China: In the end, the Big Loser
Many Indians thought former BBC journalist Humphrey Hawksley was being overly alarmist when he wrote the thriller Dragon Fire two decades ago about a war pitting China and Pakistan against India that ended apocalyptically with nuclear devastation. Hawksley, a veteran Asia hand, said his fiction was meant not just to entertain but also be a warning that China was expansionist and was a one-party state whose government had to prove itself to survive.
Since then, though, we’ve seen China offering a different narrative in which global economic diplomacy was its choice weapon. The Chinese have been busy proving they’re responsible global world order citizens, paying their dues on time to UN organisations while the US stalled. China has also assumed greater stature in the IMF and the World Bank as well as leading the Asian Infrastructure Investment Bank, a separate development lender. And China launched its ambitious Belt and Road Initiative (BRI) to create a trade superhighway and cement the country’s influence globally.
Still, of late, there’s been a marked change in China’s moves with Beijing on its soft-power approach and displaying a more bellicose face to the world which has prompted questions about whether Hawksley was right all along.
Indian diplomats and analysts are convinced, in fact, that China’s creeping move forward in Ladakh was meticulously planned, possibly before the winter began. What was the strategic gain and, if not, what was the reason for the military brinksmanship? The answer is that when it comes to strategic gain, zilch. Whichever way you look at it, the Chinese territorial gains have been piffling.
The reason, though, is more interesting: to teach India a lesson and to remind it not to get above its station. The Chinese feel India has been acting uppity, rejecting every offer and refusing to play even a small role in the BRI. Then, there was Doklam, where the Chinese hadn’t expected to be blocked by the Indian Army. “There was a feeling we should send them a message. Show them who’s boss,” says Manoj Kewalramani who’s China Studies fellow at the Takshashila Institution. But then Galwan happened.
From China’s deadly manoeuvres in Ladakh that claimed 20 Indian soldiers’ lives, the crackdown in Hong Kong, to the ratcheting up of pressure on its South China Sea territorial rivals, and also on Taiwan, all signs are of a government that feels aggression may be its best tactic after all. We’ve also seen an administration that’s clearly scared dissent will be contagious. After all, if one brick is dislodged, the entire edifice might crumble. “Your siege mentality makes you lash out,” says Kewalramani.
But taking the path of aggression is already looking costly for the Chinese. Take a look at the US which has grabbed the opportunity to make a string of hostile moves against China. On Wednesday, the US ordered the Chinese to shut down its consulate in Houston, where a large Chinese community live.
Almost simultaneously, the US acting Defense Secretary Mark Esper stepped up the tough talk during a speech at the UK’s International Institute for Strategic Studies, saying the Chinese Communist Party’s “true intentions are on full display for all to see. As he spoke, one US carrier fleet was in The Philippine Sea and another was on exercises with the Indian Navy in the Indian Ocean. It should be mentioned that India played down its naval exercises and made no formal announcement about it.
Nevertheless, the damage has been done. Says Kewalramani: “The Chinese made a big strategic mistake in Ladakh. They have alienated a friendly government and now India has a far greater willingness to be part of an alliance.”
Move back now a step from the military manoeuvres and look more closely at the business angle in all this. Start out with India. Even though we aren’t as important a player in the global marketplace as we like to imagine, we’re a highly lucrative “Promised Land” for the tech giants. Just look at our numbers. We have a billion mobile phones; e-commerce is growing exponentially; we comprise Facebook’s largest market with 290 million users compared to 190 million in the US; Facebook’s Whatsapp has 2 billion users globally out of which 400 million are in India. What’s more, Indians lead the world when it comes to data consumption. In 2019, we used an average of 12GB per month, a figure forecast to more than double to 25GB by 2025.
Is it any wonder Google’s promised to spend $10 billion in India in the next 10 years and has just poured in $4.5 billion as an investor in Reliance’s Jio Platforms? Facebook, too, is writing out a cheque for $5.4 billion and it hopes Whatsapp will be a crucial part of the Jio Platform’s e-commerce offerings.
While seeking a mutually satisfactory military solution to the Ladakh standoff, we’ve already flexed our economic muscle by banning 59 Chinese apps, including TikTok, the video-sharing social networking service which had 200 million subscribers. India was the company’s largest market, outstripping China, even though revenues from our side were modest.
Then, there’s Alibaba’s UC Browser which has cut through the clutter to become India’s second most-used browser after Google Chrome. Two Alibaba apps – UC Browser and UC News – brought in income of Rs 226 crore in 2018-19. The Chinese apps have grown into heavyweights in their own protected market but they want to be world-beaters. Without India, can they muster the numbers to outcompete companies like Facebook and Google? Our apps ban mean the global game will definitely get a lot tougher for them.
New Delhi has also stopped state-owned BSNL from buying equipment from China’s ZTE and Huawei, making it unlikely 5G development leader Huawei will participate in India’s launch of 5G. And it’s pushing Indian firms more than ever to “make in India” rather than source goods from China.
Also, India could have triggered a trend. The UK has said it will slowly phase out Huawei and France appears to have done the same on Wednesday. The US, already embroiled in a punitive trade war with China, will block Huawei from 5G networks and is talking about banning Chinese apps. In fact, moving into defensive mode, TikTok is even talking to investors to take a majority stake that would turn it into US-owned company.
In response to the Hong Kong crackdown, meanwhile, the Americans are withdrawing the customs-clearance facility in the city state which made exports far easier.
China’s also upset other countries like Japan which is offering subsidies to companies that move home or to another part of Asia from China. The Japanese say 87 companies have accepted so far. The Japanese got a supply shock after the pandemic because companies like Honda have units in Wuhan and they felt the full impact of the lockdown.
Ultimately, it would be in the best commercial interests of India and China to mend relations. Around 2016, the Chinese decided India was on the tech glidepath. The result was that, according to the Brookings Institute, Chinese investments worth $26 billion have come into India. Even that may be an underestimate because global money trails are tough to follow and investments come from places like Singapore and Hong Kong. TikTok’s India venture, for instance, was registered in the Cayman Islands.
Could it be that China’s creeping moves in Ladakh are causing greater global reverberations than anyone might have expected? Just weeks after the combination of Ladakh and Hong Kong, the US is doubling down on efforts to stay the global Numero Uno and ensure that the Chinese can’t claim to stand beside it. Do they want to provoke a military conflict? Almost certainly not. But they would like to deny cutting-edge technology to the Chinese for the next five to seven years. By then, the US expects to have consolidated its tech lead to a point where the Chinese won’t be able to catch up.
Also, one thing is certain. To at least achieve its ambition of Asian hegemony, China needs India onside, Hawksley said this month. “As an Asian power, India could now mentor China toward its survival. The alternative is that China will follow the trajectory of Japan’s rise in the 20th century and end up destroying itself because it believes it is too strong to fail,” he said.