The Financial Express


Asia's future knocking: Xi's epochal India visit?

Indian Prime Minister Narendra Modi (R) shaking hands with Chinese President Xi Jinping during their visit at Arjuna's Penance, ahead of the summit at the World Heritage Site of Mahabalipuram in Tamil Nadu state. —Reuters Photo Indian Prime Minister Narendra Modi (R) shaking hands with Chinese President Xi Jinping during their visit at Arjuna's Penance, ahead of the summit at the World Heritage Site of Mahabalipuram in Tamil Nadu state. —Reuters Photo

Xi Jinping's India visit last week should be seen in the same epochal category of summits as the World War II conferences bringing Winston Churchill, Franklin D. Roosevelt, and Joseph Stalin together: common to all of them is consolidating the unfolding status quo and creating the future world order. The key differences may help shed light on future 21st Century passages: those in the 1940s used military security as the necessary condition for future economic growth; but, here in Asia, that order is being flipped, with economic progress as the necessary condition to shape the future political military world order.

Parag Khanna, who recently proposed the future would be Asian, can now claim a prediction come true: Asian economies are poised to overtake, not just the U.S. counterpart, nor still the European Union's, not even both of them together, but if one takes a deep breath, they are set to edge ahead of all other global economies next year, based on a purchasing power parity (PPP) calculation. Though that message bears a heavy Chinese stamp, in this article's case accented by  the Centre for China and Globalisation's founder, Wang Hulyao, ground realities buttress his claim (see his July 25, 2019 World Economic Forum piece): from unilaterally building a trade treasure, and simultaneously extracting the world's top corporations to transform China's laughable industrial infrastructure through external investments and corporate technology, converting the agricultural hinterland and traditional metropolitans into a network of speedily-accessed high-rise building conglomerations, consumption corners, and energy transmitters, as well as constructing global markets in the old-fashioned 'Great Silk Route' way through the Belt Road Initiative (BRI), China has managed to wrest control of the global economy from the third largest player (Germany), then the second (Japan), and now the top one, the United States.

Lacing the BRI network in all continents save Australia and the Americas (though remaining the top trading partner in many of the key countries in these continents), China's silent piling of bilateral, then multilateral, then plurilateral agreements strengthened the economic foundations. Though the BRI network has been correctly called a debt-generating instrument taking neo-colonial features, China has quickly turned to dampening local concerns by resorting to off-shore production settlements within borrowing countries, plunging into industrial ventures to soften the heavy-handedness of infrastructure investment, opening cultural connections through Confucian Institutes and distributing education scholarships to divert foreign students to Chinese universities, and promoting tourism. These have hit the spot by bringing in new revenues, modernising institutions and instruments, and, most of all, pushing an inclusiveness alternative to find the divided 1940s atmosphere when peace dividends irrevocably split by Cold War fissures.

Hulyao tells us how the BRI project itself could boost the global economy by almost as much as 3 per cent, with trade itself expanding anywhere up to 6 per cent: millions would be brought out of sheer poverty, and with the consuming classes bulging, growth would scale new heights. Transactions, of course, need two to tango; and China's skillfully orchestrated transitions from unilateralism to bilateralism to multilateralism cannot but be missed in this transformation.

If the Asian Infrastructural Investment Bank (AIIB) has become a global player already, including membership from many countries outside Asia, its central relevance is that very multilateral framework. The United States introduced such an approach in the Bretton Woods conferences from 1944 through the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD (and the United Nations from the next year): also known as the World Bank), and just as the United States premised its world leadership upon institutions like these, China does not want its ascent to be found empty-handed. Hinging many projects to AIIB borrowings, China is set to enlarge its own Bretton Woods counterparts. Whether this will culminate in competition-turning-into-conflict we do not know, but with too many stakeholders, the AIIB diffusion may have enough power to drive the Bretton Woods institutions into a long-term uncompetitive state, and thereby obsolescence: as it is, many less developed countries carried gripes against them for their painful austerity plans, but although disgruntled AIIB/BRI recipients, like Pakistan, may return to the Bretton Woods institutions, China has the cash to mollify any disillusion spread-effect in a way the IMF/IBRD counterparts have not been able to break out of its bureaucratic rigidities to reform.

Against that backdrop, XI's Indian visit duplicates overtures being made wherever China's growth has bred resentment of sorts. From South Korea on its shores to Japan just a toss away, China is now softening Indian concerns. This is not a maiden attempt: there was the 2018 Wuhan Summit, and though the Doklam stand-off exposed what kind of conflict may still arise, efforts to bury its memory have accelerated so rapidly as to make this visit happen.

It could not be better timed. India's world-leading growth-rate has begun slipping, just as China's did a few years ago. That means a lot of hardship at the middle-class level and below in India, which also struggles under a very lopsided trade relationship with China. New deals could help narrow that trade gap while injecting growth-generating deals, even export expansion to China as some kind of incentive.

India needs this rapprochement with China to further alienate Pakistan, especially given how the Kashmir infiltration by non-Kashmiri Indian forces and flocks threatens to change its demography permanently. Any breakthrough would also help India breathe a little lighter given how China has India almost encircled with BRI projects and other investments. Mostly taking BRI extensions into India with lavish projects would be the jumpstart Modi needs economically, particularly as India's aging infrastructure may be one of its biggest obstacles for catching up with China economically. How far Modi will bend this way one does not know, given how the nationalism and Hindutva he has stirred might run tangential to China's growing presence.

From China's side, this visit bears enormous future importance. As the 21st Century progresses, mid-way through it there will be more Indians than Chinese on this planet, and the demographic advantage, especially the younger Indian population than China's, could reverse much of the current political-economic architecture.

Preparing for such anticipated outcomes was in the cards from the Wuhan Summit. Though it watered down the Doklam disturbances, the Himalayas may still be thwarting a 'Dragon-Elephant waltz', that is Savory China-India relations. Kashmir finds China on Pakistan's side, no less for the new threat it itself feels on the northeastern Kashmiri border, thus unnecessarily clouding Jinping's visit. How both sides recover may be pivotal to Asia relishing its place in the sun: India needs China's trade to bring order to its own house now; and China needs India on board for the Asian prosperity, built upon BRI pillars.

There is a greater feeling this may work out, perhaps not as fluently as expected, but better than the Yalta expectations of its Declaration of Liberated Europe and post-World War democracy. Summits like these, after all, must carry far more than photo-opportunities these days.

Dr. Imtiaz A Hussain is Professor and Head of the Department of Global Studies and Governance at Independent University. Bangladesh.


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