Guest Column
Undersea Dragons in the Indian Ocean?
by Toshi Yoshihara
China has quietly extended its reach beneath the waves of the Indian Ocean. In February 2014, Lt. Gen. Michael Flynn, the then-Director of the Defence Intelligence Agency, testified before the U.S. Senate Armed Services Committee that a Chinese nuclear-powered fast-attack submarine had made its first foray into the Indian Ocean.
In September, a Type 039 Song-class diesel-electric submarine and a submarine tender pulled into Sri Lanka’s Port of Colombo for refuelling and resupply. China’s defence ministry spokesman later confirmed that the submarine was en route to join a Chinese naval flotilla on antipiracy duty in the Gulf of Aden. He described the submarine’s replenishment at a foreign port as “common practice.”
If these moves represent the beginning of a more substantial and persistent Chinese undersea presence in the Indian Ocean, then a more complex and potentially more contentious Sino-Indian maritime relationship could well follow.
China has devoted substantial resources to the build-up of its conventional and nuclear submarine force since the earliest days of the Cold War. Undersea warfare has long been a strong suit for Beijing whereas New Delhi is a relative newcomer to the field. The potential asymmetries in subsurface capabilities have already sensitized India’s threat perceptions of Chinese naval activism in its own backyard.
And, for good reasons. Submarines can perform many missions, all with implications for Indian security. Attack submarines can interdict merchant or naval shipping through torpedo or antiship missile attack, sink enemy submarines, and even strike targets ashore using conventional or nuclear-tipped cruise missiles. Strategic submarines can conduct devastating nuclear strikes against military and civilian targets alike.
China boasts a fleet of diesel-electric submarines (SSKs), nuclear attack submarines (SSNs), and fleet ballistic missile submarines (SSBNs). Each boat type poses different challenges—in character and by degree—to India.
The majority of China’s submarines are diesel-electric boats. They are particularly well suited for defensive missions, such as interdicting an incoming enemy fleet near home waters. Compared to their nuclear-powered counterparts, they lack range, endurance, and speed. On long-distance voyages, the SSKs must refuel along the way, making them more vulnerable to detection and interdiction during hostilities.
While its purposes are unclear, the single Song-class submarine sighted at Sri Lanka could be assigned to low-end intelligence-gathering missions. Such a token presence is at most a nuisance for India. For China, the boat is likely a political signal of its growing interests in South Asian waters rather than an effective tool for projecting sustainable power.
Unlike diesel-electric boats, Chinese nuclear attack submarines—although far fewer in number—pose a more serious danger. Nuclear propulsion allows subs to loiter on station for extended intervals, threatening India’s use and control of sea lines of communication. The aircraft-carrier task forces around which the Indian Navy will be built would be vulnerable to undersea warfare. If fitted with land-attack cruise missiles, Chinese SSNs could even strike at Indian Navy’s bases on the subcontinent. Chinese nuclear attack boats, then, poses a triple threat to Indian overseas commerce, commercial and military shipping, and naval stations.
Chinese fleet ballistic missile submarines pack immense punch with their arsenal of submerged-launched nuclear-tipped ballistic missiles. Given the intercontinental range of the missiles on board the newer SSBNs, China could threaten targets on the subcontinent without leaving home waters. Moreover, China’s mobile land-based missiles can fulfil most of Beijing’s nuclear strike missions against India while remaining quite survivable.
Nevertheless, if Chinese SSBNs ever begin cruises in the Indian Ocean, they would have major strategic and symbolic ramifications despite their more limited margin of military utility. The relative invulnerability of an undersea deterrent would furnish an outsized psychological edge to China, exacerbating the already complex geometry of nuclear deterrence in South Asia.
A more permanent and sizable Chinese undersea presence, particularly of a strategic nature, in the Indian Ocean would likely prompt Indian countermeasures far more vigorous than the fairly leisurely responses New Delhi has undertaken to date.
First, Indian governments could devote more resources toward anti-submarine warfare (ASW) capabilities, investing in indigenous and foreign-bought diesel and nuclear attack boats, ASW-capable surface vessels, and fixed- and rotary-wing ASW aircraft.
Second, New Delhi could redouble its effort to upgrade its military presence on the Andaman-Nicobar Islands, a strategic outpost located west of the Malacca Strait. From there, forward-deployed ASW assets could be used to monitor Chinese submarine traffic.
Third, India could forge even closer ties with third parties that have an interest in preserving a stable naval balance of power in the Indian Ocean. These powers, such as the United States, Japan, and Australia, possess formidable anti-submarine forces of their own.
Fourth, India could conduct a more energetic diplomatic offensive stretching from the Indian Ocean littoral to the South China Sea basin. New Delhi could exploit the historical, cultural, and political affinities it enjoys in those areas to counterbalance Chinese efforts to obtain naval access to port facilities.
Finally, although a far more distant prospect, New Delhi could implement outflanking manoeuvres of its own. Should the PLAN deploy SSBNs in the Indian Ocean, then the Indian Navy may repay the favour, inaugurating SSBN patrols in China’s neighbourhood.
While many measures above are already being implemented, some options are clearly in tension with each other. Forward SSBN patrols in the South China Sea, for example, would be unwelcome for ASEAN, committed as it is to a region-wide nuclear-free zone. India would have to carefully balance its strategic needs and the imperatives of regional diplomacy.
There is no reason, yet, for India to overreact to these few Chinese undersea probes. But, it would be imprudent to dismiss these indicators altogether as isolated or one-off events. After all, no one would have predicted a decade ago that the Chinese navy, by late 2014, could claim credit for nearly six years of uninterrupted antipiracy patrols in the Gulf of Aden. China could well surprise again.
Toshi Yoshihara is John A. van Beuren Chair of Asia-Pacific Studies at the U.S. Naval War College.
Opinions expressed in this paper do not necessarily reflect the views of the Lee Kuan Yew School of Public Policy, National University of Singapore.
