Remembering a War: Sino-Indian War of 1962

26. May 2010 by admin.

Remembering a War: Sino-Indian War of 1962

 

The Rediff Special/Claude Arpi

 

 

If someone asked me what is the greatest scam since Independence, I would have some difficulty answering. I might initially consider the ‘Jeep case’ involving Krishna Menon, or the smoking guns of Bofors.

 

But in the end, the one that I find the most stupid, and perhaps the most harmful to India’s interests in the long run, is the confiscation of history by government babus under the Public Records Act.

 

These rules vaguely state that “unclassified public records more than 30 years old should be made available to any bona fide research scholar, but subject to such exceptions and restrictions as may be prescribed”.

 

Because of the last part of the sentence, the people of India are today not able to know about their recent history. One of the main casualties is the 1962 war with China. As a sad result of this policy, the Chinese version of history is often prevalent, even in India.

 

A few weeks after the debacle of October-November 1962, Lieutenant General J N Chaudhuri constituted a committee to study the causes of the ‘Himalayan blunder’. An Anglo-Indian general called Henderson Brooks was requested to go through the official records and prepare a report on the war. Sometime in 1963, the general presented his study to Nehru and a couple of his ministers. The report was immediately classified ‘Top Secret’.

 

One can understand that at that time the prime minister did not want the report made to be public, as he may have had to take responsibility for the unpreparedness of the army and, most probably, resign.

 

The tragedy is not that the report was ‘classified’ in 1963, but that it continues to remain classified today. Forty years later, nobody has still seen the report. That is, except for one person: a British foreign correspondent named Neville Maxwell. The rumour is that a senior minister passed on the report to him.

 

Nine years after the war, when Henry Kissinger made a secret trip to Beijing to prepare President Nixon’s visit to China in February 1972, he stayed five days in China and had a series of 10 crucial meetings with Zhou Enlai, the Chinese premier.

 

The transcripts of these talks, which were recently ‘declassified’ by the US administration, are mind-opening, particularly in the above context. Here are some of Kissinger’s remarks to Zhou Enlai: “I read the book by Maxwell that the prime minister recommended to me last time, and it is our view, certainly at the White House, that the Indians are applying the same tactics to that situation as they did to you.”

 

Kissinger refers to Maxwell’s book India’s China War, which shows India as an aggressive nation that bullied China during the 1962 war. Later in the discussion, the Chinese premier comes back to Maxwell’s book: “We [the Chinese] understand best the traditions of India. After having read the book of Maxwell you also believe it [that bullying others] is the traditional policy of India.”

 

It is amazing that Maxwell, thanks to the Government of India’s propensity for secrecy, is the only person who has managed to see the Henderson Brooks report. Maxwell stated himself in the Economic & Political Weekly in 2001: “The report includes no surprises and its publication would be of little significance, but for the fact that so many in India still cling to the soothing fantasy of a 1962 Chinese ‘aggression’.”

 

Yes, the theory put forward by the Chinese and Maxwell is that the war was only due to Nehru’s aggressive policy and China had no other choice but to launch a ‘pre-emptive attack’ on October 20 on the slopes of Tagla ridge.

 

Not only did India lose the Aksai Chin and other territories in Kashmir in the 1950s, but India became the bully, the ‘expansionist’ nation.

 

One can only be sad that 40 years after the event, the Government of India is still adding water to the Chinese half-baked history mill by continuing to hide what is most probably a quite insignificant report.

 

The burial of the Henderson Brooks report, however, raises several other questions. When one reads Indian newspapers, one gets the impression that the people of India (or at least the journalists of India) are greatly interested in history. For the past few years, not a day has passed without one comment or another on the history textbooks that have been revised by the NCERT; or the HRD minister who is supposedly spending his time ‘rewriting’ Indian history, or adding colour to historical facts.

 

But tell me, what is wrong in ‘rewriting’ history books when it is necessary? The great son of India, Gautama Buddha, once told his disciples: ‘As the wise test gold by burning, cutting and rubbing it on a piece of touchstone, so are you to accept my words only after examining them and not merely out of regard for me.”

 

As long as there is new information, new inputs or documents, history needs to be researched and researched again, in the Buddha’s fashion. Is it not in the interest of a nation to know her past?

 

The great misfortune in the case of the 1962 war is that there is no will from the government’s side to give the means to those inclined to do this research to obtain a truer picture of the past.

 

Personally, I faced a similar problem when I tried to research my two pet subjects: Tibet and Kashmir. Going through the painful exercise of trying to access some documents at the time of the Chinese invasion of Tibet (1950) was a nightmare.

 

At the National Archives of India, I was told that all documents for the NEFA area (which included Tibet and Bhutan) were ‘classified’ after 1913 and nobody could access them. For ‘Gilgit area’ [read Kashmir], the date is 1923. This colonial terminology gives an indication of the backwardness of the historical studies in India. Have not the British left India 55 years ago?

 

What about the famous ‘Nehru’s Papers’? They are kept in the Nehru Library by a private trust, chaired by the leader of the opposition, and you have to obtain her consent to see them. In any case, you cannot see them, as they are ‘restricted’.

 

Only ‘official’ historians are able to study them. The very helpful staff can only tell you: “Sorry, sir, this is the rule.” India must be the only nation where the prime minister’s official papers belong to his family and not the state!

 

In my case it was even more stupid because most of the political files regarding Tibet from 1914 till as late as 1952-53 were freely available for researchers in the India Office Library and Records in London. The moral of the story: go to London to study Indian history.

 

Different reasons are given as to why historical documents should not be ‘declassified’. The most current and irrelevant argument is that these old documents are of a ’sensitive’ nature and their circulation may jeopardize India’s security.

 

I believe that some years ago, a ‘group of secretaries’, the most dreaded order of the babu species, stopped the publication of the report of the 1965 war because: “it gave information about certain aspects of command and control.” Luckily, a Good Samaritan managed to get hold of a copy and post it on an Internet site.

 

But something is even more incongruous. While the Government of India is holding the Henderson Brooks report close to its chest, a very historic international conference was held in Cuba recently.

 

Many will remember that the week the Chinese troops entered in the Northeast and in Ladakh, humanity was coming very close to its first nuclear war. This was the Cold War’s climax: the confrontation between the United States and the Soviet Union in Cuba over the installation of ballistic missiles targeting American cities threatened to degenerate into World War III.

 

To commemorate the stupendous events of the Bay of Pigs, the Cuban government, with the National Security Archive of George Washington University, organized a conference titled “The October Crisis: Political Perspectives 40 Years Later”.

 

Some of the veterans who participated in those historic days were invited to discuss the conflict between Khrushchev and Kennedy.

 

During the last session of the conference, the participants, including Cuban president Fidel Castro and former US secretary of defence Robert McNamara discussed some newly declassified documents.

 

The documents show that the Soviet nuclear-armed tactical weapons in Cuba stayed there after the missiles were withdrawn, and may even have been intended for Cuban custody.

 

“Documents released today included verbatim Soviet records of the contentious meetings between top Soviet leader Anastas Mikoyan and top Cuban leaders, including Fidel Castro and Che Guevara, during Mikoyan’s trip to Cuba in early November; Soviet orders first preparing the tactical weapons for training the Cubans and then, on November 20, ordering their withdrawal; and a prophetic summary of the crisis written by the British ambassador to Cuba, who predicted that the crisis could ultimately rebound to the benefit of the Castro regime and the long-term survival of Communism in Cuba,” said a press release.

 

Some may think that Cuba is a totalitarian banana republic, but Fidel Castro did organise the conference and participate in it.

 

We cannot dream of such a debate in India today. Why? I have no answer.

 

We have in Delhi many universities, policy centres, think-tanks, a host of retired ‘thinking’ generals (as if the serving generals are not able to think). Why can’t any of them take up the challenge and open a debate on what really happened in 1962? Many fields of research have remained untouched. To give a few examples:

 

*When was Aksai Chin really occupied? Why did the government react so late?

*The relation between the 1959 uprising in Lhasa and the 1962 war (one very symptomatic fact is that the Chinese followed the same   route as the Dalai Lama took when he escaped to India in 1959) as well as the Panchen Lama’s petition against the party in 1962;

*The importance of the split between Moscow and Beijing, which came into the open in October 1962; and Moscow’s sudden change of stance vis-à-vis India in the midst of the conflict;

*The relation between the Cuban crisis and the 1962 Indo-China war;

*When did China prepare the 1962 operations and what were her real motivations;

*The internal political factors in China and Mao Zedong’s own motivations (he was facing strong opposition from within the Communist Party after his disastrous Great Leap Forward and was sidelined);

*The reasons for the sudden unilateral withdrawal by the Chinese;

*The role of the Indian Communists during the war;

*The non-intervention of President Ayub Khan.The recently ‘declassified’ documents available in the Russian, Cuban, and East European archives, as well as the already available materials collected by organizations such as the National Security Archives or the Cold War International History Project of the Woodrow Wilson International Centre for Scholars in Washington, DC, could certainly be of great help.

 

But is India interested? This seems to be the main problem. If the media and the public had made the same amount of noise for the Henderson Brooks report and other archival materials to be released as they have done for the so-called ‘rewritten’ textbooks, we would have had a truer picture of 1962 war history today. No harm in hoping!

 

(Claude Arpi, author of The Fate Of Tibet (HarAnand), which has also been translated into French, writes regularly for rediff.com)

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Sino-Indian Dispute

26. May 2010 by admin.

THE SINO/INDIAN DISPUTE

THE PREVIOUS CHAPTER examined in some detail the background to the Tibetan question. This detail is necessary if we are to understand the very important role which Tibet has played in the evolution of Sino/Indian relations.  Ever since its establishment in 1949, the attitude of the Communist Chinese Government towards India has been bound up with the Tibetan issue. India had, on gaining independence in 1947, inherited the British “special position” in Tibet, along with the Mission in Lhasa and trade agencies in larger towns. It had retained the services of British officials stationed in Tibet. When, in 1949, Tibetan leaders made their bid to contact foreign Governments, they first contacted these officials, and it was only a short step for the suspicious minded Chinese to regard this as evidence of Indian collusion with the British.  The Communist Chinese also had ideological reasons for believing that such collusion existed. At the time of their coming to power, Moscow was propagating the line of a world divided into two camps, with the Indian Government depicted as a tool of British imperialism and firmly situated in the opposing camp. The Communist Chinese leaders, who previously had had little contact with the outside world, faithfully repeated these accusations against Nehru and his Government.  Following the Chinese occupation of Tibet in late 1950, Peking’s suspicions of the Indians were further aroused when Nehru, in notes to the Chinese Government, expressed the “surprise and regret” of his Government at the Chinese action. He described as “deplorable” the Chinese use of force in Tibet.¹ Standard diplomatic practice stipulates that a state does not criticise the behaviour of another state acting within its own territorial boundaries unless there are special reasons for so doing. The Indians justified their criticism of the Chinese on the ground of their special interest in Tibet, from which the Chinese inferred that the Indians were implying some restriction on Chinese sovereignty. A sharp reply was received from the Chinese accusing the Indians of unwarranted interference and claiming that the policy of the Indian Government was “affected by foreign influences hostile to China in Tibet”.  Nevertheless, whatever suspicions the Chinese may have felt about the Indians in 1949-50 must to some extent have been allayed by subsequent developments. India opposed the 1950 Tibetan appeal to the United Nations; it was one of the few non-communist countries not to condemn China’s intervention in the Korean War; it sought to have China seated an the United Nations. The culmination of these moves to improve relations with China was the signing, in April 1954, of an agreement by which India recognised without qualification China’s sovereignty over Tibet and conceded many of India’s former rights there. A few months later the Chinese Premier, Chou En-lai, paid a successful visit to India, and in October of the same year Nehru visited Peking.  The very considerable improvement in Sino/Indian relations from 1950 to 1954 was on the Indian side almost entirely the result of efforts by Nehru, who saw friendship between China and India as the starting point of a new order in world affairs. It must have been obvious to the Chinese that considerable opposition to Nehru’s pro-China policies, at least as far as Tibet was concerned, existed both within and outside the Indian Government. It should also have been clear that problems were going to arise over wide discrepancies in the claimed Sino/Indian border, as shown in maps published by both sides.  However, as long as Nehru’s China policy appeared to produce results, his opposition in India remained silent. It was important for both Nehru and the Chinese that this policy continued to appear to give results, and hence the efforts made by both sides to keep intact the edifice of good relations. The Chinese, under the 1954 agreement, allowed India to maintain certain trade and pilgrimage rights in Tibet. They sought to play down the significance of border differences, stating that they had simply inherited their claimed Sino/Indian frontier from the pre-1949 Nationalist Government and that it would be “revised” in due course.² Nehru, for his part, avoided public mention of the reality and extent of border differences, and it seemed that both sides were moving towards a compromise settlement of the question.  What were these differences, and what evidence was there that both sides were in fact prepared to compromise?  The Sino/Indian border can be divided into three sectors:  (i) an eastern sector where 99,000 square kilometres of territory described by the Indians as the Northeast Frontier Agency, or N.E.F.A is in dispute: (ii) a middle sector where some 2.000 square kilometres of territory on either side of the main Himalayan passes is disputed: and (iii) a western sector where the Indian province of Ladakh borders on Tibet and Sinkiang and where both the Indian/Tibet and Indian/Sinkiang borders are disputed, in particular the ownership of some 30,000 square kilometres of high plateau country known as the Aksai Chin.

To an outside observer looking at the frontier as it stands, an apparent basis for a compromise settlement would be for China to drop its claim to the N.E.F.A. in exchange for India dropping its claim to the Aksai Chin, with both sides making concessions over the middle sector and the Ladakh/Tibetan border. Such a settlement accords with the realities of both geography and administrative control two important criteria in the settlement of border disputes. The N.E.F.A. lies to the south of the Himalayan watershed and is controlled by India. The Aksai Chin, for the most part, lies to the north of the main range, and the Chinese claim to have controlled the area since 1950. In 1956-7, they built a strategic road across the Aksai Chin, linking Sinkiang with Tibet. That the Indians learnt about the road only from a map published by the Chinese in 1958 is substantial evidence that India was not in control of the area.  The historical basis of the border is more confused. The Indian claim to the N.E.F.A. rests almost entirely on acceptance of the McMahon Line, a line agreed to by the Tibetans and British in 1914 as the border in this area. In the Aksai Chin area no agreement has ever been reached on the alignment of the border. Nevertheless, if both sides were to take a generous view of the historical data, a basis for a N.E.F.A./Aksai Chin exchange could be found.  During the post-1954 honeymoon period of Sino/Indian relations, both sides did in fact seem prepared to take a generous view of the situation and to move towards a compromise settlement. In 1956, Chou En-lai admitted privately to Nehru that, although lie thought the McMahon line “was not fair”, nevertheless China would accept the line as the border with India after they had “consulted with the Tibetan authorities”.³ Chinese recognition of the McMahon Line was also implied when its eastern extension was accepted as a basis for border negotiations with Burma, and by Chinese de facto acceptance of the line as the dividing line between Chinese and Indian forces in the area.  Nehru, for his part, appeared willing to play down the Indian claims to the Aksai Chin. He tried to delay disclosure if the news that the Chinese had built a road in the area. After the news had been revealed, he sought to play down the economic significance of the area, describing it as a “barren tundra”. He even went so far as to cast doubt on the validity of the Indian claim to the area. In statements to the Indian Parliament during early 1959, Nehru pointed out that “during British rule, this area was neither inhabited: nor were there any outposts”, adding that “this place, Aksai Chin area, is distinguish completely from other areas. It is a matter for argument which part belongs to us and which part belongs to somebody else. It is not clear”.  Nehru’s efforts to take the heat out of the Aksai Chin question were not entirely successful. (One of his critics even suggested building an atomic reactor in the area to promote its economic development.) News of the Chinese road in the area appeared to trigger off long-suppressed Indian sensitivity over the border issue, and, in August 1958, the Indian Government made a formal claim to the disputed territory in all three sectors. In a letter to Nehru of January 1959, Chou En-lai claimed that the Aksai Chin was Chinese territory and added that the McMahon Line was a “product of British aggression”, illegal, and had “never been recognised by the Chinese Central Government”. He proposed that the existing status quo he maintained, however, pending a negotiated settlement of the dispute, and added that China would take a “realistic attitude” over the McMahon Line.*

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*The Indians have since claimed that Chou’s 1959 denunciation of the McMahon Line represented an about-face in his attitude as expressed in 1956. Once the Indians had lodged a formal claim to ail the territory in dispute, however, it was only to be expected that the Chinese would move to establish the basis of their claim in the N.E.F.A. and so provide a bargaining counter against the Indian claim to the Aksai Chin. Moreover, it is difficult to see any significant difference between the Chinese 1956 and 1959 positions.

