalai Lama has established his headquarters and this has been an irritant to the Chinese government while achieving little for the Tibetans. The Dalai Lama relinquished his political responsibilities in March 2014 and has been replaced by a Harvard scholar who has never visited Tibet
The presence of a Chinese diaspora in Russia is a more complex issue as there is an important labor movement, of legal and illegal immigrants, along the border and is becoming an important issue in the relations between the two countries. Migrant labor is essentially employed in agriculture and construction. The total number of Chinese in Russia is estimated to be 400 000 including nearly 20 000 Chinese students in Russian universities. The vast majority of the migrants come to make money and have no plans to settle permanently.
The Chinese diaspora in the United States is much larger with 1.6 million immigrants and just as many US citizens of Chinese origin, heavily concentrated in the states of California and New York. Several incidents have questioned the loyalty of some of the immigrants to the host country.
There is a small but concentrated Korean diaspora in China numbering approximately 600000.
There has been a considerable flow of highly qualified and entrepreneurial migrants from India to the US and the Indian diaspora amounts to 2.5 million people and this number is expected to double in the next ten years. Indians are thus the most important group of Asian immigrants in the US. The 75 000 Indian students in the US are the largest foreign group registered in colleges and universities. Indian immigrants have been, on the whole, an extremely educated and successful group with total assets estimated to total $76 billion.
There are in the US over 3 million Americans of Russian descent.
There is a contentious issue between China and India regarding the latter’s water diversion plan which will shift 50 billion cubic meters of water from the Yarlung-Tsangpo, an affluent of the Brahmaputra originating on the Tibetan plateau, to the Yellow River so as to harness hydroelectric energy. This would severely restrict the flow of water to India.
As mentioned in the first part of this article, China and India, but also China and Japan, are competing to secure energy sources.
While the competition between China and India lies in securing energy sources in other countries, that with Japan is not only centred around Russian supplies, but also on the presumed hydrocarbon deposits around two rocky uninhabited islands in the East China Sea that the Japanese government purchased from a private owner and which China claims as its own.
China is uncomfortable with the long shipping route oil takes from the Middle East to its ports. The area is populated by pirates and other revolutionary or semi-revolutionary movements that could be allowed, if not encouraged, to target Chinese vessels. Ensuring the safety of the shipping routes is the official reason for China’s investments in naval power.
Russia fears the political influence that China may exert on the Central Asian republics, in particular through the SCO – the Shanghai Cooperation Organization – set up by China but pf which Russia is also a member. India is, incidentally, an observer, and Russia would like to invite the country to full membership status. Intriguingly, however, while Russia sees to remain the determining factor in influencing policy in Central Asia, China’s position is that these states are free to develop relations with countries not members of the SCO and that the organization is not, and should not, become an anti-Western club.
Russia opposes China’s wish of extending the SCO agreement to cover trade in the form of a free trade agreement, as Russian corporations would be unable to compete on price. It would also open the area to Chinese investments, including in energy projects. China is successful in the region due to the aid it brings, diplomatic pressure and large investments. Russia’s policy has been to prevent Central Asian countries to supply European markets by bypassing the Russian pipeline system and ensuring it has a monopsony. However, in view of the decreased quantities purchased by Russia affected by the reduced demand in Europe, these countries have looked for alternative markets, and China is the obvious one.
Russia would like to see a coordination of pricing policy on energy exports between the member countries that are energy exporters.
Another Chinese advantage is that it is perceived by Central Asian governments as a trading partner and a door to Europe and the Middle East, and not as a competitor as Russia is for gas supplies to Europe. Russia’s role as a supplier of finished goods disappeared with the downfall of communism.
China sees the pipelines for hydrocarbons from Central Asia as a hedge against possible disruptions of shipping lanes from the Middle East. However, just as it is beefing up its Navy to protect those lanes, and to rely less on US maritime power, it will have to beef up its security along the pipelines to protect them from possible attacks.
Russia sees China as a good partner in its policy of containing the US in Central Asia and elsewhere. In fact one can say that Russia sees China as a partner only when its relations with the West are less than perfect – which is the situation at present.
