Chindia Alert: You’ll be Living in their World Very Soon
aims to alert you to the threats and opportunities that China and India present. China and India require serious attention; case of ‘hidden dragon and crouching tiger’.
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Image copyright PRESS INFORMATION BUREAUImage caption The area has become a hotspot in part because of a road India has built
The armies of the world’s two most populous nations are locked in a tense face-off high in the Himalayas, which has the potential to escalate as they seek to further their strategic goals.
Officials quoted by the Indian media say thousands of Chinese troops have forced their way into the Galwan valley in Ladakh, in the disputed Kashmir region.
Indian leaders and military strategists have clearly been left stunned.
The reports say that in early May, Chinese forces put up tents, dug trenches and moved heavy equipment several kilometres inside what had been regarded by India as its territory. The move came after India built a road several hundred kilometres long connecting to a high-altitude forward air base which it reactivated in 2008.
The message from China appears clear to observers in Delhi – this is not a routine incursion.
“The situation is serious. The Chinese have come into territory which they themselves accepted as part of India. It has completely changed the status quo,” says Ajai Shukla, an Indian military expert who served as a colonel in the army.
China takes a different view, saying it’s India which has changed facts on the ground.
Reports in the Indian media said soldiers from the two sides clashed on at least two occasions in Ladakh. Stand-offs are reported in at least three locations: the Galwan valley; Hot Springs; and Pangong lake to the south.
India and China share a border more than 3,440km (2,100 miles) long and have overlapping territorial claims. Their border patrols often bump into each other, resulting in occasional scuffles but both sides insist no bullet has been fired in four decades.
Their armies – two of the world’s largest – come face to face at many points. The poorly demarcated Line of Actual Control (LAC) separates the two sides. Rivers, lakes and snowcaps mean the line separating soldiers can shift and they often come close to confrontation.
The current military tension is not limited to Ladakh. Soldiers from the two sides are also eyeball-to-eyeball in Naku La, on the border between China and the north-eastern Indian state of Sikkim. Earlier this month they reportedly came to blows.
And there’s a row over a new map put out by Nepal, too, which accuses India of encroaching on its territory by building a road connecting with China.
Why are tensions rising now?
There are several reasons – but competing strategic goals lie at the root, and both sides blame each other.
“The traditionally peaceful Galwan River has now become a hotspot because it is where the LAC is closest to the new road India has built along the Shyok River to Daulet Beg Oldi (DBO) – the most remote and vulnerable area along the LAC in Ladakh,” Mr Shukla says.
India’s decision to ramp up infrastructure seems to have infuriated Beijing.
Image copyright AFPImage caption There have been protests in Nepal against Indi’s new road link
“According to the Chinese military, India is the one which has forced its way into the Galwan valley. So, India is changing the status quo along the LAC – that has angered the Chinese,” says Dr Long Xingchun, president of the Chengdu Institute of World Affairs (CIWA), a think tank.
Michael Kugelman, deputy director of the Asia programme at the Wilson Center, another think tank, says this face-off is not routine. He adds China’s “massive deployment of soldiers is a show of strength”.
The road could boost Delhi’s capability to move men and material rapidly in case of a conflict.
Differences have been growing in the past year over other areas of policy too.
The new federally-administered Ladakh included Aksai Chin, an area India claims but China controls.
Senior leaders of India’s Hindu-nationalist BJP government have also been talking about recapturing Pakistan-administered Kashmir. A strategic road, the Karakoram highway, passes through this area that connects China with its long-term ally Pakistan. Beijing has invested about $60bn (£48bn) in Pakistan’s infrastructure – the so-called China Pakistan Economic corridor (CPEC) – as part of its Belt and Road Initiative and the highway is key to transporting goods to and from the southern Pakistani port of Gwadar. The port gives China a foothold in the Arabian Sea.
In addition, China was unhappy when India initially banned all exports of medical and protective equipment to shore up its stocks soon after the coronavirus pandemic started earlier this year.
How dangerous could this get?
“We routinely see both armies crossing the LAC – it’s fairly common and such incidents are resolved at the local military level. But this time, the build-up is the largest we have ever seen,” says former Indian diplomat P Stobdan, an expert in Ladakh and India-China affairs.
