Distinguished Lectures Distinguished Lectures

China: an insight and the state of bilateral relations

  • Distinguished Lectures Detail

    By: Amb (Retd) Nalin Surie
    Venue: Indian Institute of Technology (IIT), Guwahati
    Date: April 17, 2017

I am delighted to be present here amongst so many bright young people. I have been asked to speak about China and India-China relations. The subject and issues are topical and my effort will be to give an over-view and then engage in an extensive Q&A Session with all of you that will perhaps be more productive than my simply giving you a long lecture.

China has been in the news for many years now. This is understandable. China is now the second largest economy in the world and perhaps already the largest trading nation in the world. It has in place an ambitious and extensive defence modernization programme coupled with an economic and technological modernization programme that is intended to transport it into the world’s leading power. The problem is that while China’s growth and ambitions are known, the manner in which it intends to use its new power remains problematic.

It will surprise you to hear from me that, to my mind China has so far by and large been a status-quo power. It was fortunate to have inherited a permanent seat on the UN Security Council and used the Cold War in a skillful manner to convert obvious weaknesses into strengths. It has intelligently used the processes of international economic inter-independence to develop its economy and obtain access to high-end dual use technologies almost without restriction till recent years. It is also a fact that despite being the world’s largest democracy, India was denied access to high level technologies in the guise of dual use technology restrictions since 1974. But a Communist totalitarian regime did not face any such barrier. The double irony is that China has depended enormously for its development on external support especially from the west including Japan. Yet, today it is these very countries which see China as their biggest threat if not competitor on the international arena.

China is ruled by the Communist Party but it is not a Communist State. The objective of the Chinese regime is to set up a system that is overwhelming governed by Chinese characteristics. Hence, for example the concepts of "socialism with Chinese characteristics” and "democracy with Chinese characteristics.” The over-riding objective of the Communist Party of China is to retain power. In sustaining this objective, it faces many obstacles; obstacles that have arisen out of the economic success that China has achieved; obstacles that have arisen because of growing outside influences on China. The latter is important to bear in mind since China’s economic successes have depended enormously on opening out to the outside world. This dependence on the world is even larger today than before. This fact is recognized by the Chinese leadership.

The major part of the problem within China arises from the desire of people who have achieved economic prosperity to aspire for and acquire spiritual, religious and political freedom. The challenge before the Communist Party of China is to ensure that such freedoms can be provided without necessarily breaking the iron hold of the Communist Party on the governance of China. If China does indeed succeed in this effort, the Communist Party would have achieved success in establishing a Chinese model of political governance that has not yet been replicated in the modern world.

The Chinese system is characterized by another dichotomy. Let me explain this. The dominant force in China is the Communist Party and it is the constitution of the Communist Party of China that is supreme. But, China also has a State constitution and State laws. Maintaining consistency between a State system and the supremacy of the Party may have been relatively simple in the past but ever since the impact of the Four Modernizations Programme has progressively kicked in since 1978, the contradictions between the two have grown. Further, as China has integrated more and more with the world, it has put in place laws, rules and regulations which apply not only to their own citizens but also to the outside world; to foreign companies, foreign nationals, etc.

Another facet in which the contradictions have come to the fore is in respect of the Chinese armed forces, broadly defined as the PLA. The PLA functions under the absolute control of the Party. The effort in recent years has been to tighten this control. The PLA is seen as the ultimate guarantor of the Party’s supremacy. The contradiction between the Chinese system and that followed in most other countries especially democracies where the armed forces are answerable to the civilian government is quite stark. As the PLA modernizes and is reorganized to meet the requirements of modern technological warfare, the ability of the Party to maintain absolute control on the armed forces may weaken. Alternatively, the fighting capacities of the PLA could get impaired.

Before I proceed, I should explain how the Chinese system has succeeded in making China the second most powerful economy in the world today. This has been the result of a single-minded focus on development in the belief that if the people can be offered economic prosperity, their desire to seek political freedom can be kept under serious check. Deng Xiaoping brought back the Four Modernizations Programme in 1978 after the excesses of the Cultural Revolution had left China in a difficult and precarious economic situation. Please recall, however, that in spite of the Cultural Revolution, the then Chinese leadership, lead by Mao Zedong, had made peace with the United States and begun to collaborate with that country to constrain the then Soviet Union which was considered the greater threat at that point in time to China. It is yet another irony that today China and Russia are strategic partners and the United States and China potential adversaries. But then, that is the business of international relations and power balances!

