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India and China: Conflict or cooling?

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Early May saw a new aggravation of the border conflict between India and China, this time in Ladakh. The withdrawal of extra contingents, which had been brought to the border during a few weeks of the confrontation, began only on June 10th, following a series of online and offline meetings of military representatives of the two countries. Amid all these developments, India signed an agreement with Australia on mutual access to military bases. The two countries’ Prime Ministers Narendra Modi and Scott Morrison agreed to expand military and technical cooperation in the course of an online summit. Earlier, India signed a similar agreement with the USA. New Delhi has also welcomed Donald Trump’s initiative to include India in an enlarged G7. How far will the current India-China cooling go?

As far as the border “incident” in May is concerned, Indian and Chinese news media have been making practically identical accusations against one another. Both parties claim that there has been a «considerable» advancement of military units in-land, into the territories either party claims to be their own. Also, they talk about “well-fortified camps in infiltration zones” and “deployment of extra forces” on the territory of either state along the “de facto control line”.

According to Indian critics of Modi, the responsibility for the recent aggravation rests with China. Beijing’s moves came in response to India’s decision to eliminate Kashmir’s autonomy in August last year. At present, India controls 45% of the historical territory of Jammu and Kashmir, where the greater part of the population lives, while Pakistan controls 35%. The rest 20%, deserted and scarcely populated plateau Aksai Chin, is under the control of China. India views Aksai Chin as an integral part of the historical region of Ladakh – the eastern part of Jammu and Kashmir and uses this as a foundation to lay claims on it and question its belonging to China. The region carries significance due to its role in the distribution of water resources of the Indus basin. In August 2019 India deprived Kashmir of autonomy and established a new federal territory, Ladakh, which comprised Aksai China plateau. China was quick to strongly condemn New Delhi’s policy.

In the opinion of Chinese observers, tactically the recent escalation on the border with China is being used by New Delhi for “self-assertion”. Strategically, India counts on presenting such moves to the West as part of global efforts to contain Beijing, thereby paving the way for rapprochement with leading western countries, in the first place, the United States. The development of Indian-Australian ties is seen in the same context. According to Chinese data, India is even ready to reconsider its negative attitude to Canberra’s participation in American-Japanese-Indian naval exercises “Malabar”.

Historically, a state of confrontation appears “natural” for relations between India and China. Sincethe early 1960s the two countries have been mostly busy getting ready for a war and an overt escalation. By the early 2000s the rapid economic and geopolitical upsurge of China transformed the country into a major challenger for India. At present, China holds the firm position of а country that determines India’s foreign policy. The previous border conflict – in Doklam – occurred in summer 2017 and resulted in a new cooling of bilateral relations.

However, in 2018 the relations between two major Asian powers revealed a tendency for a warm-up. During 2018 Xi Jinping and Narendra Modi met five times – an unprecedented number for relations between Beijing and New Delhi. In a matter of just a few months the two sides expanded the agenda of bilateral relations to include an extensive range of issues, including the possibility of holding joint military exercises. In December 2018 New Delhi hosted talks between the Indian and Chinese foreign ministers after which the Chinese foreign minister pointed out that through joint effort China and India had built a “brilliant eastern civilization”. In October 2019, in wake of an informal summit in Chennai, Modi announced “the start of a new era in relations between India and China”.

Speaking in favor of India-China rapprochement are a number of factors. «…In spite of all the difficulties and inevitable tactical losses, such consolidation would undoubtedly meet long-term interests of both countries». The joining of efforts would facilitate «stabilization of geopolitical situation throughout the vast European expanses and would create new opportunities for trans-continental cooperation in various areas». The benefits of strategic rapprochement between Beijing and New Delhi are too “numerous” and “too evident” not to become an issue of consideration for strategists on both sides of the Himalays».

Meanwhile, Chinese-Indian relations bear quite a few strategic differences. Both China and India are coming to rely on national identity. The Bharatiya Janata Party – the party of Indian nationalists – has been in power in New Delhi since 2014. From the point of view of domestic policy, the stake on national feelings of the Hindu majority has yielded considerable dividends for the party. In turn, China’s rhetoric on the territorial issue is as unyielding as ever. China also continues to develop strategic ties with Pakistan – India’s historical opponent. Finally, China has been pushing India out of South Asia and the Indian Ocean – territories traditionally regarded by New Delhi as a zone of India’s vital interests. And India’s trade deficit has been on the rise, having amounted to 60 billion dollars.