China has been able, so far, to restrain any influence the US could have on Central Asia thus enabling China to secure energy resources for itself and to prevent the infiltration of democratic ideas.
The US has key interests in the region: to support its military adventure in Afghanistan, to have access to energy – without relying on the Russian logistical infrastructure – and to wield political influence in the entire Central Asian area. The US also sees an opportunity to lessen Russia’s position as a gas supplier – should the Central Asian republics find alternative routes for their gas shipments, Gazprom will no longer be in a position to export as domestic demand is rising from an already important base.
China’s strategy has been, and will continue to be in the foreseeable future, to encircle India both through its own forces and through those of its allies who neighbour India, Pakistan in in particular. China, nevertheless, contrary to the US, is not part of any defence organization and thus does not have the burden of having to defend the territories of other nations.
China’s military budget for 2015 has been increased by 10%, reaching $145 billion, a rather steep figure in regard to the slowing of the country’s economy. China has installed missile systems pointing to India’s major cities while China’s industrial heartland is very far removed from their common border.
China’s nuclear strategy is to use their missiles only for a second strike and not to use them for a first strike on any state. It may, however, rapidly change this policy if it so decided.
India is also worried with the building of a port, by China, on the coast of Myanmar, that would give China direct access to the Bay of Bengal. It is also worried by the increasing presence of Chinese submarines in the Indian Ocean. The submarines use Colombo as a refuelling port, leading India to fear that China was building alliances with countries surrounding India – the so-called ‘string of pearls.’ China has called this project the 21st Century Maritime Silk Road, a project financed by China to the tune of $40 billion.
Indian military hardware purchases, the world’s largest with a budget of $250 billion over 10 years, are an important source of cash for the ailing Russian military manufacturers.
The two countries will be jointly developing a fighter plane of the fifth generation. India has also served Russia as a basis to enter the South East Asian markets for military hardware by servicing and training users of Russian equipment sold to those countries.
Russia has been very supportive of India in its conflict with Pakistan over Kashmir, among other things committing not to supply weapons to Pakistan, an embargo it lifted in 2014.
The US has also been a major provider of mostly defensive weapons to the Indian army and this may lead to a licensing agreement for India to manufacture American weapons.
India and Japan have reached an agreement regarding military cooperation. Japan is about to review its constitution to enable it to expand its military which is already considered as one of the world’s best and China would have problems measuring themselves to Japanese firing power in case of a conflict. It is also backed up by the US military that have bases in Japan.
The main discussions between the two countries centred on the supply of nuclear technology and fuel to India by the US. This is an important step considering the fear of nuclear proliferation pervasive in the world today and particularly considering the fact that India will be adding to an already existing nuclear capability while it has never signed the Nuclear Non Proliferation Treaty (NPT). This allows the US to put pressure on New Delhi to reduce its energy purchases from Tehran. Further, India’s rivalry with Pakistan might lead the latter to accelerate its own weapons programs should India proceed with its own purchases.
For India this is an important development as its supplies of uranium are drying out. The treaty also allows it to remain a nuclear player without signing the NPT, although the country has entered negotiations with the International Atomic Energy Agency to negotiate an agreement that would have clauses specific to its situation.
The US has insisted on certain clauses in the treaty such as India accepting not to undertake further nuclear testing, not reprocessing the spent fuel and accepting that the President of the United States certifies, annually, that the country is respecting these clauses.
For the US this is a major step in containing China and relations between China and India took a turn for the worse, with China supplying nuclear power plants to Pakistan, after this agreement was signed.
Another main motivation of the US has been to prevent India making up for its energy shortcomings by purchasing Iranian gas that would be routed through an Indian-Pakistani pipeline. Financial motives are not left too hard behind, considering the deal would generate close to $100 billion in sales for US corporations to which must be added large sales of defence equipment which presently India purchases from France and Russia.
India is also the country with which the US has conducted the largest number of military exercises in recent years.
Following President Obama’s visit to India in 2015, a Joint Strategic Vision for the region was agreed upon. Its objective is to support sustainable development and address poverty. However, the main objective is to ensure India’s Navy plays a dominant role in the Indian Ocean.
Japan is now allowing its military to have an activity outside the country’s territory.
