Indian Defence Review

Therefore, in order to understand the strategic implications of OBOR within the Sino-Indian context an analysis must transcend the numeric of trade and investment and focus itself on china’s strategic thought that synthesise its grand strategy in long-term. If at all India needs to consider the strategic consequences of OBOR to its national security, the framework of analysis must be designed within a long-term perspective. The most adverse strategic consequence is likely to be the expansion of strategic optional base for countries that will be part of OBOR in South Asia, Central Asia, South East Asia and Eastern Europe who will now have China as part of their strategic equation vis-à-vis other regional powers. This will and should be the prime concern for Indian policy makers in long-term.

For example, in South-East Asia where China emerged as the largest trading partner since it initiated a strategic rethink in 1993 at the behest of former Foreign Minister Qian Qichen’s advice after the Southern Tour, United States remains an important source of security[16]. Economic interdependence has certainly altered the erstwhile strategic balance of power in South East Asia but has not yet culminated into region where China can exercise its free will, instead the equation is far complex.

The following section therefore looks at the reasoning behind OBOR as a grand strategy to address China’s discomfort with the in-vogue economic order in order to identify the possible strategic intent behind OBOR.

China’s Quest for a New World Economic Order

Gauging within the framework of OBOR, since the 2008 financial crisis China’s foreign trade has continued to grow faster that international trade by relocating itself as a “normal” foreign trade system integrated with its domestic economy[17]. In other words, China is moving away from an export oriented economy like Germany, to a consumption oriented economy like United States. OBOR as a strategic framework is designed to regulate to the extent possible the disappearing external conditions that favoured China’s extraordinary rise in world trade for two decades along with structural changes taking place within China’s domestic economy[18]. However according to Francoise Lemoine and Deniz Unal, for China processing activities have declined rapidly while China’s ordinary trade, driven by domestic demand and indigenous capabilities, has emerged as the most dynamic constituent of its international trade[19].According to President Xi Jinping household consumption and the services sector have become the main drivers of growth. Along with the strategic need to balance China’s internal and external dimensions of its world trade, China is now emerging as an international monetary power[20].

In other words, China’s Renminbi has the potential qualities to emerge as the leading reserve currency to facilitate international trade. However, China has claimed that it has no intention to boost its trade competitiveness by devaluating the yuan, still less will it launch a currency war[21].

Of the term “globalisation” China adheres only to the aspects of “economic globalisation” vis-à-vis “political globalisation” as perceived in a western context. China does not believe economic globalisation to be the cause of refugee crisis in Middle East or North Africa along with the international financial crisis, however China does consider economic globalisation as a double-edged sword.[22]The refugee crisis in Middle East, Europe and North Africa according to Chinese reasoning is war, conflict and regional turbulence and its solution lies in making peace, promoting reconciliation and restoring stability. Global financial crisis on the other hand have been reasoned as a consequence of excessive chase of profit by financial capital and failure of financial regulation.

According to President Xi Jinping (Davos, 2017), from a historical perspective, economic globalisation resulted from growing social productivity, and is a natural outcome of scientific and technological progress, not something created by individuals or any countries. Furthermore, economic globalisation has powered global growth and facilitated movement of goods and capital, advances in science, technology and civilization, and interactions among peoples. Despite having overcome the fears of economic globalisation, while China now believes it has learnt to swim in the global economy it fears any attempt to cut off the flow of capital, technologies, products, industries and people between economies, and channel the waters in the ocean back into isolated lakes and creeks is simply not possible. This according to President Xi Jinping runs counter to the historical trend. Three major critical issues yet to be addressed in the economic sphere are as following;

•  The growth of the global economy is now at its slowest pace in seven years. Growth of global trade has been slower than global GDP growth. Global economy lack new drivers of growth (such as 3D printing, and Artificial Intelligence) since tradition drivers are now weakened.

•  Inadequate global economic governance makes it difficult to adapt to new developments in the global economy. The fact that 80% of growth of global economy comes from developing countries, however global governance system does not reflect this reality and hence inadequate in terms of representation and inclusiveness.

•  The richest 1% of the world’s population own more wealth than the remaining 99%. Over 700 million people in the world are still living in extreme poverty. Inequality in income distribution and uneven development space are worrying.

With a view to resolve such issues, China seeks an innovation led economic model based on super national interest which is sought not at the expense of others national interest and redouble efforts to develop global connectivity to enable all countries to achieve inter-connected growth and share prosperity. China considers reforming of the global economic governance system a pressing task for the international community by adapting to new dynamics in the international economic architecture through which the global governance system can sustain global growth. Bottom line being China would not like the continuation of a world order where in one can select or bend rules as one sees fit (2010 IMF and The Paris Agreement).

In his address at the United Nations Office at Geneva on 18 January, 2017 President Xi Jinping articulated the following important points significant to Sino-Indian relations and inter-national relations in particular[23];

•  The idea of sovereign equality was the most important norm governing state-to-state relations over the past centuries. The essence of sovereign equality is that the sovereignty and dignity of all countries, whether big or small, strong or weak, rich or poor, must be respected, their internal affairs allow no interference and they have the right to independently choose their social system and development path.

