THE WISDOM FUND: News & Views
April 6, 2008
The Pilot

Confronting the Quiet Rise of China, India

by Mohsin Ali

This is a tale of two Asian countries that are quietly rising as big economic "soft" powers.

China is dreaming of winning Gold Medals at the Olympic Games it is hosting in Beijing in August.

India's Tata Motors and Ford have just announced a deal for Tata to get the two iconic brands Jaguar and Land Rover for $2.3 billion.

China and India, nuclear-armed and with a combined population of about 2.5 billion, are quietly rising as economic giants while the United States sheds its blood and treasure in a long "war on terror" in Afghanistan and Iraq.

This, to paraphrase Charles Dickens, "is the age of wisdom, it is the age of foolishness ... it is the season of light, it is the season of darkness, it is the spring of hope ... it is the winter of despair."

Beijing's hopes of an unsullied and tranquil opening climate for the Olympic Games may not be realized because of the disturbances in Tibet.

President Bush, in a telephone call to President Hu Jintao on March 26, voiced concern about the Chinese military crackdown on the most sustained Tibetan uprising in almost two decades against Chinese rule. President Bush asked China to engage in "substantive dialogue" with representatives of the Dalai Lama, the exiled spiritual leader of Tibet.

The White House said that President Bush would not boycott the Olympic Games because of the Chinese crackdown against Buddhist monks and others demonstrating against Chinese rule, arguing that the Olympic Games are an event about athletes, not politics.

President Hu told President Bush that the protests in Tibet were by no means peaceful demonstrations. The Chinese leader offered to continue contacts with the Dalai Lama but only if he drops any demand for independence. The Dalai Lama, who now lives in India, has repeatedly made clear he was not trying to sabotage the Olympic Games but wants meaningful self-rule for Tibet as part of China.

Some Western experts warn that 2008 has as much potential to be a disaster as a triumph for Beijing's attempts to herald its own arrival on the world stage.

The Chinese capital will host 31,000 journalists for the Olympics, and any sign of protest or an attempt to quell dissent with violence would be catastrophic.

Already there are calls by human rights activists in the U.S. and Europe for a boycott of the Beijing Olympics. The last thing the Communist rulers in Beijing want is to tarnish the golden image of the international Olympics movement or evoke bad memories of former political protests that have increasingly interfered with the avowed aim of the modern Olympics, that of fostering world amity.

At the time of the 1936 Berlin Olympics, Nazi Germany's deadly campaign against the Jews was just getting into its stride, with discrimination in public places and acts of violence against them. But for the duration of the games, discrimination and overt hostility were halted to avoid provoking foreign visitors.

However, Adolf Hitler refused to recognize the achievements of Jesse Owens, an African American who won four Gold Medals. India defeated Germany to win the hockey Gold Medal.

The 1972 games in Munich, West Germany, were shockingly marred by eight Arab guerrilla terrorists armed with AK-47 assault rifles. They broke into the Israeli team's quarters in the Olympic Village. The terrorists killed two Israeli athletes and took nine hostages, who were later killed, along with five of the guerrillas and a West German policeman, in a battle with police at a Munich airport. Olympic activities were suspended for a day to hold memorial services for the murdered Israeli athletes.

The U.S., after much debate, withdrew from the 1980 games, held in Moscow, to protest the Soviet Union's invasion of Afghanistan. About 64 other nations also boycotted the 1980 games. The Soviet Union, citing doubts about security measures, withdrew from the 1984 games in Los Angeles, along with 15 other mainly socialist nations that followed.

Historical Perspective

As we now approach the Beijing Olympics, let us put the rise and decline of empires in their proper historical perspective.

"The Eastern Origins of Western Civilization," by English Professor John Hobson, startlingly contends that China, India and the Middle East Arab Muslims fathered globalization during the 500 to 1800 A.D. period. This, he claims, enabled the rise of the West.

Between 1500 and 1800 A.D., the combined economies of China and India accounted for 50 per cent of the world's Gross Domestic Product.

Now, after nearly two centuries of colonialism and decline, the economies of China and India are back on the world scene with a vengeance. The statistics are impressive. More than 2,000 years after the building of the Great Wall, China has just completed the main construction of its famous Three Gorges hydroelectric dam on the Yangtze, the largest ever built. It has also started running the highest mountain railway service between Beijing and Lhasa, the capital of Tibet.

China today is sitting on foreign currency reserves totaling more than $1.3 trillion. Most of the world is gloomily contemplating economic slowdown and even recession. But China is enjoying unprecedented levels of domestic consumption and showcasing itself to a watching world with a glittering $40 billion summer Olympic Games in Beijing Aug. 8-24.

Its newly built iconic stadium is part of the Olympic Green, 3,000 acres where everything from tennis to archery will be contested by some 10,000 athletes, with more than 550,000 spectators.

Growing Influence

Beijing last year spent more than $3 billion for clearing the smog. It closed factories and halted construction. During the Games, half of the capital's 3.3 million cars will be kept off the streets.

The world's most populous nation has transformed itself in three decades from one of the poorest countries of the 20th century into the globe's third-largest economy, its hungriest (and most polluting) consumer and the engine room of economic growth.