“The stand-off is happening at some strategic areas that are important for India. If Pangong lake is taken, Ladakh can’t be defended. If the Chinese military is allowed to settle in the strategic valley of Shyok, then the Nubra valley and even Siachen can be reached.”
In what seems to be an intelligence failure, India seems to have been caught off guard again. According to Indian media accounts, the country’s soldiers were outnumbered and surrounded when China swiftly diverted men and machines from a military exercise to the border region.
This triggered alarm in Delhi – and India has limited room for manoeuvre. It can either seek to persuade Beijing to withdraw its troops through dialogue or try to remove them by force. Neither is an easy option.
“China is the world’s second-largest military power. Technologically it’s superior to India. Infrastructure on the other side is very advanced. Financially, China can divert its resources to achieve its military goals, whereas the Indian economy has been struggling in recent years, and the coronavirus crisis has worsened the situation,” says Ajai Shukla.
What next?
History holds difficult lessons for India. It suffered a humiliating defeat during the 1962 border conflict with China. India says China occupies 38,000km of its territory. Several rounds of talks in the last three decades have failed to resolve the boundary issues.
China already controls the Aksai Chin area further east of Ladakh and this region, claimed by India, is strategically important for Beijing as it connect its Xinjiang province with western Tibet.
Image copyright GETTY IMAGESImage caption India and China have a long history of border disputes
In 2017 India and China were engaged in a similar stand-off lasting more than two months in Doklam plateau, a tri-junction between India, China and Bhutan.
This time, too, talks are seen as the only way forward – both countries have so much to lose in a military conflict.
“China has no intention to escalate tensions and I think India also doesn’t want a conflict. But the situation depends on both sides. The Indian government should not be guided by the nationalistic media comments,” says Dr Long Xingchun of the CIWA in Chengdu. “Both countries have the ability to solve the dispute through high-level talks.”
Chinese media have given hardly any coverage to the border issue, which is being interpreted as a possible signal that a route to talks will be sought.
Pratyush Rao, associate director for South Asia at Control Risks consultancy, says both sides have “a clear interest in prioritising their economic recovery” and avoiding military escalation.
“It is important to recognise that both sides have a creditable record of maintaining relative peace and stability along their disputed border.”
BRUSSELS (Reuters) – The euro zone’s trade surplus with the rest of the world grew in February, with a decline in imports from China as well as sharply lower energy needs because of mild winter weather.
The unadjusted goods trade surplus grew to 23.0 billion euros ($25.1 billion) in February, compared with 18.5 billion euros a year earlier. Exports rose by 1.6%, while imports fell by 1.0%.
For China, which already had widespread coronavirus restrictions in place in February, exports from the European Union as a whole were slightly lower than in February 2019. However, imports were down by 8.1%, according to data on Eurostat’s website.
Energy imports as a whole also declined by 9.6% in February, when comparing Jan-Feb data issued on Monday and January data from a month ago. That translated into 10.1% lower imports from Russia and 5.9% less from Norway.
The trade surplus with the United States, by contrast, grew by 21% in the month as exports increased and imports declined. The persistent surplus in goods has been a source of transatlantic tension.
On a seasonally adjusted basis the euro zone trade surplus also rose to 25.8 billion euros in February from 18.2 billion euros in January. Exports were 1.8% higher month-on-month and imports 2.3% lower.
China’s famed Yiwu International Trade Market, a barometer for the health of the nation’s exports, has been hammered by the economic fallout from Covid-19
Export orders have dried up amid sweeping containment measures in the US and Europe and restrictions on foreigners entering China have shut out international buyers
The coronavirus pandemic has severely dented wholesale trade at the Yiwu International Trade Market in China. Photo: SCMP
The Yiwu International Trade Market has always been renowned as a window into the vitality of Chinese manufacturing, crammed with stalls showcasing everything from flashlights to machine parts.
But today, as the coronavirus pandemic rips through the global economy, it offers a strikingly different picture – the dismal effect Covid-19 is having on the nation’s exports.