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News Reports
Bilateral Relations
China expresses concern about Indian border road plan
Reuters, October 15
China expressed concern after India announced plans to build a road along the remote eastern part of their disputed border, saying it hoped India would not “further complicate” the festering disagreement. China defeated India in a brief war in 1962 and the border has remained unresolved since, despite 17 rounds of talks. The two armies cannot even agree on where the Line of Actual Control, or the ceasefire line following the fighting in 1962, lies, leading to face-offs between border patrols. In September, India eased curbs on building roads and military facilities within 100 km (62 miles) of the contested border in remote Arunachal Pradesh, so as to hasten construction of some 6,000 km (3,730 miles) of roads. The move came as Chinese President Xi Jinping visited India, in a bid to defuse the deep distrust between both countries, despite growing trade and business ties.
‘No one can threaten India’, says Rajnath Singh on China’s reaction to Arunachal border road issue
Deccan Chronicle, October 16
With China reacting sharply to government’s plans to construct a border road in Arunachal Pradesh, Home Minister Rajnath Singh sent a strong message, asserting that no one can warn India. “Today, no one can give warning to India. We are a very powerful country,” he told reporters on the sidelines of a function here. Singh was asked about China’s strong reaction to plans to construct a road network along McMahon line from Mago-Thingbu in Tawang to Vijaynagar in Changlang district of Arunachal Pradesh to match China’s infrastructure development. “There is a dispute about the eastern part of the China-India border. Before final settlement is reached we hope that India will not take any action that may further complicate the situation,” Chinese Foreign Ministry Spokesman Hong Lie had said in Beijing. The Home Minister today said India and China should sit together to resolve the border dispute. Government is taking a number of steps for improving infrastructure along the Sino-Indian border, especially in Arunachal Pradesh and Jammu and Kashmir.
India, China plan counter-terror drills to build trust
Hindustan Times, October 17
India will hold counter-terrorism exercises with China despite a recent face-off on their disputed border, officials said, in a sign the two governments want to manage their deep differences. India, which under Prime Minister Narendra Modi has struck an assertive national security posture, also agreed to China’s request to move next month’s exercises away from the border with Pakistan with which China shares a close relationship. The manoeuvres will come just weeks after thousands of Indian and Chinese soldiers confronted each other on their de facto border in the western Himalayas, accusing each other of building roads and observations posts in disputed territory. “The exercises are a confidence-building measure, it is in everyone’s interest,” Jayadeva Ranade, the China specialist on India’s National Security Advisory Board, told Reuters. “It doesn’t mean anyone is conceding anything.”
India, China agree to defuse tensions
The Hindu, October 18
Indian and Chinese diplomats agreed to defuse tensions of the past three months at a two-day meeting of the Working Mechanism for Consultation and Coordination on India-China Border Affairs (WMCC) in Delhi that concluded here on Friday. But a month after Chinese President Xi Jinping and Prime Minister Narendra Modi committed to restarting the high-level talks of Special Representatives on border issues, India is yet to announce its nominee for the dialogue. Sources tell The Hindu that officials in New Delhi and Beijing are deadlocked over “issues of bureaucratic rank,” given that Chinese Special Representative Yang Jiechi is a “state councillor,” equal to the Indian rank of Minister of State, while National Security Adviser Ajit Doval, who would have been the obvious choice for the post, has not been designated to that rank. Experts say the delay has come at the cost of resumption of dialogue at the highest level, making the Line of Actual Control more vulnerable to stand-offs of the kind seen in Chumar since July 25 — first over the construction of a road near Chumar by China and then an irrigation canal and observation post by India.
China’s surveillance cameras raise hackles in India
Hindustan Times, October 20
Nearly a month after the standoff between Indian army jawans and China’s People’s Liberation Army ( PLA) troops in the sensitive Chumar sector in Ladakh, the high-resolution surveillance cameras installed by the neighbouring country along the international border in Himachal Pradesh has raised hackles among Indian security agencies. China has erected watch towers and installed high-resolution cameras along the border in the tribal Lahaul and Spiti district. China’s activities have become a fresh cause of concern for Indian security agencies manning the international border along Himachal Pradesh. Chinese activities were discussed in detail at the high-level intelligence sharing meeting between the central and state agencies held here. Sources told Hindustan Times that the People’s Liberation Army had erected new watch towers to keep vigil on movement of Indian troops amidst the continued territory standoff in Chumar sector. “High surveillance cameras close to India’s border with China is a matter of concern,” said an intelligence source.
Beijing, New Delhi establish hotlines to defuse border tensions
People’s Daily, October 21
Beijing has praised the “strong” determination that both China and India showed in handling border problems, after the neighbors agreed to establish hotlines and hold regular military meetings to deal with the issue. Both governments have made remarkable progress in recent years in defusing border tension, observers said. A key meeting on border issues was held in New Delhi, gathering senior officials from diplomatic and defense authorities from both countries. The meeting reached a consensus on a range of measures and agreed to establish “regular meetings” involving the headquarters of the two militaries, adjacent combat units and border defense forces. “A telephone hotline will be established between the two headquarters and a telecommunication liaison will be set up between the frontline forces of both countries,”Foreign Ministry spokeswoman Hua Chunying said in Beijing.
Chinese incursion during Xi visit uncommon: ITBP chief
Hindustan Times, October 23
Indo-Tibetan Border Police (ITBP) chief Subhas Goswami termed the incursion by China in Ladakh during the recent visit of its President Xi Jinping to India as ‘uncommon’ as it had gone on for a fortnight, unlike in the past when such incidents didn’t last more than 10-15 minutes. Forces of the two countries were involved in a face-off at Chumur in Ladakh for a fortnight beginning September 11. The matter had clouded the Chinese President’s three-day visit to India. Extremely careful with his words and refusing to disclose the number of times the Chinese forces crossed into the Indian territory this year, Goswami said, “It was uncommon as normally such incidents do not last for more than 10-15 minutes. When they come, we show them a banner telling them that the territory is of India’s and ask them to go back. They normally do. But this time the incident lasted for long.” He also termed as ‘routine’ incidents that are resolved in 10-15 minutes. Goswami said that incursions by China take place due to the perceptional difference vis-a-vis each other’s territories.