China’s increased militarization worries Japan, particularly the installation of missile launching ramps, China’s declaration of an exclusive maritime and air space, and the highly vocal Chinese media constantly threatening of war with Japan.
China, in turn, fears a reunified Korea with nuclear weapons.
Russia continues to be China’s main weapons supplier as it wants the money from these exports which are of the order of $2 billion per year. Since 2006, the two countries have conducted joint manoeuvres, and intensified their military cooperation.
China, however, no longer represents an overwhelming share of Russia’s weapons exports – a mere 20% today from a high of 70% ten years ago, while the value of total exports has risen considerably, thus decreasing even more the importance of Chinese purchases. Further, with the new cold war, Russia itself is becoming its own major customer.
Russia is eager to maintain this monopoly on Chinese weapons purchases, and the EU and US embargo assist them in achieving this objective. However, inevitably, China will want to be involved in weapons development and testing rather than simply acquiring technology entirely developed in Russia. It has already indicated it does not want to buy finished weapons or assembly kits but want to build the planes in China.
On a longer term basis, it is obvious that China will develop its own military platforms and it is already successfully copying several weapons systems thus severely reducing its imports from Russia. This worries Russia as on a conventional army basis, China would have the upper hand in case of conflict, and Russia would have to rely on tactical nuclear weapons where it has the upper hand. While the INF treaty constrains Russia’s capability of deploying intermediate range nuclear missiles, Russia would probably opt out of the treaty should it feel threatened by China.
North Korea is actively developing its nuclear program and at least one estimate is that it may possess 100 nuclear heads by 2020.
On the other side of the demilitarized zone, there are US forces on the ground. The US keeps 40 000 troops in South Korea.
China and India have fought several border wars and in November 2006 China declared one of the Indian provinces, Arunachal Pradesh, to be part of China, calling it South Tibet. India also claims China is occupying illegally an Indian province in the Himalaya.
In fact, China and India are in a constant military confrontation along their mountainous border.
China is also in a confrontation with several countries regarding their maritime borders, and particularly Japan.
The Diaoyu / Senkaku (Chinese and Japanese names, respectively) islands have been a bone of contention for 120 years but China has lately become assertive on their claims particularly as it is believed that the waters surrounding them are rich in hydrocarbons and fishing grounds.
China’s attitude is also fed by the fact that it is using Japan as a useful scapegoat that helps it maintain strong nationalist feelings of its population, an important cement in a country in which social pressures between different groups, such as rural and urban, are increasing and threatening the country’s stability. China also believes that Japan is on a long-term decline and will not be able to adequately respond to China’ bullying presence.
China’s claim that the entire South China Sea belongs to it has opened the door for the US to pose as the protector of the South East Asian countries.
The South China Sea is an important point of convergence between the interests of the two countries as well as the countries of Southeast Asia. The rise of Chinese naval power – which could become larger than that of the US in the next 5 years – could threaten the US’ dominance in the area.
The South China Sea sees the flow of half of the world’s trade and the conflictual situation could disturb the globalization process which explains why China is becoming interested in continental routes and goods are shipped by train through a new train link which is the worlds longest and reaches all the way to Madrid.
The interest in the area, however, does not stop there. China believes that it contains massive quantities of oil – approximately the same as those in the Arab Gulf.
China’s development and purchase of high-powered microwave weapons, 1500 missiles, submarines and amphibious ships seem targeted at resisting, or keeping at bay, the US Navy in case of a conflict with Taiwan. As a response, the US moved 20 vessels from the Atlantic to the Pacific fleet in 2007 and more such moves are forecasted. The South China Sea is considered by the US as a natural border China should not cross. It is a strategic passage point between the Indian Ocean and Japan and Korea.
China also has a border issue with Russia. The two countries share a 4300 km border and an important historical confrontational past.
Inside those two borders the major issues about the autonomy of certain regions and peoples – Taiwan, Tibet and Xinjiang for China and a considerably large number of areas in Russia and the adjoining countries in Central Asia that were once part of the Soviet Union. If China has a clear position on this issue – i.e. a total aversion to any such move including with the use of force and population movements – Russia has a more opportunistic stance. It has fought an internal war to prevent the Chechen aspirations to an independent state but intervened military outside its borders in Georgia and is the only country to recognize Abkhazia and South Ossetia as independent states.
