Thursday, February 9, 2012

Investment News and Commentary from Emerging Markets in Asia - China, India and ASEAN





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China’s Military Dominance Still a Concern: “India – China Conflict by 2012”

Jul. 13 – Just as Southeast Asia has been lifted by a resurgent China over the years, so have feelings of distrust towards the country, and nowhere more so than India which is still smarting from a border war it fought with China less than a decade after it found it had a new “neighbor.” The 1962 border clashes with China were a direct consequence of the Tibetan problem which had seen the Dalai Lama flee to India. Suddenly, instead of a benign Buddhist nation on along its northern territory, India had communist China, and the Tibetan buffer state was no more. Disputes that had previously been a diplomatic matter between two friendly nations became frayed as China’s take on Tibet’s historic relationship with India took on a darkened tone to that which had preceded it under the Buddhist-led regime.

China’s rise to prominence on the international stage since then has not always been smooth, and its diplomacy has often been seen as regional bullying. China’s recent use of its veto power at the ADB to deny India development funds for its northern state of Arunachal Pradesh coupled with Rio Tinto executives being detained for spying closely following a denial by Australia of China’s desire to acquire some of the countries mineral assets looks more aggressive than peaceful. Indeed, such is the forceful nature of China’s statements these days that the country is in danger of losing the goodwill it built up during the hosting of last year’s Olympics.

Recent events in Tibet and Xinjiang are now starting to spark regional concerns. Indeed, no less a body than the Times of India, publishing an interview with Bharat Verma, editor of the Indian Defense Review, claims that China will attack India by 2012 to divert the attention of its own people from “unprecedented” internal dissent, growing unemployment and financial problems that are threatening the hold of Communists in that country. “China will launch an attack on India before 2012. There are multiple reasons for a desperate Beijing to teach India the final lesson, thereby ensuring Chinese supremacy in Asia in this century.” says Verma

Noting that one of the joys of reading India’s free media – no censorship here – is the inevitable crackpots it throws up. However, China needs to be wary of signals, intentional or otherwise, of the diplomatic, and public relations image that it often portrays. Still wanting to be appreciated, if not loved internationally, China continually throws spanners into its own works with a far too heavy handed diplomatic and militaristic approach. India’s military spending, as a percentage of GDP, is 2.5 percent. Is it really necessary for China to be spending 4.3 percent of its GDP – which again is considerably larger than India’s – on its military?

Verma’s points – a covert operation by Beijing giving North Korea nuclear technology and missiles – are the sort of nonsense one can fairly easily debunk. However, when mixed in with his views on Pakistan, as he points out, long China’s western ally against India, and a Pakistan/US alliance diminishing Pakistan’s reliance upon China, a “nervous” Beijing, able to strike at India becomes just a little more rational. With China apparently hell bent on upsetting other countries via using diplomatic means gained to reward it for its development in a manner that seems more akin to punishing nations it has commercial disputes with, the concerns are writ large on the wall. Government interference in Chinese commerce is steadily growing, and China will take commercial action at a governmental and diplomatic level to get its way. Whether that leads to the apocalyptic scenario that it attacks India seems rather off beam. But Verma, in his article, has drawn a line of concern in the sand.

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