Peace with China not at cost of honour: Rajnath
Hindustan Times, October 24
Home minister Rajnath Singh on Friday said that India wants peace with China but that cannot come at the cost of honour. “We want peace with honour. Peace cannot come at the cost of honour,” he said, referring to the recent border row with China. “Pride is the ultimate accomplishment of a human being, of mine and yours,” he said, addressing the 53rd raising day function of the Indo-Tibetan Border Police (ITBP) , which guards the Sino-Indian border.Singh said Prime Minister Narendra Modi has made it clear that New Delhi wants to maintain peaceful relations with all its neighbouring countries and wanted to resolve border issues peacefully. The home minister said China often raises question over the border and even had raised objections when India wanted to improve border infrastructure within its own territory.
Indian Air Force Asks Personnel Not to Use Chinese Xiaomi Phones
NDTV, October 24
The Indian Air Force has asked its personnel and their families not to use Chinese ‘Xiaomi Redmi 1s’ phones as it believes these phones could be transferring data to their servers in China and hence be a security risk. “F-secure, a leading security solution company, recently carried out a test of Xiaomi Redmi 1s, the company’s budget smartphone, and found that the phone was forwarding carrier name, phone number, IMEI (the device identifier) plus numbers from address book and text messages back to Beijing,” says an advisory issued by the Air Force to its personnel.
India has got better ‘youth power’ than China: Vasundhara Raje
The Economic Times, October 26
Attributing the credit to the youth for the change of the guard in the state and at the Centre, Rajasthan Chief Minister Vasundhara Raje today said India has got better “youth power” than China and the country will lead with it. Due to China’s family planning norms, the youth power and their representation was getting lower than Indian youths who had brought a sea change in democracy, Raje told the elected functionaries of Akhil Bhartiya Vidhyarthi Parishad (ABVP) of state colleges and universities here at a one-day event. The victory of ABVP candidates did not come all of a sudden, but dedication of students in last fifteen years that brought ABVP presidents in seven universities, 160 colleges, and 400 other elected students on various posts in Rajasthan, she said.
News Reports
China and India in the Regions
China urges India, Pakistan to control tensions
People’s Daily, October 15
The Chinese Foreign Ministry urged India and Pakistan to stop fighting and control tensions through dialogue and consultation. As a neighbor and friend of both India and Pakistan, China called on the two countries to keep restraint, cease fire and properly handle disputes through dialogue and consultation. They should make joint efforts for South Asia’s peace, stability and development, said Foreign Ministry spokesman Hong Lei at a daily press conference. He said China is watching the situation between the two countries.
China, Japan, ROK hold cyber security meeting in Beijing
Xinhua, October 22
Senior diplomats from China, Japan and the Republic of Korea (ROK) gathered in Beijing for a cyber security meeting to enhance trust and cooperation in cyberspace, a spokeswoman said. The meeting is the first of its kind since the establishment of the China-Japan-ROK cyber security consultation mechanism this year, Chinese Foreign Ministry spokeswoman Hua Chunying said at a regular news briefing. The three countries discussed the process of building trust online within the framework of the International Telecommunication Union, the Association of Southeast Asian Nations (ASEAN) Regional Forum, BRICS — Brazil, Russia, India, China and South Africa, and the Shanghai Cooperation Organization, according to Hua.
China welcomes India’s participation in AIIB: spokeswoman
Xinhua, October 23
China welcomes India to participate in the Asia Infrastructure Investment Bank (AIIB) proposed by China, a Foreign Ministry spokeswoman said. Hua Chunying made the comments when replying to a journalist’s question at the ministry’s daily press briefing. In September 2014, representatives of 21 Asian economies willing to be AIIB founding members, including India, attended a conference on setting up the AIIB in Beijing, said Hua.
China criticizes U.S. missile defense radar in Japan
Reuters, October 23
The United States is damaging stability in the Asia-Pacific region by positioning a missile defense radar in Japan, China said on Thursday. Japan, an ally of the United States, has voiced growing anxiety over China’s more assertive posture in the East China Sea, where the neighbors are locked in a dispute over control of a group of uninhabited islets. “Neighboring countries pushing forward the deployment of anti-missile systems in the Asia-Pacific and seeking unilateral security is not beneficial to strategic stability and mutual trust in the region,” Chinese Foreign Ministry spokeswoman Hua Chunying told a regular briefing. “It is not beneficial to peace and stability in Northeast Asia.” Countries should not use “excuses to harm the security interests of other countries,” Hua added, describing the situation as “deeply concerning”.
China not to join sanctions against Russia — Chinese ForMin
Russia & India Report, October 24
The Chinese government will not join economic sanctions against Russia over the events in Ukraine, Chinese Foreign Ministry spokesperson Hua Chunying told TASS on Friday. She commented on a statement by Paul Jones, US Principal Deputy Assistant Secretary of State in the Bureau of European and Eurasian Affairs. “We come against any sanctions or threats because they are not an effective method of solving problems. We believe that the political settlement of the situation in Ukraine is the only right way of solving problems,” Hua Chunying said. “China supports the efforts by the parties involved in the Ukrainian issue to improve the dialogue in order to search for comprehensive political settlement that will meet the interests of all sides,” she said. “The Asian countries have their own view on the Ukrainian problem. But China is sure that sanctions are useless,” Hua said.
Deal Set on China-Led Infrastructure Bank
The New York Times, October 24
China and 20 other countries signed a memorandum agreeing to create an international development bank that Beijing hopes will rival organizations like the World Bank. But some leading Asian countries refrained from joining the project, which the United States has been quietly lobbying against. Japan, Australia, South Korea and Indonesia were not represented at the signing ceremony for the bank, the Asian Infrastructure Investment Bank, in Beijing. India joined the bank, along with Malaysia, Thailand, Vietnam and the Philippines, news agencies reported. The bank, proposed a year ago by President Xi Jinping of China, is to offer financing for infrastructure projects in underdeveloped countries across Asia. China, which has promised to contribute much of the initial $50 billion in capital, sees it as a way to increase its influence in the region after years of fruitless lobbying for more say in other multinational lending organizations.