In addition, a demonstration of resoluteness in all spheres has become the main feature of Chinese foreign policy of late. «The new … approach, which manifests itself in social networks, in newspapers, and at negotiating table…» is part of China’s campaign for «what the Chinese leaders believe to be China’s legitimate place in the world». Critics describe Beijing’s new foreign policy as “assertive”, signaling a «grave conflict» with the officially declared policy of striving for “mutual gains”.Given the situation, there are grounds to assume that the growing social and economic superiority is intangibly changing Beijing’s attitude to its “backward” neighbor, making it more lenient.

In the meantime, the policy of national consolidation is fraught with new problems for both countries. Traditionally, New Delhi stakes on a multi-vector foreign policy and rejection of strategic coalitions. At the moment, India is trying to avoid a situation in which it would have to choose sides in a rapidly unfolding cold war between China and the United States. Firstly, for New Delhi, a choice of one of the sides in the war – Beijing or Washington – would radically destabilize the status quo and would destroy the fragile balance in the system of international relations, at least, in the Eastern hemisphere. Secondly, right now India would have to accept a secondary role, both in the Chinese “Community of Shared Future for Mankind”, and in the American strategy for “Indo-Pacific Region”. As a result,  New Delhi’s “hesitations” is all but intensifying distrust, both in Washington, and in Beijing. 

China, in turn, is set on avoiding a role similar to that of the USSR in the 1970s, when the United States made a breakthrough in relations with China, thereby putting the Soviet leadership in a difficult position. Should there appear a strategic alliance between New Delhi and Washington, then China would find itself in a position of geopolitical disadvantage.  If Washington could put into effect its policy of institutionalizing the so-called “union of Pacific democracies”, “Asian Atlanta”, particularly with the participation of all four major players – the United States, India, Japan and Australia, America would regain dominating positions in Asia-Pacific Region.

In the course of last year, trends that do not encourage a warming of China-India relations hit a new level. InIndia the year 2019 marked parliamentary elections and transition to a more pronounced policy of national consolidation on the basis of the principle ‘India is a nation of Hindus’. This triggered mass protests of Muslims across the country. There was also an escalation of confrontation with Pakistan, which has China as a strategic patron in recent years. Indian-American ties continued to develop – President Trump paid a visit to India in February this year.

India’s social and economic weakness is becoming a major obstacle to the country’s greater status in Asia and elsewhere in the world. In addition, according to Indian observers, strategically, New Delhi  “is incapable of resisting the irreversible large-scale industrial and infrastructural advancement of Beijing via the Himalayas and the sea routes of South Asia, which are considered a traditional sphere of influence of India, and is thus forced to resort to a counter-balance strategy”. A major element of such a strategy is the closest possible rapprochement with America.

Meanwhile, China has irreversibly been drawn into a full-blown trade war with the United States, which in 2019 entered the phase of confrontation of financial systems and a ‘cold war’ in the sphere of new technologies. Given the situation, Beijing is less willing to hide its anger over an unrelenting, in its opinion, rapprochement between New Delhi and Washington. On June 7 Global Times, a branch of People’s Daily, an official newspaper of the Communist Party of China, warns India against being fooled by the Americans. The article also says that China will not concede “a single inch of territory” to India. In another publication of Global Times India’s readiness to join G7, whose expansion but without China was recently proclaimed by Donald Trump, is described as “a dangerous game”.

As it happens, “the ideal” foreign policy framework for India is to be an autonomous center of strength, which is cooperating with different competing poles simultaneously and maintaining a constructive balance of interests amid competition between leading powers. Meanwhile, for China, given a mounting confrontation with the United States, further constructive relations with India appear to be one of the most favorable scenarios in the conditions of the changing architecture of a world order after the corona crisis. History shows that «political willpower and readiness for compromise» can overcome even the most deep-rooted differences. In the long run, both countries should be realistic enough to understand that an alternative to normalization of bilateral relations is a new escalation of crisis.