The usually bustling wholesale market, home to some 70,000 vendors supplying 1,700 different types of manufactured goods, is a shadow of its former self.
Only a handful of foreign buyers traipse through aisles of the sprawling 4-million-square-metre (43 million square feet) complex, while store owners – with no customers to tend to – sit hunched over their phones or talking in small groups.
A foreign buyer visits a stall selling face masks. Photo: Ren Wei
“We try to convince ourselves that the deep slump will not last long,” said the owner of Wetell Razor, Tong Ciying, at her empty store. “We cannot let complacency creep in, although the coronavirus has sharply hampered exports of Chinese products.”
Chinese exports plunged by 17.2 per cent in January and February combined compared to the same period a year earlier, according to the General Administration of Customs. The figure was a sharp drop from 7.9 per cent growth in December.
After riding out a supply shock that shut down most of its factories, China is now facing a second wave demand shock, as overseas export orders vanish amid sweeping containment measures to contain the outbreak around the globe.
Nowhere is that clearer to see than in Yiwu. The city of 1.2 million, which lies in the prosperous coastal province of Zhejiang, was catapulted into the international limelight as a showroom for Chinese manufacturing when the country joined the World Trade Organisation in 2001.
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Before the pandemic, thousands of foreign buyers would flock to the mammoth trade market each day to source all manner of products before sending them home.
But the outbreak, which has claimed the lives of more than 113,000 people and infected more than 1.9 million around the world, is proving a major test for the market and the health of the trade dependent city.
Imports and exports via Yiwu last year were valued at 296.7 billion yuan (US$42.2 billion) – nearly double the city’s economic output.
Businesses, however, are facing a very different picture in 2020. Most traders at the market say they have lost at least half their business amid the pandemic, which was first detected in the central Chinese city of Wuhan last year.
Just take a look at the situation in Yiwu and you will understand the extent of the virus’ effect on China’s trade with foreign countries – Tianqing
“Yiwu is the barometer for China’s exports,” said Jiang Tianqing, the owner of Beauty Shine Industry, a manufacturer of hair brushes. “Just take a look at the situation in Yiwu and you will understand the extent of the virus’ effect on China’s trade with foreign countries.”
Jiang said his business was only just hanging on thanks to a handful of loyal customers placing orders via WeChat.
“I assume it will be a drawn-out battle against the coronavirus,” he said. “We are aware of the fact that developed economies like the US and Europe have been severely affected.”
The Yiwu market reopened on February 18 after a one-month long hiatus following the Lunar New Year holiday and the government’s order to halt commercial activities to contain the spread of the outbreak.
Jiang Tianqing, owner of hair brush company Beauty Shine Industry. Photo: Ren Wei
But facing the threat of a spike in imported cases, Beijing banned foreigners from entering the country in late March – shutting out potential overseas buyers.
Despite the lack of business, local authorities have urged stall owners to keep their spaces open to display Yiwu’s pro-business attitude, owners said.
“For those bosses who just set up their shops here, it would be a do-or-die moment now since their revenue over the next few months will probably be zero,” said Tong. “I am lucky that my old customers are still making orders for my razors.”
The impact of the coronavirus is just the latest challenge for local merchants, who normally pay 200,000 yuan (US$28,000) per year for a 10-square-metre (108 square feet) stall at the market.
Traders were hard hit by the trade war between China and the United States when the Trump administration imposed a 25 per cent tariff on US$200 billion of Chinese imports last year.
At the time, some Chinese companies agreed to slash their prices to help American buyers digest the additional costs.
“But it is different this time,” said Jiang. “Pricing does not matter. Both buyers and sellers are eager to seal deals, but we are not able to overcome the barriers [to demand caused by the virus].”
Ma Jun, a manager with a LED light bulb trading company, said the only export destination for her company’s products was war-torn Yemen because it was the only country with ports still open.
It is a public health crisis that ravages not just our businesses, but the whole world economy – Dong Xin
Dong Xin, an entrepreneur selling stationery products, said he could not ship the few orders he had because “ocean carriers have stopped operations”.
