Geopolitics on the rocks

Prabhu Guptara

Why does India oppose China’s Silk Roads?

South Asia, India

A geopolitical answer: India’s discomfort with China's objective of dominating the world

There is a narrow answer as well as broader answers to the question of why India opposes China’s Silk Roads (also known as the “Belt & Road Initiative or BRI, and as “One Belt, One Road” or OBOR[i]).

The narrow answer is that one part of OBOR, the $60 billion China-Pakistan Economic Corridor (CPEC), passes through territory disputed between India and Pakistan.  Naturally, India does not wish to support any move that militates against India’s sovereignty and strengthens Pakistan’s occupation of the territory – though India has also drawn attention to the environmental[ii] costs of OBOR, as well as to the debt trap into which countries like Sri Lanka have fallen by accepting China’s onerous loan conditions for infrastructure projects[iii]

Very few people draw attention to the fact that all the labour employed in Chinese bilateral projects is Chinese, not local.  And further that, at the conclusion of these projects, many of the Chinese employees stay on illegally in the countries concerned. Whether for that reason, or by other means, the number of illegal Chinese immigrants around the world has been going up – strange, given that many of the countries to which the Chinese are going are much poorer, and may be considered to have lower growth prospects, than China[iv].

That leads us to broader consideration of Indian suspicions of Chinese investments in Pakistan as a whole. Since there is no visible economic logic to investing US$55 billion in Pakistani ports, roads and energy projects, the investments seem to India to be driven by geopolitics – and that has long caused anxieties in India[v]. China’s stance vis-à-vis India has provoked rising concern in India’s older generation, which still smarts from what is perceived by them as Chinese betrayal of friendship with India: stealthily preparing for and then suddenly launching the Sino-Indian war of 1962 (cementing a loss to India of 38,000 square kilometres of land – not far off the size of Switzerland)[vi].

 

Most broadly of all, India is concerned by China’s increasingly aggressive stance in the world, systematically sidelining and reducing India’s influence in the world in pursuit of China’s ambition of becoming the global hegemon instead of the USA.  If there must be a hegemon, in India’s view, the US is a much more tolerable hegemon than China, primarily because China is relatively opaque while being focused on nationally dominating the world, whereas the US is relatively transparent while being focused on fostering “mere” capitalism. 

“Mere” because capitalism is something in which everyone can participate, at least in theory, provided one has either capital or skills and experience that might be useful to those who have capital.  “Mere” also because the shape of that capitalism is relatively democratic – that is, more or less open to modification by all participants.

 

The broader perspectives on India’s rejection of OBOR have not been readily appreciated by the West mainly because Westerners commit a fundamental mistake in analysing China’s actions and circumstances.

 

That mistake is to do in relation to China what we rightly do in relation to the rest of the world – that is, to separate and discount “non-state” and “private” entities, in order to focus instead on the government and on the main political party or parties.  While Chinese “non-state” and “private” entities are indeed in a certain sense in a separate area, analysts need to keep clearly in mind that the boundaries between Party, government and “non-state”/”private” entities are entirely porous in China whenever it is a matter of Chinese national interests or objectives.

“Non-state”/”private” entities in China do have different freedoms and responsibilities from those that such entities have in the West.  In other words, Chinese power in the world flows as much out of the guns of its armed forces as it does out of the pockets and actions of its “non-state” and “private” entities[vii].   The Chinese armed forces, Chinese aid, Chinese investments, Chinese commercial loans, and Chinese trade (more or less State-financed, State-supported and State-directed), all need to be seen as different arms of the same body, being used flexibly as appropriate for the achievement of Chinese national interests and objectives. 

 

Some of those objectives are clearly spelt out. OBOR, for example, is a practical strategy for:

 - the pacification and stabilisation of China’s western regions by means of connecting with the world,

 - seeking new growth engines in view of China’s economic slowdown,

and

- utilising China’s surplus expertise and capacity especially in the finance, construction, communication, and logistics.

 

In pursuing these transparent objectives OBOR may bring benefits to partner countries, though OBOR also has a strategic and political agenda which remains opaque.

 

Let’s look at both the transparent and the non-transparent aspects, in terms of examples of where there is convergence of interests between China and other countries. Think, first, of the Asian Infrastructure Investment Bank.  This is a multilateral development institution whose shareholders may include as many as 82 countries by the end of this year, and in which India is the second largest shareholder after China.