Russia fears that its under-populated and vast expanse of territory rich in natural resources, Siberia and the Far East, yields in the face of China’s demography while Russia is in a state of demographic collapse. These two areas have large deposits of hydrocarbons, diamonds, gold and other metals as well as large tracts of forests that provide raw materials to the Chinese paper industry.
Some of the lands forming the region of the Russian Pacific were Chinese until the eighteenth century, and while China has not made any recent claims for their return, Russians fear they may do so.
Russia and China are intent in developing their relations but simultaneously competing for domination of Central Asia and attracting Japanese and South Korean capital to develop the Far East so as not to be exclusively bound to China.
Simultaneously, Russia will redevelop China’s and North Korea’s moribund industry in the adjoining North Eastern parts of the country so as to economically integrate these areas.
Russia also has a contentious issue with Japan that has prevented the signing of a peace agreement between the two countries since the end of the Second World War. It concerns what the Russians call the Southern Kuril Islands, and the Japanese the Northern Territories.
Russia carried out military drills on the islands and announced it would spend over $1 billion between 2016 and 2025 to develop these islands. Japan would like to invest in these islands, particularly in energy projects.
While for many years neither country appeared to think, in spite of speeches to the contrary, that dealing with the other was a priority, Primer Minister Abe’s visit to Moscow in August 2013 seems to have started a different process. One thing Japan needs to avoid at all costs is a coalition between China and Russia.
A dialogue process was started between the defence and foreign ministers of the two countries to discuss measures to combat piracy and terrorism.
Russia’s strengthening of its military presence in the Arctic should also be considered as part of its Asian play, the Arctic being a possible base for ventures in Europe, the American continent and Asia.
Japan also has a territorial issue with South Korea centred around the Takeshima or Tokdo islands, as called respectively by the Japanese and Koreans, that each country claims to be a part of their territory.
These are very small volcanic islands. They are, however, of interest economically as their waters are good fishing grounds and the surrounding waters are believed to contain gas, although none has so far been found. Further, if an international arbiter would rule in favour of Korea, Japan’s case for the Kurile Islands and the Senkaku Islands would be severely affected as the country’s claims in all three cases stems from the San Francisco Peace Treaty that remained vague on this issue.
China’s Inclusive Diplomacy for Global Cooperation
President Xi Jinping’s address at the recently held 2023 CIFTIS resonates as a powerful call for inclusive development and cooperation in the services trade sector. China’s commitment to expanding market access, increasing connectivity, and aligning policies with global standards demonstrates its commitment to ensuring a level playing field for all nations.
This commitment extends across different sectors, including telecommunications, tourism, law, vocational examinations, and the larger services sector. President Xi’s address emphasized China’s intention to expand broader, broaden market access, and support inclusive development in the services trade sector. His sentiments resonate with the global world as China seeks to create new prospects for openness, cooperation, and economic equality.
Over the last few decades, the services trade landscape has changed drastically, becoming an essential component of international business. However, this expansion has not been uniform, with developing countries frequently encountering difficulties such as limited market access, complex rules, and capacity limits that prevent them from fully participating in international services trade.
Notably, China is committed to promoting inclusive growth in the services trade sector. It assured of taking continuing steps to accelerate Chinese modernization through high-quality development, to open up new avenues for openness and collaboration for all countries.
Through openness, cooperation, innovation, and shared services, China emphasized the need for inclusive growth and connectivity. Recognizing that a rising tide in services trade should raise all boats, particularly those from nations with limited resources, China has launched a series of ground-breaking initiatives. Additionally, China is actively expanding its network of high-standard free trade areas, participating in negotiations on the negative list for trade in services and investment.
China is setting an example by aligning its policies with international standards. President Xi highlighted in his speech that national integrated demonstration zones for increased openness in the services sector, suitable pilot free trade zones, and free trade ports will be at the forefront of aligning policies with high-standard international economic and trade regulations. These zones demonstrate China’s commitment to fostering an atmosphere conducive to international cooperation and growth.