Moscow is fully aware of the challenge of establishing a dialogue between so big, so ambitious and so different, in many respects, countries. Russia wants the world’s two most densely populated nations to search for solutions which would make their relations better and more effective, without jeopardizing the positive experience of cooperation they accumulated in previous years. It is essential to find a way between continuation of constructive effort in the absence of full consensus, on the one hand, and refusal to cooperate under the pretext of outstanding differences, on the other. 

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East Asia

Chinese Communist Party and the path of “high-quality development” at Guangdong Province

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A night view of Shenzhen, Guangdong province, on March 10, 2018. (PHOTO / VCG)

During the meeting of “Huang Kunming”, Secretary of Guangdong Provincial Party Committee mentioned that it is significant for Guangdong embark on a path of high-quality development fit for its own situation. According to my highly understand of China’s high-quality development and analysis to the nature of the Chinese society and the polices of the Communist Party of China regarding the development is meaning (all-round building a strong modern socialist country) and all-round rejuvenation of the Chinese nation still need to rely on development.

 With the continuous development of the Chinese economy and the deepening of reforms, China put forward a new expression of “high-quality development” for the first time at the 19th National Congress of the Communist Party of China in 2017, which indicates that China’s economy has moved from a stage of rapid growth to a stage of high-quality development.

 Changing China’s economic development strategy is an inevitable choice in line with the law of development and the demands of its development. Now, China is seeking to change its previous development pattern of relying on a large number of factors of production to focus more on quality and efficiency.  It has begun to adhere to the implementation of the new development philosophy that emphasizes innovative, coordinated, green and open development for all, and to build a new development pattern that relies on domestic trade and promotes integration between domestic and foreign trade to enable the Chinese society to complete the building of a strong modern socialist country in an all-round way, Chinese side should stick to advancing high-quality development as the top priority, as President Comrade “Xi Jinping” stressed in the report.

 High-quality development mainly depends on the economy’s vitality, innovation and competitiveness.  In order to improve these capabilities, China is accelerating the implementation of the innovation-driven development strategy, intensifying its efforts to achieve a high level of self-reliance in scientific and technological research, mobilizing forces and focusing on solving intractable problems in original and pioneering science and technology research to achieve breakthroughs in some crucial and pivotal technologies, which are guided by these strategies, China has achieved good results in manned space industry, lunar and Mars sounding, deep-sea and land exploration, supercomputers, satellite navigation, quantum information, electro-nuclear technologies, large-scale passenger aircraft, medicine, biopharmaceuticals and other fields over the past years, and joined the ranks of innovative countries in the world.

 Green development is an important symbol of the transition of China’s economy from the stage of rapid growth to the stage of high-quality development. In recent years, China has pushed the green transition to a development mode, implemented the comprehensive rationalization strategy, developed green and low-carbon industries, and advocated green consumption.

  The bright future of China’s economy stems from more flexible and high-quality development. In 2021, China calmly responded to changes in the world as well as the COVID-19 epidemic, took new steps to build a new development pattern, achieve new results in high-quality development, and achieve a good start for the 14th Five-Year Plan. China has maintained a leading position in the world in economic development and in epidemic prevention and control, accelerated the growth of national strategic scientific and technological forces, improved the flexibility of the industrial chain, continued to deepen supply-side structural reforms, and made solid progress in the green transformation of the low-carbon economy and prosperity subscriber.

  Here, with the strong leadership of the Communist Party of China, the significant advantages of the socialist system with Chinese characteristics, the technological foundation accumulated since reform and opening up, the extremely large market advantage and domestic demand potential, and with huge human capital and human resources, the Chinese economy will continue to grow steadily on the path of high-quality development, enabling China to contribute in achieving a steady and stable progress in the recovery of the global economy.

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China’s Deflating Population: The Economic Marvel in Eclipse?