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The Tibetan uprising of March 1959 upset the delicate balance of Sino/Indian relations. Reports of Chinese military action to suppress the uprising, together with the sight of thousands of Tibetan refugees crossing into Indian territory, quickly aroused feelings of alarm and anger in India, particularly among those who believed their country had an historic interest in Tibet. Nehru’s Right-Wing critics charged that India should never have allowed the Chinese into Tibet in the first place. Nehru, influenced possibly both by Indian public opinion and his own feelings on the question, came out in open condemnation of Chinese behaviour in Tibet. 

The Chinese reacted even more strongly than they had in 1950. Nehru, in addition to condemning the Chinese, had spoken of his sympathy with “the aspirations of the Tibetans for autonomy”. He had given asylum to the Dalai Lama, who was also allowed facilities to make his 1959 appeal for U. N. action over Tibet. And finally, the Chinese had reason to believe that the Tibetan guerrillas were receiving arms from across the Indian border. ⁴ In May 1959 the Chinese published a long article urging, almost begging, Nehru not to be swayed by his reactionary Right-Wing critics and to return to the path of Sino/Indian friendship. With a frankness and detail probably unmatched by any other Chinese statement on foreign policy, the article set out the Chinese case over Tibet, and accused the Indians of unjustified interference. Indian trade with Tibet was greatly restricted. Clashes involving casualties occurred at several points along the disputed border as the Chinese Army extended its control over border areas in an effort to restrict the move- court of Tibetans across the frontier.*

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*Whether the sites of these clashes lay in Chinese or Indian territory has been argued at some length. At least one of these points, however, Tamaden, lay to the north of the McMahon Line, clearly within Chinese territory, and was subsequently evacuated by the Indians.

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These border clashes, following in the wake of the Tibetan uprising, appeared to put an end to Nehru’s willingness to compromise over the border dispute. Having earlier in 1959 cast doubt on the Indian claim to the Aksai Chin, in September he stated before the Indian Parliament that the Chinese claims were “absurd” and would mean “handing over the Himalayas to them as a gift”. A Chinese call in November 1959 for negotiations and a twenty-kilometre military withdrawal from the McMahon Line in the east and the “line of actual control” in the west to prevent a recurrence of border clashes was met with an Indian demand for a prior Chinese withdrawal from the Aksai Chin. A Chinese reply pointing out that this should also be paralleled by an Indian withdrawal from the NE.F.A. was ignored. In the end the Chinese appeared to settle for a freezing of the existing status quo - without negotiations or a twenty-kilometre withdrawal.*

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*The Chinese claim to have made a unilateral twenty-kilometre withdrawal, leaving only civilian-manned posts along the line of actual control.

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However, if the Chinese were happy to keep things as they were (keeping also their road across the Aksai Chin), Nehru and his Government were not. Throughout 1960-61 Indian opinion progressively hardened, and demands for the Government to do something about Tibet and the disputed border increased. The army was given full control over the frontier districts and it proceeded to build up its strength in these areas.  During the summer (northern) of 1962, Indian military patrols repeatedly crossed the Chinese-claimed line of actual control in the western sector of the frontier. Posts were established well behind the Chinese forward positions in territory claimed and occupied by the Chinese. Frequent and insistent Chinese protests were met with the bald statement that the Indians were merely operating in Indian territory. By August 14, Nehru was able to announce that India had three times as many posts in the western sector as the Chinese. He asked for a free hand to continue the build-up of Indian strength in the area.  The Chinese had repeatedly warned that a continuation of such activity would end in hostilities. On July 9, they had warned the Indians “to rein in on the brink of the precipice”. On August 4, they called for immediate negotiations on the border. The Indians replied that negotiations could not be held until the Chinese had ceased their occupation of “every square inch of sacred Indian territory”, and that the Chinese must first “vacate their aggression” in the Aksai Chin. The Chinese replied on September 13 proposing talks to begin on October 15 “without preconditions”, that is, without a Chinese withdrawal from the Aksai Chin. The Indians refused the offer.  While Indian military pressure was building up along the Chinese-claimed border in the western sector, a curious situation was developing along the McMahon Line in the eastern sector. The Indians claim that at its western end the McMahon Line was not accurately drawn: that it was meant to have followed the crest of a line of hills known as the Thag La ridge. The Chinese claim, and have produced the original McMahon Line from the Tibetan archives to prove their point, that the line as originally drawn lies approximately twelve miles south of this ridge along the southern side of a small river valley. (Western maps show the McMahon Line in conformity with the Chinese claim.) The area between the Indian and Chinese versions of the McMahon Line is described by the Indians as the Dho La strip.*

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* This was not the only unilateral revision of the McMahon Line carried out by the Indians. In his letter to Chou En-lai of September 29, 1959, Nehru admitted that in the Migyitun area (to the east of the Dho La strip) the border shown on Indian maps “differs slightly from the boundary shown in the Treaty map”. He claimed that when the McMahon line was drawn, “the exact topographical features in this area were not known”. The Indians have also now come to admit that “blind adherence” to the original McMahon Line would leave the Dho La strip on the Chinese side at the border. ⁷

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It is not clear who first occupied the Dho La strip. The Chinese claim that the area had always been under their control and that Indian troops moved in during 1962. The Indians claim they had long occupied the area and that the Chinese began a to establish posts in the area after September 8, 1962. What is clear is that on October 12, 1962, Nehru announced in the Indian Parliament that he had given the order to drive the Chinese out of the Dho La strip.  Eight days later, on October 20, the Chinese attacked in force across the Thagla La ridge and into the disputed strip, while advancing their troops into the Chinese-claimed territory in the western sector where the Indians had earlier established posts. Four days later, the Chinese called for a ceasefire to be followed by a withdrawal of both sides from the line that separated them at that moment (the so-called October 24 line of actual control). Failing to get a satisfactory response from the Indians, they advanced troops south of the Dho La strip into the N.E.F.A., defeating Indian military forces in the area. Two weeks later, they withdrew to the positions occupied on October 24. The main point of contention between the Chinese and Indians ever since has been whether the Chinese should maintain their October 24 positions or withdraw further to the positions they occupied before fighting broke out.  Sino/Indian Hostility: a Case Study in Mutual Misunderstanding. The Chinese attack of October 1962 has led to an almost complete breakdown in relations between China and India. The level of each country’s diplomatic representation in the other has been greatly reduced. Many thousands of Chinese nationals have been expelled from India. The few Indian nationals living in China have, in one way or another, been forced to leave. Border incidents have continued. Both sides have launched extreme propaganda campaigns against each other, the Chinese denouncing Nehru as a representative of the “big bourgeoisie” and a tool for U. S. aggressive designs against Tibet, while the Indians denounce the Chinese for having aggressive, imperialist designs against Indian territory. Both sides have gone to great lengths to discredit each other inter- nationally. Both sides have increased their military preparedness along the Himalayan frontier, particularly India, which has doubled its military budget to a level it cannot afford.  The question thus arises: Who is primarily to blame for the hostility in Sino/Indian relations? From the account already given, the primary cause of the hostility was the post-1959 dispute over the Sino/Indian border leading to the Chinese attack of October 20. But why the sudden emergence of such a dispute between two countries previously enjoying good relations?  Reverting to the terminology of our previous discussion on hostility between states, both sides see the breakdown in relations as being caused by the active hostility of the other side. This hostility, they claim, is both ideologically and national- interest based. The Chinese are accused of having acted in a hostile manner out of a desire to acquire territory and out of strong ideological dislike for the Indian Government. The Chinese claim the Indians have designs against Chinese territory and that their Government is under the influence of anti-Chinese and pro-U. S. reactionary elements.  Both sides realise that they have somehow or other to explain why the other side suddenly, in 1959, decided that its interests were no longer served by the maintenance of normal relations. The Indian explanation is that Chinese pre-1959 policy was designed to lull India into a false sense of security and so facilitate Chinese ambitions. The Chinese explanation was that reactionary elements began to gain the upper hand in the Indian Government in 1959, and point to the post-1959 increase in U. S. aid to India as evidence.  In fact there is good reason to believe that the hostility shown by each side towards the other was reactive rather than active: that each side was reacting to the believed hostility of the other. To take the Chinese side of things first.  In terms of the account already given, it seems likely that the Chinese attack of October 20, 1962, was primarily a reaction to Indian military pressure along the disputed frontier during preceding months. It could be argued, however. that the behaviour of the Chinese before October 20, and in particular their propaganda attacks against the Indians from 1960 onwards, cannot be explained simply as a reaction to previous events: that overall Chinese behaviour must therefore include some aggressive component.  The Chinese had in fact made their first hostile move against the Indians back in 1959 when they restricted Indian trading and other rights in Tibet. The Chinese had also, according to the Indians, extended somewhat the area they claimed in the western sector.* And they had, according to the Indians, been responsible for the 1959 border clashes already mentioned.

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*The Indian charge is based on alleged differences between the frontier claimed by the Chinese to 1956 and that shown on a map of the claimed Sino/Indian frontier handed to the Indians by the Chinese in 1960. The Chinese deny any difference between the two lines.

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Unless these apparently hostile acts of the Chinese can be explained in reactive terms., in terms of their reacting to previous Indian actions, then it would seem that the Chinese had taken the initiative in hostility towards India and were largely responsible for the eventual breakdown in relations.  The hardening of the Chinese attitude towards India in 1959 was clearly related to Tibetan developments in that year. In judging the behaviour of the Chinese, we need, in effect, to ask whether their sensitivity over Tibet was sufficient to explain this hardening of attitude.  To accept that the Communist Chinese are, in fact extremely sensitive toward Tibet does not necessarily imply a simple acceptance of Chinese propaganda. What we know of Chinese thinking and behaviour, strongly suggests that this sensitivity does exist. If all non-communist Chinese believe that China has the right to consider Tibet as an integral part of her territory, we should accept that Communist Chinese are equally convinced. If many non-communist Chinese believe (as they do) that Britain had designs against Tibet, we should accept that Communist Chinese, educated to believe in the evils of US Western imperialism, will be at least equally fearful. We do not need accept that these views are correct; we may even consider they are absurd. But if we are going to get anywhere in trying to understand China’s behaviour, we should start from the assumption that these views may be sincerely hold in Peking.  Nor may it be so absurd for the Communist Chinese to think along these lines. The Chinese legal claim to Tibet, it has been argued, appears difficult to refute. As for fears of foreign designs, if the British had earlier convinced themselves that the activities of one Russian agent in Lhasa could lead the politically unstable Tibetans to ally themselves with Tsarist Russia, the Chinese could be excused for thinking that the presence of a British Mission in Lhasa dealing directly with the independent-minded Tibetans and arranging on occasion for the supply of arms from India was evidence of British ambitions eventually to detach Tibet from China, and that India may have inherited these ambitions. Similarly, it would not be entirely surprising if the Chinese viewed the supply of foreign arms to Tibetan guerrillas from northern India in 1959 as confirmation that such ambitions existed. Finally, the Chinese were hound to be impressed by the demands of the Indian Right Wing for action against the Chinese in Tibet.*

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* For example: some weight could be attached to the fact that the then Chief of the Indian Army Staff wrote a not unenthusiastic foreword for a book published in 1961 entitled The Chinese Aggression. The author of the hook, a Dr. Satyanarayan Sinha, predicted that the “clash of the Indochinese weapons for the possession of the Himalayas will lead to making Tibet an independent country again”, and suggested ways in which this could be done.

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These, then, are the reasons for believing the Chinese may he sensitive about Tibet. Chinese behaviour provides further confirmation. British officials captured in Tibet in 1950 were subjected to long imprisonment and continual interrogation - treatment far more severe than that meted out to British nationals who fell into communist hands elsewhere in China. And there was Nehru’s sad admission to the Indian Parliament in 1959 after talks with Chou En-Iai, of the Chinese having “some sort of kink in their minds… of foreign countries, United Kingdom or America, somehow making incursions into Tibet”.  In sum, therefore, it does not seem unreasonable to conclude that the Communist Chinese sincerely believed they had a right to Tibet and that their position in the area was threatened from the direction of India. In which case they would have interpreted Indian behaviour in 1959 as an indication of hostility to which they felt compelled, or entitled, to react.  However, if Chinese behaviour in 1959 can be explained in reactive terms, can the same be said about the Chinese attack of October 1962? Even if the Indian claim to the Dho La strip was doubtful, does not the violence and intensity of the 1962 attack suggest that China was doing more than retaliate for any wrongs she may have believed the Indians to base committed?  By 1962, the Chinese were confronted not only by Indian agitation over Tibet, but also by two further aspects of Indian behaviour which would even more easily have been misunderstood. They were: (i) the Indian military build-up along the Sino/Indian border in 1961-2 and (ii) rigid Indian insistence that, as a precondition to border negotiations, the Chinese must first evacuate the whole of the Aksai Chin.  At the time, the Indians justified their position on negotiations and their military build up in terms of the correctness of their border claims. Indeed, the official Indian position was that the line claimed by India as a border had already been defined historically, and that the only purpose of negotiations was to demarcate on the ground the exact alignment of this border. From this it followed that they were justified (a) in regarding rival Chinese claims, and the occupation of the Aksai Chin, as evidence of Chinese hostility, and (b) in insisting that occupied territory had to be vacated before there could be negotiations. In the meantime the Indians had no alternative but to use military means to counter the Chinese “aggression”.  If India was in fact the injured party in the territorial dispute, the Indian attitude over the disputed border would have been explicable at least to an impartial observer, and possibly even to the less impartial Chinese. There would be less justification for the Chinese reacting in the way they did. But was this the case? To answer this question we need to take a closer look at the historical background to the Sino /Indian frontier, and shall begin with the eastern sector, or N.E.F.A.  Until the 1920’s, the region now known as the N.E.F.A. was largely unexplored. It was, and still is, inhabited by tribes of Tibeto-Burmese origin, some of which enjoyed trade and tributary relations with Tibet. Certain areas in the north of the region, the Tawang district for example, were inhabited by Tibetans and were under administrative control from Tibet.  The McMahon Line was negotiated with the Tibetans in 1914 at the time of the Simla Conference. It was drawn as far to the north as possible, since the British at the time sought to forestall a feared Chinese expansion into the foothills bordering the Assam plains. The Tibetans, as mentioned in the previous chapter, accepted the McMahon Line as part of a bargain whereby the British would press the Chinese to concede territory elsewhere to Tibet.  Even so, the Tibetans were not entirely happy about losing territory south of the McMahon Line, the Tawang district in particular. Their acceptance of the line was conditional on possible future adjustments in their favour. No such adjustments, were ever made. The British also failed to extract the promised concessions from the Chinese, since the latter refused to accept the Convention produced at the Simla Conference. Thus, even as a Tibetan/British frontier, the McMahon Line does not have full validity, particularly as the Tibetans subsequently, in 1936, made a formal request to the British for revision of the line in their favour a request which the British ignored. As late as 1946, the Tibetans were still collecting taxes in the Tawang area. And, in 1947, the Tibetans approached the newly established Indian Government, seeking the “return” of “Tibetan territories” from Assam to Ladakh*⁸.