China to host international meeting on Afghanistan
Xinhua, October 24
The Fourth Foreign Ministerial Conference of the Istanbul Process on Afghanistan will be held in Beijing on October 31, Chinese Foreign Ministry spokeswoman Hua Chunying said. Chinese Foreign Minister Wang Yi and his Afghan counterpart Zarar Ahmad Osmani will co-chair the meeting, which will be attended by foreign ministers or senior representatives from Afghanistan’s neighbors and near-neighbors, Hua said at a regular news briefing. In November 2011, China, Russia, Afghanistan and Central Asian countries reached an agreement in Turkey known as the Istanbul Process, presenting a new vision for regional cooperation for a secure and stable Afghanistan. The 14 members include Afghanistan, China, India, Iran, Kazakhstan, Pakistan, Russia and Turkey and 28 supporting parties include the United States, Britain, the United Nations and the Shanghai Cooperation Organization.
Dalai Lama US visit will not affect APEC summit: experts
People’s Daily, October 24
The Dalai Lama’s recent visit to Canada and the US will not have any political influence on the upcoming Asia-Pacific Economic Cooperation (APEC) summit, experts said. The Dalai Lama started his three-week visit to North America on October 20. He is scheduled to finish his visit to educational institutes in Canada on Friday and then leave for the US. There are no meetings with Canadian or American political figures on his schedule, according to the website of the Dalai Lama’s office. “Western countries have been very cautious in meeting with the Dalai Lama in the past three or four years, and there’s no chance that he could accomplish any of his political demands,” Niu Xinchun, an expert at the China Institutes of Contemporary International Relations, told the Global Times.
Questions over China-backed infrastructure bank: ADB
Thanh Nien News, October 24
Several questions remain to be answered about an Asian infrastructure lender proposed by Beijing, the Japanese head of the existing Asian Development Bank said. China is expected to sign a memorandum of understanding with around 20 countries towards the establishment of the Asian Infrastructure Investment Bank (AIIB), as Beijing seeks to increase its global heft. “Our position about AIIB is first that it is understandable because there is a very big financing need in the region,” ADB President Takehiko Nakao told reporters. But he said he was still awaiting details about the bank such as membership, shareholdings, the location of its headquarters and who will head it. The AIIB should “adhere to the international standards,” he said. Beijing last year proposed the bank, seen as a potential rival to existing Western- and Japanese-dominated institutions such as the World Bank and the ADB, which is based in Manila.
India conveys concern at China presence in Sri Lanka
The Hindu, October 26
India has expressed serious concern to Sri Lanka over China’s increasing military presence on the island, it is reliably learnt. Official sources in New Delhi told The Hindu that Sri Lankan Defence Secretary Gotabaya Rajapaksa’s India visit last week was for a meeting in this connection.The Defence Secretary, who is the brother of President Mahinda Rajapaksa, met National Security Adviser (NSA) Ajit Doval and Defence Minister Arun Jaitley. “The meeting was held to raise the issue of a Chinese submarine calling at a Sri Lankan port last month. It is of serious concern to India’s national security,” said a senior official, who requested anonymity.
India to spy its ‘borders’ with Israeli drones
Daily Times, October 26
The Northern Command of the Indian Army has recently purchased 49 miniature unmanned aerial vehicles to patrol its ‘border region’ with Pakistan and China, a foreign media reported. The report said that the Indian Army would deploy these Israeli drones to carry out ‘reconnaissance mission’ over its ‘border areas’ after soldiers of the People’s Liberation Army of China set up camp in Ladakh, part of disputed state of Jammu Kashmir, on the night of April 15. The Chinese Army soldiers were located 10 kilometres inside the Line of Actual Control, a de-facto border that runs across the Himalayas between China and areas of the Indian-held Jammu Kashmir. An ‘official border’ between China and India was never drawn following a 1962 war. “The drones are the true ‘game changers’ in India’s ‘territorial dispute’ with China,” the military-run Indian Defence News reported.
As Ebola Spreads, Asia Senses Vulnerability
The New York Times, October 26
With hundreds of advanced infection-control hospital rooms left over from the fight against SARS, and with some medical professionals suggesting that the Ebola virus was inherently fragile and unlikely to spread in places with modern medical facilities, many doctors in Asia paid little attention to the disease until very recently. But that confidence — some say complacency — was punctured two weeks ago when two nurses in Dallas and another in Madrid fell ill while treating patients who had contracted the Ebola virus in West Africa. Governments and doctors around Asia are now much more worried that the region’s densely populated cities and towns could be vulnerable if infected people start flying here from Africa.
Oil, defence top Vietnam PM’s agenda
The Hindu, October 27
Vietnam’s Prime Minister Nguyen Tan Dung will arrive in India for a two-day visit, and the bilateral agenda will be seen as another strong assertion of India’s interests in the South China Sea. China will be closely watching the visit. The Hindu has learnt that India and Vietnam will sign three agreements, one an MoU on prospecting by OVL (ONGC Videsh Ltd.) in two more fields in the South China Sea. Discussions will be held on supplying naval vessels to Vietnam. Both issues had seen statements of concern from Beijing in the past. However, officials confirmed that the current blocks under discussion to be signed during this visit, part of a batch of five offered by Vietnam in November, are in Vietnamese territorial waters, and not disputed. The agreements, which will include oil exploration, economic and cultural cooperation, will be signed after meetings between Prime Minister Narendra Modi and Mr. Nguyen in Delhi.
News Reports
Trade and Economy
China’s slowing growth will impact LatAm: Economist
People’s Daily, October 13
The impact of economic deceleration in China is felt far beyond the Greater China Region and could have an impact on a number of Latin American nations, according to an economist with the World Bank. “Deceleration is not specific or unique to Latin America,” Augusto de la Torre, the World Bank’s chief economist for Latin America and the Caribbean, said through a translator. “Most of the emerging countries in the world, including China, India and Eastern Europe,are seeing deceleration in their growth rates that are quite significant and even greater than what’s seen in Latin America.” “The two most important external factors adversely hitting LAC (Latin America and Caribbean) seem to be the falling commodity prices and the deceleration in China,” a World Bank report said. “This is particularly important for LAC countries that depend on China for their exports and that have counted on China’s investments in their own economies.”
