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East Asia

The Asian Square Dance – Part VIII

Michael Akerib

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The economy

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.

Demography

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.

The Diasporas

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.

Water

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.

Energy

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.

Central Asia

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.

Weapons

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.

Border issues

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.

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Is Strategic Balancing a ‘New Normal’ in Interlinked World?

Gen. Shashi Asthana

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The G-20 Summit 2018 will be remembered for extraordinary  large number of bilateral and trilateral meetings, which seem to be even more significant than the main purpose of the meet. There are some high profile bilateral meetings like US – China and US – Russia (Scheduling of which has seen many flip-flops) which are very significant in context of Trade-War or Ukraine crisis. The two trilateral meetings involving US-Japan-India and China-Russia-India are also seen to be very significant because of centrality of Indian position in both the meetings. One of the reasons for this phenomenon is that the world is that the world has got interlinked so much as never before, hence even bilateral relations between global powers impact the world directly or indirectly.

When a large number of countries including US allies, strategic and trade partners joined AIIB, against the wishes of US, it was quite evident that a time has come that many countries will like to have alternate sources of funding other than west dominated IMF or Japan dominated ADB and will follow their own national interest. Similarly when China exhibited aggressive design of converting feature and atolls to artificial islands, with a view to have South China Sea as ‘Chinese lake’ based on unilateral interpretation of history ignoring international laws, UNCLOS and decision of ICJ, a group of democratic countries huddled together to form QUAD with a potential to counter balance such moves, which have possibility of obstructing global trade and exploitation of global commons. The Russian aggression westwards post Crimea, brought many western countries together resulting heavy sanctions on Russia, (followed by the recent standoff with Ukraine, Martial Law in some parts of Ukraine and the criticality continues. The Western opposition and sanctions was instrumental in pushing Russia nearer to Beijing. The international relationships and strategic interests of most countries in the interlinked world of today are so interwoven, that it is difficult to count countries only in one grouping; hence many new issue based groupings have emerged in last few decades.

Are Global Powers pushing everyone to Strategic Balancing?

In the exuberance of pursuing ‘America First’ policy, in last few years US has been highly critical of some of its allies, strategic and trade partners, whenever they did not follow a course which was of interest to America. In some cases it used threatening gestures, while some others were put under sanctions. The policy got a major jolt, when they threatened everyone to support their decision of shifting embassy to Jerusalem, but many countries junked the threat and voted as per their own perception. A similar issue came up earlier, when the last US President got all Head of States of ASEAN countries together to discuss South China Sea issue and wanted a joint statement, condemning Chinese actions, but those countries did oblige.  Pulling out of Paris accord for climate change, Iran Nuclear deal, TPP are some more examples when all the ‘Friends of US’ are not on the same page, and decided to continue with it even without US. Pulling out of nuclear deal with Russia is under global criticism, as it could trigger fresh arms race and a dangerous one, although US has some strategic logic to do so in American interest. The last G-7 Summit was not a pleasant experience for US allies due to alleged self centered economic approach of US. The NATO allies are also relatively lesser confident of US backing and keep waiting for next surprise from US Administration. Under these circumstances, Is US Concept of ‘With US’ or ‘Against US’ is outdated in Interlinked World?

On the other hand Chinese after announcing Belt and Road Initiative (BRI) in 2013, with elevation of President Xi Jinping from ‘Chairman of everything’ to ‘Core’ and ‘Leader for life’, exhibited its expeditionary design starting from South China Sea to land grabbing in Indian Ocean. With its fast growth it tried to showcase its methodology of governance better than democratic model. Its ‘Incremental Encroachment Strategy’ in Doklam as well as South China Sea exhibited its ambitions exceeding beyond peaceful growth to the arena of global strategic dominance; hence it started facing opposition from a group of democratic countries in various forms like formulation of QUAD and other groupings. Interestingly most of Chinese neighbors did not buy its method of governance and some of them went democratic in recent past, while maintaining good relations with it. In case of Russia also, we find Germany, a US ally drawing gas from them. Russia and China helping out North Korea with fuel and essentialities immediately after Singapore Summit between President Trump and Kim. Russia a strategic partner of India supplying military hardware to Pakistan and many other countries. A cross pollination of relations is therefore quite evident.