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*The Indian reply to this approach may be of interest in the light of complaints to be voiced later by the Indians over the manner in which the Chinese spoke of their border claims being inherited from previous Chinese Governments “The Government of India should be glad to have an assurance that it is the intention of the Tibetan Government to continue relations an the existing basis until new Agreements are any reached . .. This is the procedure adopted by all other countries with which India has inherited Treaty relations from His Majesty’s Government”. ⁹

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The validity of the McMahon Line as a Chinese/Indian frontier is considerably more doubtful. True, in rejecting the draft Simla Contention, the Chinese did not specifically object to the McMahon Line as drawn on the map of Tibet attached to the Convention. But, as the Chinese point out, the then Chinese Government had no way of knowing what this line was supposed to represent, since the terms of the McMahon Line agreement were for some reason kept secret by the British and Tibetans until 1929. It could, in theory, have been a border between Tibet and a Chinese-owned N.E.F.A. Moreover, Chiang Kaishek’s Government was later to make it clear to the British (and the Indians after 1947) that it did not accept the McMahon Line. The Chinese have also pointed out that, since neither the British nor the Chinese regarded Tibet as a sovereign entity, the Tibetans were obliged to obtain Chinese approval for any frontier negotiated with a foreign power. * Failure to obtain this approval, both at the Simla Conference and later, meant that the McMahon Line never at any stage enjoyed international legality. And finally, as the Chinese never tire of pointing out, many Western and Indian maps, including one reproduced in a book by Nehru himself, Discovery of India, have, even in recent years., shown the Sino/Indian border as running along the edge of the Assam plain in conformity with the traditional Chinese claim.

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*The 1906 Convention between Britain and China (see page 95) had required China to accept responsibility for Tibet’s foreign relations. “The 1907 Anglo/Russian Convention required Britain ‘not to enter into negotiations with Tibet except through the intermediary of the Chinese Government”. Negotiations with the Tibetans over the McMahon Line were thus a breach of both conventions - a possible reason why the terms of the McMahon Line agreement were kept secret.

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For the Communist Chinese to appear to be willing to drop their N.E.F.A. claim is no small concession in view of the very considerable doubts as to the validity of the McMahon Line. Indeed, the Nationalist Government in Taiwan feels so strongly shout the justice of the Chinese clams that its official newspapers have accused Peking of being willing to abandon “sacred” Chinese territory. They have predicted that the present Communist Chinese leaders will be condemned by future generations of Chinese for their betrayal of China’s interests.  Nevertheless, the Indian position was that the Chinese should not only drop their claim to the N.E.F.A. but to the Aksai Chin also. How strong is the Indian claim in the western sector of the disputed frontier?  The province of Ladakh, which lies on the Indian side of the disputed western sector, was originally a semi-independent state with a complex tributary relationship with Tibet. It was far from being clearly defined Indian territory. These links with Tibet were severed as a result of the 1841 invasion of Tibet from Kashmir, and Ladakh was incorporated into India. In the agreement which followed the invasion, the Ladakh/Tibet border was defined simply as following “the old established frontier”, and it was only subsequently that British cartographers decided where this frontier should lie. A small area lying between the Chinese-claimed and Indian-claimed frontiers is in dispute.  By far the larger area in dispute, the Aksai Chin, lies for the most part north of the Ladakh/Tibet frontier, and its ownership depends on a definition of the Ladakh/Sinkiang border. At the end of the nineteenth century, the British decided an effort should be made to define this border, and in 1899 a note was delivered to the Chinese suggesting a possible alignment. This alignment is shown on the map above, and it will be seen that it leaves with China much of the territory at present in dispute. The Chinese never replied to the note. Shortly afterwards, the British attitude changed. Alarmed by growing Chinese weakness in Central Asia, and fearing Russian expansion into the area (fears similar to those being entertained in connection with Tibet), the British felt they should establish the border as far north as possible to forestall any southward advance by the Russians. British maps began to show the border as lying far to the north along the Kun Lun mountains. Chinese agreement was never sought for this claimed border (despite the fact that the British recognised Chinese sovereignty in Sinkiang) ; presumably it was only being put forward as an emergency measure in case the Russians attempted to seize Sinkiang. By the 1920’s the Russian threat had disappeared, and it was deemed safe to drop this particular claim.  In subsequent years, British and Indian maps showed a variety of claim lines some coinciding with the present Chinese claim line, some the claim line along the Kun Lun mountains, and some an in-between claim line which ran south of the Kun Lun mountains but which included the Aksai Chin as Indian territory. Maps showing this last claim line were in general use at the time of the 1947 transfer of power, and appear to constitute the basis of the present Indian claim to the Aksai Chin. However, the only border to have ever been officially proposed to the Chinese by the British in this area was that of 1899, and, as already mentioned, this border left most of the Aksai Chin with China.  Whatever the merits of rival Chinese and Indian claims to the Aksai Chin area, it does seem clear that the Indians can hardly speak of the frontier they claim in this area as being already defined by history and therefore subject only to demarcation. In this connection a rather curious aspect of the Indian position should be mentioned - an aspect which has been overlooked by most students of the Sino/Indian dispute. Numerous Indian authorities, including Nehru himself, have claimed historical validity for their version of the Indian! Sinkiang frontier on the ground that the line proposed by the British in 1899 “ran along the Kun Lun range to a point east of 80° longitude, where it met the eastern boundary of Ladakh”. In fact, the 1899 line ran well to the south of the Kun Lun mountains, and the text of the proposal speaks only of the tine meeting “the spur running south from the Kun Lun range, which [the spur] has hitherto been shown on our maps as the eastern boundary of Ladakh. This is a little east of 80° east longitude”.* A misquotation of these dimensions is rather serious, particularly when it is used to justify an official claim to some 30,000 square kilometres of territory, and when, on the basis of this claim, negotiations are refused in favour of a military solution of a complex border dispute.

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*The only observer who appears to have noted this misquotation is Alastair Lamb. In his book, The China-India Border, he gives the full text of the British note of 1899 and lists some of the Indian authorities who have misquoted the 1899 proposal. Distribution of his book within India has been banned.

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It would seem, therefore, that an impartial observer who takes into account not only the historical background of the border dispute, but also the equally relevant criteria of geography and administrative control, would agree that the Chinese are not being unreasonable when they call for border negotiations on the basis of the present status quo. If, as seems to be the case, the Chinese are prepared to do a N.E.F.A./Aksai Chin exchange leaving India in control of far the largest and most valuable of the territories in dispute, he may even feel that the Chinese are being quite generous. And if our impartial observer were to reach such a conclusion, it seems highly likely that the Chinese would be convinced of the reasonableness of their position and the unreasonableness of the Indian demand for a unilateral Chinese withdrawal from the Aksai Chin.  If the Chinese were in fact convinced that they were in the right over the border dispute, they would in all probability have interpreted the Indian military build-up along the disputed border in 1961-2 as evidence of active hostility. Striking confirmation that this was the case is contained in the “Tibetan Documents” - official Chinese documents which were captured by Tibetan rebels in 1961 and which subsequently found their way to the U.S., where they have been translated and published. These documents were intended as background briefing to senior Chinese military commanders stationed along the Sino/ Indian border. As such, their contents cannot be dismissed simply as propaganda. The documents warned of U.S./Indian collusion to build up pressure along the Tibetan frontier as a prelude to a joint attack against Tibet. Military commanders were instructed to observe strictly the twenty-kilometre troop withdrawal from the line of actual control and to avoid clashes with advancing Indian patrols since this would provide the “imperialists” with the pretext they needed to justify their planned attack.*

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*This instruction, incidentally, could explain why in the months before October 1962 the Chinese took no military action to prevent the incursions of Indian patrols along the western sector. The Chinese attack of October 20 could thus he interpreted in much the same terms as the 1950 Korean intervention, as a carefully considered resort to force to deter a feared enemy from further advance, taken only after repeated warnings had failed to deter his advance.

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Were the Indians themselves convinced of the reasonableness of their position?  To understand the Indian position we need to take account of the intense nationalism which underlies Indian politics. Even before 1959 Nehru was being strongly criticised for his apparent refusal to take a hard line with the Chinese over Tibet and the disputed border. After 1959, Nehru may have felt that he had no choice but to take an uncompromising stand towards China if he was to prevent the Indian Right-Wing from exploiting nationalist passions which had been aroused throughout the country. In addition, he had himself suffered a serious blow to his own prestige.  Thus it is possible to conclude that Indian behaviour throughout 1961-2 was influenced by a sense of wounded nationalism and wounded pride, which in turn were a reaction to the events of 1950. If, in fact, we can assume that Indian behaviour was emotionally based, we have a ready explanation of its seemingly unnecessary rigidity. To observers of Sino/Indian relations in the period prior to October 1962 (of which the author was one), it seemed highly likely that the Indian policy of military pressure along the disputed border, together with intransigence over the Aksai Chin and the Dho La strip, would inevitably provoke a Chinese military response in which the Indians could be the only losers.  That Nehru and his advisers had seriously misassessed the probable Chinese reaction to Indian policies and that this misassessment was at least partly a result of the emotional manner in which they had reacted to previous events, has been recently confirmed The former Commander of Indian Military Forces in the N.E.F.A., Lieutenant-General B. M. Kaul, in a book entitled The Untold Story and published in 1966, has given some of the background to events of 1962. Kaul states that Nehru believed the revolt in Tibet indicated a “break in the morale of the Chinese people and armed forces and that if India dealt with the Chinese it would get the better of them”. *¹⁰ Kaul also states that the Indian Government decision to move against the Chinese in the Dho La strip was made on September 22, and by way of explanation adds: “Nehru and his Government were deeply concerned about public opinion which was worked up at the time”. The decision was queried by the Army Chief, General Thapar, who on October 2 warned that the use of force against the Chinese was bound to have serious repercussions. Nehru assured Thapar that “he had good reasons to believe the Chinese would not take any strong action against us”. Kaul adds that on October 11, nine days before the Chinese attack of October 20, he made an unsuccessful approach to the Government to establish “whether I should launch an attack on the Chinese despite their superiority and the possibility of a reverse”.  What conclusion can be drawn from all this? Our original aim was to find out whether China had in fact followed a policy of active hostility towards India. If we accept that both sides appear to have been reacting defensively - the Chinese out of undue sensitivity over Tibet and fear of “imperialist” designs against their territory, the Indians out of a sense of wounded pride and nationalism - then it would seem that neither side has taken the initiative to promote hostility: that both sides would have preferred good relations. That both sides would in fact have preferred good relations seems clear from the record of Sino/Indian relations up until 1959.  Little of this has been accepted in the West, where China is widely condemned as the aggressive party in the dispute. Explanations for Chinese behaviour range widely. The fact of Chinese withdrawal from the N.E.F.A. following defeat of the Indian forces there has not discouraged those who favour the “expansionist China” explanation. Others see the Chinese as wanting (a) to drive India into a pro-Western alignment in order to destroy her non-aligned image, despite the fact that a pro-Western Government on China’s southern border means an increased danger to Chinese security, (b) to retard Indian economic growth which was said to be outstripping the Chinese rate of growth, despite the fact it costs China far more than India to maintain troops in the Himalayas and that foreign aid to India has sharply increased since 1962, (c) to overthrow Nehru’s Government and replace it with a pro Chinese Government, despite the fact that the 1962 conflict was used as grounds for the imprisonment of the pro-Chinese communist opposition in India; and so on. If one consistent feature emerges from this catalogue of misunderstanding it is the Western refusal to examine impartially the Chinese case in a dispute involving relations with another country. But that is the subject of another chapter.

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REFERENCES

1. Most of the correspondence between the Chinese and Indians from from 1950 onwards has been published in a series of Indian Government White Papers, and it is from this source that many of the quotations etc.., which appear in this chapter have been drawn For background to the territorial dispute, the reader is recommended to Alastair Lamb’s The China-India Border (1964).  2. Letter from Nehru to Chou En-lai of December 52, 1958, recounting conversations held in October 1954.  3. Ibid.  4. George N. Patterson, “Recent Chinese Policies in Tibet and Towards the Himalayan Border States”, The China Quarterly, October December, 1962, and “The Himalayan Frontier”, Survival, September 1963.  5. “The Revolution in Tibet and Nehru’s Philosophy”, Peoples Daily, May 6, 1959.  6. Letter from Nehru to Chou En-lai, September 26, 1959.  7. See The Chinese Threat (1963), Ministry of Information and Broadcasting, New Delhi.  8. Tibet and its History,. op.cit., p. 174.  9. Peking versus Delhi, op.cit., p. 174.  10. See review of Kaul’s book in The Hindu Weekly Review, January 10, 1967.

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Tibet, China, India: The Lies, Myths and the Facts

26. May 2010 by admin.

Tibet, China, India: The Lies and the Facts

The Dalai Lama is a wonderful chap. He is wise and full of good humour and has led a peaceful resistance movement for half a century. His antagonist, the Chinese government, is hard to sympathise with. The regime has committed gross crimes in the past and continues to deny its citizens certain basic human rights. It is not surprising, then, that the Dalai Lama’s cause finds favour across the globe. The demand for Tibetan independence, unfortunately, is backed by arguments that twist history, misinform the public and are on occasion willfully deceptive.

Greater Tibet

Take a close look at this image. It is the map of Tibet according to the Tibetan government-in-exile based in Dharamsala. This is the area that the organisation led by Tenzin Gyatso, the current Dalai Lama, wants to liberate from Chinese rule.

The map will mean little even to most who actively proselytise the cause of Tibetan independence, so let me explain its implications. The area which is generally known to the world as Tibet is the bit in yellow, the Tibetan Autonomous Region. The other provinces on the map never had Tibetan majorities and were never under Tibetan rule apart from a brief period when Tibet became an imperial power, and controlled, also, a large swathe of areas now within the Indian republic. It is absurd for the Tibetan government-in-exile to claim that all of these regions, which constitute together a fourth of the total area of the People’s Republic of China, belong in an independent Tibetan state. Is it any wonder that the Chinese government looks upon the Dalai Lama not as a holy man desirous of gaining autonomy for his province but as a dangerous secessionist?

Tibet as an independent nation

“As recently as 1914, a peace convention was signed by Britain, China and Tibet that again formally recognised Tibet as a fully independent country.” 

The sentence I have quoted is from the introduction (http://www.tibet.net/en/index.php?id=6&rmenuid=8) to Tibet’s history on the government-in-exile’s website. It is an outright lie, and the fact that the Dalai Lama has done nothing to alter it in all these years makes me think less of him. Media reports favourable to the separatist cause invariably quote the 1914 treaty as ground for considering Tibet a once-independent state.