The Four Modernizations was the policy to ensure the modernization of agriculture, industry, science and technology and defence. This was not a new plan but a revival of Zhou Enlai’s plan of 1963. The difference is that following the Cultural Revolution and its disastrous outcome for China, Deng Xiaoping who emerged as the supreme leader and had learnt serious lessons from Mao’s disastrous campaigns decided that the time had come to put China’s development on an assured and firm footing. This did not, however, mean that he wanted the Communist Party to lose power.

The process of implementing the Four Modernizations coupled with the system put in place by Deng Xiaoping to ensure political succession in an organized manner every ten years, along with the opening of the Chinese economy to the world and access to science and technology from outside is what has brought China to where it is today.

The Four Modernizations has been implemented in a sequential manner. As the economy grew, the ability to do more in each sector grew with it. As agriculture and industry grew, so did the ability to spend on science and technology and defence grow. Membership of WTO enabled China to integrate itself fully into the international economic system. Indeed, China used its WTO membership to put in place domestic economic reform which may otherwise have faced resistance.

The outcome of the Four Modernizations process has been dramatic across all four areas of focus, be it agriculture, industry, science and technology or defence. Thus, China’s comprehensive national power has grown enormously especially since the beginning of this century. The down side of the economic model that China has followed so far, however, is that appears to have run its course of being able to generate double digit percent growth rates on a sustained basis. That model which was based on infrastructure investment, exports, FDI and technology from abroad could not be sustained beyond a point. The global financial and economic crisis that began in 2008 highlighted this fact. In all fairness however, the Chinese leadership had, since the beginning of this century, begun to make efforts to change the economic paradigm and make it more domestic demand oriented. There has been some success in this latter effort but not enough. Hence, the so called "new normal” in China’s economic growth rate has been reduced from a double digit figure to 6% -7%. With an economy as large as China’s, this still represents a huge absolute increase in GDP every year. But, given the massive requirements of China’s development, for reducing inequalities, for financing urbanization, addressing unemployment, modernizing agriculture, reducing environmental degradation, etc, this may not be adequate. Thus, the challenge to continue to grow at a reasonably rapid growth rate between 6 to 7% will remain a major pre-occupation of the Communist Party of China and the Government of China.

I said earlier that it is the Party that is supreme in China. I also mentioned that Deng Xiaoping had put in place a regular system of leadership change every ten years. The last such change in the top leadership of the Party happened in October 2012 at the 18th Party Congress. It is at that time that time Xi Jinping assumed the leadership of the 5th Generation of the Communist Party of China as General Secretary of the CPC and was subsequently elected as President of China at the National People’s Congress in spring 2013. Let me explain the generational issue. The first generation leadership was lead by Mao Zedong and the second by Deng Xiaoping and thereafter the ten year cycle began with Jiang Zemin taking charge at the head of the third generation leadership. The fourth generation leadership was led by Hu Jintao and Xi Jinping heads the 5th generation. At the 19th Party Congress scheduled for autumn this year, Xi Jinping is expected to receive his second five year term which will take him to 2022. There will be major changes in the Standing Committee of the Politbureau and substantial change in the Politbureau. Xi Jinping will remain at the "core” of the new Central Committee leadership.

It is the Party Congress which lays down the policy priorities for the country over the next five years. The General Secretary of the Party along with the Standing Committee and Politbureau are responsible for implementation of these policies under the supervision of the Central Committee. In view of this, it may interest you to know that the 18th Party Congress had given to Xi Jinping, directions which he has faithfully implemented including the drastic action against corruption and the development of China’s great power ambitions.

Every General Secretary has in recent years coined a focus theme to identify with his respective leadership term. Deng Xiaoping was the father of the Concept of Socialism with Chinese characteristics. This is the foundation of the current Chinese state. For Jiang Zemin, it was the Theory of Three Represents. For Hu Jintao, it was Social Harmony and the Scientific Concept of Development and for Xi Jinping it is Renewal of the Chinese nation and achievement of the China Dream. I mentioned earlier that there has been continuity in Chinese policy since Deng Xiaoping put in place his reforms in 1978. This continuity is reflected in the policies underpinning the slogans given by the respective General Secretaries in recent years of all which aim to achieve the two centenary goals set by the Party namely;

By the year 2021, the 100th anniversary of the founding of the CCP, China's GDP and per-capita income should double from 2010 levels, and "the building of a moderately prosperous society in all respects” should be complete.