Real-world examples vividly demonstrate the practical impact of China’s assistance to developing countries in the services trade. China’s investments in transport infrastructure, such as the Standard Gauge Railway, have considerably facilitated the flow of goods and people in Kenya, boosting the services sector indirectly.
Pakistan’s experience with the China-Pakistan Economic Corridor (CPEC) is similar, with improved physical connectivity catalyzing the expansion of digital services and e-commerce. Various infrastructure developments in Indonesia have resulted in spectacular advances, opening up new potential for services trade.
Ethiopia, too, has reaped the benefits of China’s commitment, with active participation in industrial parks reviving the services sector, which includes logistics, banking, and education. These real-life success stories highlight China’s critical role in facilitating the expansion and development of services trade in developing countries.
China’s commitment to capacity building and technical aid is critical in its support for developing countries in the services trade. China provides these countries with the knowledge and skills they need to participate effectively in the services trade by offering specialized programs. Furthermore, China’s significant investments in infrastructure projects such as ports, logistical hubs, and telecommunications networks play an important role in facilitating the smooth flow of services.
Furthermore, China’s commitment to reducing entry barriers and optimizing regulations indicates the country’s persistent commitment to creating an equitable environment. This approach not only promotes equitable possibilities but also simplifies market access, making it easier for developing countries to export their services to China’s enormous and dynamic market.
Furthermore, China gives significant financial support in the form of loans and grants for service trade-related initiatives, recognizing the financial problems that many developing countries confront. This financial assistance enables nations to overcome economic challenges and invest in the expansion and improvement of their service sectors, thereby encouraging economic equality and cooperation.
As the world continues to evolve, services trade will play an increasingly important role in global economic growth, and China’s leadership in this realm is helping to shape a future where opportunities are shared, disparities are reduced, and cooperation knows no bounds. It is a vision worthy of appreciation and support since it is consistent with the ideals of justice and equality, moving the globe closer to a more linked and wealthy global community.
China’s Multilateral Engagement and Constructive Role in the G20
The recent G20 Summit in India has once again taken center stage, attracting global attention as it gathered together leaders and delegates from the world’s 20 most powerful economies. This high-profile event was significant in shaping international relations and addressing serious global concerns due to its broad presence and crucial talks. This high-stakes gathering occurs at a pivotal juncture, marked by escalating divisions among major powers on a multitude of pressing global issues, including the Russia-Ukraine conflict, global economic recovery, food security, and climate change.
The recent inclusion of the African Union (AU) as a permanent member within the G20 serves as a positive signal, signifying consensus among major economies. However, lurking concerns persist about the formidable challenges involved in achieving unity and issuing a joint declaration in the midst of these complex global dynamics.
Chinese Premier Li Qiang’s opening remarks at the 18th G20 Summit in New Delhi resonate as he underscores the paramount importance of unity and collaboration among G20 member nations. He emphasizes the critical need for effective coordination of macroeconomic policies to restore hope and generate momentum for long-term economic growth.
Premier Li eloquently highlights the interconnectedness of humanity’s destiny and calls upon nations to demonstrate mutual respect, seek common ground while momentarily setting aside differences, and work tirelessly towards peaceful coexistence. In a world characterized by profound crises and shared hardships, he aptly observes that no nation can thrive in isolation. Therefore, the only plausible pathways for guiding humanity forward are those rooted in cooperation and harmony.
The G20, originally established to navigate global financial crises and forge collective strategies for addressing economic challenges while fostering global economic development, has, regrettably, experienced a decline in consensus and a rise in differences among major powers. This shift has been particularly evident since the onset of the Ukraine crisis and the United States’ strategy of containment against China. Consequently, the G20 is increasingly devolving into a forum marked by discord, rather than the once-productive and constructive multilateral mechanism it was intended to be.
Nevertheless, the G20 retains its significance as a pivotal forum for international collaboration in confronting global challenges. With the increasing contributions of developing nations like China, India, and African countries, the voices within the G20 have diversified, no longer solely dominated by Western perspectives. As a response, the United States seeks to regain control of the multilateral process to further its agenda of great power competition. However, this approach is unlikely to be warmly received by the broader international community.