Before 1914, all agreements regarding Tibet’s boundaries were signed between Britain and the Qing emperor, proving that Britain did not consider Tibet an independent nation. In 1914, when the Qing empire had crumbled, a conclave was held in Simla between representatives of British India, Tibet and the weak new Chinese government. The final draft agreement provided for Chinese suzerainty over Tibet, and marked boundaries between China, Outer Tibet (more or less what is today the Tibetan Autonomous Region) and British India.

The first lie Tibetan activists tell, then, is that the treaty defined Tibet as a “fully independent country”. The 1914 document cannot possibly be interpreted to mean any such thing, containing as it does the sentence, “Tibet forms part of Chinese territory”. The Chinese envoy, moreover, rejected the draft. The second lie in the government-in-exile’s statement is that all three parties signed on to the deal.In 1914, Britain had an extant agreement with Russia, which included a commitment that all agreements about Tibet would be signed with China. Since the Chinese did not sign the Simla agreement, London believed it contravened the Anglo-Russian pact. As a result, Britain itself did not publish the accord as an official document till the Anglo-Russian treaty ended in 1938. The basis of Tibet’s claim to independence, then, rests on an agreement that did not offer Tibet sovereignty, was not signed by China, and rejected for decades by the very power that drafted it, Britain.

Arunachal Pradesh

The recent diplomatic spat between China and India was sparked by the Dalai Lama’s trip to Tawang in Arunachal Pradesh, an area China has never accepted as a settled part of India. Tawang has an interesting history. The boundaries drawn by the British in the late 19th century placed all of Arunachal in Tibet. Later on, British India moved north, but Tawang stayed a part of Tibet. Only in the 1914 agreement was the boundary of British India shifted further to swallow up Tawang. China, remember, never signed on to the agreement. The dispute over boundaries was central to its refusal to sign. The man who drafted the accord was Lieutenant-Colonel Henry McMahon, and the boundary he drew is called the McMahon line. It was a classic colonial land grab. Unfortunately, after 1950, the independent republic of India, which repudiated similar land grabs where they were found inconvenient, took the position that McMahon’s border was the settled international boundary between India and China.China was willing to talk the issue through, but after India gave the Dalai Lama asylum in 1959, relations between the nations soured, eventually leading the Chinese to undertake a land grab of their own. During the 1962 war, Chinese forces overran Arunachal, and India’s military fled pretty much all the way to Calcutta. Afterwards, however, China voluntarily withdrew from almost all the areas it occupied, including Tawang.

In an impassioned editorial page article in the Times of India (http://timesofindia.indiatimes.com/home/opinion/edit-page/The-Moral-Defence-Rests/articleshow/5216162.cms), the activist Tenzin Tsundue wrote, “For India to keep Arunachal, based on the McMahon Line, the only choice is to recognise Tibet’s independence. It cannot legitimise the McMahon Line border otherwise.” His argument is that, while McMahon’s boundary is unjust (Tawang ought really to be in Tibet), the 1914 accord, signed by the 13th Dalai Lama’s envoy, commits any future Tibetan government to respect that border, something China will never do.

I believe the opposite is true. The current Chinese regime is open to a final settlement of the international border with minor adjustments. Their forces have had control of Tawang in the past and withdrawn. India is helped by the fact that the citizens of Arunachal Pradesh have no great love for China. The situation would change radically if Tibet became a sovereign republic. Historically, geographically, culturally, linguistically, Tawang is closer to Lhasa than to Delhi. Instantly, secessionist movements would arise in Arunachal and Sikkim demanding to be part of the newly created Tibetan nation. At that point, a number of Tibetan officials would doubtless discover that the 1914 accord was, in fact, imposed by a brutal colonial regime, and must therefore be rejected.

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A Brief History of the Sino-Indian Border Dispute and the role of Tibet

23. May 2010 by admin.

A Brief History of the Sino-Indian Border Dispute and the role of Tibet

Written by Maitreya Bhakal on Friday, March 26th, 2010

On 3rd July 1914, as Ivan Chen made his way down the steps of the Summit Hall building in Simla, he must have been aware of mixed feelings rising up inside him. He had done something which would have far reaching repercussions; and which would for years be remembered by many people on both sides of the Sino-Indian border, albeit in very different ways – He had just left the Simla conference. After refusing to sign the agreement himself, he was made to sit in a separate room, and behind his back, was signed one of the most controversial and bizarre treaties in human history – The Simla accord.

For over a century, the intricacies of the border between India and China/Tibet have baffled scholars. In fact, the plot leading to the Simla conference and beyond actually plays just like a thriller movie or book. The sheer complexity of this problem can be judged by the fact that 36 rounds of negotiations have taken place between India and China at different levels since 1981; but they have yet to reach a settlement.

Background

The era of the late 19th century and the early 20th century was ripe with the European colonial powers finding new ways of exerting their influence in Asia and dividing it up.Tibet was no exception. For years, many kings and empires, from Muhammad Tukluq to the British, had tried to wrench Tibet from China, with no significant successes.Finally, the British came up with an underhand ploy to divide Tibet from within; so as to create a buffer state between British India and China; just as Mongolia had been divided and part of it made into a buffer between Russia and China. Sir Henry McMahon proposed the division of Tibet into an ‘inner’ and ‘outer’ Tibet.

The Chinese representative saw through British imperial designs and smelt a rat; and thus left the Simla conference. But the matter didn’t end there. A note was appended to the Simla accord, which contained a map showing a part of Tibetan territory as Indian, based on a thick red line known as the McMahon line. Furthermore, China was barred from any rights and privileges of the Accord with respect to Tibet.

Disputed Territories

The major territories which are disputed between these two countries can be divided into two distinct parts:

1) The Western Sector – Aksai Chin, which lies to the east of the Kashmir valley, covering an area of about 37,250 sq.km (14,380 sq.mi) – currently occupied by China.

2) The Eastern Sector – The Indian state of Arunachal Pradesh, which China calls South Tibet, covering an area of 83,743 sq.km (32,333 sq.mi) – currently occupied by India.

In addition to these, there are also a few small chunks of territory in between these two sectors, but they are largely irrelevant when compared to these two major distinct territories.

The McMahon Line

The McMahon line is the basis of the Indian claim to the area which was formerly known as the North-East Frontier Agency; and has since become the Indian state of Arunachal Pradesh. It was drawn with a complete disregard forcartographic techniques and the geography of the area. The scale was – eight miles to an inch.As Wikipedia makes clear, “The actual treaty map itself is topographically vague (as the treaty was not accompanied with demarcation), and the treaty includes no verbal description of geographic features nor description of the highest ridges.” There is no protocol or scientific method which uses cartographic techniques to identify the geographical location of the line. The McMahon line was literally a line on paper.

Aksai Chin

Historical claims on the Aksai China area are even more dubious. There has never been any concrete demarcation of this region.Britain was concerned about Russia’s designs in this area, and hence proposed to make the Karakorum Pass as the boundary, so as to again create a buffer between Xinjiang/China and India.As author Neville Maxwell states,

“In early 1880s, China and India agreed the Karakoram Pass as the fixed point of boundary, while leaving both sides of the pass indefinite. In the mid-1890s, China claimed Aksai Chin as its territory, and voiced the claim to Macartney in 1896, who drew part of the British boundary in the Himalayas. Macartney presented the claim to the British who agreed with his comment that part of Aksai Chin was in China and part in the British territory. Meanwhile, the forward school of British strategist in London suggested that the British should not only include the whole of Aksai Chin, but also all the territory given to Kashmir in 1865.”

In 1899, the British proposed to China that the whole of Aksai Chin would remain Chinese territory and the boundary would be along the Karakorum range; which is the status quo as of today. The Karakorum pass falls precisely on the boundary of territory controlled by India and China, marking northern end of Sino – Indian border, known as the Line of Actual Control.

However, China didn’t reply to this proposal, something which it would regret for years. If it had, the fate of Aksai Chin would have been sealed then and there. Nehru, for his part, appeared willing to play down the Indian claims to the Aksai Chin. He tried to delay disclosure if the news that the Chinese had built a road in the area. After the news had been revealed, he sought to play down the economic significance of the area, describing it as “barren tundra” and where “not even a blade of grass grows”. He even went so far as to cast doubt on the validity of the Indian claim to Aksai Chin. In statements to the Indian Parliament during early 1959, Nehru pointed out that

“…during British rule, this area was neither inhabited: nor were there any outposts, …….this place, Aksai Chin area, is distinguished completely from other areas. It is a matter for argument which part belongs to us and which part belongs to somebody else. It is not clear”.

Britain’s Flip-Flops

Around that time, it was understood by the British government that Tibet forms part of Chinese territory. According to the Anglo-Russian Convention of 1907, both players of the so called ‘Great Game’, Britain and Russia, had decided to negotiate with Tibet only through China. According to the Anglo-Chinese Convention of 1906, Britain was “not to annex Tibetan territory”. British Journalist Neville Maxwell states that McMahon had been instructed not to sign bilaterally with the Tibetans if China refused. But that was exactly what McMahon did, previous promises be damned. Britain and Tibet signed the agreement themselves without Chinese knowledge, and was thus rejected at first by the British government in London. (Later however, its stance seems to have changed; and then changed again in 2008, as discussed below).

Tibet welcomed this treaty because it would give further credence to what it thought was its ‘sovereignty’, even if it came at the cost of territory. Accordingly, the purpose and content of these exchanges had to be kept secret, and not only from the Chinese. Britain seems to have taken upon itself the self-appointed role of Tibet’s Guardian. In the 1940s, British officials in India pointed out to Anthony Eden, the then British Foreign Secretary, that China had no rights in Tibet since it had not accepted the provisions of the Simla accord of 1914 (As if it was up to Britain to decide the extent of China’s ‘right’ to Tibet!). Needless to say, the Tibetan government welcomed these intrusions. Initially, London rejected the Simla accord as it was in contradiction with many previous agreements. But later, in 1935, some hardliners within the government convinced it to start using the line on official maps – thus officially accepting that the McMahon line was the official border between India and Tibet (and hence, later China too). But recently in 2008, a historical statement was released by the British Foreign Office which would have far reaching consequences.

The British government discarded the Simla agreement as an anachronism and a colonial legacy – a “position [the British] took based on the geo-politics of the time”. The British pulled away the only leg India had to stand on. The statement says,

“…….our position is unusual for one reason of history that has been imported into the present: the anachronism of our formal position on whether Tibet is part of China, and whether in fact we harbour continued designs to see the break up of China. We do not.”

“Our ability to get our points across has sometimes been clouded by the position the UK took at the start of the 20th century on the status of Tibet, a position based on the geo-politics of the time. Our recognition of China’s “special position” in Tibet developed from the outdated concept of suzerainty. “ (A New York Times article about this statement, entitled, ‘Did Britain just sell Tibet?’ (as if Britain owned it!) accused the British of ‘rewriting history’ in exchange for China’s support during the financial crisis!)

Effectively, what Britain in fact was saying was that Tibet is a part of China and is not sovereign – which was the position of almost all countries by that time, including EU nations and the US. It even apologized for not having done so earlier. However, what is important in that statement is that the British seem to have completely discarded the Simla agreement – on which the whole of India’s negotiating stance is based. Consequently, if we start with the assumption that the Simla agreement was illegal as Tibet had no right to conclude treaties separately, then we arrive at what the Chinese position has been all along!

The Tibetan question and the cause of the dispute

The fact is that a large part of the border dispute hinges on the uncomfortable question of Tibet’s sovereignty. If Tibet was sovereign at the time of the Simla conference, then the treaty is legal and it serves India’s cause. If Tibet was not sovereign at that time, then the treaty is illegal and serves China’s cause. Some activists campaigning for a free Tibet often bring up the Simla conference as proof of Tibet’s independence.

Their arguments are mainly two fold -

a)The Tibetan representative signed the treaty even though he was instructed by the Chinese representative not to sign, a clear indication undermining Chinese suzerainty over Tibet.

b) More importantly, since Tibet concluded a treaty with a foreign power on its own, it was an independent country on that day. At the time of the Simla conference, although the Tibetan government had driven out all Chinese officials from Tibet after the collapse of the Qing dynasty and declared independence, the Nationalist government did not accept this and neither has the PRC or any other government.

India had enjoyed certain privileges with regard to Tibet under the Simla Agreement, including those regarding trade and commerce. If the Simla accord is legal, then it serves India’s cause; and if it is illegal, China’s. However, when China annexed Tibet in 1951, India under Nehru recognized it as Chinese territory, thus giving up those privileges and undermining Tibet’s sovereignty (which it may have momentarily enjoyed during the time of the Simla agreement). Thus in a sense the Indian government tacitly admitted that the Simla agreement was effectively illegal, which to this day remains China’s official position. In doing so, India weakened its own position with respect to the border dispute. The Simla agreement was signed between Britain, Tibet and China. Now, from this information, two questions present themselves -

1) If Tibet was sovereign, why was China invited at the conference at all? Why didn’t the British negotiate directly with Tibet?

2) If Tibet was not sovereign, why was it invited at the conference? Why didn’t the British negotiate directly with China?

In other words, why did China accept to attend a conference where Tibet was represented as a separate party? The answer to (1) is that, as stated above, Britain recognised Tibet to be under Chinese suzerainty. Hence, anybilateral agreement that Britain signed with Tibet (without Chinese agreement) would be illegal. (But ironically, that is exactly what the British did)(2) is a bit more complicated. There are indications that the British had blackmailed the Chinese into attending by threatening to – a) withdraw their recognition of the new nationalist government, and,b) sign the treaty with Tibet alone if China didn’t participate, thus acknowledging that Tibet was in fact sovereign. (But later the British did this exact same thing when China didn’t agree to its terms during the conference). Hence it is clear that Britain’s imperial designs and its policy of ‘divide and rule’ and double crossing everyone was in effect the cause of the entire dispute.

Conclusion

Surprisingly, in this complicated dispute, China has shown a remarkable tendency to restrain its own claims and even recognize the McMahon line. It is willing to ignore history and has offered to recognize Indian claims on 74% of the total disputed territory (currently controlled by India); provided India recognizes Chinese claims on the remaining 26 % (Chinese controlled Aksai Chin). In other words, while China has taken a prudent first step and is willing to convert the current status quo ‘borders’ into the international boundary. But India, on the other hand, is just not willing to even discuss the issue of compromise. In the western sector the claim is entirely a matter of perspective, as Nehru himself admitted. In the eastern sector, however, the entire disputed territory hinges upon one question – The legality, or not, of the Simla agreement. India has had two contradictory stances simultaneously – a) Not recognizing Tibet’s sovereignty and b) Recognizing the McMahon line as the international boundary; and thus the legality of the Simla agreement. However, if a country doesn’t recognize Tibet’s sovereignty, then consequently it is expected that it would also not recognize the legality of the Simla agreement and the McMahon line. The Indian position can also be construed to mean that regardless of whether or not Tibet is sovereign now , it wassovereign when the Simla agreement was signed; and consequently the McMahon line is legal.

Which begs the question on which the whole dispute in the eastern sector is based – Does signing a bilateral treaty with a foreign power make a province sovereign?

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Is War Around the Corner?

22. May 2010 by admin.

“Is war around the corner?”

By Vice Admiral Arun Kumar Singh

Originally Posted on 1st Jan, 2010

 

A few month’s back, Bharat Verma, Editor of the Indian Defence Review, in an article, had predicted that China may attack India by 2012. Frankly, at that time, I did not agree with this prophecy, because in my opinion China would not want a war till it becomes a true super power by 2050,and in any case the Chinese, in my opinion, would only go to war, if they had a 100 percent chance of success. Also China has now become India’s leading trade partner, and common sense dictates that good economic relations are a logical antidote against war. Finally, in the event of war in the next five years, the Indian Navy would be in a position to wreck havoc with China’s oil tankers, ferrying homewards, the Middle East oil, through the straits of Malacca, Sunda and Lombak straits. The IAF, too would be utilised, and the Chinese”cake walk” of 1962, would not be possible.