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So China’s population shrank last year. I admit my first instinct was … well, isn’t this a good thing? I mean, during the entire 1960s and 1970s, global discourse misted around how the world population kept growing beyond the finite resources of this world. And how food scarcity and poverty would create a social depression. China, with a population of roughly 1.4 billion people, was specifically a focal point of population reduction strategies. After the widespread catastrophe of the Great Leap Forward, a debilitating social program orchestrated by Mao Zedong in the late 50s, China’s population was on the up and up in the following decade, to the point that the infamous ‘One-Child Policy’ was introduced in the late 70s to inhibit the burden of a growing population – and concomitant poverty. Since then, however, China has dynamically transformed into an economic powerhouse – a factory floor for global manufacturing. And here lies the answer to this population conundrum: Shrinking population in China is a problem now!

According to the data released by the Chinese government last week, China’s population contracted by circa 850,000 people in 2022; with 9.56 million births against 10.41 million deaths, it was the first time in more than half a century that deaths outnumbered births in China. The initial thought would be to blame it on the pandemic. But that would be a blinkered assumption without gauging the stunted birth rate. It was the sixth consecutive year that the number of births fell, down from 10.6 million in 2021, according to the National Bureau of Statistics. Many demographers and statisticians warned for years about a population decline on the cards, albeit much later in this decade. This presage was why the government reposed its one-child policy in 2016 and extended the limit to three children in 2021. Local governments offered tax rebates and outright cash handouts to couples having children. The source of anxiety was partly social and partly economic – or maybe socioeconomic is the correct juxtaposition.

China is a rising economic power, the world’s second-largest economy, and the strongest contender to dethrone American supremacy. But in listing all the superlatives, we sometimes forget that China is still a developing economy. Despite its phenomenal evolution from endemic poverty, its average population still earns less than the average earnings in advanced economies. And the shrinking population is a two-pronged issue that could constrict China, like other leading developing economies, into a middle-income trap.

Just by simple inference, we can judge that a declining population is also an aging population. Impressive modernity in China’s healthcare system has led to an increase in life expectancy. Meanwhile, a decades-long hiatus in birth-conducive policies and changed mores of young Chinese couples, often antipathetic to having children altogether, have led to a sharp decline in births. A combination of these factors has invited a conspicuous outcome: Shrinkage in China’s working-age population. In fact, China’s working-age population has been in decline since 2015; according to a government spokesman, it could fall to roughly 700 million (approximately 23%) by 2050. This factor would be particularly problematic for China, which has long been a competitive labor market for manufacturing heavyweights like Apple and Microsoft. But moreover, a bulging elderly population amidst falling tax receipts would pose a challenge to government finances, especially given the comparably underdeveloped social safety net programs in China. Therefore, either taxes ought to be raised sharply or state pensions to old-age dependents would hit the skids – a spartan policy dilemma either way.

We can draw apt comparisons from Japan – the world’s third largest economy – which has notoriously suffered from a lopsided aging population and accompanying anemic economic growth since the asset bubble burst of the 1990s. I mean, China’s real estate market does look like a financial crisis just waiting to happen. But post-boom Japan has tried virtually every bizarre economic strategy – from negative interest rates to yield curve control – yet has failed to spark demand-led inflation. Strangely, however, China has sustained its bustling economy on prohibitive rates of investment rather than consumer demand, which has remained relatively lukewarm due to policymakers’ reluctance to pass the complete scope of economic growth to households. Nonetheless, a contracting labor force would perhaps accelerate the exodus of manufacturing from China unless the government finds alternatives to sustain China’s unrivaled productivity levels.

We could blame China’s ‘zero Covid’ policy for strangling economic growth. It is no surprise that China’s economy grew by a modest 3% in 2022, its slowest rate in nearly four decades, barring 2020. Intermittent lockdowns and pedantic mass testing regimes cast a pall over economic activities. And higher interest rates imposed by the Federal Reserve and other central banks have dampened global demand and diluted appetite for Chinese imports. According to government officials, year-on-year Chinese exports fell by 9.9% in December. While an economic turnaround is widely expected later this year, a falling working-age population; a skyward old-age dependency ratio; and the ongoing trade tussle with the United States could cost China many more decades to supersede the American edge. However, China has been an iridescent success story, an economic miracle of sorts. And therefore, if the Chinese Communist Party (CCP) could somehow prioritize economy over national security; social reforms over governmental control; and collaboration over confrontation, I reckon China can again defy the odds and achieve its dream.