Stockpiles prompt cutbacks in palm oil output
China Daily, October 13
Palm oil production in Malaysia, the biggest supplier after Indonesia, probably dropped the most in seven months in September after reaching a record in August. Futures climbed the most in more than a week. The market is finding support from increased demand by importers while producing areas in top growers Indonesia and Malaysia are experiencing dry weather, Oil World said on Sept 30. Demand has expanded from buyers in India, China, Europe and other countries, the Hamburg-based researcher said. Rainfall in the first 20 days of September was “well below normal” in parts of Indonesia and Malaysia, it said. “In terms of demand, I don’t see much of a significant catalyst,” Ben Santoso, analyst with DBS Vickers said. “In India, they would already have stocked up for Diwali, and China is still weak in terms of demand.”
More Than 82 Million Chinese Live on Less Than $1 a Day
The Wall Street Journal, October 15
China lifted nearly 40 million people out of poverty in 2013, by its own measure, but more than 82 million rural Chinese still get by on less than $1 a day, a senior government official said. “Poverty is still a salient problem in China,” Zheng Wenkai, a vice-minister at a government office responsible for poverty alleviation and development, said at a news briefing Tuesday, according to the state-run China Daily newspaper. About 200 million Chinese, or 15% of the country’s population, would be considered poor by international poverty measures, set at $1.25 a day, Mr. Zheng added. China’s poor are often beset by inadequate infrastructure and a lack of access to education, healthcare and loans, and are vulnerable to natural disasters, Mr. Zheng said at the briefing, according to the Global Times tabloid. China accounted for 8% of the world’s “extreme poor” as of 2011, down from 13% a year earlier, according to the latest World Bank estimates. Only two countries contributed a larger share in 2011—India with 30% and Nigeria with 10%. Even so, China and India have been instrumental in reducing global poor in recent years, lifting a combined 232 million people above the international poverty line from 2008 to 2011, the World Bank said in a report released last week.
India home to 11th largest population of uber-rich people
Hindustan Times, October 15
Although the global economic environment has remained challenging, total global wealth has grown to a new record and has doubled since the year 2000, a report by the Credit Suisse Research Institute said. Meanwhile, personal wealth in India and China has risen by a factor of 3.1 and 4.6 respectively. Indians accounted for a quarter of people in the bottom half of wealth distribution. Immense wealth inequality and immense population mean that India also has significant number of members in the top wealth echelons, says the report. China has very few representatives at the bottom and top of the global wealth distribution but dominates the middle of the section. Despite recent increases, wealth inequality in China is not high by standards of developing world.
DPRK woos investors at China expo
People’s Daily, October 20
A 500-strong trade delegation from the Democratic People’s Republic of Korea (DPRK) is promoting the country’s investment opportunities at a four-day expo in China’s border city of Dandong, Liaoning Province. The third China-DPRK Economic, Culture and Tourism Expo, has seen 70 million yuan (about 11.6 million U.S. dollars) of trading, agreements on eight investment contracts worth 100 million U.S. dollars, and 60 trade agreements worth 1.26billion U.S. dollars in total. Shi Guang, mayor of Dandong, said the expo has drawn 100 DPRK exhibitors, 96 companies from Russia, India, China’s Taiwan and Hong Kong, as well 210 companies from the Chinese mainland.
First Sino-India joint venture film, starring Jackie Chan, launched
Hindustan Times, October 22
Chinese action star Jackie Chan will star in the first Sino-India joint film production slated to go on the floors in the coming months. This will be the first co-production film venture between the two countries under the memorandum of understanding (MoU) on audio-visual cooperation signed during President Xi Jinping’s India visit in September. The September MoU was signed to “pool their creative, artistic, technical, financial and marketing resources to co-produce films. It would help Indian audio-visual products to gain greater market access,” an official statement said after the signing. Tentatively titled, Kungfu Yoga, the action-comedy joint venture film will be directed by Chinese director, Stanley Tong, who had earlier directed the 2005 movie, The Myth.
AIIB authorized capital amounts 100 billion U.S. dollars
People’s Daily, October 24
The Memorandum of Understanding on Establishing the Asian Infrastructure Investment Bank (AIIB) specifies that the authorized capital of AIIB is 100 billion U.S. dollars and the initial subscribed capital is expected to be around 50 billion dollars. The paid-in ratio will be 20 percent, according to Chinese Finance Minister Lou Jiwei. Lou said Prospective Founding Members have agreed that GDP will be the basic parameter in determining share allocation among member countries. Therefore, China will be the largest shareholder. Twenty-first Asian countries that are willing to join AIIB as founding members signed the MOU. As agreed, Beijing will be the host city for the AIIB’ s headquarters. The 21 countries are Bangladesh, Brunei, Cambodia, China, India, Kazakhstan, Kuwait,Laos, Malaysia, Mongolia, Myanmar, Nepal, Oman, Pakistan, the Philippines, Qatar,Singapore, Sri Lanka, Thailand, Uzbekistan and Vietnam.
Asia economic growth to languish as China slows: poll
Reuters, October 24
Emerging Asia will contribute less to the global economy in 2015 than was expected just months ago as a slowdown in China drags on growth in the region, partially offset by acceleration in the United States, Reuters polls showed. Until recently the primary engine of global growth, most Asian economies have slowed, hamstrung by erratic exports, sluggish domestic demand, capital outflows and political and policy uncertainty. Estimates for 2015 GDP growth were either cut or left unchanged for nine Asian countries in the latest poll of over 200 economists conducted over the past week, with Hong Kong, Indonesia and Singapore bearing the brunt of the downgrades. India, Malaysia and Thailand were the few economies for which economists made slight upgrades to growth projections.
India world’s 4th largest steel maker at 62.41 MR in Jan-Sept
The Hindu, October 26
With 62.41 million tonnes output, India remains the world’s fourth largest steel producer in the first nine months of the current year, preceded by China, Japan and the US. World Steel Association (WSA) data showed India’s steel production grew by 1.8 per cent, the second highest among the top four steel producing nations, during the January-September period from 61.27 MT in the same period last year. India has been the world’s fourth largest steel maker for the last four years. The order is likely to remain unchanged in current year too, an industry expert said. During the first nine months, China produced 618 MT steel which is a little more than half of world’s total production at 1,231 MT. China logged 2.3 per cent growth during the period. But its steel production remained static in September, as per data revealed by WSA, at 67.5 MT when compared with the same month last year.