 

However, two recent events have caused me to rethink, though I still feel that an Indo–China war is not likely, specially if India urgently  reverses the current decline in its defence capability. The first event was the recent early September 2009 Chinese firing across the LAC (the first since 1986, and the first since the 1996 “no firing agreement”), in Kerang (northern Sikkim) where two ITBF jawans were reportedly injured (this report has been denied by the Indian Foreign Ministry). The second event was the firing on 12 September 2009, of five 107 mm rockets, by the Pakistan based Lashkar e Toiba (LeT), across the international border at Indian villages near Amritsar. Are these two firing incidents linked, coming as they do on the background of very disturbing reports of border incursions by our two hostile nuclear armed neighbours? While the Pakistani terrorist based actions are not new, the Chinese activities, sound similar to the ominous activities prior to the disastrous 1962 war.

Another serious mistake we are making is assumimg that the United States will pull our chestnuts out of the fire, by deterring China and pressurising Pakistan. While our broad national interests do generally appear to coincide with Washington, we must remember that no country will go to war against nuclear armed foes, unless directly threatened. Given Pakistan’s undeniable geostrategic location, we should not expect the Americans to “take out” or “neutralise” Pakistani nuclear weapons, to prevent them from falling into the hands of the terrorists. Neither should we assume that America has joint control over Pakistani nuclear weapons. It is good to have close ties with the USA, but it’s prudent not to outsource our national security to any external power.

 

Musharraf’s latest admission on 14 September, about Pakistan diverting American aid to beef up its defences against India, and how he ensured Pakistan’s strategic weapons programme was “speeded up”, and China’s latest border incursions, should finally clear the cobwebs from the minds of India’s leadership. Why do we continue to suffer nasty surprises at the hands of Pakistan and China. Some 47 years after 1962, India has again been repeatedly surprised by China in Arunachal Pradesh, Ladakh and in Uttarakhand . About nine years after Kargill, and 15 years after the 1993 Mumbai bomb blasts, India was surprised by Pakistani terrorists taking the searoute to cause a bloodbath in Mumbai on 26/11 in 2008. The fact remains that India’s lack of strategic culture has been repeatedly exposed, and its military has been required to fight under very disadvantageous conditions because our politico–bureaucratic leadership, has allowed defence preparations to fall below critical levels, while following a policy of “passive , low reactive defence” which relies more on diplomacy than military strength. Hopefully the restrictions imposed on the Indian Army not being allowed to patrol some “sensitive areas” on the Indo–China border will now be lifted before the Chinese grab more of our territory. Also hopefully, the Government will think about inducting the long delayed 155 mm artillery, and raising more mountain divisions before it’s too late.

Their should be no doubt as to why Pakistan and its terrorists will always aim to cause mayhem in two places in India, viz Mumbai and Vadinar. Mumbai (its stock market turnover is four times Pakistan’s GDP) and Vadinar port in the Gulf of Kutch (it has three refineries with 99 million tons capacity and over two million tons of fuel storage). Yes, attacking foreign tourists in Goa will gain a lot of international publicity, but Mumbai and Vadinar are India’s economic jugular, and attacking these will keep India economically hyphenated to Pakistan. Fortunately the Coast Guard’s new North West Command, for Gujarat, headquartered at Gandhinagar has become functional, and is expected to be formally inaugerated by the Defence Minister in October. Hopefully, this new Command will urgently receive additional vessels and aircraft to ensure the safety of Gujarat, including Vadinar, because nothing can be more dangerous than creating a “paper force”.

 

What is the second best method to attack Mumbai and Vadinar,after terrorism? The answer is cruise missiles with land attack capability, launched from ships, submarines and Maritime Patrol aircraft like the P-3C Orion. Theoretically, the 120 km range, Harpoon anti-ship missile with a 250 kg warhead fits the bill perfectly for Pakistan as an interim system, while its ratcheting up the production of its larger Chinese gifted, 500 km range Babur cruise missiles to build an estimated stockpile of 450. The long term aim of the Pakistani Babur cruise missiles (these can be delivered by fighter or Maritime Patrol aircraft to extend their range) is to counter India’s over publicised Ballastic Missile Defence System (BMDS) and give Pakistan a “cheap”, massive first strike capabilty which may overwhelm India’s nuclear retaliation capabilty. Right now, Pakistan’s nuclear capability is designed to counter India’s superior conventional military power, but the Babur cruise missile along with new miniaturized plutonium warheads, will put Pakistan in a different league altogether.

 

The newer versions of the Harpoon, which Pakistan is hoping to acquire from the USA, already has a secondary land attack capability built in. What it has now apparently tested a few months back is the older anti-ship Harpoon, (about three dozen of these were acquired from the USA in the Reagan era). Given todays miniaturised Inertial Navigation Systems (INS) and Global Positioning Systems (GPS), any missile specialist should be able to convert the vintage anti-ship Harpoon to a land attack capable missile with reasonably accurate chances of hitting the Oil refineries at Vadinar and the various installations in Mumbai port. The only problem would be how to replace the 250 kg conventional warhead in the 53 centimetre diameter cylnderical Harpoon missile with a plutonium miniature nuclear warhead. Most Indian scientists will tell you that it is impossible for Pakistan to achieve this. In my opinion India should expect China to transfer the technology of a proven miniaturised nuclear weapon which would fit the larger Babur, and possibly the Harpoon cruise missiles.

 

What are the launch platforms for the modified land attack Harpoon missile ? The answer is simple. The two older French built Agosta 70 submarines and the half a dozen American P-3C Orion aircraft are the ideal launch platforms. The missile has sufficient standoff range to hit Vadinar and Mumbai.

Global experts believe that “low tech” nuclear powers would need 8 kg of Plutonium 239 (PU 239) to make a bomb, while “medium tech” powers would need about five kgs, and “hi-tech” powers (including China) would need 3 kg of PU 239.The media has given enough details of the new Khusab 2 and 3 reactors , which will be expected to produce about 15 to 30 kg of Plutonium for 3 to 10 miniaturised nuclear weapons per year to Pakistan. Latest media reports indicate that Pakistan’s nuclear weapons stockpile has now grown from 70 to 90. I have no idea about India’s nuclear weapons stocks, and am uncertain about how many Agni type missiles India can produce per year. China will take Indian deterrence seriously only after we induct the 5000 km Agni 5. The recent controversy about the 1998 thermonuclear tests “fizzzle” has not cleared the air. I am not a nuclear weapons designer, but as a nuclear specialist, it is my opinion that lots of luck would be needed to get a complex thermonuclear prototype device to function properly the first time, and even if it did, it would need atleast two more successful, confirmatory tests in a rugged militarised form. Detterence works best, when it’s based on hard realty, and not ambigious discussions. Also deterrence works best when the enemy leadership is itself threatened with annihilation by a politically firm Indian Government.

 

The Chinese, as expected have kept the pressure on India, with the latest news of its forces violating Indian territory in Ladakh, Sikkim and Uttarakhand. Being masters of the art of long term strategic planning, the Chinese game plan is obviously to keep India tied down by the triple threats from China, Pakistan and Pakistani sponsored terrorists. India’s foreign ministry should stop justifying China’s daily incursions by talking about “the differing perceptions on the Line of Actual Control”. China will stop its incursions only when it’s deterred by India’s conventional and strategic defence capability. We will need to change our “no first use” nuclear policy, and increase our defence expenditure from the present measely 1.99 percent of the GDP to atleast three percent of the GDP.

 

Ofcourse, the immediate threat to India is from terrorism by land, air and sea. In August, I was pleasantly surprised to see that the normally chaotic fishing vessel traffic in Mumbai port was now more disciplined. It was also heartening to see the Navy and Coast Guard maintaining round the clock vigil from boats and helicopters. Numerous visitors, enquiring about my health, also assured me that there was now unprecedented co-ordination and co-operation between the Navy, Coast Guard, Police, Customs, Intelligence Agencies and the port authorities. The real threat from the sea will come after early October, when the monsoon subsides, and the seas become calmer for permitting small boat terrorist operations. The recent 12 September rocket attacks from Pakistan on Indian villages near Amritsar, along with terror strikes in Srinagar, are pointers that things will only get worse, unless India responds firmly.

 

Given the decades of neglect, national security (including strategic deterrence) will need sustained funding for the next decade. The Prime Minister, while focussing on 9 percent GDP growth, and countering drought, will need to keep a very watchful eye on national security. The only insurance against any future disastrous, though unlikelym wars with China or Pakistan lies in deterrence, based on India investing heavily in conventional, counter terrorism and nuclear defence. If India fails to invest sufficiently on national security and displays palpable lack of political will, then there is a risk of minor border incidents spiralling out of control, and tensions escalating. The only danger this time, lies with Pakistan and its terrorists, also joining this unlikely doomsday scenario. We must have excellent economic and diplomatic relations with China, but we must also keep our powder dry. Our foreign policy should be backed by sufficent military power — something akin to a steel fist in a velvet glove.

January 1st, 2010.

 

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INDIA: CAUGHT BETWEEN CHINA & THE DEEP SEA

3. May 2010 by admin.

INDIA: CAUGHT BETWEEN CHINA & THE DEEP SEA

B. RAMAN

 

1.On April 1,2010, India and China embarked on a six-month programme to celebrate the 60th anniversary of the establishment of diplomatic relations between the two countries. S.M.Krishna, the Indian Foreign Minister, is visiting China for four days from April 5 to join the celebrations.

 

2. Forgotten—at least for the time being— are the suspicions, distrust and harsh words of last year over the visits of Prime Minister Dr.Manmohan Singh to India’s Arunachal Pradesh State on the Chinese border in the North-East to campaign for local candidates in the elections and of His Holiness the Dalai Lama to Tawang  in Arunachal Pradesh at the invitation of the local people. China claims Arunachal Pradesh as its territory and calls it Southern Tibet. It wants India to hand over to China under the border negotiations under way  without progress at least Tawang if not the whole of Arunachal Pradesh.

 

3.The Chinese have a long memory. They have not forgotten that one of the old Dalai Lamas was born in Tawang and that the present His Holiness fled from Tibet into India in 1959 across the border in the Tawang area. They have made it clear that there will be no border agreement unless India transfers at least Tawang to China. That would mean the exodus of the Indian population from the territory handed over to China. No Indian Government, however popular, may be able to sell such a transfer favourable to the Chinese to the Indian Parliament and people.

 

4.2009 was full of alarming reports about the Chinese further strengthening their military infrastructure in Tibet and Chinese military patrols repeatedly  intruding into Indian territory. Faced with opposition criticism of its perceived inaction against the growing trans-border assertiveness of  China, the Government of India pressed ahead with an already ongoing programme for strengthening its military infrastructure in the Indian territory. India is many years behind China in developing its infrastructure in the border areas.

 

5.2009 also saw non-governmental Chinese analysts discussing in  seemingly unofficial web sites and blogs the options available to China for teaching India a lesson should it become necessary. A repeat of the humiliating defeat of 1962 was one such option discussed. Taking advantage of the various separatist movements  in India in an attempt to balkanize the country was another. An article on possible Indian balkanization by an unknown and insignificant Chinese analyst  added to the already strong Indian suspicions of China.

 

6.China was active and assertive not only in the border areas. It has been equally so right around India’s periphery. Taking advantage of the suspicions and distrust of India in the other States of the  South Asian region, China, which is not a South Asian power, has acquired a growing South Asian presence.

 

7.It continues to help Pakistan in further strengthening its nuclear and missile capabilities which are directed against India. After having completed the construction of the Gwadar commercial port on the Baloch coast, it has promised to develop it further into a modern naval base which would be available for use to the Chinese Navy too.

 

8.It won the gratitude of Sri Lanka by supplying it arms and ammunition to crush the Liberation Tigers of Tamil Eelam (LTTE) and is  embarked on the expansion of the Hambantota commercial port, which might one day be developed into a naval base. A grateful Sri Lanka has given a block for gas exploration  to a Chinese company without inviting bids.  India was given a block for exploration without bids and China was treated on par with India.

 

9.There are as many Chinese tourists visiting the Maldives as Indian and a Chinese bank has been allowed to operate in the Maldives to meet the foreign exchange needs of the Chinese tourists.

 

10.In Bangladesh, Prime Minister Sheikh Hasina, despite her strong friendship for India, has continued with the look East policy of her predecessor Begum Khalida Zia and strengthened the links with China. During her  visit to China in March, an agreement was signed with a Chinese company for oil/gas exploration in Bangladesh. She also sought Chinese help for the upgradation of Chittagong into a modern deep sea port. Her Government has sought to calm Indian concerns by reassuring India that India will also be allowed to use the Chittagong port modernized with Chinese help.

 

11.At least, Sri Lanka and Myanmar have sought to treat India on par with China by granting it equal rights of oil/gas exploration, but Bangladesh has not given any such contracts to India due to strong local opposition to India playing any role in the development of its energy resources.

 

12.Sheikh Hasina also discussed with the Chinese plans for linking Yunnan with Bangladesh through Myanmar by a modern road. If the Chinese company finds oil or gas in Bangladesh it is only a question of time before the  Chinese production facilities in Bangladesh are connected with those in the Arakan area of Myanmar so that oil and gas from Bangladesh can flow direct to Yunnan through the pipeline connecting Arakan with Yunnan now being constructed.

 

13.In Nepal, China is looking for a road link to connect Nepalese roads with those in Tibet and  for an extension of the railway line from Lhasa to Nepal.

 

14.Thus, the Chinese have been developing their infrastructure of potential military significance around India’s periphery. The Chinese think  and plan long-term. Indian response is ad hoc. Just as New Delhi woke up late to the likely threats by land from  the North, one realizes belatedly that the threats are from the South, East and West as well.

 

15.Whatever limited influence India has in South Asia is in danger of being eroded by the Chinese inroads.  India is yet to work out a comprehensive response to it. All the sweet words of the 60th anniversary  cannot hide this harsh reality. ( 3-4-10)

 

( The writer is Additional Secretary(retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. He is also associated with the Chennai Centre For China Studies. E-Mail: seventyone2@gmail.com )

 

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China: The Shaky Structure of an Economic ‘Miracle’

1. May 2010 by admin.

China: The Shaky Structure of an Economic ‘Miracle’

A serious defect of East Asia’s export economic model is that it discourages the development of household consumption as a source of economic growth. Families are encouraged to save rather than spend, which depresses their consumption. At a certain point, leading East Asian economies have undergone transitions during which policies were adjusted to stabilize or boost consumption while allowing fixed investment to taper off, thereby creating more balanced economies. China, however, has yet to do so, and thus remains dangerously reliant on exports and investment.

