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China & Nepal working towards a genuine good-neighbour tie

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Authors: Himal Neupane & Jamal Ait Laadam

Although China and Nepal are very different in terms of each territorial size, population, economic capacity, technological prowess and above all military power, the bilateral relations between them have been undergone consistently and significantly. Since 1955 when China and Nepal formally recognized each with, their bilateral relationship has been characterized by equality, harmonious coexistence, everlasting friendship and overall cooperation. Particularly during the past over 40 years, China and Nepal have undergone substantial developments in view of mutual understandings. For example, in 1996 the two sides for the first time agreed to build up a good-neighbour partnership of the 21st century.

In line with this spirit of mutual respect and equality, Chinese President Xi Jinping paid a state visit to Nepal on October 12-13, during which the heads of the two states formally announced that they elevated the China-Nepal Comprehensive Partnership of Cooperation to Strategic Partnership of Cooperation in light of their many common values to enhance cooperation It is reported that President Xi frankly said Nepal wouldn’t be a landlocked country in the future as the trans-Himalayan connectivity network ultimately will support sustainable development and stability of the entire South Asia region. This is not only a promise from a large neighbor, but also a sort of responsibility from a rising major power of the world, which aims along with other parties, either large or small,  to create an international community of shared future.

Accordingly, on October 12, Nepal and China signed 18 memorandums of understanding and two letters of exchange. The priority was laid down with a focus on the implementation of signed agreements and acknowledged policies. Besides, they also reaffirmed the commitment to broaden the level of cooperation under the spirit of the Belt and Road Initiative (BRI). Moreover, China and Nepal have agreed to enhance connectivity through ports, railways, roads, aviation and communications within the broad framework of the BRI and the Trans-Himalayan Multi-Dimensional Connectivity Network which are of strategic significance. As Chinese President Xi put it, “our two peoples have shared weal and woe, and set an example of friendly exchanges between neighboring countries, and we would act to carry forward the traditional friendship and take the bilateral relationship to a new and higher level via his state visit to Nepal.

For sure, nothing is free in the realm of international politics as the realists argue what China and Nepal need from each other are their common geopolitical and geo-economical interests? This kind of inquiry is sensible and also cynical. In fact, historically China and Nepal had been at good terms for a few centuries, and during the British colonial era, Nepal actually acted as a natural buffer state between imperial China and colonial India. Since 1949 when the People’s Republic of China was founded soon after the independence of India, Nepal ended its isolation and forged amicable ties with India and other countries. Initially, Nepal had close ties to India in terms of culture, ethnics and even military affair, but it never accepts external domination. In 1955 Nepal formally recognized Beijing as the legitimate government of China and since then, it has consistently supported China in foreign affairs. Meanwhile, China has offered economic aid to Nepali reconstruction in a gradual way.

However, since the 1980s, China has steadily transformed itself into the second largest economy of the world with its alarming manufacturing capability and progressive technologies. Due to this, China has provided more assistances to Nepal and other neighbours to share Chinese public goods, especially in terms of the infrastructure projects and alleviation of poverty. For example, President Xi announced in 2018, “In the coming three years, China will provide assistance worth RMB 60 billion to developing countries and international organizations participating in the Belt and Road Initiative, and contributing an additional RMB 100 billion to the Silk Road Fund.” As a developing country nestled in the heart of the Himalaya, Nepal surely needs to expand its infrastructure through involving itself into the BRI with the view to exploring and finally harnessing its huge potential sources —hydropower—for export.

Strategically speaking, China needs to maintain its border areas peaceful and stable in light of its “NEWS strategy” that means while China tries to consolidate its entente partnership with Russia on the North and pacifying its East coast, it necessarily aims to sustain the BRI projects to the West and the maritime silk route to the South. This is the core of the NEWS strategy initiated by the Chinese elite since President Xi took power. Consider Nepal’s strategic location and political stability, China is sure to promote the bilateral ties as the two previous MOUs were signed in Beijing including to rebuild Chinese—Nepali transit road network agreements. It will help northern Himalayan areas get an alternative transit route and also facilitate the local economics, as much important part of the BRI as the economic corridor between China and Pakistan. Moreover, since 2016, a freight rail line was even completed linking Lanzhou, a heavy industrial city in the West of China through Xigaze in Tibet, down to the capital of Nepal. This is a truly strategic pivot of the grand BRI project.