“It is a public health crisis that ravages not just our businesses, but the whole world economy,” he said. “The only thing can do is to pray for an early end to the pandemic.”
Most wholesale traders in the Yiwu market run manufacturing businesses based outside the city, so a sharp fall in sales has a ripple effect on their factories, potentially resulting in massive job cuts.
Workers pack containers at Yiwu Port, an inland port home to dozens of warehouses. Photo: Ren Wei
At Yiwu Port, an inland logistics hub full of warehouses where goods from the factories are unpacked and repacked for shipping abroad, container truck drivers joke about their job prospects.
“We used to commute between Shaoxing and here five times a week, and now it is down to twice a week,” said a driver surnamed Wang, describing the trip from his home to the shipping port, just over 100km away.
“At the end of the day, we may not be infected with the coronavirus, but our jobs will still be part of the cost of the fight against it.”
The Chief Economic Adviser, K Subramanian, disagreed with the idea of industry-specific incentives and argued for structural reforms in land and labour markets. Members of Prime Minister Narendra Modi’s economic advisory council sound inchoate, resorting to social media and opinion editorials to counter one another.
In essence, the quibble among the members of the economic team of Mr Modi and his government is not about whether India is facing an economic slowdown or not, but about how grave the current economic crisis is.
To put all this in context, it was less than just two years ago, in November 2017, that the global ratings agency Moody’s upgraded India’s sovereign ratings – an independent assessment of the creditworthiness of a country – for the first time in 14 years.
Image copyrightGETTY IMAGESImage captionSales of cars and SUVs have slumped to a seven-year low
Justifying the upgrade, Moody’s had then argued that the economy was undergoing dramatic “structural” reforms under Mr Modi.
In the two years since, Moody’s has downgraded its 2019 GDP growth forecast for India thrice – from 7.5% to 7.4% to 6.8% to 6.2%.
The immediate questions that arise now are: is India’s economic condition really that grim and, if yes, how did it deteriorate so rapidly?
To make matters worse, Finance Minister Nirmala Sitharaman presented her first budget recently with some ominous tax proposals that threatened foreign capital flows and dented investor confidence. It sparked criticism and Ms Sitharaman was forced to roll back many of her proposals.
Image copyright GETTY IMAGESImage caption In 2016, India withdrew 85% of all currency notes from the economy
So, it is indeed true that India is facing a sharp economic downturn and severe loss of business confidence.
The alarm over the economic condition is not merely a reflection of a slowdown in GDP growth but also the poor quality of growth.
Private sector investment, the mainstay of sustainable growth in any economy, is at a 15-year low.
In other words, there is almost no investment in new projects by the private sector. The situation is so bad that many Indian industrialists have complained loudly about the state of the economy, the distrust of the government towards businesses and harassment by tax authorities.
But India’s economic slowdown is neither sudden nor a surprise.
Behind the fawning headlines in the press over the past five years about the robustness of India’s growth was a vulnerable economy, straddled with massive bad loans in the financial sector, disguised further by a macroeconomic bonanza from low global oil prices.
India’s largest import is oil and the fortuitous decline in oil prices between 2014 and 2016 added a full percentage point to headline GDP growth, masking the real problems. Confusing luck with skill, the government was callous about fixing the choked financial system.
Media caption What is really happening with India’s economy?
This move destroyed supply chains and impacted agriculture, construction and manufacturing that together account for three-quarters of all employment in the country.
Before the economy could recover from the currency ban shock, the government enacted a transition to a new indirect taxation system of the Goods and Services Tax (GST) in 2017. The GST rollout wasn’t smooth and many small businesses initially struggled to understand it.
Such massive external shocks to the economy, coupled with a reversal in low oil prices, dealt the final blow to the economy. Millions of Indians started to lose their jobs and rural wages remained stagnant. This, in turn, impacted consumption, slowing down the economy sharply.
Not easy
The wobbly state of the economy has also thrown government finances in disarray: tax revenues are much below expectations.
On Monday, the government got a much-needed breather when India’s central bank announced a $24bn (£19bn) one-time payout for the cash-starved government. (This amount is more than the dividend paid by the central bank to the government in all five years of the Congress rule between 2009 and 2014.)