Following from the East Asian model of growth, China’s economic “miracle” relies on the channeling of massive household and corporate savings into fixed capital investment to build the roads, factories, trains and buildings necessary to modernize and expand economic activity. But a serious defect of the East Asian model is that it discourages the development of household consumption as a third source of growth to complement exports and investment. Families are encouraged to save (which helps the government finance national policies) rather than spend (which would assist the local economy), depressing household consumption. Increasing government investment in recessionary periods means building more production capacity despite weak demand (domestically or abroad). This practice cannot be maintained indefinitely, and East Asian states have tended to undergo transitions (sometimes very rocky ones) during which policies are adjusted to stabilize or boost domestic consumption while allowing fixed investment to taper off. The result — if the restructuring is successful — is a more balanced economy sustained by consumption while varying degrees of exports and investment contribute to its growth.At the root of the East Asian model of economic growth is the need to maintain employment for massive populations. East Asian states in general have high population densities and histories of labor-intensive agriculture. Governments that do not provide stable employment conditions inevitably end up with large and unhappy populations on their hands — frequently the cause of revolutions. In the modern context, East Asian governments have focused on harnessing the savings of the population and controlling the country’s financial system to ensure credit is directed to expanding infrastructure and industrial capacity. Cheap credit enables businesses — especially export-oriented manufacturers — to maximize employment and output and seize greater international market share, bringing in more cash to perpetuate the cycle.

 

Both Taiwan and South Korea have gone through this process. In Taiwan, rapid growth in exports, savings and investment between 1962 and 1985 was accompanied by the decreasing importance of consumption to the overall economy. Taiwan’s exchange-rate deprecation in the late 1970s facilitated a rapid rise in exports, which outstripped domestic consumption as a share of gross domestic product (GDP). However, since Taiwan is a small island with limited room for heavy industry, capital formation never rose above 30 percent of GDP, meaning the economy never became so reliant on investment as to detract from consumption. After 1983, Taiwan implemented financial liberalization to allow for more efficient, market-oriented allocation of capital and to help make the transition into a high-tech economy. This transition facilitated a rise in private consumption from 47 percent of GDP in 1968 to 60 percent of GDP in 2008. Today, Taiwan maintains a balance of consumption (60 percent of GDP), exports (73 percent of GDP) and investment (21 percent of GDP).

 

Similarly, beginning in the 1970s, South Korea saw rapid growth in exports, savings and fixed investment, reaching the peak of fixed investment in the years leading up to and immediately following the Seoul Olympics of 1988. While geographically small, South Korea required large fixed investment to support the expansion of heavy industry by cheobol, or state-supported corporate conglomerates. Naturally, consumption fell as a portion of GDP until 1988, when it reached a low of 49 percent. After this period, currency appreciation (which increased domestic purchasing power) enabled consumption to remain stable, while the resulting drop in exports was offset by an increase in investment. Even after the 1997 Asian financial crisis, when consumption dropped to its lowest point amid domestic financial troubles and recession, South Korea was able to recover rapidly on the back of a policy-supported domestic consumption boom from 1998 to 2002. Today, Korea balances consumption (55 percent of GDP) with exports (53 percent of GDP) and investment (about 30 percent of GDP).

 

China, however, has not yet undergone this transition to consumer-led growth and remains heavily dependent on exports and investment. While consumption in Taiwan and Korea fell below half of GDP only once (and quickly recovered), in China consumption fell below half of GDP in 1990 and, especially since 2000, has continued to fall, hitting a low point of 35 percent of GDP in 2008. Of course, household consumption grew in absolute terms during this period as family incomes improved and consumer markets expanded. But as a portion of the overall economy, household consumption fell while savings, fixed investment and especially exports grew. In other words, unlike other East Asian states, China has not succeeded in shoring up the consumption share of its economy. A major danger of this economic structure is that it makes China extremely vulnerable to global slowdowns that affect trade. In fact, when exports plummeted during the 2009 global recession, a surge in investment from government stimulus accounted for more than 90 percent of growth while consumption contributed less than 10 percent.

 

A variety of historical factors account for the metamorphosis of the South Korean and Taiwanese economies, in contrast to China, beginning with the obvious fact that their development process began earlier. It is not a coincidence that in both South Korea and Taiwan, the shift from state-guided investment to consumption-driven economies occurred in tandem with democratization. More private control over wealth generated more popular demand for control over other things, like political representation and governance. Moreover, these states set out on the path of modernization sooner and were supported every step of the way by the United States, which provided them with security, capital investment and expertise and granted them access to the world’s biggest consumer market. In China, the Communist Party remains resolutely opposed to popular-style governments that could challenge its regime and does not have the strategic option of opening its doors fully to the United States — though since its opening up in 1978 it has enjoyed the enormous advantage of exporting to the U.S. consumer market. Nevertheless, allowing greater domestic freedoms and more extensive foreign presence poses a threat to the Chinese regime’s unity and stability. These factors have contributed to the government’s reluctance to unleash the consumptive power of Chinese households.

Weak Consumption

 

Despite China’s inherent handicaps, the trend of falling consumption as a share of China’s economy was not inevitable. In the first decade of economic reforms, China experienced relatively balanced growth. Economic liberalization in 1979 unleashed 30 years of pent-up consumption as households, entrepreneurs and farmers gained the freedom to buy and sell. Consumption stayed at 50 percent of GDP throughout the 1980s, while exports and fixed investment expanded at a gradual rate averaging 25 percent and 18 percent per year respectively. However, by the late 1980s consumption growth became unstable, as rapid inflation and political unrest forced the government to re-centralize control, including control over economic policy in order to cool down the overheating economy.

 

Consumption has never contributed as much to the Chinese economy as it did in the 1980s, though it enjoyed a period of relative stability from 1994 to 2000. In 1992, then-leader Deng Xiaoping launched a growth strategy focused on promoting the coastal cities as manufacturing and export powerhouses. Initially, the booming export economy and investment led to a rapid rise in private employment in the export sector, stabilizing the decline in consumption, but this proved unsustainable. By the late 1990s, coastal cities and state-owned enterprises were flooded with subsidized capital, much of it misallocated by government-controlled banks, and the domestic banking system was at risk because of an increasing number of non-performing loans and an overheating real-estate sector. Blaming the inefficient management of state-owned enterprises (SOEs) for the economic problems, the government launched major reforms that caused rising unemployment and a breakdown of the “iron rice bowl” — the welfare system for the masses of state employees. After Premier Zhu Rongji initiated the process of downsizing the state sector in 1995, 48 million jobs were lost and the state sector contracted by 3 percent per year for the following decade. This downsizing, in addition to pro-export policies, resulted in China’s consumption as a share of GDP falling more than it ever had. It was not that Chinese consumers were not earning more and spending more — rather, it was that their overall contribution to the economy was smaller relative to exports and investment.

 

In the last decade, the Chinese economy has been driven primarily by fixed investment (44 percent of GDP in 2008) and exports (32 percent of GDP) at the expense of domestic consumption (35 percent of GDP). Employment and wage growth have lagged behind rising costs for education, housing, health care and basic goods, leading to the rise in savings. And with few investment opportunities, most families deposit their savings in the state-run banking system, which converts the funds into government-planned investments. Meanwhile, consumers and small- and medium-sized businesses have trouble obtaining credit and must rely on their earnings for self-financing or on underground lending, thus perpetuating the high savings rate.

 

Limited capital for entrepreneurs and small and medium-sized enterprises has made China dependent on the export sector for employment. Over the last two decades, state-sector downsizing and a shrinking agricultural sector has put pressure on the Chinese government to create jobs. The relaxation of agricultural trade barriers leading up to China’s World Trade Organization accession, in addition to greater job opportunities in the booming cities, caused rural jobs to fall as a proportion of China’s labor force from 73 percent in 1990 to 61 percent in 2007. This created a contingent of at least 150 million migrant workers who move between rural and urban areas providing low-wage labor, which was soaked up — especially before the recent global recession — by export-oriented private and foreign enterprises. For most of the early 2000s, China’s economy increasingly achieved growth through foreign consumer demand rather than its own.

 

Emerging from the global economic crisis, China’s economy is in a period of flux, with exports diminishing in importance and government investment taking up the slack. There is much official rhetoric about economic “restructuring” to create sustainable household demand to drive growth in the future. Nevertheless, the economy at present retains the structure — and structural liabilities — of the patterns of development over the past two decades. The transition away from export dependency has only just begun, and stimulus policies targeting domestic-driven growth are necessarily temporary.

Regional Disparities

 

China’s increasing economic dependency on exports and investment — and the accompanying decline of consumption — has contributed to regional disparities. Looking at China’s provinces through the lens of economic structure, four major classes can be identified: those provinces that are the most heavily dependent on exports, those that are most heavily dependent on investment, those that show a relative balance and those with limited exports and investment.

 

The first category (orange on the accompanying map) consists of export-dependent regions, where exports generally take a greater share of regional GDP than consumption. These are the wealthy, cosmopolitan coastal provinces and municipalities, including Beijing, Tianjin, the Greater Shanghai region and Guangdong province. When Western countries speak of “China,” they refer to these vibrant manufacturing hubs. Xinjiang, the autonomous region in the far northwest and the single non-coastal province in this category, is a newcomer to the category due to a recent push by Beijing to deepen economic links to Kazakhstan and Central Asia. But the wealth of these export centers is deceptive, and they are really China’s most vulnerable regions. Not only are their economies extremely dependent upon international markets, but investment has surpassed what local consumption there is, making them uniquely vulnerable to factors well beyond their control.

Second, come the investment-heavy regions, where fixed investment is vastly more important than consumption. Northeast China, previously known as Manchuria, the “Rust Belt” or old industrial heartland, lies in this category — a region kept alive by government subsidies and transfers. Sparsely populated regions such as Inner Mongolia in the north and Tibet in the west serve as geopolitical buffers that give China strategic depth and provide natural resources but otherwise have no economies to speak of. High fixed investment goes into the capital-intensive industries that exploit resources in these regions, including coal (China’s number one source of energy by far). Beijing also needs to maintain sovereignty over these buffer regions for them to serve a strategic purpose effectively. This category also includes landlocked, poor, populous and resource-rich provinces that lie next to wealthier coastal areas, such as Shaanxi and Shanxi in the north and Anhui and Jiangxi in the south. These regions are — and probably always will be — dependent upon monies from Beijing to subsidize their social stability. It is not a coincidence that Mao Zedong’s famous Long March began and ended in such regions (Jiangxi and Shaanxi, respectively).

 

Two neighboring provinces on the eastern coast, Jiangsu and Shandong, as well as Hebei in the north and Heilongjiang in the northeast, fall into their own category (white on the map). These four provinces present as close a semblance of “balanced” economic structure as China can provide. Exports are beneficial but not essential, and though investment is more important than consumption, the discrepancy between these sources of growth is not as warped as it is in the investment-dependent regions. Both these provinces are wealthy and have large populations, diversified natural resources and vibrant light manufacturing sectors, and benefit from foreign trade and investment. Many leading Chinese politicians come from this area, and if China has a region that could ever achieve the “success” of Taiwan or Korea it would be comprised of some combination of these provinces.

 

Finally, there are the interior provinces (green on the map) that cannot develop export industries and where the investment share of the economy is not outrageously high (though often more than half of GDP). These range from the heavily populated central provinces known for providing migrant labor to other provinces (Henan, Hubei, Hunan) to the sparsely populated western provinces (Gansu, Qinghai) as well as the poor, relatively isolated and self-contained Sichuan and Chongqing provinces in the southwest. These areas are exceedingly poor in absolute and relative terms, but they are not dependent on the outside world or subject to the most rapid or volatile forces of change.

Where Next?

 

Despite the massive amount of public funds spent in 2009 and 2010 to boost domestic consumption, no amount of incentives or subsidies will enable Beijing to turn domestic household consumption into the engine of China’s growth in the near term. The past two decades of export-orientated growth have taken money out of the pockets of consumers to finance infrastructure and industrial capacity to the detriment of growth in consumer credit, wages and social services. The result is an economy with overcapacity, over-reliance on the outside world and anemic domestic consumption. A transition to a consumer-driven economy will take a long time and will come at the cost of rising unemployment for low-wage laborers from rural areas unable to find jobs in an economy that increasingly demands skilled labor. Rising unemployment in the export sector and falling government investment likely will create sociopolitical instability. Adding a sense of urgency to the dilemma, the Communist Party is preparing for a leadership transition in just two and a half years, and the outgoing administration must weigh the need for timely economic restructuring against the bleak realities of inertia in the system.

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Dissecting The “Chinese Miracle”

27. April 2010 by admin.

Dissecting the ‘Chinese Miracle’

The “Chinese miracle” has been a leading economic story for several years now. The headlines are familiar: “China’s GDP Growth Fastest in Asia.” “China Overtakes United Kingdom as Fourth-Largest Economy.” “China Becomes World’s Second-Largest Energy Consumer.” “China Revises GDP Growth Rates Upward — Again.” Everywhere, one can find news articles about China, rising like a phoenix from the economic debris of its Maoist system to change and challenge the world in every way imaginable.

But just like the phoenix, the idea of an inevitable Chinese juggernaut is a myth.

Moreover, Western markets have been at least subconsciously aware of this for a decade. More than half of the $1.1 trillion in foreign direct investment that has flowed into China since 1995 has not been foreign at all, but money recirculated through tax havens by various local businessmen and governing officials looking to avoid taxation. Of the remainder, Western investment into China has remained startlingly constant at about $7 billion annually. Only Asian investors whose systems are often plagued (like Japan’s) by similar problems of profitability or (like Indonesia’s) outright collapse have been increasing their exposure in China.

Once the numbers are broken down, it’s clear that the reality of China does not live up to the hype. While it is true that growth rates have been extremely strong, growth does not necessarily equal health. China’s core problem, the inability to allocate capital efficiently, is embedded in its development model. The goals of that model — rapid urbanization, mass employment and maximization of capital flow — have been met, but to the detriment of profitability and return on capital. In time, China is likely to find itself undone not only by its failures, but also by its successes.

The Chinese Model

Until very recently, China’s economic system operated in this way:

State-owned banks held a monopoly on deposits in the country, allowing them to take advantage of Asians’ legendary savings rate and thus ensuring a massive pool of capital. The state banks then lent to state-owned enterprises (SOEs). This served two purposes. First, it kept the money in the family and assisted Beijing in maintaining control of the broader economic and political system. Second, because loans were disbursed frequently and at subsidized rates — and banks did not insist upon strict repayment — the state was able to guarantee ongoing employment to the Chinese masses.

 

This last point was — and remains — of critical importance to the Chinese Politburo: they know what can happen when the proletariat rises in anger. That is, after all, how they became the Politburo in the first place.

 

The cost of keeping the money circulating in this way, of course, is that China’s state firms are now so indebted as to make their balance sheets a joke, and the banks are swimming in bad debts — independent estimates peg the amount at around 35-50 percent of the country’s GDP. Yet so long as the economic system remains closed, the process can be kept up ad infinitum: After all, what does it matter if the banks are broke if they are state-backed and shielded from competition andenjoy exclusive access to all of the country’s depositors?

This system, initiated under Deng Xiaoping in 1979, served China well for years. It yielded unrestricted growth and rapid urbanization, and helped China emerge as a major economic power. And so long as China kept its financial system under wraps, it would remain invulnerable.

 

But the dawning problem is that China is not in its own little world: It is now a World Trade Organization member, and nearly half of its GDP is locked up in international trade. Its WTO commitments dictate that by December, Beijing must allow any interested foreign companies to compete in the Chinese banking market without restriction. But without some fairly severe adjustments, this shift would swiftly suck the capital out of the Chinese banking system. After all, if you are a Chinese depositor, who would you put your money with — a foreign bank offering 2 percent interest and a passbook that means something, or a local state bank that can (probably) be counted on to give your money back (without interest)?

 

The Chinese are well aware of their problems, and perhaps their greatest asset at this point is that — unlike the Soviets before them — they are hiding neither the nature nor the size of the problem. Chinese state media have been reporting on the bad loan issue for the better part of two years, and state officials regularly consult each other as well as academics and businesspeople on what precisely they should do to avert a catastrophe.