China remains steadfast in its commitment to deepen reforms and open up further to foster high-quality development and its unique brand of modernization. China views itself as a catalyst for additional momentum in global economic recovery and sustainable development. China stands ready to collaborate with all stakeholders to contribute to the well-being of our shared Earth, our common home, and the future of humanity. Despite Western media’s attempts to sensationalize China’s stance and magnify perceived differences, China continues to play a constructive role within the G20, dedicated to its multilateral mission.
To ensure that the G20 remains a platform focused on global governance rather than being overshadowed by geopolitical conflicts, China remains determined to fulfill its constructive role within the group, regardless of attempts by Western powers to politicize the mechanism. China’s efforts have expanded the G20 to include the African Union, effectively transforming it into the “G21.” China was the first nation to endorse African Union membership in the G20 and advocates for the African Union to assume an even more significant role in international governance.
The growing divisions and disputes within the G20 have eroded its effectiveness as a platform for addressing global challenges. These divisions, primarily driven by American actions and policies, have spawned tensions with far-reaching global implications, from the Ukraine crisis to escalating tensions in the Asia-Pacific region, particularly in the Taiwan Straits and the South China Sea. These developments underscore the critical role the G20 plays in promoting cooperation and unity.
Amid the current geopolitical landscape characterized by major powers’ divisions, tensions have surged, resonating globally and causing ripple effects. From the Ukraine crisis to tensions in the Asia-Pacific region, particularly in the Taiwan Straits and the South China Sea, the significance of the G20’s role in fostering cooperation and unity cannot be overstated.
All G20 member nations must recognize the urgent imperative of cooperation in building a world that is safer, more prosperous, and increasingly peaceful. Given the global challenges that transcend narrow national interests, effective responses can only be crafted through international cooperation. The G20 stands as a pivotal arena for this cooperation, with China’s positive contribution being indispensable in promoting cohesion.
Despite Western media’s efforts to sensationalize China’s position and magnify perceived gaps, China remains a committed multilateral partner within the G20, dedicated to constructive engagement. The G20 continues to serve as a critical platform for addressing global concerns, fostering unity, and promoting international collaboration. As the world grapples with intricate issues, it remains imperative that nations adhere to the principles of multilateralism and collaborate relentlessly to secure a more prosperous, peaceful, and sustainable future for all.
Al-Assad’s Beijing Visit: A Stepping Stone to a Strategic Partnership Between the Two Nations
The Chinese government is adopting a new diplomatic stance, marked by a bold challenge to American directives. This strategy aims to bolster ties with nations that the U.S. has sought to alienate, with Syria being a prime example.
Recently, Beijing welcomed Venezuelan President Nicolas Maduro. The outcome of this visit was the announcement that their ties had been elevated to a “strategic partnership of resilience.” This status is the pinnacle of China’s diplomatic relationships, and so far, only three countries—Pakistan, Russia, and Belarus—have been granted this distinction. Could Syria be next in line?
For China, their interest in Syria is multifaceted. It’s not just about the country’s economic riches; it’s a geopolitical gamble. In Beijing’s eyes, Damascus stands as an ideological outlier in the Middle East, defined by its unique intellectual and ideological foundations. This, coupled with the nation’s rich cultural diversity and pluralism, makes it all the more appealing.
Syria’s value for China transcends its natural resources. Geographically and civilizationally, its significance and the influential role it plays in Middle Eastern geopolitics make it indispensable.
Despite the ongoing war, China’s relationship with Syria has persisted. However, the depth of their ties hasn’t always mirrored China’s firm stance in the Security Council, where it has wielded its veto power in support of Syria on numerous occasions.
In 2012, China exercised its veto power against a Washington-proposed resolution calling for the withdrawal of all military forces from Syrian cities and towns.
In February 2017, Beijing vetoed a draft resolution that sought to impose sanctions on the Syrian government, accusing it of deploying chemical weapons. Then, in July 2020, Beijing opposed the extension of aid deliveries to Syria via Turkey.
China’s foreign policy towards Syria is shaped by the interplay of interests and ideology. These twin pillars have historically been foundational to China’s external relations and are deeply rooted in Chinese political philosophy.