The second Centenary Goal targets year 2049, the centenary of the founding of the People’s Republic of China. According to this goal , China should become a "modern socialist country” that is "prosperous, strong, democratic, culturally advanced and harmonious” by 2049.

The direction given to Xi Jinping by the 18th Party Congress was to address the growing social strains within society, growing inequalities, deep-seated corruption, public disorder, crime and the question mark on the acceptability of the institutions and current system of governance. All this had to be done while ensuring the leadership and sole & absolute control of the Party over the institutions of power and governance. Pluralism and democracy are ruled out.

On the external front, the directives were no less significant. At that point in time, it was the assessment that world economic growth was over shadowed by growing factors of instability and uncertainty; the imbalance in global development had widened; and there were signs of increasing hedgemonism, power politics, neo-interventionism and local turmoil.

In response to the above external challenges, China, a permanent member of the UNSC, was, inter-alia, to get more actively involved in international affairs and play its due role of a major responsible country; take an active part in global economic governance; promote and facilitate free trade and investment and oppose protectionism in all its forms. [These are essential for China’s continued high growth.] To meet its external objectives, China had also announced that under the new leadership it will continue to build strong national defense and powerful armed forces that are commensurate (what this means is not spelt out) with China’s international standing and meets the needs of its security and development interests. The latter stress was new and particularly important from the perspective of the conduct of international relations. Indeed, guaranteeing China’s security and development interests is identified as a strategic task of China’s modernization drive. A strong national defence and powerful armed forces provide a security guarantee for China’s peaceful development. [MSWP 05/15]

During the course of the 18th Party Congress and its follow up, China also more clearly defined its core interests. These are wide ranging and cover: defense of state sovereignty, national security, territorial integrity & national integration, China’s political system, overall social stability and development interests.

It is quite clear that China’s defence of its self-defined core interests will, willy-nilly, clash with those of other major powers. And this has begun to happen. You will recall in this context the Chinese position on the South China Sea and on the island dispute with Japan. It is also clearly visible in their approach towards the border with India.

Let me fast forward you now to the contemporary. Serious preparations for the 19th Party Congress are already under way. In this context it would be interesting to understand from leadership statements how China assesses the international situation as also the domestic situation.

In his report to the National People’s Congress on 5th March this year, Premier Li Keqiang described the challenges facing China in the following terms [Please note that the NPC is China’s Parliament equivalent and Li is # 2 in the political hierarchy] Li said:

1. In the past year, China's development has faced grave challenges posed by a great many problems and interwoven risks and dangers both at home and abroad.

2. Domestically, China faced multiple difficulties: major structural problems, prominent risks and dangers, and mounting downward pressure on the economy…factors impacting social stability grew. But, the Chinese economy possesses potential, resilience, and strengths.

3. China opened wider to the rest of the world. As it pushed ahead with the Belt and Road initiative, it worked to increase complementarity between the development strategies of, and practical cooperation between, China and other countries along the routes.

4. As a major country, China has made outstanding achievements in its diplomacy…China was actively involved in reforming and improving the global governance system…It was resolute in upholding China’s sovereignty, territorial integrity, and maritime rights and interests…China has made significant contributions to world peace and development.

Note: the tone of self confidence prevails.

He then argued that:

1. The developments both in and outside of China require that China be ready to face more complicated and graver situations…the deglobalization trend and protectionism are growing…factors that could cause instability and uncertainty are visibly increasing… The difficulties China faces are not to be underestimated, but… they will be overcome.

2. Stability is of overriding importance. China should ensure stable growth, maintain employment, and prevent risks. To ensure overall economic and social stability it must not allow the red line to be crossed concerning financial security, people’s wellbeing, or environmental protection.

3. China intends to speed up the development of the maritime economy demonstration zones and will move faster to develop China into a strong maritime country, and will be resolute in safeguarding China’s maritime rights and interests.