India Inc hails creation of Asia Infra Investment Bank
The Hindu Business Line, October 24
India Inc today welcomed the country’s participation in the newly—established Asia Infrastructure Investment Bank (AIIB) saying it will help to leverage badly needed funds for infrastructure development. The moot point is that large economy like India really needs financing badly as it requires over a trillion USD for infrastructure development, A Didar Singh, Secretary General of the Federation of Indian Chambers of Commerce and Industry (FICCI) said today. India along 20 other countries signed the Memorandum of Understanding (MoU) to be its founding member. “It is a very positive development in the sense that it opens up more borrowing opportunities. As another window of financing we welcome it,” Singh told PTI. “There is tremendous requirement of funding in India for the a trillion USD infrastructure development. It is not possible for the Indian banking sector to manage that kind of investment,” despite the presence of Asian Development Bank (ADB) and other multilateral financing bodies.
News Reports
Energy and Environment
India to pay Iran $500 mln next week as second part of oil deal
Reuters, October 17
Indian refiners will pay $500 million to Iran next week, the second installment in an interim deal that allows Tehran to recover part of overseas frozen oil revenues that are payments for oil it has sold, two industry sources said. Indian refiners together owe about $6 billion to Iran. They are depositing payments in rupees in an Indian bank. Iran uses these funds to pay for imports from India. Iran’s top oil client after China, India has imported 38 percent more oil from Tehran in the first nine months of this year than in the same period last year, tanker data obtained by Reuters show.
Nigeria sees higher 2015 growth, oil price risk
Reuters, October 21
Nigeria expects economic growth for 2015 to reach 6.75 percent, an improvement on this year’s forecast of 6.2 percent, despite the risks posed by falling global oil prices to government revenues, its finance minister said. Okonjo-Iweala said “U.S. demand (for Nigerian oil) has fallen to zero but has been substituted by China and India”, so sales remained strong. Brent crude oil, which Nigeria produces, has lost more than 25 percent since June. Losses accelerated in October on signs the Organization of the Petroleum Exporting Countries had no plan to cut output.
India’s ONGC plans $180bn spending spree
Financial Times, October 26
India’s Oil and Natural Gas Corporation plans to launch a “huge” global acquisition spree, as the state-backed energy flagship delivers an aggressive Rs 11tn ($180bn) investment push to take on Chinese rivals and drive foreign production up sevenfold by 2030. ONGC has historically been viewed as a conservative, mid-sized global energy player, held back by cautious management and risk-averse political leadership in New Delhi. It also has often lost out to more aggressive state-backed Chinese energy groups in the race to snap up foreign oil and gas fields, analysts say. India is set to overtake China to become the largest source of growth in global oil demand by 2020, according to the International Energy Agency. Almost of all of this increase will be met via imports, given India’s limited domestic production.
Vietnam wants more Indian oil exploration projects in South China Sea
The Hindu, October 26
On the eve of its Prime Minister’s visit here, Vietnam today favoured greater participation by Indian companies in oil and gas exploration projects in South China Sea, a huge source of hydrocarbons, and promised to extend full security to them. Newly appointed Vietnamese Ambassador Ton Sinh Thanh rejected China’s objection to Indian oil exploration projects in South China Sea, asserting that that his country has the “right” to protect its interests. “We hope that more oil and gas ventures of India can be done in Vietnam and we will create favourable condition for them,” Ton told PTI. The Ambassador said all oil exploration projects by India in South China Sea have been within the territorial waters of Vietnam and it will provide “full security” to Indian companies involved in them.
Will look into Vietnam offer of oil blocks in South China Sea: India
The Indian Express, October 27
India has said it is examining Vietnam’s offer of additional oil blocks in the South China Sea. Vietnamese Prime Minister Nguyen Tan Dung is scheduled to arrive in the country Monday for a two-day visit. During the October 27-28 visit, he will meet Prime Minister Narendra Modi and sign bilateral agreements. He will also visit Bodh Gaya and meet Bihar Chief Minister Jeetan Ram Manjhi. “Vietnam has offered some oil blocks in South China Sea. We are examining it and if they are commercially viable for us we will take that into account and proceed further,” the Ministry of External Affairs’ spokesperson said. ONGC Videsh Ltd has operations in number of oil blocks in South China Sea which were offered to it by Vietnam. China and Vietnam have an acrimonious relationship due to their stand-off over the South China Sea, a huge source of hydrocarbons. China has been objecting to India’s oil exploration projects in the disputed waters.
EU’s green gambit: Pressure now on US, China and India over 2025/2030 goals
Live Mint, October 27
Just a few days back, leaders of the 28-country European Union (EU) announced that the EU as a whole would cut its emissions of greenhouse gases by at least 40% by 2030 on 1990 levels. They also agreed to a renewable energy market share of 27% and a 27% increase in energy efficiency by 2030. The operational aspects of the three decisions have been left vague so that a consensus could be reached since countries like the UK, Poland and Portugal have been baulking. Clearly, Europe is once again sending a signal to countries like the US, China and India in the run-up to the UN Climate Change Conference to be held in Paris in December 2015 when a new international agreement to curb global warming is expected to be finalised.
Analyses and Commentaries
India’s development potential often overestimated despite its unique advantages
Global Times, October 14
Many foreign media outlets have expressed optimism at the prospect of the India’s development and have even predicted it will prove the victor in its race with China. Some Chinese people also think that India enjoys unique advantages. During his visit to the US, Indian Prime Minister Narendra Modi promoted India’s rise and claimed that its democracy, demographic dividend and market demand constitute the country’s ongoing advantages. There is no denying that India boasts many incomparable advantages in its rising process; these, however, do not necessarily constitute the ingredients for an Indian century, opine Sun Xihui. There is no necessary connection between democracy and economic development. The Philippines cloned American democracy, but its economy has long lagged behind other ASEAN member states. Thailand, Ukraine, Egypt and other nations with a democratic system have not been able to ensure social stability and development. In India, economic growth is often hindered by its so-called democracy. With its inefficient bureaucracy, grave corruption and lack of effective regulations, India frequently witnesses violent crimes. All these demonstrate that good governance and rule of law, instead of Western-style democracy, will be the foundations of India’s rise.