Analysing the cases of three global powers above, a time has come when most countries want to manage their international relations as per their own national interest, and do not want their strategic choices to be dictated by others. The strategic autonomy is quite dear to every sovereign country. It is also a fact that the world today is much more interlinked; hence issue based relationships is increasing. In context of the above let me analyze few cases justifying the ‘Compulsion of Strategic Balancing’ in international dynamics.

Japan’s Insecurity and Prime Minister Abe’s visit to China followed by meeting Indian Counterpart

During Prime Minister Abe’s visit to China on the 40th anniversary of the ‘Treaty of Peace and Friendship between Japan and China’ hardly any issues of divergences was discussed. It was looked as an effort to ‘Fostering Mutual Political Trust’ and ‘Cooperation and Confidence Building in Maritime and Security Affairs’. Beyond good optics, It can be seen as an effort to balance out/reset relations with China, and a messaging to Uncle Sam, about independence in foreign policy formulation of Japan. Immediately after this first visit to Beijing since 2012, Prime Minister Abe hosted Indian Prime Minister Narendra Modi, in a resort near Mount Fuji for a luncheon Sunday, just a day after returning from talks with the leader of China. While the leaders may call India-Japan partnership having been strengthened as a ‘special strategic and global partnership,’ but beyond the optics, it can be termed as an effort to balance relations between China and India as well.  India would perhaps be looking to move forward in convergences, and need not be concerned of Sino -Japan engagement because India and Japan have hardly any issues of divergences. The balancing/resetting by Japan in international relations was again exhibited, by the fact that Japanese PM seems to be  “determined” to wrap up talks toward peace treaty based on 1956 declaration with Putin, stipulating the return of two of four northern islands by Russia to Japan, while retaining claim on all four. The self confidence of Japan in balancing act between US, China, Russia and India is noticeable.

South Korean bonhomie with North Korea

South Korea despite being apprehensive of dangerous arsenal of North Korea, continues to be an ally of US. Deployment of THAAD, military exercises with US forces, have caused great anxiety not only in North Korea, but in China and Russia as well. Despite heavy sanctions on North Korea, it continued with its nuclear and missile tests. When President Trump started giving confusing signals of ‘America First’ and asking allies to pay for their security, South Korea was inclined to attempt peace in Korean Peninsula and making it nuclear free. It was successful in seemingly impossible diplomatic exercise of getting together Kim and President Trump together for a summit. As an analyst, I do not count the summit anything beyond optics, as nothing worthwhile has changed in nuclear and long range missiles capabilities of North Korea as well as UN sanctions, but South Korea has improved its relations with North considerably applying the theory of strategic balance. North and South Korea had Summits, exhibiting lot of bonhomie, decided to field one sports team under single flag, started people to people contact, and South Korea started helping North Korea with essential humanitarian needs, where China and Russia joined in to start business as usual with North Korea, immediately after Singapore Summit. The optics of keeping missiles and nukes away from North Korean parade does not mean that it will really destroy the only leverage it has, which is making US talk to him, and condemning Rouhani and Assad, looking for regime change there. Some symbolic destruction of few testing sites by North Korea and destruction of few posts along demilitarized zone does not mean that South has full confidence over North Korea but it clearly indicates that South Korea is balancing/resetting relations between them.

India’s Strategic behavior: Is it different than Balancing/Resetting International relations?

Post Wuhan visit of Prime Minister Modi to China it is being alleged by western media that India has perhaps drifted towards China. In my opinion there is hardly any worthwhile change in Indian strategic behavior. India has a set of convergences and divergences of interests with major global players namely China, USA and Russia. India has so far been able to keep these relations exclusive of each other; hence has been able to successfully manage an independent foreign relationship without any bias. In the turbulent complex environment of today, our convergences and divergences have started impacting each other. India’s differences with China on certain aspects of Sino-Pak nexus, use of global commons in South China Sea, its adventurism in Indian Ocean, and obstruction to Indian entry in NSG can also be viewed as convergence of interests with US. India’s differences with US on trade, tariff, and CAATSA in context of Russia can be seen as convergence of interests with China The silver lining is that US being our strategic partner will like to have well equipped Indian Forces to balance China and Indian connectivity to Afghanistan, in case Pakistan does not serve its strategic interest. The US waiver on Chabahar port and connectivity to Afghanistan, as well import of Iranian oil for next six month is a welcome step by US towards its strategic partner India.