 

Think, second, of the New Development Bank, in which Brazil, Russia, India, China and South Africa are equal partners. 

 

Neither of these banks is seen as part of OBOR by these countries, and the two banks have negligible roles in funding OBOR.  They contributed only $2billion each toward OBOR’s $292 billion in loans and equity as of end-2016. An amount equal to those provided by those two banks (i.e. $4 billion) was provided by the Silk Road Fund, which is a US$40 billion Chinese State-owned investment fund.

The most important single funding source for OBOR is China Development Bank, which has assets of roughly one trillion US dollars, and which contributed $110 billion to OBOR.  The four largest state-owned “commercial banks” provided another $150 billion.  So, of the total funds available to OBOR at the end of 2016, less than 1% were non-Chinese.  But the point is that this is all transparent, and is all convergent with the interests of other countries – which is why they participate in all this.

 

However, let’s look now at an example of what appeared initially to be transparent, but then became different.  The Bangladesh-China-India-Myanmar Forum (BCIM) enables these four countries to discuss economic cooperation. The latest meeting of the Forum was in April 2017 in Kolkata.

One of the things that irked India is that China suddenly started projecting the BCIMEC as a part of OBOR. India feels that a regional cooperation effort, which is equally led by all the four countries involved, and which started before OBOR was formulated by China, should not suddenly and without agreement be converted into one subsidiary project within OBOR which is clearly initiated and driven by China alone.

 

Do we have here a key to understanding the historical development of China’s behaviour internationally?  Since Chinese liberalisation started in the 1980s, Chinese moves in international business and politics are characterised by an initial ploy that is “win-win”. 

However, over the last few years, it has become clear that even what is initially a “win-win” turns into a “WIN-win” with the advantage increasingly going to China. That may be tolerable, up to a certain point.  The danger is that the trajectory from “win-win” doesn’t stop at “WIN-win” but goes on rather to become “win-lose” (in which other countries lose).

 

Is OBOR, which is touted as a global partnership by China, in reality a neocolonial strategy to gain assets in other countries or even to dominate them completely? The “partnership” starts by financing risky infrastructural projects in target countries at rates of interest that suit the riskiness; when the country is unable to repay the loan, China gains either complete ownership or at least control of the project.

And here is an even worse consideration: has the Chinese government allowed OBOR to be "hijacked by Chinese companies, which have used it as an excuse to evade capital controls, smuggling money out of the country by disguising it as international investments and partnerships", as Jörg Wuttke, outgoing president of the EU Chamber of Commerce in China, warned in May this year? If so, what is China’s larger agenda? An increasing number of countries is now reacting to such perceptions and questions regarding the trajectory of OBOR. 

 

Here is the final consideration: in spite of the Great Recession since 2008, it is clear that the world is still growing economically; the benefits may not be spreading as quickly as they were before 2008, but the benefits are still spreading.  The impact of artificial intelligence, quantum computing, and other technological developments means that there is good reason to foresee a continuing increase in productivity and prosperity in the world. 

In any case, the world has enough for everyone’s need, as a wiser man than I once said; but the world does not have enough to satisfy even one man’s greed – let alone a nation’s greed.  Will Chinese communism remain Xi’s mechanism for continuing capitalist national competition? Or can China (with other countries) learn to forego the mentality of capitalist competition, and learn to contribute instead to genuinely addressing the new global issues[viii] facing our world?  That is the key question for our time.

 

 

 

[i] The One Belt One Road initiative or OBOR is also called by various other names, including the “Belt & Road Initiative” or BRI. In any case, the reference is to the (land-based) Silk Road Economic Belt in combination with the Maritime Silk Route - a $5 Trillion initiative launched by the Chinese government with the ostensible intention of promoting economic co-operation among 69 countries along the proposed OBOR routes, but widely thought to encapsulate the Chinese strategy for gaining hegemony not only over these countries but over the entire world – e.g. now extending to Latin America - by tying countries to China’s apron strings (military, aid, investments, trade and soft power).