By coincidence, China last year also became the world's No 1 producer of gold, pushing South Africa into second place for the first time in more than a century.

China in 2007 contributed more to global growth than the U.S. and became the biggest consumer nation in many energy, food and industrial commodities.

Recently, China overtook the U.S. to become the world's leading emitter of CO2.

Since the disastrous Cultural Revolution of Mao tse-tung and his death in 1976, China has lifted some 400 million people out of poverty. This is about 75 percent of the world's total poverty reduction in the past century.

Meanwhile, China's authoritarian regime shows little sign of relaxing its grip on power and continues to expand its influence overseas from the oil fields and metal mines of Africa to London's financial center.

Beijing's trade surplus with the rest of the world will widen from $130 billion in 2007 to $290 billion this year. From global warming to Darfur and North Korea, the views of Beijing and its willingness to act have become prerequisites to any international solution.

The drumbeat of protectionism is sounding louder in America's presidential election year. Meantime, Beijing will also have to grapple with issues from rising inflation to Taiwan to its likely own role as the largest consumer of primary energy resources.

The U.S. trade deficit with China is $275 billion. Last year, Americans imported $340 billion of Chinese toys, furniture, drugs and other products. China ordered $65 billion from American factories.

China has allowed the Yuan to rise by more than 15 percent since July 2005, but prices of Chinese imports have largely increased over the same period, according to the U.S. Bureau of Labor Statistics.

American experts forecast that over the next 25 years nearly $10 trillion -- more than 60 percent of all the money invested in the future of energy -- will pour into the electricity sector, especially in China, India and the U.S.

For electricity, the big money will be in coal, nuclear power and natural gas. China and India, the world's largest democracy, are fast laying foundations for global economic superiority. With their big army reserves, they are also on the way to becoming leading military powers.

In 2003, the Gross Domestic Product (GDP) of China and India together was about 91 per cent the size of the U.S. GDP. In 2030, their combined GDP is projected to be almost double that of the U.S.

India Not Far Behind

India's economy may surpass the U.S. and be second only to China's by mid-century, according to Western economists.

U.S. energy experts predict that by 2030 the world demand for oil will be about 120 million barrels daily. In the impending East-West clash of mastery for the world's finite energy resources and raw materials, the combined demand for oil of China and India will account for nearly one-half of the total increase.

Currently, the U.S. is the world's biggest consumer of oil, using 25 percent of the global supply of about 70 million barrels daily. China, which has four times as many people, uses 7 percent.

Today, 50 percent of Europe's oil and gas imports are from Russia, Norway and Algeria. Seven million barrels of oil are shipped daily through the Straits of Hormuz and the disputed Shatt al-Arab waters between Iraq and Iran.

Moreover, Asian countries hold more than $2 trillion of foreign reserves, overwhelmingly denominated in dollars.

A major development, which has been barely reported here, is the Shanghai Cooperation Organization, formed in 2001 as a Russia-China based counterweight to the expansion of U.S. power into the former Soviet Central Asia, which could induct such members as India, Pakistan and Iran.

Much of Iran's oil is already going to China, and Beijing is providing Teheran with weapons.

The Sino-Saudi Arabia relationship has quietly developed dramatically. This includes Chinese military aid to Saudi Arabia and gas exploration rights for China.

The Chinese economy is now expected to grow at around 10 per cent. Can anything disrupt this forward rush? We can observe the social impact of the changes, movements of populations, the dictatorial government style, a long tradition of corruption, the clash of industrial development with traditional values. All these have the potential to cause disruptive social unrest, which the government may or may not be able to control.

Industrial pollution is already reported to reduce GDP by 7 percent. Less than half of the population has access to clean water. There are serious and growing water problems in the dry north. Seven of the world's most polluted cities are in China.

Thus, in the middle term, the role of China and India in the world may depend largely on how they manage internal change.

A Major Challenge

Will the Chinese bubble burst? Will the new urban middle class be able to deal with a severe economic downturn? The Chinese Communist Party will probably reassert power and influence in such a situation. This in turn could hold up any real moves to democracy and social justice.

It may well be that democratic India's economic growth, if less spectacular than China's, is more solid. It is continuing to feed the apparently insatiable appetite of its rising consumer-oriented middle class.

Because of the differing government philosophies and structures in the two countries, India will rely much more on the prowess and acquisitiveness of its large industrial groups and less on government activity in this field.

As the nature of Communist China's challenge is unprecedented in human history, the response will have to be imaginative. The U.S. will have to engage China and take advantage of its vulnerabilities by proposing new forms of cooperation on issues as diverse as trade, investment, military security, managing global energy supplies and climate change.

The world must learn to live with the new rising Chinese and Indian middle classes, which will take over power in both countries in the foreseeable future.

ORIGINAL



Mohsin Ali, a former Reuters diplomatic editor and Times of London correspondent, lives in Pinehurst. He is a member of the Order of the British Empire.