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Nepal-China Relations and Belt and Road Initiative

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Image source: xinhua

China appears to be more “functional” in Nepal recently. A new administration led by leader Pushpa Kamal Dahal has acted on the same pitch initially also. The Rasuwagadhi border crossing, which had been blocked for three years, has been reopened for two-way trade, and the much-anticipated Gyorong-Kathmandu train project’s final survey has also begun as of January 1, 2023. The second phase of the 10-lane ring road project from Kalanki to Chabhil is anticipated to start soon as well. All these accumulatively demonstrate the current nature of friendship between them and the profound Belt and Road Initiative is the key rostrum for the current complexion of the relationship between them. Hence, the trends are indicating a greater form of cooperation even in the regional domain as well.

Meanwhile, China and Nepal have inked a six-point agreement to strengthen bilateral collaboration and exchanges on governance, legislation, and supervisory practices, in line with Beijing’s Belt and Road Initiative (BRI). On September 12, 2022, in Kathmandu’s federal parliament building, Agni Prasad Sapkota, Speaker of the Parliament, and Li Zhanshu, Chairman of the Standing Committee of the Chinese National People’s Congress, signed the agreement. According to the agreement, the nations would exchange information about each other’s legislative, oversight, and governance activities. Five years after BRI’s founding, on May 12, 2017, Nepal formally joined the process. Nine projects – the upgrading of the Rasuwagadhi-Kathmandu road, the construction of the Kimathanka-Hile road, the construction of the road from Dipayal to the Chinese border, the Tokha-Bidur Road, the Galchhi-Rasuwagadhi-Kerung400kv transmission line, the Kerung-Kathmandu rail, the 762MW Tamor Hydroelectricity Project, the 426MW Phuket Karnali were on the to do list. However, more than any other nation, China invested US$188 million in Nepal during the 2020–21 fiscal year. During KP Sharma Oli’s visit to Beijing in 2016, Nepal and China also ratified a transit transport agreement for commerce with other parties.

However, amidst the current global tension and the changing rapport of international politics, China remains as a key investor in Nepal. Besides, the recent activities from the Nepal administration showed a shift in policy domain from the previous regime which in some cases was rigid to Chinese projects. Meanwhile, the BRI becomes more eminent in the strategic, political and economic domain of the status quo. Against such backdrop, the next sections will discuss current trends of the BRI in Nepal.

Nine Projects: Token of Continuation of the Initiative

Nepal put forward nine potential projects to be undertaken under the BRI at the beginning of 2019. These included setting up a technical institution in Nepal, building new highways, tunnels, and hydroelectricity dams, as well as conducting a feasibility assessment for a trans-Himalayan railway that would connect Jilong/Keyrung, a Chinese port of entry, with Kathmandu. This enhanced the significance of the project which will direct to more prosperous China- Nepal relations.

Nepal, the “Pillar”

Hou Yanqi, the Chinese ambassador to Nepal, stated in April 2022 that Nepal was one of the BRI’s most significant pillars and that projects were still moving forward despite the “speed of pragmatic collaboration” slowing down because of the coronavirus pandemic and Nepal’s changing political climate.

Transit Through China: Better Connectivity and Trade

Kathmandu protocol agreement with Beijing, Nepal will import and export goods from a third country through China through Tianjin, Shenzhen, Lianyungang and Zhanjiang seaports and land ports of Lanzhou, Lhasa and Shigatse. They will also get the facility of transporting goods through six dedicated transit points of the two countries. It will boost the trade for improved connectivity.

Extended Cooperation in Domains Except for BRI

In addition to the BRI projects, China is currently making significant investments in Nepal’s infrastructure, including ring road expansion, dry ports at the border crossings of Larcha and Syabrubesi, the establishment of China Study Centers, a new international airport in Pokhara, and optical fiber cable connectivity from Kathmandu to the Chinese border.