OBOR’s five major goals are: policy co-ordination, facilities connectivity, unimpeded trade, financial integration, and people-to-people bonds. China’s National Development and Reform Commission (NDRC) issued its Vision and Actions on Jointly Building the Silk Road Economic Belt and 21st Century Maritime Silk Road on 28 March 2015, outlining the framework, the key areas of co-operation and the co-operation mechanisms. The Silk Road Economic Belt focuses on: (1) linking China to Europe through Central Asia and Russia; (2) connecting China with the Middle East through Central Asia; and (3) bringing together China and Southeast Asia, South Asia and the Indian Ocean. Meanwhile, the Maritime Silk Road focuses on using Chinese coastal ports to: (a) link China with Europe through the South China Sea and Indian Ocean; and (b) connect China with the South Pacific Ocean through the South China Sea. In October 2017, OBOR was enshrined in the Chinese Communist Party’s Constitution – a first for a foreign-policy initiative in any political party’s constitution in the world.  At OBOR’s launch summit in May 2017, OBOR was snubbed by the EU on the final day, because OBOR does not include commitments to transparency or to social and environmental sustainability.  The only country which was invited but declined the invitation to the Summit, was India – and China retaliated by triggering a 73-day military standoff with India. The US participated in the Summit and was ambivalent about OBOR till 24 October, when Secretary Tillerson enunciated the Trump government shift of language from “Asia-Pacific” to “Indo-Pacific”, extolling India’s peaceful rise while chastising China’s disdain for international law and sovereignty.  The US is now cooperating with India, Japan and Australia in order to counter OBOR.  That is a rare and major foreign-policy triumph for India.  India’s additional counter-move to OBOR is, in cooperation with Japan, the Asia Africa Growth Corridor (AAGC), with initially $40 billion expected to be committed to it by the two countries (with a view to extension and scaling up).

[ii] The Myitsone dam project involving a Chinese firm in Myanmar was suspended over environmental concerns.  Had it gone ahead, it would have been the fifteenth largest hydroelectric power station in the world: 1,310 metres (4,300 ft) long and 139.6 metres (458 ft) high. The plan was to produce 6,000 megawatts of electricity primarily for consumption in Yunnan, China.  For a fuller discussion of the overall point here, see “China in Latin America: Lessons for South-South Cooperation and Sustainable Development” report of the Boston University Global Economic Governance Initiative Working Group on “Development and Environment in the Americas”, which found that “Chinese trade and investment in Latin America since the turn of the 21st century was a major driver of environmental degradation in the region, and was also a source of significant social conflict” (emphasis mine); see also “China’s Environmental Footprint in Africa” by Peter Bosshard, China in Africa Policy Briefing, No. 3, 2008, published by the China in Africa Project of the South African Institute of International Affairs (SAIIA); further see: “The Environmental Impact of China’s Investment in Africa” by David H. Shinn, Cornell International Law Journal, issue 25 (2016)

[iii] In the case of Sri Lanka’s Hambantota Port, the onerous conditions included repayment of the $1.6 billion investment with 6% interest, and an accompanying agreement for a 15,000-acre Chinese industrial zone. When, as foreseen, due to lack of sufficient use of the port, Colombo was unable to make repayments on the loan, it found itself having to sell a 70 percent stake to the China Merchants Ports Holdings, a Chinese state-owned company.  Moving to take possession of “commercially failed” projects seems to be a well-established Chinese commercial strategy – e.g. “China Gezhouba Group , the main construction firm in charge of the massive Three Gorges Dam project… has property holdings worth at least 2.3 billion yuan, mostly seized from companies that failed to pay their loans” (https://finance.yahoo.com/news/cinda-ipo-test-investor-appetite-080818410.html).  So China Merchants Ports Holdings now operates Hambantota port on the basis of a 99-year lease. As one Sri Lankan put it, “The high interest rates, strict commercial conditions, and the alleged lack of respect for laws or the environment are some of the numerous drawbacks of Chinese financing and moreover, the lack of transparency in agreements with China has led to many controversies and alleged corruption. Now, add to all of that a 99-year foothold for China in Sri Lanka, and there is also the question what will China want next?” (http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=169779). In 2014, several Chinese naval vessels – including submarines – called at the port, which caused alarm bells to go off around the globe, in the context of the worldwide expansion of Chinese military influence including inauguration of a naval base in Djibouti in the Horn of Africa earlier this year.