4. China will fully implement its plan for developing strategic emerging industries.

5. China will intensify efforts to implement the Made in China 2025 initiative, promote accelerated application of big data, cloud computing, and the Internet of Things, and use new technologies, new forms of business, and new models to bring about transformation in the production, management, and marketing models of traditional industries.

6. China will accelerate the building of overland economic corridors and maritime cooperation hubs.

7. China is a responsible country. It will firmly defend its due rights and interests.

8. The tree of unity between the military and the government and between the military and the people continues to grow deep roots and is always in blossom.

The decisions that I have referred to above would underscore the points that I have been making. There is a long term approach behind Chinese actions; that the processes of modernization and technological change along with access to world markets and technologies remain critical for China to fulfill the China Dream. The maritime outreach aspect also remains in focus. The PLA remains critical to the Party.

Also pertinent to bear in mind in the context of the forthcoming Party Congress is to recall the nature and spread of threats that China perceives/ confronts. These were quite clearly listed in the White Paper issued in May 2015 on China’s Military strategy. In that important document it had been noted that China faces a formidable task to maintain political security and social stability. It was publicly acknowledged that anti-China forces have never given up their attempt to instigate a "colour revolution” in China. Further, with the growth of China’s national interests, its national security is more vulnerable to international and regional turmoil, terrorism, piracy, serious national disasters and epidemics, the security of overseas interests such as energy and resources, SLOCs, personnel and assets abroad. In effect, China and its armed forces are preparing to face all such challenges. Since the White Paper was issued, these challenges have only grown but not declined. Let me explain why.

If you are positioned in Beijing and look around China’s periphery, you may note that there is much to burden the minds of China’s policy makers in so far as its external security and internal stability is concerned. The Chinese leadership is fully aware of these problems, many of which are the outcome of their own policies.

A quick glance around China’s periphery clearly brings out the major areas of concern. There is the situation in North Korea over which China is either not willing to exercise influence beyond a point or unable to. It has taken on Japan in respect of the Diaoyu islands. There are difficulties with ROK not only on a territorial issue but more critically perhaps on deployment of the THAAD missile system in that country against the DPRK.

The election of the DPP government in Taiwan would no doubt be causing a serious headache to policy makers in Beijing especially since there seems to be an inclination in the new US administration to cast a more positive light on relations with Taiwan.

The situation in Hong Kong is bothersome given the growth of pro-democracy forces.

The South China Sea issue has sent out serious red signals in many ASEAN countries and China’s careful long term effort to wean ASEAN into its orbit has suffered a setback.

The problem of terrorist activity in Xinjiang appears to be growing. In this context, the situation in the Gulf, Afghanistan, Pakistan and the evolution of ISIS is a cause for concern.

An arms race in South East and East Asia is underway. The future of the US pivot to Asia under President Trump is unclear but it is most unlikely that the US will cede ground to China or any other power in Asia and the Indo-Pacific.

China’s efforts to build the OBOR received a warm welcome at the outset but two to three years down the road the signals are getting mixed. Recipients are no longer sure of the benefits to them and are not particularly happy with their growing dependence on China.

The election of Donald Trump as President of the United States would also have given sleepless nights to policy makers in China. Mr. Trump’s underlenting attacks on China, be it on economic or security issues, were a highlight of his campaign. The recent meeting between him and President Xi Jinping in Florida has begun the process of a dialogue between two of the most important players on the international arena today. But there is no clarity yet on how the issues raised by Trump during his campaign are going to be addressed to mutual satisfaction. The implications for the international community of the latter will also have to be carefully examined.

The China-Pakistan Economic Corridor impacts on India’s core concerns of sovereignty and its now being shown as part of the OBOR has obviously made India even warier of the OBOR. Surprisingly, China has chosen not to dialogue seriously with India on the OBOR and the CPEC. It can be argued that this was deliberately done in anticipation of Indian objections and concerns. If that was the case, it is inexplicable since the Indian Ocean will play a critical part in the maritime aspect of the OBOR. Besides, the CPEC involves a direct violation of India’s territorial integrity and sovereignty and is unacceptable. China cannot ignore the core interests of others while professing unshakeable commitment to its own core interests. To make matters worse, China has, at least in public, hardened its position on the border with India.

The situation in Europe, where right-wing forces and forces of protectionism are on the rise will also be a cause of concern for China.