The solutions to the economic crisis are not easy.
Indian industry, fed and fattened with government protection through decades, is once again clamouring for tax cuts and financial incentives.
But it is not clear that such benefits will revive private sector investment and domestic consumption immediately.
For all the hype about the Make in India programme, hailed as the harbinger of the country’s emergence as a manufacturing power, India’s dependence on China for goods has only doubled in the past five years.
India today imports from China the equivalent of 6,000 rupees ($83; £68) worth of goods for every Indian, which has doubled from 3,000 rupees in 2014.
So, India is neither making goods for itself nor for the world.
Image copyright AFPImage caption India’s agrarian crisis is a major stumbling block
Ornamental tax and other fiscal incentives to specific industries are not suddenly going to make Indian manufacturers competitive and stop India’s addiction for affordable Chinese goods. If any, the trade spat between China and the United States only saw countries such as Vietnam and Bangladesh benefit and not India.
More currency or trade tariffs are not the solutions either. The central bank has lowered interest rates and there is some push to lowering the cost of capital for industry. But again, Indian industry will invest more only when demand for goods and services increases. And demand will increase only when wages increase, or there is money in the hands of people.
So, the only immediate solution for India seems to be to boost consumption through a stimulus given directly to people, in the classical Keynesian mould.
Of course, such a stimulus should be combined with reforms to boost business morale and confidence.
In sum, India’s economic picture is not pretty.
It is important for India’s political leadership to see this not-so-pretty picture and not hide behind rose tinted glasses. Prime Minister Modi has a unique electoral mandate to embark on bold moves to truly transform the economy and pull India out of the woods.
Settlements along the route linking Europe and Asia thrived by providing accommodation and services for countless traders
Formally established during the Han dynasty, it was a 19th-century German geographer who coined the term Silk Road
The ruins of a fortified gatehouse and customs post at Yunmenguan Pass, in China’s Gansu province. Photo: Alamy
We have a German geographer, cartographer and explorer to thank for the name of the world’s most famous network of transcontinental trade routes.
Formally established during the Han dynasty, in the first and second centuries BC, it wasn’t until 1877 that Ferdinand von Richthofen coined the term Silk Road (historians increasingly favour the collective term Silk Routes).
The movement of merchandise between China and Europe had been taking place long before the Han arrived on the scene but it was they who employed troops to keep the roads safe from marauding nomads.
Commerce flourished and goods as varied as carpets and camels, glassware and gold, spices and slaves were traded; as were horses, weapons and armour.
Merchants also moved medicines but they were no match for the bubonic plague, which worked its way west along the Silk Road before devastating huge swathes of 14th century Europe.
What follows are some of the countless kingdoms, territories, (modern-day) nations and cities that grew rich on the proceeds of trade, taxes and tolls.
China
A watchtower made of rammed earth at Dunhuang, a desert outpost at the crossroads of two major Silk Road routes in China’s northwestern Gansu province. Photo: Alamy
Marco Polo worked in the Mongol capital, Khanbaliq (today’s Beijing), and was struck by the level of mercantile activity.
The Venetian gap-year pioneer wrote, “Every day more than a thousand carts loaded with silk enter the city, for a great deal of cloth of gold and silk is woven here.”
Light, easy to transport items such as paper and tea provided Silk Road traders with rich pickings, but it was China’s monopoly on the luxurious shimmering fabric that guaranteed huge profits.
So much so that sneaking silk worms out of the empire was punishable by death.
The desert outpost of Dunhuang found itself at the crossroads of two major Silk Road trade arteries, one leading west through the Pamir Mountains to Central Asia and another south to India.
Built into the Great Wall at nearby Yunmenguan are the ruins of a fortified gatehouse and customs post, which controlled the movement of Silk Road caravans.
Also near Dunhuang, the Mogao Caves contain one of the richest collections of Buddhist art treasures anywhere in the world, a legacy of the route to and from the subcontinent.