In the case of Nepal, the US$2.5 billion hydropower plant Budhi Gandaki Hydro Electric Project awarded to a Chinese state-owned company, China Gezhouba Group (GGG), the conditions were apparently because “China’s negotiation tactics when dealing with countries such as Sri Lanka, Myanmar, Nepal and Pakistan mirrored the hard-headed approach of US or European Union companies rather than offering “friendly” terms and conditions” (http://www.scmp.com/news/china/diplomacy-defence/article/2120461/how-nepals-cancelled-dam-scheme-highlights-countrys-big).  On GGG’s mixed record of achievement, see for example http://www.globalconstructionreview.com/news/cameroon-min7ing-infrastruct7ure-sch7eme-do7ubt and http://www.hindustantimes.com/world-news/nepal-awards-2-5-bn-power-project-to-controversial-chinese-firm/story-mLY8ctnTVAp0ULMIe1IVmJ.html

[iv] As long ago as 2004, the South African Department of Foreign Affairs estimated that there were around 250 000 illegal Chinese immigrants in the country. Across Africa, the number of illegal Chinese immigrants may already have been as high as one million by then. In Angola, the Chinese population in Luanda alone was then estimated between 80,000 and 100,000; in the tiny island of Mauritius, the Chinese embassy estimated that there were 30,000; In Sudan, Ministry of Foreign Trade officials estimated that there were over 16 000 Chinese residents in Khartoum alone with another large concentration in Port Sudan; in Nigeria and other countries, there have been public disturbances due to business upsets caused by illegal Chinese immigrants; regarding Ghana, see https://www.theguardian.com/global-development/2013/apr/23/influx-chinese-goldminers-tensions-ghana). For Western countries, the worry is not so much the potential for destabilisation represented by illegal Chinese immigration in Africa or other parts of the global South, as the fact that many illegal Chinese immigrants use the South as a stepping stone to finding some way to Europe and North America (https://wwwnc.cdc.gov/eid/article/9/9/03-0353_article; https://www.express.co.uk/news/world/648428/Gang-Chinese-immigrants-stolen-passports-police; http://www.scmp.com/news/world/united-states-canada/article/1968984/illegal-chinese-immigrants-are-flocking-san-diego).  The difference between illegal Chinese immigration and illegal immigration from other countries is that those from other countries are oriented only to themselves as individuals or families or, at most, clans; illegal Chinese immigrants, on the other hand, do not stop being considered by China as Chinese citizens, and are unwittingly or wittingly agents of China’s agenda in these countries, ranging from subversion of local businesses in order to expand Chinese exports, to espionage http://www.livemint.com/Opinion/O6fkpAr5xiqUmRf1OF5z0O/What-China-does-when-it-disagrees-with-you.html. For a decades-old discussion of illegal Chinese immigration into the US, see Forbidden Workers: Illegal Chinese Immigrants and American Labor by Peter Kwong (The New Press, USA, 1998); for the most recent statement of concern by the US, see https://www.voanews.com/a/us-china-talks-focus-on-immigration-fugitives/4057291.html).

[v] Those anxieties led to India’s actions apparently making it difficult for Pakistan to get funding from international institutions for the $14b Diamer-Bhasha dam (which is planned to generate 4,500 megawatts of hydropower), as that dam is within territory disputed with India. As a result of failing to secure funding from international institutions, the dam was slated for inclusion in CPEC/OBOR, but Pakistan has recently cancelled that because of China’s ‘too strict’ conditions (the project will now be financed by Pakistan itself).

 

[vi] In 2010-2011, there were 200 border violations between China and India; the number rose to some 500 before dropping to 200 again in 2016 (see inset video at http://indiatoday.intoday.in/story/aksai-chin-china-india-tawang-dai-bingguo/1/895657.html).

[vii] “As head of the party, military and state, Xi has accomplished what other world leaders can only dream of: an unprecedented centralization of power. He has the authority to make the world’s largest armed forces and the huge transnational Chinese corporations an instrument of his state policy, and this gives him the muscle to rewrite the rules of international politics” – Samir Saran, Vice-President, Observer Research Foundation (ORF), quoted from https://www.weforum.org/agenda/2017/10/president-xi-and-secretary-tillerson-what-two-speeches-tell-us-about-the-future-of-china-and-the-us

[viii] The largest issues of our time are: inequality, environmental irresponsibility, monetary instability, economic volatility, social and political extremism, technology-caused unemployment, lack of consideration of how best to regulate technology’s potential for magnifying good as well as for magnifying evil, and the decline of humane values around the world.