The Great Game Folio – Russia hugs China
The Indian Express, October 17
The extended crisis in Ukraine and the growing tension between Russia and the West are likely to pose a major challenge for India’s foreign policy, writes C. Raja Mohan. As Russia embraces China to relieve the pressures from the West, India’s room for geopolitical manoeuvre in Asia and beyond is bound to shrink. For nearly half a century, New Delhi’s strategic partnership with Moscow has survived many twists and turns, including the collapse of the Soviet Union. Much like China’s ties with Pakistan, India’s relations with Russia seemed to constitute an all-weather partnership. One big factor cementing Delhi’s ties with Moscow over the decades was their common apprehension about China, which shares long borders with both India and Russia. The rapid rise of Chinese power relative to Russia and India over the last two decades suggested Moscow and Delhi needed each other even more today in securing a stable Asian balance of power. The significant expansion of Russia’s economic, security and political ties with China, however, begin to pose a problem for India.
India Steps Up Defense Cooperation with Sri Lanka and Maldives
The Diplomat, October 21
Ankit Panda writes that India is reportedly stepping its defense cooperation with Sri Lanka and the Maldives, two island states in the Indian Ocean. According to the Times of India, the assistance will focus primarily on “capacity building” of the armed forces of both countries. New Delhi will supply equipment and assist in training. The decision to ramp up defense ties with Sri Lanka and Maldives was likely spurred by China’s interest in both those countries. Prior to his visit to India, Chinese President Xi Jinping visited both Sri Lanka and the Maldives where he promoted China’s Maritime Silk Road initiative and emphasized maritime complementarities between China and the two Indian Ocean states. Meanwhile, India and China are holding counter-terror drills along their disputed border, where they had a major face-off involving over a thousand troops from both sides less than a month ago. The exercises are being promoted as a confidence-building measure following last month’s stand-off in the Chumar sector of Ladakh.
New bank a challenge for Bretton Woods
China Daily, October 24
Cecilia Tortajada and Asit Biswas write that emerging economic powers such as China, India and Brazil have long been demanding greater share of votes in multilateral development institutions like the World Bank, International Monetary Fund and the Asian Development Bank to reflect their recent phenomenal growth. China’s economy is expected to grow to $10 trillion this year, yet its share of votes in the Bretton Woods institutions is only 3.72 percent, compared with 17.4 percent for the United States. The existing situation is frustrating for emerging economies, because less voting power means less say in deciding where funds from these institutions should go. Also, most developing countries are unhappy with the unfair conditions imposed on them by the Western powers. Unwilling to accept the status quo and answering critics, especially the US, that have long argued that China assume greater global responsibilities in areas like climate change and arms proliferation, President Xi Jinping surprised his Indonesian hosts during a state visit last year by initiating the formation of the Asian Infrastructure Investment Bank.
US Economists Warn on China, India Growth Slowdown
The Diplomat, October 24
Anthony Fensom writes that China’s slowdown may have rattled markets, but optimism over the region’s longer-term prospects could be blinded by “Asiaphoria” similar to Japan’s earlier rise, according to U.S. economists. The warning in a research paper by former U.S. Treasury Secretary Lawrence Summers and fellow Harvard economist Lant Pritchett has added to concerns over Asia’s ability to remain the powerhouse of the global economy, amid a sluggish world recovery. According to the two U.S. economists, growth in Asia’s billion-plus population “giants” of China and India is more likely to slow to a developed world pace of 2 percent a year than maintain current rates, a “full regression to the mean” that challenges optimistic forecasts over the region’s eventual global economic dominance.
Washington Must Recognize India as Another Great Power to Be
Huffington Post, October 25
Before becoming prime minister, India’s Narendra Modi was barred from receiving a visa to visit the U.S. A rising leader in the Hindu nationalist Bharatiya Janata Party (BJP), he was tied to deadly sectarian violence. But now, backed by an overwhelming parliamentary majority, he leads one of Asia’s most important powers. The Obama administration rolled out the red carpet when he visited. The prime minister’s visit to America offers an opportunity for a reset in bilateral relations, writes Doug Bandow. The Bush administration made a major push to improve ties by accepting New Delhi’s development of nuclear weapons, in contrast to the Clinton administration, which imposed economic sanctions. But little progress has occurred during the current administration, despite a meeting of the U.S.-India Strategic Dialogue in 2010. Indeed, controversies over trade policy and criminal charges against an Indian diplomat put the two governments at sharp odds. The result is a lost opportunity for both nations.
Make in India vs. Make in China
The Hindu, October 26
Markets across Indian towns and cities that are flooded with Chinese products, more so around festivals such as Diwali, are grim reminders of how Made-in-China has come to dominate Indian offices and homes, writes Puja Mehra. The previous week, Tata Motor’s Jaguar Land Rover (JLR) opened its first plant in Changshu, China. The luxury car-maker’s $1.78-billion Make-in-China push has come a little over a month after Tata Group chairman Cyrus Mistry confessed to be greatly encouraged under Prime Minister Narendra Modi’s leadership to join the “Make In India” programme that, he said, brings together industry and government for crafting a new future. When companies such as Tata Motors choose where to locate a new factory, they consider a range of factors. But India fares badly on most of the counts. For instance, contract enforcement takes 1,420 days and going through the 12 procedures for starting business typically takes 27 days. India’s chronic infrastructure and logistics deficit with inefficient transport networks makes it tough for manufacturing companies to achieve just-in-time production.
Beijing lessons for Delhi?
The Hindu, October 26
As Prime Minister Narendra Modi’s “Make in India” project to boost domestic manufacturing capacity gains momentum both in terms of policy focus and the public discourse, The Hindu turned to academic experts to ask what substantive macro-changes are required to make the campaign a reality and not merely a catchy slogan. Professor Sudhir argues, “There is hope that if Mr. Modi [Prime Minister Narendra Modi] sets the right regulatory tone for India, we may be able to unleash the kind of growth China has had in the past 10 years,” he says, a target that is by no means certain, but by no means impossible.” Economics Professors Nicholas Bloom and Megha Patnaik of Stanford University argue that a focus on increasing the competitiveness of Indian firms through higher Foreign Direct Investment and on improving ease of business through better rule of law is required, in addition to managerial training on current best global practices.