Afghanistan
Afghanistan’s mountainous terrain was an inescapable part of the Silk Road, until maritime technologies would become the area’s undoing. Photo: Shutterstock
For merchants and middlemen hauling goods through Central Asia, there was no way of bypassing the mountainous lands we know today as Afghanistan.
Evidence of trade can be traced back to long before the Silk Road – locally mined lapis lazuli stones somehow found their way to ancient Egypt, and into Tutankhamun’s funeral mask, created in 1323BC.
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Besides mercantile exchange, the caravan routes were responsible for the sharing of ideas and Afghanistan was a major beneficiary. Art, philosophy, language, science, food, architecture and technology were all exchanged, along with commercial goods.
In fact, maritime technology would eventually be the area’s undoing. By the 15th century, it had become cheaper and more convenient to transport cargo by sea – a far from ideal development for a landlocked region.
Iran
The Ganjali Khan Complex, in Iran. Photo: Shutterstock
Thanks to the Silk Road and the routes that preceded it, the northern Mesopotamian region (present-day Iran) became China’s closest trading partner. Traders rarely journeyed the entire length of the trail, however.
Merchandise was passed along by middlemen who each travelled part of the way and overnighted in caravanserai, fortified inns that provided accommodation, storerooms for goods and space for pack animals.
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With so many wheeler-dealers gathering in one place, the hostelries developed into ad hoc marketplaces.
Marco Polo writes of the Persian kingdom of Kerman, where craftsmen made saddles, bridles, spurs and “arms of every kind”.
Today, in the centre of Kerman, the former caravanserai building forms part of the Ganjali Khan Complex, which incorporates a bazaar, bathhouse and mosque.
Uzbekistan
A fort in Khiva, Uzbekistan. Photo: Alamy
The double-landlocked country boasts some of the Silk Road’s most fabled destinations. Forts, such as the one still standing at Khiva, were built to protect traders from bandits; in fact, the city is so well-preserved, it is known as the Museum under the Sky.
The name Samarkand is also deeply entangled with the history of the Silk Road.
The earliest evidence of silk being used outside China can be traced to Bactria, now part of modern Uzbekistan, where four graves from around 1500BC-1200BC contained skeletons wrapped in garments made from the fabric.
Three thousand years later, silk weaving and the production and trade of textiles remain one of Samarkand’s major industries.
Georgia
A street in old town of Tbilisi, Georgia. Photo: Alamy
Security issues in Persia led to the opening up of another branch of the legendary trade route and the first caravan loaded with silk made its way across Georgia in AD568.
Marco Polo referred to the weaving of raw silk in “a very large and fine city called Tbilisi”.
Today, the capital has shaken off the Soviet shackles and is on the cusp of going viral.
Travellers lap up the city’s monasteries, walled fortresses and 1,000-year-old churches before heading up the Georgian Military Highway to stay in villages nestling in the soaring Caucasus Mountains.
Public minibuses known as marshrutka labour into the foothills and although the vehicles can get cramped and uncomfortable, they beat travelling by camel.
Jordan
Petra, in Jordan. Photo: Alamy
The location of the Nabataean capital, Petra, wasn’t chosen by chance.
Savvy nomadic herders realised the site would make the perfect pit-stop at the confluence of several caravan trails, including a route to the north through Palmyra (in modern-day Syria), the Arabian peninsula to the south and Mediterranean ports to the west.
Huge payments in the form of taxes and protection money were collected – no wonder the most magnificent of the sandstone city’s hand-carved buildings is called the Treasury.
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Trade enriched Venice beyond measure, helping shape the Adriatic entrepot into the floating marvel we see today.
Besides the well-documented flow of goods heading west, consignments of cotton, ivory, animal furs, grapevines and other goods passed through the strategically sited port on their way east.
Ironically, for a city built on trade and taxes, the biggest problem Venice faces today is visitors who don’t contribute enough to the local economy.
A lack of spending by millions of day-tripping tourists and cruise passengers who aren’t liable for nightly hotel taxes has prompted authorities to introduce a citywide access fee from January 2020.
Two thousand years ago, tariffs and tolls helped Venice develop and prosper. Now they’re needed to prevent its demise.
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CHINDIA ALERT: You'll be living in their world, very soon 