To that end, President Xi revealed to his Nepali counterpart Bidhya Devi Bhandari that the two sides should work closely to carry out the construction of a trans-Himalayan connectivity network, and expand exchanges and cooperation in various fields. For her part, Nepali President Bhandari graciously welcomed Xi’s state visit to Nepal and stressed that the rise of China backed up by its modernization drive will help bring benefits to Nepal and promote regional peace and prosperity. In light of this cordiality, the two governments issued a joint statement on Oct. 13, agreeing on more practical cooperation in the new phase of bilateral relations. For a few key points serve to inllustrate that first, the two sides agreed to take the BRI as an opportunity to deepen mutual benefits in arious fields including the Kathmandu-Pokhara-Lumbini Railway Project. Furthermore, cooperation will cover the Zhangmu/Khasa port, the Lizi/Nechung port, and the three North-South corridors in Nepal. Second, the two sides will hold comprehensive discussions to strengthen trade relations, including to take positive measures to increase Nepal’s exports to China and to facilitate Chinese banks to open their branches and other financial services in Nepal. Last, China promises to help Nepal shake off the status of being a least developed country and achieve the sustainable development goals in the next two decades.

Since states are committed to each other by the nature of the world in which they exist, any close cooperation between China and Nepal is never bilateral only, that means there is always local, regional and international concerns, suspicions and even hostilities towards either China or Nepal or both. Geopolitically, India is the first power, understandably, to feel uncomfortable if not angry. This is the reason why President Xi made his first trip to India prior to his state visit to Nepal, and held comprehensive talks with Indian Prime Minister Modi. Second, China and Nepal also need to coordinate each other deftly to convince other neighbours such as Sri Lanka and Bangladesh that any sort of their cooperation would never be exclusive but inclusive and open all others in the South Asia. Geo-economically, China has reiterated that it would not seek to use its economic or financial leverages to “dictate” the local affairs of the recipient countries. Meanwhile, Chinese companies also need to move in prudently and read the local laws and political norms before jumping into the businesses.

Xi has frequently said, China is the largest developing country and also a learning country all the time. In order to promote China’s strategy to link the countries involved, mutual respect and equality are the prior condition to the long-term cooperation. In light of this, it is expected that Xi’s state visit to Nepal, the first one by a president of China over the past 26 years, will unlock new strategic opportunities for bilateral relations, as well as positively promote their ties with India by understanding the prospects for trilateral cooperation. It is clear that Chinese-Nepali economic integration through BRI is unstoppable, so it is sensible for India and the others in the region to take the opportunity to extend the proposed high-speed railway between those two all the way south to the nearby West Bengal port of Kolkata to more closely tie the three together in a system of complex economic interdependence. This is a balanced approach to prevent an open rivalry between the key member states of the BRICS and the SCO over their common neighbors. Given this, Xi’s visit to both India and Nepal might be the very time to enhance the trilateral understanding among Nepal with its giant neighbor. To that end, Nepal, though a much smaller state compared to China and India, could play positively a role as the bridge for building a more trust-based relationship across this region.

China has showed its willingness to share with Nepal its development experiences, practices and inclusive economic governance approaches. In doing so, geopolitical factors should never be the obstacles for China-Nepal cooperation. Rather, Nepal could serve as a dynamic bridge between China and India, and China and South Asia.

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East Asia

Hong Kong: No more China’s disheartened capitalism, please

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Hong Kong’s unrest started in June 2019. It was triggered by the plans to allow extradition to mainland China. Critics felt this could compromise judicial autonomy and jeopardise free-speech legacy.

Until 1997, Hong Kong was under the British rule as an overseas territory (effectively a colony), but then returned under the mainland China jurisdiction. Under the Deng’s “one country, two systems” arrangement, it has considerable autonomy, and Hongkongers (Mandarin: 香港人) enjoy comparatively more civic rights.

The controversial bill was finally withdrawn in September 2019. Under the slogan ‘too little too late’, the demonstrations continued, growing even larger. Protesters now demand full democracy and an independent inquiry into police actions.

Lately, clashes between police and activists have turned worryingly violent; police firing rubber bullets and occasionally even live rounds, while protesters counter-attacking officers by throwing stones and petrol bombs.

Generational and Class struggle is back?

What still remains rather underreported are social and generational dimensions of the protests. Hence, it indeed feels to comment on some distorting interpretations and oversimplified views.