After Indian expression to expand the scope and dimension of QUAD, opening it up to other affected countries, there is a general feeling amongst other QUAD members that India is perhaps getting softer towards China in progressing QUAD agenda. The reality is that India has an independent foreign policy.  In Indo-Pacific, it stands with US, Japan and Australia in checking Chinese encroachment of global common like South China Sea, stands for seamless movement in international water and rule based order. Interestingly none of the QUAD members have common unsettled land borders with China. In land frontier and combating proxy war, India has to fight its own battle with some help from friendly countries including equipment from Russia, Israel, France to name a few, besides Indian friends from QUAD, hence it has to tackle relationship with China in a different manner than other members of QUAD. India therefore has to maintain harmonious relations with all its friends and neighbors to pursue its national interest. Despite such complexities, the silver lining is that the US, as well as China want better relations with India and vice versa. Russia also will not like to give up the largest purchaser of military hardware and a strategic partnership which stood the test of time even in ‘Heated Cold War’ era, hence, with smart diplomacy, India should be able to manage an independent foreign policy in current global environment. The number of bilateral and trilateral meetings attended by India clearly explains the balancing diplomatic exercises carried out by India, as per its National interest. Indian participation in two significant trilateral meetings namely US-Japan-India and China-Russia-India signifies the centrality of India. It clearly indicates the efforts required to balance out relations with two separate groupings which have wide gap in perceptions.

Unilateralism is Outdated/Impractical Concept

There is a growing opinion that US needs to revise its policy of sanctions and CAATSA. The analysis suggests that President Trump’s reintroduction of sanctions on Iran,(with many of its allies still honoring Iran Nuclear Deal), as well as further push on CAATSA (without modification) on countries trading with Russia might edge US towards its own diplomatic/ strategic and economic isolation in the long run . The ICJ decision on 03 October 2018 ordering US to remove any restrictions on the export of humanitarian goods and services to Iran to some extent shows that the world may not always buy US narrative on sanctions. Similarly Chinese aggressive stance in South China Sea will continue to bring resistance in different forms by collective efforts of affected parties, and its purse diplomacy will not work everywhere. Ongoing Trade War, strengthening of Taiwan and military posturing in South China Sea are indicators which will discomfort China.  In interlinked world interactions with all countries wherever their interests converge is the order of the day. Japanese trade with China, visit of Prime Minister Abe to China followed by visit of Prime Minister Modi and Countries pursuing relations with Saudi Arabia despite CIA revelations are some examples of this new normal in future. It is also expected that in a multilateral world of today, no one country will be able to dictate the strategic choices of others or force any country not to act in its national interest in future. It also proves a point that any country, which thinks that it can rule the world all by itself, is sadly mistaken in the future world, which is overly interlinked.

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Chinese Perspective on South China Sea

Prof. Pankaj Jha

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Chinese Premier Li Keqiang during his Singapore visit for the China ASEAN summit had remarked that China would work hard and ensure that the Code of Conduct (CoC) on South China Sea is concluded within three years. While the global community and regional strategic experts waited for sixteen long years (2003-2018) to get a single draft on the CoC, another three years would be acceptable. However, outlining Chinese objections and rather incoherent historical arguments might not hold true in the long discussions. The problem for Chinese is that while they have technically agreed on the single draft, the reservations with regard to conduct of exercise and the non-binding nature of the COC will once again open Pandora’s box. Within China, there have been strong advocacy groups and even historical facts which are constructed to build the narrative that South China Sea belonged to China since times immemorial. However, in the same context, historically, Hainan island belonged to Vietnam, and it has been accepted by the Chinese. The reflections of which can be seen in their provincial museums. The nature of debates and discussion in this context is interesting, and it is still not clear that how much China going to accommodate the interests of other claimants and whether there would be a lasting peace.