Adam Dunn, "Did the Chinese Discover America?," CNN.com, January 13, 2003

Mohsin Ali, "China Today," The Wisdom Fund, October 27, 2005

[The driver of the emerging Eurasian geopolitical cooperation is obvious. China, with the world's largest population and an economy expanding at double digits, urgently needs secure alliance partners who could secure her energy security. Russia, an energy goliath, needs secure trade outlets independent of Washington control to develop and rebuild its tattered economy. These complimentary needs form the seed crystal of what Washington and US strategists define as a new Cold War, this one over energy, over oil and natural gas above all. Military might is the currency this time as in the earlier Cold War.--F. William Engdahl, "Putin and the Geopolitics of the New Cold War," 321gold.com, February 19, 2007]

John Gray, "Control Oil and Water, Control the World," Observer, March 30, 2008

David Lindorff, "On Waking Sleeping Giants," counterpunch.org, April 11, 2008

Anthony Browne, "Why China is the REAL master of the universe," Daily Mail, April 11, 2008

Jeffrey N. Wasserstrom, "China's Inauspicious Year," Nation, May 20, 2008

Jamil Anderlini and Peter Smith, "China and Australia sign $41bn energy deal," Financial Times, August 18, 2009

M K Bhadrakumar, "The Dragon spews fire at the Elephant," Asia Times, October 17, 2009

[When the republic was founded on Oct. 1, 1949, political institutions were just starting to be formed. People were hungry. The average life expectancy was 35 years. Infant mortality reached a high of 20 percent. The overall illiteracy rate was 80 percent. There was little organized education, no health care and no means of social security. The national treasury was empty, the economy bankrupt. There was no industry to speak of and little basic infrastructure. Indeed, the Chinese people had endured a century of government mismanagement, political instability, constant civil war and warfare imposed by other countries.

In the six decades since the republic was formed, China's economy has become the world's third-largest. Life expectancy has reached 73 years; infant mortality is down to 1.5 percent. The illiteracy rate has fallen to 5 percent. A nine-year education has become available to all children. Health care and social security are improving. Modern industries are being developed. Roads, railways, airports and ports blanket the country. In the areas of democracy, the rule of law and human rights - including the rights of 55 minorities - China has made enormous progress. At no other point in history has so much improvement been made for so many people in such a short period.--C.H. Tung, "In China, there's a lot to celebrate," Washington Post, October 31, 2009]

Alexandra Stevenson, "India losing English advantage to China," Financial Times, November 19, 2009

[ . . . the Sino-American affair over South Asia presented Delhi with another puzzle. The fact remains that US and Chinese interests are so patently at odds in the region that the two countries cannot easily mate. Washington is actively undermining the stability of the Mahinda Rajapakse government in Colombo, with which both Beijing and Delhi enjoy close ties. The US has just begun a robust thrust in Myanmar to contest China's influence. . . .

Meanwhile, a concerted media campaign has begun in the US to discredit Chinese policies toward Afghanistan - that China is involved in "brazen examples of corruption" to grab Afghanistan's wealth of mineral resources.--M K Bhadrakumar, "US's dalliance in Beijing is short-lived," atimes.com, November 21, 2009]

Arvind Subramanian, "India's weak state will not overhaul China," ft.com, August 16, 2010

[So where are we this August of 2010, with guns blazing in one war in Afghanistan even as we try to extricate ourselves from another in Iraq? Where are we, as we impose sanctions on Iran and North Korea (and threaten worse), while sending our latest wonder weapons, pilotless drones armed with bombs and missiles, into Pakistan's tribal borderlands, Yemen, and who knows where else, tasked with endless "targeted killings" which, in blunter times, used to be called assassinations? Where exactly are we, as we continue to garrison much of the globe even as our country finds itself incapable of paying for basic services?--Chalmers Johnson, "The guns of August," atimes.com, August 19, 2010]

Sarah Arnott, "Fears of Chinese land grab as Beijing's billions buy up resources," Business Insider, October 2, 2010

[By 2013, China will have the world's most comprehensive high-speed railway network and 800 bullet trains. SO far, China has 4,706 miles of high-speed railway, more than any other country, and by 2020 it expects to have 75,000 miles of railway, of which 10,000 miles will be high-speed rail.--Clifford Coonan, "China's 302mph train leaves the rest of the world behind," Independent, December 4, 2010]

Steve Connor, "US science chief warns: 'China will eat our lunch'," Independent, February 20, 2011

Nick Ottens, "The short, sharp life of 'Chinese century'," atimes.com, November 9, 2011

Josephine Moulds, "China's economy to overtake US in next four years, says OECD," guardian.co.uk, November 9, 2012

Clifford Coonan, "China's new men of iron take over," independent.co.uk, November 16, 2012

[India's failure to equal the success of China's hyper development is due in large part to the failure of the state to provide "essential public services - a failing that depresses living standards and is a persistent drag on growth"--William Dalrymple, "What happened to India's economic miracle?," newstatesman.com, July 5, 2013]

Shanghai, China 1990 Shanghai, China 1990

Shanghai, China 2010 Shanghai, China 2010

"15 Facts About China That Will Blow Your Mind," Business Insider

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