One bright spot in the situation around China’s periphery for Beijing is the state of its relations with Russia. These are growing comprehensively. But, as the process unfolds, Russia would expect more and more out of this partnership and not wish to remain the junior partner. The dynamics of Russia-China-US relations and the dynamics of Russia-Europe relations could take an interesting turn that may not necessarily be best for China’s interests.

It would be clear from what I have said so far that while China is confident that its growing comprehensive national strength, defence modernization and cyber capacities allow it to face the future with a fair degree of confidence, it does not yet possess the makings of a super power. While it seeks parity with the United States, such parity can only be in a limited sense at this point in time. Whether in the years ahead, the United States once again takes a technological leap that propels it far ahead of the others remains to be seen. If that does happen, the Chinese claim or desire to be treated on par with the United States will further weaken. Militarily also, while China is certainly a powerful regional military force, its current ability to protect its global interests is still quite limited. But this is changing and will require huge investments. China wanting to break out of the status-quo while retaining the advantages of the status-quo is not always feasible nor simple. There are serious costs involved. Besides, China’s growing military outreach will not necessarily go unchallenged.

Let me now turn briefly to India-China relations. If newspaper reports are to be believed, these seem to be at a particular low at this point in time. But before we assess the current status of our relations, let me remind you of certain vital features of our relationship. This list though is not exhaustive.

1. China is India’s largest neighbor. We are two ancient civilizations. Ours is a long civilizational relationship that has been to mutual benefit.

2. We have a disputed border. We faced unprovoked aggression by China over the border in October/ November 1962.

3. India and China are the two most populous countries in the world. Both are developing countries. As a result, the nature and scope of the developmental and societal problems facing the two countries are not only similar but unique in terms of scale.

4. A very large number of India’s major northern & eastern rivers rise in the Tibet Autonomous Region of the People’s Republic of China. The issue of water security between our two countries is a major one.

5. As a result of a conscious decision taken at the highest levels in both countries, the relationship between the two countries has grown substantially since the beginning of this century. It has also diversified. China is India’s second largest trading partner. Chinese companies have also set up a large number of infrastructure projects in India specially in the power sector. The investment partnership, however, is small but has considerable potential and has begun to grow.

6. India’s trade deficit with China is not sustainable. This is not because of reasons of pure balance but because goods and services where India has comparative advantages face barriers in China.

7. Our border dispute notwithstanding, the border has been peaceful since 1967 in the sense that no shot has been fired. Important agreements are in place to ensure peace and tranquility along the LAC in the India-China boundary region. These agreements were signed in the years 1993, 1996, 2005 and 2013.

8. Serious discussions have been under way between the special representatives of the two states to work towards a boundary settlement. The political parameters and guiding principles for this purpose were negotiated by the special representatives and signed in April 2005.

All the bilateral agreements I have referred to are public documents and merit study.

9. Both countries share common perceptions and positions on issues on the international agenda. The difference is that China being a permanent member of the UN Security Council and having emerged as the second largest economy in the world is able to negotiate better arrangements for itself. This phenomenon is also visible in terms of collaboration in the G20, BRICS, etc.

10. In so far as India is concerned, China and Pakistan are for all practical purposes joined at the hip. China began to befriend Pakistan for strategic reasons and for containing India since the early 1960s. The infamous agreement of March 1963 by which territory in J&K under the military control of Pakistan was transferred to China marked the beginning of that process. This partnership has strengthened over the decades not weakened including with respect to helping Pakistan develop its nuclear weapons and missile capabilities. The CPEC is the most recent manifestation of this. For China, the regime in Islamabad is not relevant.

China’s backing of Pakistan has also seriously coloured its policy on the impact of terrorism sponsored by Pakistan against India. China hides behind the argument that unless it declares an individual, or organization as terrorist, it need not allow international sanctions against such person or entity in spite of overwhelming evidence and even where the rest of the United Nations Security Council membership is in agreement.

11. Similarly, China has been encroaching upon India’s immediate periphery in South Asia. As China’s economy and its power have grown, this effort has been strengthened. This is clearly manifest in China’s activities and assistance to countries such as Myanmar, Bangladesh, Nepal, Sri Lanka, Maldives and now also Afghanistan. I have already referred to China’s assistance to Pakistan.