 

The result has been a series of stopgap measures to buy time. Among these, the most far-reaching initiative has been a partial reform of the financial sector. The government has founded a series of asset-management companies to take over the bad loans from the state banks, thus scrubbing them free of most of the nonperforming loans. The scrubbed banks are then opened up so that interested foreign investors can purchase shares.

 

So far as it goes, this is a win-win scenario: Foreign banks get access to assets in-country before the December jump-in date, and the state banks avoid meltdown. In addition, a measure of foreign management expertise is injected into the system that hopefully will teach the state banks how to lend appropriately and — if all goes well — lead to the formation of a healthy financial sector. At the same time, the deep-pocketed foreign companies come away with a vested interest in keeping their new partners — and by extension, the Chinese government — fully afloat.

The only downside is that central government, through its asset-management firms, assumes responsibility for financially supporting all of China’s loss-making state-owned enterprises.

But this rather ingenious banking shell game addresses only the immediate problem of a looming financial catastrophe. Left completely untouched is the existence of a few hundred billion dollars in dud loans — linked to tens of thousands of dud firms for which the central government is now directly responsible.

 

Which still leaves for China the unsettled question: “Now what do we do?”

 

Two Opposing “Solutions”

As can be expected from a country that just underwent a leadership change, there are two competing solutions.

 

The first solution belongs to the generation of leadership personified by Deng Xiaoping and Jiang Zemin, and could be summed up as a philosophy of “Grow faster and it will all work out.” It could be said that during Jiang’s presidency, while the leadership certainly perceived China’s debt problem, they — like their counterparts in Japan — felt that attacking the problem at its source — the banking system — would lead to an economic collapse (not to mention infuriate political supporters who benefited greatly from the system of cheap credit).

 

Jiang’s recommendation was that everyone should build everything imaginable in hopes that the resulting massive growth and development would help catapult China to “developed country” status — or, at the very least, raise overall wealth levels sufficiently that the population would not turn rebellious. In the minds of Jiang and his generation of leaders, the belief was that only rapid economic growth — defined as that in excess of 8 percent annually — could contain growing unemployment and urbanization pressures and thus hold social instability at bay.

 

The second solution comes from the current generation of leadership, represented by President Hu Jintao. This solution calls for rationalizing both development goals and credit allocation. The leadership wants to eliminate the “growth for its own sake” philosophy, consolidate inefficient producers and upgrade everything with a liberal dose of technology. Key to this strategy is a centrally planned effort to focus economic development on the inland areas that need it most — and this entails tighter control over credit. Hu wants loans to go only to enterprises that will use money efficiently or to projects that serve specific national development goals — narrowing the rich-poor, urban-rural and coastal-interior gaps in particular.

 

There are massive drawbacks to either solution.

 

Regional and local governors enthusiastically seized upon Jiang’s program to massively expand their own personal fiefdoms. And as corporate empires of these local leaders grew, so too did Chinese demand for every conceivable industrial commodity. One result was the massive increases in commodity prices of 2003 and 2004, but the results for the Chinese economy were negligible. China consumes 12 percent of global energy, 25 percent of aluminum, 28 percent of steel and 42 percent of cement — but is responsible for only 4.3 percent of total global economic output. Ultimately, while “solution” espoused by Jiang’s generation did forestall a civil breakdown, it also saddled China with thousands of new non-competitive projects, even more bad debt, and a culture of corruption so deep that cases of applied capital punishment for graft and embezzlement have soared into the thousands.

 

Yet the potential drawbacks of the solution offered by Hu’s generation are even worse. In attempting to consolidate, modernize and rationalize Jiang’s legacy, Hu’s government is butting heads with nearly all of the country’s local and regional leaderships. These people did quite well for themselves under Jiang and are not letting go of their wealth easily. Such resistance has forced the Hu government to reform by a thousand pinpricks, needling specific local leaders on specific projects while using control of the asset management firms as a financial hammer. After all, since the central government relieved the state banks of their bad loan burden, it now has the perfect tool to strip power from those local leaders who prove less-than-enthusiastic about the changes in government policy.

 

Or at least that is how it is supposed to work. Local government officials have become so entrenched in their economic and political fiefdoms that they are, at best, simply ignoring the central government or, at worst, actively impeding central government edicts.

 

Hu’s team is indeed making progress, but with the problem mammoth and the resistance both entrenched and stubborn, they can move only so fast for fear of risking a broader collapse or rebellion. And this does not take into consideration Beijing’s efforts to strengthen the Chinese interior — where the poorest Chinese actually live. Complicating matters even more, Hu’s strategy relies upon the central government’s ability to wring money out of the wealthy coastal regions to pay for the reconstruction of the interior.

 

That has made the coastal leaders even more disgruntled. However, they have come upon a fresh source of funding, replacing the traditional sources of capital that now are drying up as a result of the personnel changes in Beijing: the underground lending system, which was spurred by the official government monopoly over banks in years past. The central government now estimates that the underground banking sector is worth 800 billion yuan, or some 28 percent of the value of all loans granted in country.

 

Dealing with Failure — And Success

The question in our mind is which strategy will fail — or even succeed — first. If Jiang’s system prevails, then growth will continue, along with the attendant rise in commodity prices — but at the cost of growing income disparity and environmental degradation. The likely outcome of such “success” would be a broad rebellion by the country’s interior regions as money becomes increasingly concentrated in the coastal regions long favored by Jiang. And that is assuming the financial system does not collapse first under its own weight.

Local rebellions in China’s rural regions have already become common, but two of are particular note.

 

In March, the villagers of Huaxi in the Zhejiang region protested against a local official who had used his connections to build a chemical plant on the outskirts of town. When rumors of police brutality surfaced, some 20,000 villagers quite literally seized control of the town from 3,000 security personnel. Before all was said and done, the villagers invited regional press agencies in to chronicle events in the town that had told the Politburo to go to hell, and started burning police property and parading riot control equipment before anyone who would watch. They actually sold tickets to their rebellion. Huaxi marked the first time local officials actually lost control of a town.

 

Then, in December, protests erupted against a local official in Shanwei, who had similarly lined his pockets with the money that was supposed to have been made available to farmers displaced by his expanding wind-power farm. The local governor figured that since he was investing not just in an energy-generating project in energy-starved China, but a green energy project, that he would have carte blanche to run events as he saw fit. He was right. When the protests turned violent, government forces opened fire — the first authorized use of force by government troops against protesters since the Tiananmen Square incident in 1989.

 

Such events are, in part, evidence of a degree of success for the strategy espoused by Jiang’s generation. The grow-grow-grow policy results in massive demand for labor by tens of thousands of economically questionable — and typically state-owned — corporations. This, in turn, draws workers from the rural regions to the rapidly expanding urban centers by the tens of millions. The dominant sense among those who are left behind — or those who find their urban experiences less-than-savory — is that they have been exploited. This is particularly true in places like Shanwei, on the outskirts of urban regions, when urban governors begin confiscating agricultural land for their pet projects.

 

But for all the complications created by Jiang’s solution to China’s economic challenges, it is Hu’s counter-solution that could truly shatter the system. In addition to dealing with all the corrupt flotsam and high-priced jetsam of Jiang’s policies, Hu must rip down what Jiang set out to accomplish: thousands of fresh enterprises that are unencumbered by profit concerns. A steady culling of China’s non-competitive industry is perhaps a good idea from the central government’s point of view — and essential for the transformation of the Chinese economy into one that would actually be viable in the long term — but not if you happen to be one of the local officials who personally benefited from Jiang’s policies.

 

The approach of Hu’s generation is nothing less than an attempt to recast the country in a mold that is loosely based on Western economics and finance. Even in the best-case scenario, the central government not only needs to put thousands of mewling firms to the sword and deal with the massive unemployment that will result, it also needs to eliminate the businessmen and governing officials who did well under the previous system (which did not even begin to loosen its grip until 2003). And the only way Beijing can pay for its efforts to develop the interior is to tax the coast dry at the same time it is being gutted politically and economically.

 

The challenge is to keep this undeclared war at a tolerable level, even while ratcheting up pressure on the coastal lords in terms of both taxation and rationalization. But just as Jiang’s “solution” faces the doomsday possibility of a long rural march to rebellion, Hu’s strategy well might trigger a coastal revolution. As the central government gradually increases its pressure on the assets and power of China’s coastal lords, there is a danger that those in the coastal regions will do what anyone would in such a situation: reach out for whatever allies — economic and political — might become available. And if China’s history is any guide, they will not stop reaching simply because they reach the ocean.

 

The last time China’s coastal provinces rebelled, they achieved de facto independence — by helping foreign powers secure spheres of influence — during the Boxer Rebellion. This resulted, among things, in a near-total breakdown of central authority.

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China: Dragon Of Inflation

20. March 2010 by admin.

 The specter of runaway inflation in China is a topic of increasing debate, and countless Chinese leaders have in recent months stressed the need for controls to prevent general price increases. The Chinese economy is expected to grow at a rate of around 10 percent in 2010, and the banking system continues to support government stimulus policy with massive lending. While consumer prices in 2009 were negative overall, January 2010 statistics showed that consumer prices grew by 1.5 percent compared to the same month in 2009, underscoring inflation expectations.
 
However, for a developing economy, China has low inflation rates. The annual average change in its consumer price index (CPI) has rarely risen above 5 percent since the late 1990s, a rate that many developing states — to say nothing of one developing as rapidly as China — find enviable. In fact, the Chinese economy often shows deflationary tendencies. The concerns being voiced by China’s leaders about inflation are therefore actually concerns over spiking prices in certain sectors, rather than any broad-based inflation more typical of economies at this stage of development. Price spikes in three key sectors — energy, real estate and especially food — could cause a great deal of social unrest, which Beijing hopes to avoid at all costs.

What is Inflation?

Inflation is the increase in the general level of prices across an economy. It is usually measured with the consumer price index (CPI), a basket of widely used goods and services. In general, it is distinct from price increases in any particular good or sector because it is more fundamental — it spans across a range of goods and sectors. While some inflation generally accompanies growth and employment, too much can be destabilizing. Excessive inflation results from economy-wide shocks in supply or demand, setting them abnormally off balance, and is frequently associated with panic buying, hoarding and shortages, as consumers will rush to buy things if they fear prices rising higher the longer they wait. Inflation can result from monetary and fiscal expansion, war or blockade, sharp demographic or labor shifts, drastic government policy shifts in a range of areas, and other large-scale phenomena.
 
Developing countries are often the most vulnerable to serious bouts of inflation. They are in the midst of erecting an entire industrial and social infrastructure, and so much activity — often where there was little in previous years — can create extraordinarily high and persistent demand for energy, raw materials and basic goods of which the supply cannot quickly be increased. Oftentimes supply chains need to be constructed from the ground up, and the establishment of these new processes where none existed before goes hand-in-hand with stronger price pressures — for example, think of how much it would cost to be the first person in town to install a backyard swimming pool. Additionally, consumers in developing countries usually have limited disposable income, spending most of what they earn on basics like food and energy. Demand for these items cannot be easily reduced, and supplies cannot be easily increased (though they can rapidly shrink). Everyone has to eat, and producing more food or energy requires long lead times. The results — particularly in a rapidly growing economy — are shocks in supply and demand that become apparent in greater price fluctuations. Rampant construction, intensive investment, growing private business and consumer demand — these are factors which, happening all at once in formerly undeveloped circumstances, tend to push the general level of prices up.
This is not the case in modern China. But before we can discuss the present, it is critical to understand how China got to where it is now.

Inflation in China

After China’s initial economic opening in 1979, there were three major bouts of broad based inflation — in 1985, when average annual prices grew at more than 10 percent, in 1988-1989, when prices grew nearly 20 percent, and in 1993-1996, with price increases reaching nearly 25 percent. Each of these incidents was economically and socially disruptive, with dissatisfaction over high prices in 1989 contributing to the protests at Tiananmen Square. Imbalances of supply and demand naturally occurred as the Chinese economy transitioned from a Marxist command economy to a pseudo-free market economy. The worst bouts in 1988-1989 and 1993-1996 were caused by a variety of economic and financial factors, foremost of which were changes involving government price controls and state-owned enterprises (SOEs).
 

The 1980s, the period of initial liberalization, best illustrates this paradigm. Subsidies and price controls that had determined prices for decades were relaxed, and prices on a gradually widened range of goods and services were allowed to fluctuate more freely than before, as part of the process of allowing market forces to play a greater role in the allocation of resources. Since there were new opportunities for growth and profit, business and consumer demand were also increasing. In the countryside, the central government allowed rural businesses and markets to take shape, and also raised the prices it paid for procuring agricultural output, to boost farmers’ incomes. The combination of higher incomes and price liberalization led to rising prices across the board, especially for food, where prices grew 77 percent in total between 1978 and 1986.
 
At the same time, changes were taking place in China’s industrial sector. The SOEs were the dominant forces in China’s industrial complex during the Maoist period, comprising 90 percent of gross domestic product (GDP) in 1978. With the market reforms, they were suddenly granted new freedoms to make investments, and they seized the moment by borrowing heavily from state-owned banks to undertake massive projects and expand in size and capacity. Supported by local and central government, they had no fear of bankruptcy, but did fear their competitors and thus borrowed money to grow as rapidly as possible and grab maximum market share — and yet their overall output fell, indicating serious inefficiencies. Subsidized loans, unblinking government support and a desire to grow as quickly as possible created a surge in demand that affected the entire economy.
 

Rising wages also contributed to inflation by stimulating demand and increasing input costs for producers. As the SOEs grew, they hired more and more employees, going from 74 million in 1978 to more than 100 million in 1990 — while that may not seem like a big increase for a country with China’s population, it took place in the context of predominantly rural conditions and an isolated and defunct economy, magnifying its impact on society. With food prices high, urban workers demanded higher wages. Wages rose by an average of 15 percent per year during the mid-1980s, and they rose especially during peak inflation years (50 percent in 1985, 20 percent in 1988 and 35 percent in 1994), putting additional upward pressure on prices.
 
Underlying these changes were equally important changes in government monetary policy. The central government’s adoption of loose monetary and credit policies designed to accommodate its own investments and budget deficits and the massive bank lending for local governments and SOEs amplified these inflationary trends.
 
Eventually, in the late 1980s, with food prices and wages both climbing and the system flush with cash, overall inflation skyrocketed, averaging nearly 19 percent in both 1988 and 1989. Consumers rushed grocery stores in the summer of 1988 fearing new government moves to raise prices. Ultimately domestic unrest broke out, culminating in the infamous June 4, 1989, crackdown on protesters at Tiananmen Square and the implementation of other tough security measures to maintain control.
 
Although a period of political tightening followed Tiananmen, in a few years economic liberalization resumed and the forces behind soaring inflation from 1993-1996 were essentially the same: food prices and wages were rising, and SOEs were gorging on subsidized credit as they made investments. The basic conditions of inadequate productive capacity and supply, combined with excessive demand and liquidity, continued to put pressure on existing resources and drove inflation.
 
Thus the first 20 years of reform were years in which whole-scale adjustments were taking place in the economy, and a modern industrial and manufacturing base was being built, in addition to an ongoing process of urbanization. After the tremendous price hikes in 1993-1994, the Communist Party was faced with the need to restructure, and the result was an overhaul of the SOEs that had been the source of so much credit-fueled spending. Retrenching and consolidating the sector took several years, with SOEs shedding over 30 million workers from 1996 to 2000 (and paring down more than 15 million since then) resulting in a current total of around 60 million workers. These reforms trimmed off some of the SOE demand that was an endemic cause of inflation in China’s system.