Evaluating the developments with regard to SCS, China has made it very clear that signing of COC does not in any way means that the territorial and maritime sovereignty issue related to the contentious zone would be resolved. So if the global community is under this utopian idea that things will smoothen out, might face shock in future. China has been claiming during the PCA arbitration between 2013-2016, SCS was not peaceful and there have been untoward incidents. However, in the post PCA phase there has been relative peace in the region. China has been claiming that with the influx of new actors including US, UK, Japan and Australia, the issue of territorial sovereignty and maritime zones would give rise to new trends in regional conflicts. Of late, there has been a series of unpleasant face offs between China and US, and it has been claimed by scholars from China that SCS might influence US-China relations in future. Chinese scholars have claimed that SCS is more about geo-political interest rather than any strategic advantages in terms of sea power. It has been seen that competition between US and China is strategic and structural and the bigger challenge is that it is irreconcilable. Scholars from Chinese institutes such as National Institute on South China Sea have stated in public discourse that US have been using strong propaganda mechanisms to project that Chinese island building would jeopardize peace and tranquility in the region. China believes that there should be some balance with regard to the interactions between claimant states and the role played by non-claimants. Closely emulating US stance other US allies are trying to flare up tensions and it is stated in Chinese discourse that in May 2017 and between August -October 2018, Japan as well as other US allies have conducted operations and sorties leading to unnecessary tensions. Chinese believe that presence of US undermines peace and stability in SCS. Among the claimant states peace and tranquility is undermined because of US military interactions with Vietnam, Indonesia, Singapore and Australia focusing on the developments in SCS.

China has conducted military exercises with ASEAN in the past and is willing to build structural mechanisms to address issues of trust and confidence building. The claimant states need to work on the cooperative action plan such as developing joint cooperative mechanism for exploration and development of resources. However, the serious lacunae in Chinese proposal is that it wants to work in non-disputed areas before making any commitment in SCS. Outlining the Chinese perspective on the reasons for flare up in SCS, Chinese scholars have projected that the reasons include the conduct of US navy, interference in COC consultations, facilities and military deployment in SCS by other claimants, and unilateral action in disputed areas by the outside powers.

While the Chinese narrative might seem convincing but there are flaws in this discourse. Firstly, China has failed to outline the geographic coordinates of the nine-dash line and the nine-dash line was at one point eleven dash line also. It claims that it has resolved maritime delimitation mechanisms between China and Vietnam in the Gulf of Tonkin due to which the two dashes were removed from the claimed area.

President Xi has signed an MoU on oil and gas exploration during his visit to Philippines but China feels that the development and even exploration of any oil and gas exploration should be endorsed by China as it is the biggest party to the conflict. China has also proposed that China and ASEAN should maintain peace and stability in SCS without any outside intervention. The proposal of developing Reed bank has been made by China as it is a non-controversial area. Nevertheless, China has made it very clear that COC would not be able to solve sovereignty and territorial issues.  In conclusion, China has made it clear that it would not define the geographic coordinates of SCS claimed by the country as it would give a wrong impression that China is going to usurp the whole SCS but the challenge for China is that it has not yet done its homework and is wary of the global backlash. Of course, US-China trade war has impacted Chinese hardline stance on SCS.

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Japan faces titanic struggle to balance Chinese dominance in Africa

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Earlier this month it emerged that Japanese officials are planning to upgrade the country’s only foreign military base, in Djibouti. The news might come as a surprise, given that the scourge of piracy in the Horn of Africa, which prompted the base’s construction, has been almost completely eradicated. In 2011, when the facility opened, there were 237 incidents involving suspected pirates operating from neighboring Somalia. Last year, the figure was nine.

If the battle against piracy has been a near-total victory, why is Japan looking to redouble its offensive? The question is particularly puzzling given that government debt now stands at 200% of GDP, and the country’s aging population has prompted fears of a social security crisis. Surely the Japanese government has more important things to spend its money on.

But observers on the ground in Djibouti will understand. The tiny country is a powder keg of competing global interests, none more prominent than China, which opened its own monolithic military camp there last year. Japan’s political relationship with its perennial Asian rival may have thawed in recent years, yet the two countries remain locked in a fierce economic struggle that now centers on Africa, whose untapped economic potential makes it the ideal proxy battleground.