12. China’s approach to nuclear proliferation gives cause for concern.

13. China has now begun cautiously to make inroads in the Indian Ocean region. This is in pursuance of and consistent with its declared policy of protecting its development and overseas interests.

14. India and China signed a landmark agreement on cooperation in defence matters in May 2006. In pursuance of this, there is a regular dialogue between our defence establishments. We also hold exercises against terrorism etc.

It can be seen from the above that China poses serious challenges to India in our immediate and extended hinterland. Yet, it will also be clear from the factors that I have listed above that notwithstanding their potential rivalry, both India and China have serious reason to collaborate with each other to mutual benefit. This basic premise has been accepted at the highest level in both countries. The clear manifestation of this was the Agreement on the Declaration on Principles for Relations and Comprehensive Cooperation signed between the two countries in June 2003 by Prime Minister Atal Bihari Vajpayee and Premier Wen Jiabao. These principles have since been supplemented in subsequent bilateral high level statements but the essential motivation is to stress that there is need for both to collaborate and cooperate while keeping their rivalry under careful management and scrutiny. The problem that has arisen, however, is that in recent years, China’s rapid rise and its belief that the post global financial crisis era provided it the opportunity to seek the number one status at least in Asia has made it push harder to achieve its objectives. This push has also been driven by domestic concerns for which external economic solutions are being sought. The solutions such as OBOR & CPEC are not purely economic but fundamentally strategic and thus clash with the core interests of other major Asian countries such as Japan, ROK, India, Vietnam, Indonesia etc.

It would also have been clear from what I have said earlier that there is concern in China of regime change influenced from the outside and the possible encirclement of China in which India could figure in a prominent manner.

China has risen and believes that it is its destiny to recover the historical position that it held as the largest economy in the world. It also seeks military supremacy. It is on course to become, in the coming years, the world’s largest economy in absolute terms and amongst the top one or two trading nations. The Chinese leadership has made it clear that China’s voice will have to be heard in the world. In his address to the NPC last March, Li Keqiang clarified that China will contribute to a framework that ensures the overall stability and balanced development of relations between major countries; that China will offer constructive proposals for addressing global and regional hotspot issues. At the same time, China will continue to protect its overseas development and other interests.

The future development of India’s relations with China will, to my mind, be determined amongst others by the following factors:

i) Progress on clarification of the L.A.C. in the India-China border areas.

ii) Working out a fair, reasonable and mutually acceptable boundary settlement while maintaining peace along the LAC.

iii) Safeguarding India’s territorial interests including in POK.

iv) Cooperation on shared river water resources.

v) Sustaining India’s sphere of interest in its neighbourhood and the broader Indo-Pacific.

vi) Reworking the basic parameters of the Sino Indian economic relationship by bringing in better parity in trade relations based on respective comparative advantages; by development of investment partnerships including in infrastructure that are based on environmentally sustainable and technologically modern capital equipment and cooperation in global value addition chains that serve third country markets.

vii) Genuine collaboration in the fight against terrorism.

viii) Cooperation on maritime issues in the Indian Ocean and Asia-Pacific Regions.

ix) Arriving at a consensus on each others’ core interests and thereafter look for mutually acceptable solutions.

x) Genuinely learning from each other’s developmental experiences and collaborating to mutual benefit.

xi) Collaboration as equal partners on international issues and international organizations to bring about genuine reform.

To use a cliché, the India-China relationship has huge potential. The net impact of recent developments, both internal and external, would suggest that India will continue to grow at a high growth rate and China will continue to sustain a growth rate that by its past standards may be low but is nevertheless high. This should mean that India and China, along with the other countries of Asia, will continue to drive growth in the world economy in the years ahead.

Both our countries face significant challenges and both are determined to play a greater role in international affairs. As a result, the imperative to collaborate and work together should far exceed the tendency towards competition or rivalry or conflict. The latter is neither in our bilateral interests nor in regional interest nor for the growth of multipolarity and the strengthening of forces to make the 21st century the century of Asia.

The challenge thus is to convert potential into reality. This will require a major mindset change in China wherein it agrees to be part of commonly negotiated integrative processes that are inclusive, transparent and based on equal benefit and security for all. It is necessary to look back into history to learn from it, not to replicate it.

I have spoken longer than I had intended to but this is a subject on which one can speak virtually without limit.

Thank you for the patience you have shown. I will now be very happy to respond to your questions.

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