Inflation Today

Since the inflationary mid-1990s, China’s inflation landscape has been fundamentally different. With a massive and more fully developed productive capacity in place, China’s economic system has maintained high production levels, flooding foreign and domestic markets with goods. Overcapacity and oversupply — made possible by the endless availability of subsidized loans — have been the dominant forces affecting prices. In contrast, consumer demand remains relatively low, as people for a variety of reasons prefer to save rather than spend. Steadily rising supply plus anemically growing demand pushes domestic prices on consumer goods down. Hence core inflation (calculated without energy and food prices) generally stays low.
 

In fact, sporadically from 1998 to 2003, and again in 2009, China fell into deflation — that is, negative change in the general level of prices. Growth and exports fell due to recessions abroad, and Chinese consumption dropped along with the prices of stockpiled goods for which there was little global demand. Even when inflation reached its most recent highs of 7-8 percent compared to the previous year, which lasted for a few months in 2008, the annual average inflation rate that year barely exceeded 5 percent — and that was for the first time since 1996. By contrast, from 2000-2009 Brazil averaged more than 15 percent inflation and Russia more than 12 percent. The inflation of 2008 was then cut short by a financial crisis that interrupted global trade, sending prices everywhere plummeting.
 
In 2009, overall inflation was -0.7 percent, revealing China’s deflationary tendencies once again amid the latest global recession. Even in 2010, with overall economic growth expected to top 10 percent and massive amounts of liquidity in the system as part of government stimulus efforts, the central bank claims it expects inflation of 3 percent and no more than 4 percent. International demand remains constrained, keeping prices for China’s imports down, and China is also looking for ways to wind down its stimulus measures. Domestic consumption has remained resilient, but mostly because of stimulus policies propping it up — it is not suddenly surging forward on its own accord. All of these factors apply downward pressure on prices.
 
While the Chinese government is not expecting a swelling of broad-based inflation comparable to the late 1980s or mid-1990s, it remains highly concerned that spiking prices in critical areas could stir up social unrest. Three sectors of particular concern are energy, real estate and especially food.
Real estate bubbles have been a constant in China for years, with the slowdown in 2009 being short-lived, and 2010 showing all the signs of a new bubble forming. Anywhere with limited land available for development, a large population, and an endless stream of subsidized credit will see property prices rise. Local governments derive an average of 40 percent of their tax revenues from land sales and therefore collude with property developers to drive prices up. The developers themselves want the land not only hoping to sell it later for a profit, but also as collateral to present to banks to get more loans.
 
There is no doubt a construction and real estate bubble taking shape (with serious implications for overall financial and economic stability), given the 3.2 trillion yuan or $530 billion invested in real estate in 2009 alone. But the impact on overall inflation is not presently a paramount concern. Housing prices in the CPI dropped by 3.6 percent in 2009 compared to 2008, reflecting the fall from recent highs in summer 2008 (though China’s National Bureau of Statistics uses a variety of methods to underestimate the effect of housing prices on CPI).
 
The chief concern is the risk to social stability. The frantic pace of development frequently leads to peasants getting coerced from their homes, a major cause of protests. Moreover, housing prices have accelerated faster than incomes, putting pressure on families’ pocketbooks. Beijing is attempting to limit social stresses by restricting forced evictions and restraining rising prices in the real estate sector through a variety of measures announced in January, but these central government policies will be difficult to enforce and will have at best mixed results on the local level. Beijing’s best hope comes from the fact that prices on cheap housing and second-hand homes barely grew in 2009, constraining the impact of price increases on the poorest sectors of society.
 
Energy is another area where social stability is the primary focus. Maintaining China’s booming industries requires energy and raw materials inputs, which have volatile prices and are certainly capable of driving inflation in other countries when prices soar. But the Communist Party uses price controls to ensure that prices of oil, refined oil products, natural gas, coal and electricity stay within socially acceptable ranges, so as to prevent fluctuations from wreaking havoc on the delicate balance of Chinese companies and households. State-owned energy companies are required to sell goods at low prices domestically, sometimes below the cost of production; in return, they receive subsidies from the government to make up for the lost profits. Such subsidies hide the true costs of many economic processes in China, transferring them to the government finances or banking system in some way. But one intentional outcome of these practices is that since the costs are not borne by the physical economy, they do not increase prices for all users downstream.
 
Of course, such price control policies create all kinds of distortions: during times of high input costs, energy producers will deliberately limit supply so they do not have to subsidize the domestic market from their own pockets — they will also seek to export their product as much as possible, and avoid reinvesting in capacity upgrades, since their goal is to make money and that is difficult to do when foreign oil is expensive and domestic prices are capped. Oil refiners resorted to such methods during the period of high international commodity prices in 2007 and 2008, and natural gas companies were accused of limiting supplies in winter 2009-2010 when cold weather increased demand for household heating. Artificially low domestic prices also encourage consumers to consume inefficiently, generating unnecessarily high demand. Normally, inflationary pressures would limit such demand growth, but to maintain social stability, the Chinese government has chosen to short-circuit market forces. As a result, energy shortages happen frequently in China.
 
Nevertheless, China’s energy price controls have worked well enough to maintain internal order. Attempts to reform pricing mechanisms to allow higher prices are in the works, but always subject to reversal given the social risks. As long as bank loans are available for state energy companies, China can mask the costs of controlling energy prices.
 

Food is perhaps the sector most capable of sparking domestic unrest if prices spike. Food prices are inherently inflationary in China, where too little arable land must feed too many people. Food price inflation generally runs well above overall CPI, such as the run from spring 2007 to fall 2008, when food prices rose well above 7 percent every month and reached a peak of 23 percent in February 2008. This is not a problem that can be solved easily, since food supply and demand are hard to change. Crop yields are unpredictable because of weather, and slow to adjust considering planting seasons. Meanwhile food demand has a stable basis, since population changes happen over generations, everyone eats, and there is no substitute for food.
 
The causes of food price inflation do not necessarily mark economy-wide changes but are often highly specific, contingent or localized. Farmers may create shortages of certain supplies that drive prices up — wheat farmers frequently turn to other crops during times of low wheat prices, inadvertently causing shortages later on. Pig farmers slaughtering their pigs (amid a disease outbreak) were the leading factor causing meat prices to rise by more than 40 percent (compared to the previous year) during spring 2008. The government may also buy domestic farm produce or restrict imports to control prices. But ultimately food prices are subject to factors beyond the control of short-term business or policy adjustments. Even during times of overall low inflation, food prices follow their own rules — for example, vegetable prices rose by 24 percent in November 2009 because of weather conditions. About 35 percent of expenditures by urban and rural households go to food, so price increases are sharply felt.
 
When China first emerged from its command economy, core inflation was a dangerous threat, and would remain so for decades. But over time China’s economic structure became so heavily geared toward high production and low consumption that deflationary tendencies formed. Today when Chinese officials say they are concerned about inflation they are talking about price spikes in key economic sectors — energy, real estate and especially food. The risks posed by such spikes have the potential to spark social unrest that shakes the foundations of the central government’s control, as they indeed have in the past, and could again in the future.

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China: Turkey’s Interest in the Uighur Issue

12. March 2010 by admin.

Protesters in Istanbul burn a Chinese flag during a demonstration after a Friday prayer.

Summary

Turkish Prime Minister Recep Tayyip Erdogan, in a July 10 televised address, labeled the Chinese crackdown against Uighurs in the northwestern Chinese province of Xinjiang a “genocide.” Erdogan’s statement is the latest in a stream of bold moves by Ankara to internationalize Beijing’s struggle with its minority Uighur population. Turkey’s interest in the violence between ethnic Han Chinese and Muslim Uighurs is motivated in part by domestic politics, but is also a manifestation of the ruling Justice and Development Party’s contentious desire to push a pan-Islamic and pan-Turkic agenda.

Analysis

In a televised address July 10, Turkish Prime Minister Recep Tayyip Erdogan commented on the Chinese crackdown in Xinjiang province, stating: “The incidents in China are, simply put, a genocide. There’s no point in interpreting this otherwise.”

Given the mass killings of Armenians by Turks during the Ottoman Empire, “genocide” is a loaded term for the Turks, and not one they throw around freely. Erdogan’s comment is the latest in a stream of provocative statements aiming to draw international attention to Beijing’s attempts to contain ethnic unrest in Xinjiang. China, highly vexed by Turkey’s actions, has already dismissed Turkey’s attempt to take the Xinjiang riots to the U.N. Security Council (UNSC); Chinese Foreign Ministry Spokesman Qin Gang issued a statement asserting that the Chinese government had taken decisive measures according to the law, and that the unrest is a purely internal Chinese affair. Qin emphasized that the issue was not one that demanded the attention of the UNSC, despite Turkey’s claims.

Ethnic riots between dominant Han Chinese and Muslim Uighur minorities in Urumqi in China’s northwestern Xinjiang region have so far killed 156 people and left more 1,000 injured, according to Chinese reports. The international response to date has been relatively mixed and muted. Russia has come out strongly in defense of China’s territorial integrity and the state’s forceful crackdown, while Europea and the United States have cautiously called on China to respect human rights in putting down the unrest. Turkey, however, has gone above and beyond any other country in internationalizing the issue and in condemning Beijing, raising questions over what is truly driving Ankara’s agenda.

Turkey has not always been this vocal about its support for the Uighurs, an ethnically Turkic group that speaks a dialect similar to Turkish and a fraction of which considers itself part of a greater Eastern Turkestan region of Central Asia. Though Beijing’s repressive policies toward the Uighurs have long been a sticking point in Chinese-Turkish relations, the Turkish government typically has restrained itself and acted indifferent when China carried out periodic crackdowns in Xinjiang, in the interest of maintaining a healthy relationship with Beijing.

Just five days before the riots in Urumqi broke out, Turkish President Abdullah Gul visited the Xinjiang region after visiting Beijing in the first trip to China a Turkish president has made in 14 years. While there, Gul said that China’s Uighurs represented the “friendship bridge” between China and Turkey and would allow the two countries to further their relations.

It only took a few days for that friendship bridge to collapse. When the riots erupted, the Turkish Foreign Ministry summoned a senior Chinese diplomat and issued a relatively calm response July 7 with a statement that read: “It is our expectation that the persons who are responsible for these incidents will be found as soon as possible and brought to justice. We believe that the necessary measures will be taken to prevent this kind of incident in the future in China, a country on the way to becoming more stable and prosperous. We extend our condolences to the people of the Xinjiang Uighur Autonomous Region in particular and to the people of China in general, to the families of those who lost their lives and wish speedy recovery to those who were injured.”

Domestic politics then began to take over, as several Turkish nongovernmental organizations, human rights groups, pro-government business unions and nationalist opposition parties began calling for boycotts of Chinese goods and criticized the ruling Justice and Development Party (AKP) for keeping quiet while Turkic Uighurs were getting killed by Chinese security forces. Erdogan on July 8 then denounced Beijing, calling the Uighurs Turkic brethren of Turkey and saying he would take the issue to the UNSC, using Turkey’s position as a non-permanent member of the council and as president of the council for the month of July. A day later, Erdogan announced that his government would grant a visa to Rebiya Kadeer, a wealthy and prominent Uighur political activist, if she chose to travel to Turkey. Kadeer had said in a July 8 interview that her visa applications to Turkey in 2006 and 2007 had been denied. Apparently, the Turkish government no longer feels as compelled to respect Beijing’s wishes in keeping the Uighur issue out of the political limelight and is even ready to give the stage to a well-known activist like Kadeer. Finally, on July 10, Erdogan brought the issue to a new level when he called the Chinese crackdown a “genocide” — a term that even the most radical Uighur separatists would not use lightly.

Turkey’s bold criticism of Beijing brings to light a number of contradictions. The Turks’ ethnic ties to China’s Uighur population may justify, in Ankara’s mind, a defense of Turkic Uighurs against the Chinese state. However, the Turkish government’s concerns are just as large as Beijing’s when it comes to maintaining territorial integrity and containing separatist movements, whether Eastern Turkestani or Kurdish.

The AKP also has a strong economic interest in China, which is what primarily drove Gul to visit China recently with a large business delegation to encourage more Chinese investment into Turkey. Turkey has a large trade deficit with China that works in Beijing’s favor; according to Chinese customs statistics, bilateral trade between the two countries, which mostly consists of raw materials, totaled $12.57 billion in 2008, with Chinese exports to Turkey reaching $10.59 billion and Turkish exports to China only reaching $1.98 billion. Turkish exports have already taken a major hit over the past year as Turkey’s main trading partners in Europe have struggled to cope with the global recession and sustain demand for Turkish exports, making it all the more imperative for Turkey to seek out new markets in places like China. However, in this case, the Uighurs were paramount to Turkish economic interests in China. Even Turkish Trade and Industry Minister Nihat Ergun implied on July 9 that Turkish consumers should boycott Chinese goods over the Xinjiang riots, stating that Turks should reconsider their values if the country that they buy goods from does not respect human rights.

Domestic politics has certainly played a role in the AKP’s increasingly hard-line attitude toward Beijing, but the Turkish response to the Xinjiang riots is also a reflection of the AKP’s broader pan-Turkic and pan-Islamic agenda to expand Turkish clout in its traditional spheres of influence, a policy embodied by Erdogan and his foreign minister, Ahmet Davutoglu.

Turkey’s unusually bold criticism of Israel during the Israeli military offensive against Hamas in the Gaza Strip in early 2008 was the Islamist-rooted AKP’s way of broadening its appeal in the Arab and wider Islamic world. By taking a harsh stand against its traditional ally in the region, Turkey sent a message that it would be a defender of Muslims across the region, allowing Ankara to gain esteem from its Arab neighbors who had only just started to pick up on Turkey’s regional resurgence.

While the Islamic image has worked well for Turkey in its Arab backyard, the Turks have been struggling to garner the same level of support in the Caucasus and Central Asia, where Turkic-speaking populations are spread throughout Azerbaijan, Turkmenistan, Uzbekistan, Kyrgyzstan and Kazakhstan. In these regions, Turkey has relied more heavily on its Turkic identity to connect with the Turkic populations and establish a stronger foothold in its near abroad. However, the AKP has also overestimated the extent to which others identify themselves as cousins of Turkey, particularly in the post-Soviet space where the AKP’s Islamic branding and pan-Turkic movement tend to alienate post-Communist regimes that do not identify as strongly with Islam and fear a Turkish imperial agenda. This is mostly due to the issue of time. Turkey — as the Ottoman Empire — ruled much of the Middle East up until the end of World War I. But the Turkic groups of Central Asia have not been united with their “brothers” in Turkey for the better part of a millennium, and even then not under the rubric of what could be considered a single government.

In China, the Turkic Uighurs, while grateful for a foreign backer, were already suspect of Turkey’s intentions when Gul visited Xinjiang province. Turkey has had little influence amongst the Eastern Turkestan movement and, until now, has been more inclined to remain indifferent to the Uighurs’ plight. Even now, Turkish support for the Uighurs does not stretch beyond rhetoric. Taking the case to the UNSC may draw international attention to the issue, much to Beijing’s discontent, but any action in the UNSC is highly unlikely with Russia and China carrying veto power.

Nonetheless, Turkey seems prepared to risk a serious breach in relations and economic links with a major power like China for the sake of promoting its pan-Turkic/Islamic brand. The AKP may well believe this is the path toward regional expansion, but once the Turks go beyond the Arab world in pushing this brand, they are only more likely to encounter greater resistance.

“This report is republished with permission of STRATFOR“

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