Wrong signals as Make in India gets under way
The Hindu, October 26
The Nokia plant shutdown was announced close on the heels of the launch of the high-profile campaign. For the Modi government, it is a big embarrassment. The impending closure of the Nokia plant at Sriperumbudur, near Chennai, on November 1 has come at the wrong time. For, the shutdown was announced close on the heels of a high-profile “Make-in-India” campaign launched by Prime Minister Narendra Modi. Nokia’s decision may well have a wider ramification for Foreign Direct Investment (FDI). K. Jagannathan looks at what went wrong with regards to Nokia’s investment, and its wider ramifications. The State government’s tax demand aggravated Nokia’s misery and conspired to hasten the shutdown. The attitude of the governments at the Centre and in the State in this instance was in sharp contrast to those of the authorities in China, who go head over heels to woo FDI.
Will China Fund the World’s Next Round of Economic Expansion?
Forbes, October 26
Earlier this month, the International Monetary Fund downgraded its outlook for global economic growth, citing weaker expansions in the Eurozone and several emerging markets. IMF chief Christine Lagarde warned that the economic recovery is “brittle, uneven and beset by risks” and that the world might experience “a new mediocre” era of subpar growth for a long time.” At a time when inadequate demand, high debt and low investments continue to pose challenges to a sustained economic recovery in the West, the spotlight is again shifting to the big dog of the emerging world, China. This time, however, the focus is not on China’s growth prospects, but the potential for Chinese capital to revive growth in the developed world, writes Shrey Verma. A new report by Deutsche Bank, The Wide Angle: The Age of Chinese Capital,argues that China’s large current account surpluses will define the next round of economic expansion globally in what could be termed “Bretton Woods Three.” According to the author, Sanjeev Sanyal, global strategist at Deutsche Bank, the scale of capital outflow could be so large as to negate the effects of monetary tightening pursued by central banks around the world.
India Cannot Look Up to China for its Energy Security
The Indian Republic, October 26
Sunjoy Joshi writes that “every time we scour the international market for fuel imports, our companies invariably run against the third C – the Great Wall of China. It is a wall we confront and compete with in every sphere whether it be export markets or natural resources such as oil, gas, coal, cadmium, uranium.” China’s phenomenal growth has been fuelled almost entirely by coal. This is a country with double our coal reserves but six times our production. With these levels of production, China now plays international markets, switching between domestic and imported coal depending on where the price advantage lies. India struggling with sheer availability, remains a price taker, at the mercy of international markets.
China’s cloak of civility hides battle of wills
Financial Review, October 27
China certainly took note of Australia’s absence when President Xi Jinping held his big signing ceremony on the Asia Infrastructure Investment Bank in Beijing, writes Jennifer Hewitt. The Chinese state-run media publicised the signing of a memorandum of understanding at the Great Hall of the People, including the fact that 21 countries were represented. But the reports also pointed out Australia was not present. The official line remains conciliatory. China is suggesting other countries may join at a later date and Chinese officials are briefing the Australian media that Australia will be welcome if it chooses to sign up in future. Behind the polite rhetoric lies a major struggle of wills between China and the United States – as well as allies like Australia. This reflects the level of influence and control China will have in a new body designed to fund regional infrastructure development with start-up capital of $US50 billion ($56 billion) and eventually up to $US100 billion. The idea of a new infrastructure bank is not only Xi Jinping’s personal initiative. The Chinese consider it a necessary counterweight to the World Bank, the Asian Development Bank and the IMF, where leadership is dominated by the West.
Books, Journal Articles and Conferences
BRICS in the Response to Neglected Tropical Diseases
Bulletin of the World Health Organization, June 2014
Amber Cashwell, Anupama Tantri, Ashley Schmidt, Greg Simon and Neeraj Mistry study how the BRICS countries – Brazil, the Russian Federation, India, China and South Africa – can ensure that neglected tropical diseases receive the international attention they deserve. Each of these countries is increasing its role in international cooperation. It has been estimated that BRICS provided 5.6 billion United States dollars in foreign assistance in 2010. As BRICS launch a new development bank and institutionalize dialogue between their heads of state, they will expand their influence from the regional stage to the global stage and strengthen their role as drivers of innovative cooperation. By demonstrating leadership and addressing their domestic disease burdens, Brazil, China, India and South Africa can make a substantial contribution to reducing the global burden of neglected tropical diseases. By building on their individual and collective mechanisms for shaping policy and promoting cooperation, all five of the BRICS countries can enhance the global response to neglected tropical diseases and help other countries to scale up their neglected tropical disease programmes – to reach the remaining 1.4 billion people worldwide who are at risk of developing one or more of these debilitating diseases of poverty.
Rising Powers from Emerging Markets – The Changing Face of International Business
International Business Review, 2014
There is recognition that some emerging economies, in particular China, India and Brazil and their economic dynamism have the potential to change the face of international business (IB). Both in terms of theory but also in terms of the amount of empirical evidence that is currently generated in the domain. Terminology and acronyms such as BRICs, MINTs and ‘rising powers’ are used to highlight the importance of the discourse taking place. However, what is meant by these terms, who is ‘in’ and who is ‘out’ is less clear. Rudolf Sinkovics, Mo Yamin, Khalid Nadvi and Yingying Zhang Zhang attempt to explore the phenomenon of ‘rising’, what we actually mean by ‘rising powers’ and provides an overview of IB contributions to emerging country multinationals.
Asymmetrical Threat Perceptions in India-China Relations
Oxford University Press, 2014
The rise of China and India are undoubtedly a major feature of contemporary global politics. The relationship between the two rising Asian powers will not only exert a profound and far-reaching influence over Asian security, but is also seen as a decisive factor of reshaping international order. To provide a new perspective for understanding India–China relations, this book, written by Tien-sze Fang, draws on evidence from interactions between China and India over the past few years to make an empirical case for the existence and impact of asymmetrical perceptions of threat between the two countries.
China In Indian Ocean Region
Conference, Osmania University, 2014
The UGC Centre for Indian Ocean Studies (UGC CIOS), Osmania University is conducting an international conference on ‘China in Indian Ocean Region’ on November 13 and 14 to discuss and deliberate on China’s growing influence on the Indian Ocean region and its ‘Maritime Silk Route Plan’.