Energy Exploration: New Domain of Cooperation

China is also looking into the prospect of discovering gas and oil deposits in Nepal and is building a border river crossing at Hilsa, Humla. It will open a new domain of cooperation based on mutual interest.

Poverty Reduction and Generating Newer Income Sources

Currently, roughly six Chinese airlines offer regular flights to Nepal. Nepal has the fastest-growing Chinese tourist industry. Nepal granted China access to choose 16 Himalayan regions that border China to develop as part of a program to fight poverty.

Security: Bringing Peace

Joint military drills between China and Nepal are also a new development in security cooperation. It will bring peace in the region since the image of Nepal is very clean.

Increased Diplomatic Connectivity

The BRI appears to be one of the three priority pillars for the Chinese government’s organizing principles of foreign policy, along with the Global Development Initiatives and the Global Security Initiatives, in terms of developing successful international relations rather than just an economic endeavor. It will bring a fresh start in the diplomatic domain of both countries and the future prospects of ties in the diplomatic arena can be discussed robustly.

No More Landlockedness

Under BRI and the Trans-Himalayan Multi-dimensional Connectivity Network, which will transform Nepal from a landlocked country to a land-linked one, there are multiple road, sea, and corridor networks throughout the world. It will boost the relationship to a great extent while there will be a surge in the arena of export and import.

Regional Connectivity

The extension of the Qingzang railway from Tibet to Nepal and the border with India is among the most significant BRI projects. Three routes are being considered for this railway. The first would connect Shigatse to Kathmandu via Kerung and continue on to Pokhara and Lumbini before reaching the Indian border. The second would run from Shigatse to the Burang border and connect Humla and Darchula districts in Nepal with Pithoragdh, Uttarakhand, while the third would link Shigatse to the Yandong border of Sikkim, India.

As China and India have no trade disputes with one another, India would gain from this project as well after trading through this route. In comparison to other industrialized parts of the world, South Asia could see an increase in commerce and investment if this project is carried out on a win-win basis between China and Nepal.

Challenges

Additionally, loans are typically provided on commercial terms through the Silk Road Fund and the Asian Infrastructure Investment Bank (AIIB), both of which are led by China (SRF). Due to project site clearance delays and the nation’s political instability, along with its comparatively short repayment time, Nepal’s big projects have raised concerns that they may not get off the ground.

Besides, three primary issues with China are of particular concern to the Nepalese government. First, instead of commercial loans, the nation favors grants and lenient loans from China. Second, it wants the interest rate and repayment period to be comparable to those of multilateral funding organizations like the Asian Development Bank and the World Bank. Thirdly, it thinks that bid competitions ought to be allowed for the BRI projects. But the Chinese authorities are not responding on the same page.

The Inception of a Recommenced Cooperation

Pradeep Gawali, Foreign Minister in the KP Sharma Oli’s government, said that from the perspective of Nepal, the BRI projects were the way to be connected to the trans-Himalayan multipurpose connectivity network. Nepal had been able to select the nine projects included in the BRI with great success. However, Chinese authority said on December 26 that it looks forward to cooperating with the new government to advance projects under the ambitious Belt and Road Initiative, a day after the Maoist party chairman Pushpa Kamal Dahal alias Prachanda was named as Nepal’s new prime minister (BRI). China aims to develop initiatives under the Belt and Road collaboration, according to Mao Ning, the official spokesperson for the Chinese foreign ministry, who congratulated Prachanda on his appointment. Beijing claims that as a longtime ally and neighbor of Nepal, China cherishes Nepali relations very highly. China is prepared to collaborate with the new Nepalese administration to broaden and deepen friendly relations and cooperation on all fronts, pursue high-quality Belt and Road cooperation, strategic cooperative alliance marked by enduring friendship for growth and prosperity new impetus, and bring more benefits to peoples from both sides.

Hence, it is evident that China’s policy toward Nepal is generally stable and uncomplicated, and the two countries’ bilateral relations have been cordial and shaped by Nepal’s strategy of balancing the divergent impact of China and its southern neighbor. Through BRI projects, Nepal could gain better connectivity relations with its northern neighbors, but in order to do so, Nepal must enhance its negotiations with China.

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