As an illustration, one can take reporting such as James A. Dorn’s columns (eg. “If protesters want to protect Hong Kong’s way of life, they must win the war of ideas”). This author is cited as a China specialist. Essentially, he is a senior fellow of the Cato Institute, a conservative think tank similar to The Heritage Foundation, which often declares Hong Kong the “world’s freest economy”, even though Hong Kong’s working class endures horrid living conditions here.

Authors like him allude to a “war of ideas” and do criticise socialism with Chinese characteristics, even though China has made tremendous economic progress and enjoyed political stability. One wonders why such views and opinions about Hong Kong or China should be considered or adopted.

China has not dictated how the US or other Western countries should run their economies or political systems, nor has it solicited advice from these free market theoreticians or think tanks. China has lifted at least half a billion people out of poverty, helping to alleviate poverty globally.

Another country which has done exceptionally well and which has not subscribed to neoliberal dogma but retains strong state control of the economy and political freedom is Singapore.

Hong Kong’s main problem is that the sacrosanct free market has become a political excuse for government non-interference, allowing tycoons and big businesses to freely game the system, gorge themselves on Hong Kong’s resources and create large wealth disparities that have contributed to our current social and political instability.

This neither alleviated the suffering of Hong Kong’s working class nor solved the housing problem. Rather it has allowed tycoons to profit. The city needs tax reform so that government revenue does not rely on land sales.

The policy of non-intervention has led to tycoons and big businesses privatising necessities like housing, health care, education and, through the Mandatory Provident Fund, retirement savings. This benefits the private sector at the expense of the public.

Driven by an unrestrained greed, someone wishing to monetise, gambles with our future. Simply, compare the Gini for Hong Kong of 1997 and of today, and see yourself.

Massive social costs to enrich few – Parasites among us

Nowhere in the world is housing as unaffordable and nowhere has it made property developers as wealthy. Allowing markets to set prices only reinforces the housing crisis, as does letting local and foreign investors buy up property despite the housing shortage. Another absurdity is calling for more free competition to break up the property cartel.

As professor Anis H. Bajrektarevic observed and compared: “… it seems that the narrative by which the ‘freedom’ obsessed and spoiled capitalist youth is fighting the big egalitarian communist apparatus is overly simplified and is, thus, short in capturing the truth… It is [what is happening last months in Hong Kong] closer to an outcry of excluded and pauperised youth – quite similar to the one on the streets of Europe, whose protests faded away years ago … [Well] educated but disfranchised youth that feels the generational warfare replaced the social welfare… The Hongkongers are not fighting against the egalitarian ideas or system. Quite to contrary, they are bitterly opposing social inequality and endemic generational exclusions. The very tomorrow of European society might be – prudently or violently – decided on the streets of Hong Kong.”

A low-tax regime mostly benefits the landlord class and big business. Hong Kong residents actually pay among the highest taxes in the world in the form of high rents and housing prices, yet they have scant social safety nets. A wealth tax and more progressive taxes should be imposed to generate government revenue, instead of relying on land sales.

Hong Kong needs the opposite of the free-market dogma, so we can have more humane living conditions and social stability. Or as a former Vice-chancellor of the Hong Kong University wonderfully captured: “Neither violence, nor Beijing, can fix City’s housing shortage and lack of a social safety net.”

Many Hongkongers have lost out due to economic changes, and many have deep-seated distrust of mainland China. The Hong Kong government must first address their social exclusions and financial insecurities, enhancing all-generational debate before it can work on fostering a sense of Chinese identity.

 From our partner International Affairs

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East Asia

China struggles to fend off allegations of debt trap diplomacy

Dr. James M. Dorsey

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Desperate for cash, Tajikistan is about to sell yet another vital asset to China at a time that countries like Sri Lanka and the Maldives are demanding renegotiation of debt settlements that either forced them to surrender control of critical infrastructure or left them with unsustainable repayments.

The pending Chinese acquisition of  a stake in Tajikistan’s aluminium smelter, coupled with earlier tax concessions to Chinese companies that would substantially reduce the trickle down effect of investments for the troubled Tajik economy, suggest that China has yet to fully take account  of frequent criticism of its commercial approach to Belt and Road-related projects.

The Washington-based Center for Global Development warned last year that “23 of 68 countries benefiting from Belt and Road (BRI) investments were “significantly or highly vulnerable to debt distress.”

The centre said eight countries — Tajikistan, the Maldives, Pakistan, Djibouti, Kyrgyzstan, Laos, Mongolia, and Montenegro — were particularly at risk.

