M D NalapatMonday, August 25, 2014 - Since he took office a year ago as General Secretary of the Chinese Communist Party (CCP) and President of the Peoples Republic of China (PRC), Xi Jinping has shown that he is as much an innovator as Deng Xiaoping. The architect of modern China - in effect –sanctioned moneymaking by whatever means in his famous statement, that it did not matter if a cat were black or white, so long as it caught mice. Seeing that key elements in the CCP were opposed to the thoroughgoing economic reforms which he favoured, Deng in 1992 went on a tour of coastal areas, encouraging reform and chastising those who saw the new policies as against the sprit of the ruling party.
After this, the CCP fell in line and backed economic reform whole-heartedly, thereby creating the conditions that have made China the world’s second-biggest economy, soon to be the biggest. Unlike the China of Chairman Mao,which was poor and underdeveloped, the country which Xi Jinping took charge of in 2013 is a global powerhouse. But to ensure that such a trajectory continues is a daunting task, but one that General Secretary Xi has decided to carry out, by changing policies where necessary. He has instituted the most comprehensive anti-corruption campaign ever carried out in the PRC, and which has resulted in the jailing and even execution of hundreds of officials, including those at the very top of the policy pyramid.
In economic policy, efforts are being made to ensure that the chokehold of state-owned enterprises over the banking and industrial system is being lessened, so that the immense entrepreneurial talents of the Chinese people can be set free. Should Xi succeed in ensuring a level playing field between state enterprises and their private sector competitors, he may succeed in generating as much growth as (then) Prime Minister Zhu Rongji’s reform of state-owned enterprises did in the close of the 1990s. From ramshackle and inefficient companies,several of China’s state-owned enterprises have become international giants. Should the Chinese private sector get a similar boost this time around,the consequences would be significant. Clearly, Xi would like to see China’s growth continue during the decade that he will be in charge,and to achieve this,he is using diplomacy as a primary instrument. In quick order,President Xi has made visits to Africa and South America,seeing in those continents potential markets which could offset possible slowdown in exports to Europe and the US.
Among the countries that Xi is devoting attention to is India, which has the potential of being a $300 billion market for Chinese goods and services, provided “win-win” programs get carried out in which both countries gain. At present, China has a surplus of $34 billion with India on a trade of $70 billion annually India was the first country that Prime Minister Li Kequiang, on a nod from President Xi, visited after taking charge, and in Brazil, both Prime Minister Narendra Modi and Xi established a cordial relationship, strong enough to ensure that Shanghai and not Mumbai became the headquarters of the BRICS bank, a decision taken unanimously. Hence it is unsurprising that Xi will visit India in three weeks time accompanied by six Cabinet Ministers and more than forty business executives. The expectation is that MoU will get signed during the visit that would begin work on China-specific industrial parks in Gujarat and Maharashtra, two of the most advanced states in India, besides agreements to modernise India’s rail network, where speeds are low and safety less than certain.
The CEOs of Chinese companies are likely to sign agreements with their Indian counterparts so that manufacturing facilities geared towards the export market get built in India, on the lines of the invite given by Prime Minister Modi in his August 15 speech, where he called for manufacturers across the globe to come to India and build in India. Most importantly, it is expected that Chinese banks will enter India in significant measure, thereby diluting the monopoly which banks from the US and the EU have in the country. None of this will be palatable to the US or the EU, or to the numerous influential Indians who push their agenda, but from the start, even as Chief Minister of Gujarat, Modi has accepted that Beijing can be a major factor in nudging growth towards double digits Deng Xiaoping worked hard to make China an indispensable partner for economic development, and succeeded.
Whether it be Japan or the US, Australia or South Korea, a significant chunk of prosperity hinges on trade with China, thereby reducing the risk of armed conflict, no matter how shrill the rhetoric over issues such as the South China sea. Should trade between India and China be both much bigger and more balanced, that would become an effective Confidence Building Mechanism dampening tensions between the two. Prime Minister Modi will need to rein in those in the government who focus on the 10% of the overall Sino-Indian canvas that represents a threat and thereby miss out on the balance 90%,which is an opportunity.
Chairman of the Central Military Council Xi will need to convince the PLA that the best of relations with India is necessary for the maintenance of prosperity in China. At present, the PLA still favours as rigid a policy towards India as the Ministry of Home Affairs in Delhi does towards China, for example by blocking Chinese tourists from coming to India, even though these may bring more than $10 billion in annual revenue. The forthcoming visit of President Xi Jinping to India (after which he will head for Pakistan and Sri Lanka) will be crucial in determining whether the two countries move beyond their fixation on the relatively smaller threat that each is perceived to pose to the other or grasp at the immense opportunity which better relations between Beijing and Delhi can bring.