India’s Snub to China on OBOR: Unwise to Ignore Economic Interests

Out to isolate Pakistan on the issue of terrorism, India finds itself isolated in the bigger game reshaping the geopolitical map of the world. China’s ‘One Belt One Road’ scheme will have momentous consequences, yet New Delhi has refused to even engage China on the issue by staying out of the Belt and Road Forum that took place in Beijing on Sunday and Monday.
The Chinese work on long-range plans; many of their achievements of today are a result of the effort that has gone into them in the past thirty years. Take Shenzen, the greenfield city that today powers China’s economy. It began as a rural backwater opposite Hong Kong on the mainland 40 years ago. Or, the six Chinese high tech zones – which started with a dozen or so establishments in the 1990s and today typically feature 30-40,000 businesses, including the leading companies of the world.

Why is China Seeking an Economic Embrace?

What does this have to do with OBOR? Everything. Having achieved the status of the world’s largest manufacturer and exporter, China is now in the process of transforming itself once again. The benchmarks are 2021, the centenary of the founding of the ruling Communist Party of China, and 2049, which will mark hundred years of the People’s Republic of China. The first involves the doubling of the GDP as of 2010, and making China a “moderately prosperous society”, and the second is to take China to the level of a “moderately developed country”, which means a per capita GDP of $55,000.

 

To achieve this, China needs to maintain an annual per capita growth rate of at least 6.3 percent till 2021 and 5.8 percent through 2049. Both these are daunting targets and China is facing severe challenges in meeting them, in part because of the headwinds of the global economy, and, in part, the excesses of the past, which include over-investment, overcapacity in certain industries, and indebted state-owned enterprises (SOEs).

Pakistan Prime Minister Nawaz Sharif, left, is greeted by Chinese President Xi Jinping during the welcome ceremony for the Belt and Road Forum in Beijing on 15 May 2017. (Photo: AP)

China can no longer depend on an investment and export driven model. Instead, it must enhance domestic consumption and enhance productivity through innovation-driven growth. This is where OBOR comes in.
Using its vast monetary reserves to invest in developing infrastructure and economies around its periphery, China is simultaneously seeking to get rid of its excess capacity in areas like steel and cement while drawing large swathes of its neighbourhood into a closer economic embrace.

Raising the Stakes

The actual Chinese target is Europe with its affluent economy, high levels of technology and lifestyle products that the Chinese middle class crave for. China is reaching out to the affluent West through high-speed rail links and enhanced maritime connectivity.
Simultaneously, China is upgrading its own industrial capacities through R&D and acquisitions. In the past year, China has acquired the Swiss agribusiness giant Syngenta and the world’s foremost automotive robotics company, KUKA. It has spent over $150 billion in acquiring companies in the area of integrated circuits or chips, though in the past year, the regulators have prevented companies like Micron, Western Digital, AIXTRON and Toshiba from selling their chip businesses to China.
Western assessments are that in areas like artificial intelligence, biotech and electric cars, Chinese technology, backed by an enormous amount of government funding, is already amongst the best in the world.

Distracted by Pakistan

We in India are distracted by the China-Pakistan Economic Corridor or the activities of China in Sri Lanka, and are taking our eye off the ball in the main game. The Indian Ocean activity is a side-show, albeit understandably important for India because it’s in our neighbourhood and its military elements are all too clearly visible.
OBOR is a Chinese national project, aimed at fulfilling Chinese goals.

The government of India cannot but formally protest the CPEC going through Pakistan-occupied-Kashmir. But the tone and tenor suggests that, perhaps, we are protesting too much.

And that the remonstrations are a pretext to adopt a needlessly confrontationist stand against China. At least thrice in the past 70 years, India has been willing to formalise a border along the Line of Control in Jammu & Kashmir, so to make out that Chinese projects in Gilgit-Baltistan are the cause of Indian ire is to truly miss the wood for the trees.

A security official walks by a pagoda at the Yanqi Lake International Conference Center, where the Belt and Road Forum was being held, in Beijing on 15 May 2017. (Photo: AP)

A Missed Opportunity

A more sophisticated policy would use OBOR for Indian purposes where it can. India cannot stop OBOR, neither can it ignore and nor will it be immune to its effects. While it’s true that pipelines and railroads hardwire a destination, ports do not, and can be used by anyone. If China promotes an economic zone in Sri Lanka or East Africa, Indian businesses are free to utilise them for their own ends.
India is a member of the Chinese-led Asian Infrastructure Investment Bank and the New Development Bank. What is to stop it from seeking funding there to hardwire its own connectivity schemes to South-East Asia and across Iran to Europe?

Focus on Implementation of Projects

New Delhi has two problems — first, India’s own hopeless internal infrastructure, setting which right should be its priority. Second, it lacks the structure of capable state-owned enterprises which can execute projects in quick time. The 19.2-km Kamchiq tunnel in Uzbekistan built by the China Railway Tunnel Group was completed in 2016 in exactly three years, the 756-km Addis Ababa-Djibouti railway in five years by the China Railway Group. These are just random examples of the accomplishments of Chinese companies.

 

As far as India is concerned, the Chabahar scheme, the Kaladan Multimodal project and the International North South Transportation Corridor have been in the works since the 2000s and none of them are complete and the last-named has not even begun.

The same is the case with the India-Myanmar-Thailand highway project begun in 2001.
Beyond the issue of connectivity, India needs to up its economic game by doing more, rather than less planning. As we see, China’s achievements are a result of sophisticated planning by outfits like the National Development and Reform Commission (NDRC). A slogan a day like IT+IT=IT, or Smart cities, Start-up India, Make in India and so on, are not going to work. We need a sustained strategy of promoting economic growth and qualitatively better governance, and a dose of modesty.
The Quint May 15, 2017