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|by Dr. Rajinder Puri|
Starting Monday the India-China Strategic Economic Dialogue is being held. On the eve of the talks a glitch developed. Both governments are flexing their muscles. While issuing visas China has shown Arunachal Pradesh and Aksai Chin as part of China on maps accompanying passports. India has retaliated. While issuing visas it shows both territories as part of India. This may deceive Indian public opinion into thinking that the government is being tough. It is not. Such empty gestures made by New Delhi do not suffice. This will in no real way trouble Beijing.
When will India get a government prepared to act
Unless India starts to exercise its leverage against China, Beijing will not be restrained from hegemonic bullying. The appeasers who describe themselves as pragmatists will argue that India has no leverage against Beijing. China they say is too powerful militarily and advanced economically to be intimidated by New Delhi. These appeasers, which includes the entire policy making class belonging to the government as well as to the opposition, are wrong. I have outlined earlier how India can compel China to see reason. Briefly, a recapitulation of how New Delhi should address relations with China follows.
First, the minimum Indian demands related to China need recognition. India must insist upon Beijing stopping arms aid and providing sanctuary to separatists operating in India; it must stop arming India’s immediate neighbours with hostile intent against India; it must reverse its policy of giving missile and nuclear technology to Pakistan; it must honour its written agreement given in 2005 to the Indian government that while negotiating the boundary dispute it will not disturb settled populations and thereby withdraw its claims on Arunachal Pradesh. There are other subversive Chinese acts but for a start these broad demands provide a realistic basis.
India’s strength is that unlike most of the world the Indian people and the Indian government are thrifty. Both tend to live within their means. That is why the Indian economy is primarily dependent upon domestic savings. China on the other hand is critically dependent upon export earnings to sustain its economy. This is Beijing’s Achilles heel. And right now China is facing a problem. Exports have fallen to a six-month low because of persisting global slowdown and diminishing European demand that is further compounded by increasing factory costs inside China. Mr. Zheng Yuesheng who heads Chinese General Administration of Customs (GAC), admitted: “It will be an arduous task to fulfill our foreign trade target, as external demand is weak.” Mr. Alistair Thornton of HIS Global Insight commented: “This isn't a 2008 collapse, but it's not worth testing how close the economy can get!”
To appreciate the political significance of this it should be recalled that 60 percent of China’s urban population is employed by China’s State Owned Enterprises (SOE) which are all running at huge loss. These SOEs are kept afloat only through bad loans which are never repaid advanced by government-owned banks in China. The banks can keep advancing these bad loans from the earnings that the government acquires from its exports. That makes export earning for China almost a life and death issue. Already corruption and forcible land acquisition have created up to 80,000 clashes each year between the police and citizens in China. These are mostly in rural China. If Chinese exports dwindle to a trickle how will banks advance more bad loans to SOEs? If SOEs close down what will happen to stability in urban China?
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