“There is…concern that debt problems will create an unfavourable degree of dependency on China as a creditor. Increasing debt, and China’s role in managing bilateral debt problems, has already exacerbated internal and bilateral tensions in some BRI countries,” the report said.

Progress on the construction of a road in Afghanistan’s Wakhan Corridor, a narrow strip in the east of the country that touches the Chinese border and separates Tajikistan from Pakistan and Pakistan-controlled Kashmir, may explain China’s seeming insensitivity to the concerns of beneficiaries of the People’s Republic’s largesse.

The road would link the corridor to Central Asia in the north and Pakistan’s Chinese-built Arabian Sea port of Gwadar in the south, a crown jewel in China’s infrastructure- and energy driven Belt and Road initiative.

To be sure, the road has local rather than geopolitical significance for workers building the road and the region’s shepherds as documented by anthropologists Tobias Marschall and Till Mostowlansky.

The road creates temporary employment for labourers. For shepherds, it facilitates access to mountain pastures.

For China, the stakes are geopolitical and economic.

The road would not only facilitate commerce with Central Asia as well as traffic from Gwadar but also construction of shorter pipelines as well as a fibre optic cable.

Perhaps more importantly, it would together with a military base in Tajikistan and Chinese cross border operations in the corridor itself, facilitate the movement of troops in China’s gradual projection of military power beyond its borders, particularly in regions adjacent to its troubled north-western province of Xinjiang.

The road’s potential military significance raises questions about the sustainability of a presumed division of labour between Russia and China under which Russia shoulders responsibility for security in Central Asia while China concentrates on economic development.

Ironically, if the examples of Sri Lanka, the Maldives, Pakistan and Malaysia coupled with anti-Chinese sentiment in Central Asia, fuelled in part by the brutal crackdown on Turkic Muslims in Xinjiang, are anything to go by, China’s approach to Belt and Road-related development could turn out to be a threat to its broader geopolitical ambitions and regional security policy.

Sri Lanka recently demanded that China return control of Hambantota port.

Sri Lanka became the poster child of allegations that China was pursuing debt trap diplomacy when it two years ago surrendered to China control of the port as part of a deal to reduce the country’s debt payments.

China lent Sri Lanka US$5 billion between 2010 and 2015 for infrastructure projects that included development of Hambantota at interest rates of up to 6.3 percent.

By comparison, World Bank and Asian Development Bank rates on soft loans range from 0.25 to three percent.

“The perfect circumstance is a return to the norm. We pay back the loan in due course in the way that we had originally agreed without any disturbance at all,” said newly appointed Sri Lankan prime minister Ajith Nivard Cabraal.

Similarly, the foreign ministry of the Maldives said earlier this month that it was seeking to restructure its Chinese debt.

“Borrowings by the previous government were unreasonable and put us in difficulty. But we can solve this mess through diplomatic means,” said foreign minister Abdulla Shahid.

Last month, former president Abdulla Yameen was jailed for five years and fined US$5 million for corruption during his term that ended late last year. Mr. Shahid’s government has accused China of land grabs during Mr. Yameen’s reign.

In a rare success, Malaysia earlier this year negotiated a one third reduction in the cost of a US$15.7 billion Belt and Road-related rail project.  In a further concession, China agreed that 70 percent of the workforce would be Malaysian and that Malaysian contractors would get 40% of the civil works.

China has repeatedly been accused of employing Chinese rather than local labour for Chinese-funded projects along the Belt and Road and importing materials from China rather than sourcing them locally.

The government of Pakistani prime minister Imran Khan has been less successful than its Malaysian counterpart.

It recently bowed to Chinese pressure to revive hundreds of projects initially suspended after it came to office in 2018.

The appointment of a retired lieutenant general as head of a new authority overseeing the China Pakistan Economic Corridor (CPEC) that groups Belt and Road-related projects reflected China’s wariness towards messy Pakistani politics and preference for dealing with the country’s military.

With Sri Lanka as the anti-thesis, analysts suggest that China is determined to make Pakistan a success story.

“The big battle at the moment is about CPEC’s reputation, and Beijing cares about salvaging that. They need to show BRI has been a success, that it hasn’t put Pakistan’s economy in trouble and that there isn’t a backlash. If they can’t do it in a context like this, it suggests that there is something flawed in the model,” said Pakistan and China scholar Andrew Small.

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East Asia

Standing up to China: Czech mayor sets a high bar

Dr. James M. Dorsey

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A Czech mayor’s refusal to endorse Beijing’s One China policy potentially sets a high bar as Western powers grapple with how to respond to allegations of excessive use of violence by police against Hong Kong protesters and the implications of leaked documents detailing a brutal crackdown in China’s north-western province of Xinjiang.