•  Advance democracy in international relations and reject dominance by just one or several countries.

•  All countries should jointly shape the future of the world, write international rules, manage global affairs and ensure that development outcomes are shared by all.

•  Countries should foster partnerships based on dialogue, non-confrontation and non-alliance.

•  Major Powers should respect each other’s core interests and major concerns, keep their difference under control and build a new model of relations featuring non-conflict, non-confrontation, mutual respect and win-win cooperation.

•  Big countries should treat smaller ones as equals instead of acting as a hegemon imposing their will on others.

•  No country in the world can enjoy absolute security.

•  China will never waver in its pursuit of peaceful development. No matter how strong its economy grows, China will never seek hegemony, expansion or sphere of influence.

Analysed in terms strategic thought, the above summary of President Xi Jinping’s speech reveals; (1) China seeks changes to the in-vogue aspects of world economic order (2) It has learnt that in the past nations have adopted incorrect approaches to attempt changes to the economic order by positioning themselves in a conflictual relation with each other, China wishes to avoid such an approach (e.g., Germany and Japan in mid-20th century) guided by its doctrine of peaceful rise (3)In order to secure policies such that of OBOR, China guided by its traditional strategic thinking is positioning itself to success by pre-arranging or setting up the scenario for assured success and adaptation to unexpected uncertainties (4) OBOR, and ideas associated with Chinese Dream have maximum spatial and temporal dimensions. Both seek to address global dimensions of its national narrative within a long-term perspective which begins around the time when Chinese held 30 % share of global GDP.

While China’s OBOR initiative has aroused curiosity in terms of its true strategic intent, its overall implication was expected from China, the second largest economy of the world. The concept of G-2 put forward by former US Assistant Secretary for International Affairs of the US Treasury given China’s appearance as a free rider whose economic rise was as much external as internal expects China to put forward policies where in incurs costs associated with the world economic order[24]. Chinese leadership has agreed that after 30 years of successful economic reforms China was ready to give back to world its economic achievements. According to President Xi Jinping (2017) China will do well only when the world does well.

Conclusion:

The fact that only 28 Heads of State attended the OBOR Forum held at Beijing on May14-15, and major economic powers Germany, France, India, US and UK chose not to represent at the highest level suggests continuation of real-politick. However, this does not take away the theoretical merits of OBOR initiative which seems to deeply reflected by China in strategic terms when the UN General Assembly, the UN Security Council, UNESCAP, APEC, ASEM and the GMS have all incorporated or reflected Belt and Road cooperation in their relevant resolutions and documents. The Asian Infrastructure Investment Bank (AIIB) and Silk Road Fund[25] have provided firm support to financial cooperation[26]. Apart from its execution, in terms of an idea OBOR remains a master stroke where China has let go of its unilateral stakes in the project by allowing for strategic partnership is both economic and security spheres.

For India, OBOR will remain both a challenge and opportunity depending how India develops its economy in near-long term. Trade deficit with its largest trading partner by volume and lack of intra-regional trade in its immediate neighbourhood will remain cause for concern.

Department of Commerce (India)

Despite the challenges offered by OBOR in South Asia which may increase China’s political and economic influence in the region, India has begun the process of investing in its immediate neighbours and developing strategic partnership with extra-regional powers to deal with the unexpected uncertainties. What remains central to India is its partnership with China in coming years. While India and China are the key drivers of world GDP growth amidst financial instability, the potential of their bilateral trade relations is far from optimal, instead it is underperforming. Initiatives of BRICS, New Development Bank, and ASEAN led initiative of Regional Comprehensive Economic Partnership (RCEP)where in India and China have expressed strategic alignment is likely to develop Sino-Indian trade relations further by building on each other’s domestic economic advantages and allow India to integrate with Asia-Pacific region and China with South Asia[27].

RCEP according to Asian Development Bank (ADB) will accelerate China and India’s GDP by 1.45 percent and 1.74 percent respectively. However according toChina’s Ministry of Commerce, in 2015 China’s direct investment in India was $ 3.77 billion which is 0.34 percent of total FDI received by India and 1.34 percent of China’s total FDI abroad. India’s total investment in China was only $313 million in 2014, accounting for 0.34 percent of its total FDI abroad and 1.34 percent of total FDI received by India (International Monetary Fund)[28]. In economic dimension OBOR is less likely to cause negative consequences for India and China bilateral relations as both stand to gain from each other’s economic growth and development.

“Our real enemy is not the neighbouring country; it is hunger, poverty, ignorance, superstition and prejudice.” (The Founder of the Red Cross Henry Dunant cited by President Xi Jinping at Davos – January, 2017)

Having outlined the economic dimensions of OBOR in Sino-Indian context, the final (Part III) analysis will attempt to decode the military security aspect of OBOR within the Sino-Indian Context and clarify its traditional security dimension.