Officials in Tokyo are open about the reasons for their interest in Djibouti. When plans to expand the Japanese base were announced last year – a precursor to the latest upgrade – government sources admitted they were responding to the new Chinese hub. Now analysts suggest Djibouti’s president Ismail Guelleh will gift the country’s monolithic Doraleh Container Terminal to China, after ejecting Dubai’s state-owned operator DP World. The Emirati company has even sued China over the dispute, claiming the state-owned China Merchants induced Djibouti to break contract.

Japan is not the only country to raise concerns. In the US, a pair of senators recently wrote to the Trump administration expressing their alarm over Beijing’s rumored Doraleh deal. Yet Tokyo’s priorities are very different from Washington’s; while the US relies on its own Djibouti base, Camp Lemonnier, as a jump-off point for military action in nearby Somalia and Yemen, Japan has maintained a strict policy of non-intervention in foreign conflicts since 1945. Until 2015, the policy was enshrined in law, and even today the Japanese army is known as the Self-Defense Forces. With the piracy threat all but extinguished, the primary purpose of the Djibouti base is to provide logistical support for Japan’s peacekeeping work with the UN.

In economic terms, however, Djibouti – and China’s stake in it – matters a great deal to Japan. Because, just like China, Japan sees huge potential in Africa, and has readily copied Beijing’s playbook in its attempt to capitalize. Aping China’s ‘One Belt, One Road’ investment strategy, the Japanese government has pledged billions of dollars to Africa and encouraged the private sector to follow suit. Like China, Japan has funded several major projects, from a port expansion in Mombasa to a digital broadcasting system in Botswana. And just like Chinese Premier Xi Jinping, Japan’s Prime Minister Shinzo Abe has invited Africa’s leaders to glitzy summits in Tokyo, his officials talking warmly of their commitment to the continent’s prosperity.

Age-old rivalry

This commitment is nothing new. Japanese companies have been investing in Africa since the early post-war period and the first edition of the Tokyo International Conference on African Development was held as far back as 1993. But the value of this relationship has been magnified by a string of factors, including rising commodities prices, Japan’s chronic mineral deficit, and an energy crisis precipitated by the Fukushima nuclear disaster.

Above all, though, Japan wants to prevent China from surging too far ahead economically. Tokyo powered away from its vast neighbor after 1945, its economic miracle leaving China’s clunky bureaucracy sputtering in its vapor trail. But since the mid-1980s, when China’s planners mapped out their game-changing mixed economy, the balance of power has shifted. China’s economy overtook Japan’s in 2011. Now, it’s nearly three times as big. Japan has launched a fierce counter-attack, forging its own economic corridor with India to rival Belt and Road and attempting to woo the ASEAN region, which has fallen under Beijing’s sway in recent years.

In this context, it’s easy to see why Africa is so attractive. The continent is a huge part of Beijing’s growth strategy; what’s more, China’s involvement is increasingly unpopular with the African people. The hordes of Chinese companies parachuted in to deliver Beijing-backed infrastructure projects have been widely accused of racism and mistreatment of domestic workers, and there are fears that China’s financial generosity is nothing more than a giant debt trap, which will soon snap shut to claim Africa’s most prized possessions. Japan has played on these fears, lamenting Africa’s vast debts while stressing that, unlike certain other foreign powers, they want the African people to share in the benefits of their investment.

Yet, for all Japan’s optimism about claiming a major slice of Africa for itself, the reality is that China enjoys a huge head-start. For one thing, Xi’s government has far more money at its disposal; Japan pledged $30 billion to Africa in 2016, so China responded by promising $60 billion earlier this year. Furthermore, China’s willingness to offer loans with no strings attached appeals to some of Africa’s less scrupulous rulers. Finally, China’s economic model allows the state to blur the lines between international aid and investment – and means funding can be signed far more quickly than in rivals such as Japan.

If you want an example of the dominance China already enjoys in Africa, just go back to Djibouti. Guelleh’s government, blighted by allegations of corruption and despotism, has amassed a debt pile approaching $2 billion and nearly 90% is owed to China. For all Tokyo presents itself as a fairer, more enlightened partner, Beijing already has Africa firmly in its grip. It’s hard to see how Japan – or the region’s debt-riddled constituents – can loosen it.

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