Prague mayor Zdenek Hrib rejected a sister city agreement between the Czech capital and Beijing in late October because it included a clause endorsing the One China policy, which implicitly recognizes China’s sovereignty over Taiwan, as well as Hong Kong and Tibet.

Mr. Hrib argued that the agreement was a cultural arrangement and not designed to address foreign policy issues that were the prerogative of the national government.

The mayor’s stance has since taken on added significance against the backdrop of US President Donald J. Trump’s signing of legislation that allows for the sanctioning of Hong Kong officials, embarrassing Communist party leaks that document repression in Xinjiang, the election of a new Sri Lankan government that intends to adopt a tougher policy towards China, and simmering anti-Chinese sentiment in Central Asia and beyond.

Mr. Hrib’s rejection was in fact a reflection of anti-Chinese sentiment in the Czech Republic as well as opposition to the pro-China policy adopted by Czech president Milos Zeman.

To be sure, Mr. Hrib, a 38-year old medical doctor who interned in Taiwan, was shouldering little political or economic risk given Czech public anger at China’s failure to fulfil promises of significant investment in the country.

On the contrary, Mr. Hrib, since becoming mayor in mid-2018, appears to have made it his pastime to put Mr. Zeman on the spot by poking a finger at China.

Mr. Hrib visited Taiwan in the first six months of his mayorship, flew the Tibetan flag over Prague’s city hall, and rejected a request by the Chinese ambassador at a meeting with foreign diplomats to send Taiwanese representatives out of the room.

Beijing’s cancellation of a tour of China by the Prague Philharmonic Orchestra in response to Mr. Hrib’s provocations forced Mr. Zeman to describe the Chinese retaliation as “excessive” and his  foreign minister, Tomas Petricek, to declare that “diplomacy is not conducted with threats.”

Perhaps more importantly, M. Hrib was taking a stand based on principles and values rather than interests. In doing so, he was challenging the new normal of world leaders flagrantly ignoring international law to operate on the principle of might is right.

“Our conscience is not for sale,” said Michaela Krausova, a leading member of the governing Pirate Party of the Prague city council. Ms. Krausova and Mr. Hrib’s party was founded to shake up Czech politics with its insistence on the safeguarding of civil liberties and political accountability and transparency.

While couched in terms of principle, Mr. Hrib’s stand strokes with newly installed Sri Lankan president Gotabaya Rajapaksa’s intention to wrest back control from China of the island’s strategic Hambantota port that serves key shipping lanes between Europe and Asia.

Hambantota became a symbol of what some critics have charged is Chinese debt trap diplomacy after Sri Lanka was forced to hand over the port to China in 2017 on a 99-year lease because the government was unable to repay loans taken to build it.

“I believe that the Sri Lankan government must have control of all strategically important projects like Hambantota. The next generation will curse our generation for giving away precious assets otherwise,” Mr. Rajapaksa said.

Fears of a debt trap coupled with the crackdown on Turkic Muslims in Xinjiang, which targets not only Uighurs, but also groups that trace their roots to Central Asian countries, have fuelled anti-Chinese sentiment in Kyrgyzstan, Tajikistan and Kazakhstan.

“Given that China is likely to continue to expand its presence, further irritating local publics, the temptation of opposition groups to exploit such anger will only grow. If that happens…the anti-Chinese demonstrations that have taken place to date will be only the prelude to a situation that could easily spiral out of control, ethnicizing politics in these countries still further,” said Central Asia scholar Paul Goble.

Beyond Xinjiang, anti-Chinese sentiment in Central Asia is fuelled by some of the same drivers that inform Czech attitudes towards China.

The shared drivers include unfulfilled promises, idle incomplete Chinese-funded infrastructure projects, widespread corruption associated with Chinese funding, and the influx of Chinese labour and materials at the expense of the local work force and manufacturers.

Beyond Xinjiang, Central Asians worry about potential debt traps. The Washington-based Center for Global Development listed last year two Central Asian nations, Kyrgyzstan and Tajikistan, as risking China-related “debt distress.”

Warned China and Central Asia scholar Ayjaz Wani: “Chinese principles in Central Asia are hegemonic. China has always interacted with Central Asian states without regarding their cultural identities, but according to its own vested interests… However, the ongoing anti-China sentiments may be coming to a tipping point.

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