Syria’s geopolitical and economic significance to China, paired with Beijing’s steadfast stance against meddling in sovereign nations’ internal affairs and its commitment to justice and rights restoration, has allowed China to craft its Syrian foreign policy. This alignment ensures both the safeguarding of national interests and the upholding of principles intrinsic to China’s unique political identity.
China’s stance on the Syrian conflict has always been principle-driven, aligning with its foreign policy ethos which advocates non-interference in the domestic matters of other nations.
Subsequently, Beijing has made concerted efforts to bring an end to the Syrian war, proposing numerous initiatives aimed at resolving the ongoing strife.
Beyond matters of interest and ideology, China’s position on the Syrian conflict is also informed by its aspirations to maintain and bolster its influence within the Middle East’s global power dynamics. As China emerges as a dominant force on the world stage, its evolving foreign policy towards Syria mirrors its ascending stature and influence.
Anyone examining the ties between the two nations will see no clear evidence suggesting their relationship has evolved into what the media frequently labels a “strategic partnership.”
This could be attributed to the deliberate ambiguity and behind-the-scenes diplomacy both countries favored, given their respective circumstances. It’s possible that this approach was more a Chinese preference than a Syrian one.
Particularly since Beijing is careful with its actions, striving not to unnecessarily antagonize the United States while it focuses on its grand strategic endeavor, the Belt and Road Initiative.
While Syria is in dire need of allies during its challenges, it recognizes the interests and circumstances of other nations. It understands that relationships can’t be purely evaluated on a “profit and loss” basis; there’s a strategic depth that heavily influences the decisions of major powers.
China has consistently supported Syria both diplomatically and humanitarianly. It maintained its embassy in Damascus, championed Syria’s interests in the Security Council, and readily provided humanitarian assistance, notably during the Covid-19 pandemic and after the earthquake Syria experienced a few months back.
While the evidence might not strongly suggest that the relationship between the two countries qualifies as a strategic partnership, it’s the unseen dynamics between them that appear to play a significant role in elevating their ties to a “strategic relationship” level.
The deployment of popular diplomacy was evident, with Damascus benefiting from China’s endeavors to amplify its “soft power.” Exchanges of party and economic delegations between the two nations persisted, and there was a notable increase in the number of Syrian students attending Chinese universities, funded by the Chinese government.
Interestingly, direct visits between officials of the two nations were sparse. It appears that the respective embassies served a pivotal role in cultivating and fortifying these ties.
The visit of Chinese Foreign Minister Wang Yi to Damascus on the day the results of Syria’s presidential elections were announced on July 17, 2021, wasn’t just serendipitous. He was the first to extend congratulations to President Al-Assad on his electoral triumph.
This visit held immense significance, marking a shift in China’s foreign policy towards challenging Western influence in various global regions. It was the first visit by a high-ranking Chinese official to Syria since 2011, following the onset of the conflict.
Wang’s meeting with President Al-Assad, where he congratulated him on his re-election, was symbolic. Additionally, Chinese President Xi Jinping dispatched a congratulatory message to Al-Assad on his election victory, expressing: “China staunchly supports Syria in safeguarding its national sovereignty, independence, and territorial integrity, and will extend as much assistance as possible.”
Following Wang’s visit to Damascus, Beijing advocated for the removal of sanctions on Syria and proposed a four-point initiative to address the crisis. This plan encompassed:
- Upholding Syria’s national sovereignty and territorial integrity, allowing the Syrian people the autonomy to determine their nation’s destiny.
- Fast-tracking the reconstruction process and immediately lifting all sanctions on Syria, a crucial step to ameliorate the country’s humanitarian crisis.
- Combatting terrorist organizations recognized by the UN Security Council.
- Championing a comprehensive and conciliatory political resolution to the Syrian conflict, bridging divides with all Syrian opposition groups through dialogue and consultation.
Wang’s trip followed the Syrian government’s successful reclamation of a majority of its territories. This transition signaled a shift towards reconstruction, a phase where Beijing is poised to assume a significant role due to its ample financial and political resources.
Given the intensifying tensions between China and the United States, China found itself drawn into a subtle yet assertive counteraction against the U.S.
Beijing has strategically ventured into regions historically under American influence, notably the Middle East. This move is significant, especially considering China’s traditional reluctance to entangle itself in the complexities and challenges of that region.
For many years, the United States has depicted the issues in the Middle East as “intractable problems,” rooted in religious disputes that span centuries.
China’s success in bolstering Arab-Chinese collaboration, particularly following the Arab-Chinese summit in Riyadh, served as an impetus for several Arab nations to pursue closer ties with Damascus. This renewed rapport culminated in Syria’s reintegration into the League of Arab States. Although the Arab initiative with Damascus seems to be progressing slowly, and at times hesitantly, it hasn’t hit an insurmountable roadblock.
Furthermore, the fruitful outcomes of Chinese mediation in narrowing the differences between Saudi Arabia and Iran, resulting in the re-establishment of diplomatic ties and ambassadorial exchanges, should positively impact Arab-Syrian relationships.
China now navigates the Syrian situation with a sense of ease, steering clear of rivalry with major international players in Syria, notably Iran and Russia.
Amid intensified actions against Damascus, manifested by the deployment of additional American troops to the area and discussions about severing the connection between Syria and Iraq via a corridor from Al-Tanf to Al-Bukamal, the foundation of American intelligence leverages regional factions with specific local allegiances.
This period also saw heightened protests in southern Syria (Suwayda) and skirmishes between the SDF militia and tribal forces in northern and eastern Syria.
Syria’s challenging economic landscape has played a significant role in exacerbating these conflicts, amplifying concerns about their potential spread throughout the country.
The root of these protests can be largely attributed to differing perspectives. The Syrian government views American sanctions as the primary culprit, while many Syrians believe the escalation in corruption, which has surpassed tolerable levels, is burdening the populace.
China’s involvement in the Syrian crisis at this juncture offers robust political backing for Syria and should be complemented by heightened economic support, which Syria urgently requires.
Hosting the Syrian President in Beijing would signify a pivotal moment in the ties between the two nations, underscoring China’s aspiration for a more equitable global order.
The Syrian conflict may have been the catalyst for this shift, and the Ukrainian war further solidified it, making the strategy of international alignments more evident on the global stage.
President al-Assad’s sole visit to Beijing took place in 2004, centering on economic collaboration between both countries.
While development hinges on political and security stability, this shouldn’t deter efforts to address challenges potentially impeding economic collaboration or reconstruction involvement.
It’s beneficial to foster and stimulate dialogues between Syrian and Chinese entrepreneurs, particularly in devising solutions to reconstruction challenges, such as financing. The goal should be to transition from mere economic cooperation to a tangible economic partnership, incorporating road and rail links and connecting energy lines from Iran, China, Iraq, and Syria. This vision, proposed by Syrian President Bashar al-Assad in 2002, aimed to transform Syria into a pivotal gas transit hub and a free-trade nexus bridging the East and West by linking the Five Seas. China interpreted this as a rejuvenation of the Silk Road, envisioning a vast economic corridor from Syria to China. This aligns seamlessly with the Belt and Road Initiative introduced by Chinese President Xi Jinping in 2013.
Syria needs to modernize its banking system and could benefit from China’s expertise in this domain, exploring payment mechanisms that aren’t reliant on the US dollar. Strengthening ties between the chambers of commerce, industry, and agriculture and creating joint chambers between the two nations can be valuable, among other cooperative ventures.
There are numerous potential collaboration areas between the two countries that could yield significant outcomes for both if they can navigate bureaucratic hurdles and establish direct communication channels.
Such cooperation may not be well-received by Syria’s adversaries, notably the United States, which is reportedly extracting Syrian oil from the wells it controls, all the while claiming its forces are in the region to combat terrorism, specifically ISIS.
The Chinese media has extensively highlighted this act, deeming it a blatant international theft conducted openly.
China appears to be growing in confidence and is more assertive in demonstrating its global influence, especially given the rising tensions with the United States. This dynamic presents Syria with an opportunity to enhance its ties with Beijing.
Anticipation is building around the forthcoming visit of the Syrian President to Beijing. Current predictions suggest it will mark a significant moment in the relationship between the two nations, potentially reshaping the geopolitical equilibrium in the Middle East and possibly on a global scale.
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