China-India Brief #172

Guest Column

Asia’s Near Future? China’s New Plans and Implications for East Asia and India

By Min Ye    

Image credit: Flickr/Rose Davies

From October 26 to 29, 2020, Beijing held the fifth plenary session of the 19th Communist Party Central Committee, at which it discussed the draft proposal for the 14th Five-Year Plan (2021-2025) and the 2035 Long-term Vision Document. The documents summarised China's development over the last few years and assessed the internal and external conditions for growth in the near future. They incorporated experiences, proposals, and feedback from Chinese central agencies, local governments, and commercial businesses. The documents took broad strokes, covering many areas and issues without laying out any concrete policies and implementation mechanisms. Nevertheless, they represented vital guidelines and directions for development that the Chinese state bureaucracy and affiliated commercial entities will interpret and implement. The Plans will profoundly impact social-economic policies and behaviors across China, and will have considerable impact on neighboring economies. 

What are the priorities of the planning documents?

The official documents are comprehensive but vague, consisting of 15 broad areas and 60 issue points. No concrete policies are offered, and from the wordings, it is hard to comprehend how they will shape China’s development on the ground. However, based on the analysis of some experts, as well as some recently announced projects and programmes, it can be deduced that China's developmental plans for the next five years (2021-2025), and even up to 2035, will have three focal areas: (1) achieving a steady GDP growth target; (2) expanding the domestic market based on consumption and innovation; and (3) enhancing security and sustainability in China.
 
First, is continuing economic growth. Beijing no longer sets numerical GDP growth targets. However, maintaining reasonable rates of annual growth will remain a clear and consistent priority. Statements at the Fifth Plenum and wordings in the planning documents have reiterated China’s long-term goal of achieving great leaps in its economic and technological capabilities by 2035, with its aggregate GDP and per capita income rising to new heights. To put such a vision in perspective, it has been estimated that China’s GDP per capita would need to double by 2035—something that President Xi Jinping has said is “completely possible”. 

Second, Beijing will focus on boosting domestic and international dual circulations. China's dependence on the global market has declined significantly in recent years. With deteriorating external markets, Beijing deems it an imperative to expand the domestic market by eliminating internal barriers and stimulating domestic consumption. With enlarged domestic markets, Beijing aspires to attract global capital, talent, and entrepreneurs, making China a new destination for international investments, imports, and innovation. The goal is to drive simultaneous growth in domestic and international markets, and over time, to achieve integral dual circulations that complement one another. 

Such goals are not abstract. To maintain growth, expand the domestic market, and attract foreign investments. Beijing needs to integrate institutions and infrastructure across the country and bring its domestic institutions in line with international practices. This year, China's localities embarked on new digital and physical infrastructure projects, and have been striving to keep and attract foreign investment. Beijing has promoted the liberalisation of the service and financial sectors, and other areas like the land system, hukou (household registration system), and urbanization, are expected to open up.

Finally, the Plans reveal salient concerns with sustainability and security in China. On sustainability, Beijing underscored the commitment to construct an "ecological civilization" through land protection, green economy, and waste management in society. It also considers natural disasters and public crises to be fundamental challenges facing China. Therefore, it has stipulated measures to improve the public health system and mechanisms to address major natural disasters. On security, the documents have stated that independent and robust science and technology sectors are the “strategic anchor” of national development in China, and that the country needs to strengthen innovation and placement in core technology fields. Beijing will also seek to restructure supply chains that leverage on production advantages inside China and increase its resilience when cooperating with foreign entities. 

How will these objectives influence Asia? 

China's development objectives are synergistic with economies in East Asia. As Chinese localities and companies embark on implementing them in the next 5-15 years, three trends may develop in the region. First, China’s foreign economic locus will tilt further to Southeast Asia. In recent decades, China's investment and trade have grown exponentially with the region. Under the massive Belt and Road Initiative (BRI), China’s top investment partners have consistently been Singapore, Indonesia, Vietnam, Thailand, Laos, Malaysia, and Cambodia. This has already fostered greater inter-governmental engagement and deepened business relationships between China and these countries. Therefore, as China moves ahead with its new plans, such interactions will intensify.

Second, as China deepens investment and interactions in the region, its concerns with the security of overseas assets, personnel, and supply chains will intensify. Therefore, on one hand, Beijing is likely to seek a stronger security presence around its overseas projects, which may entail the deployment of its military forces or private security contractors, but on the other hand, Beijing may become more proactive in supporting multilateral mechanisms and promoting cooperation on critical issues to enhance regional stability. 

Finally, the large and grandiose projects that were previously the hallmark of the BRI will likely give way to smaller, more sustainable projects. Given the financing constraints of the post-Covid era, embarking on grandiose and potentially unprofitable projects will no longer be feasible. Thus, it is more likely that smaller, more practical, connectivity-enhancing infrastructure projects will mushroom around the region to leverage China’s dual circulation development in the coming years. However, work on infrastructure projects already signed will continue. China has the infrastructure and manufacturing capacity to complete these projects and it recognises that it is one of the few countries that can fulfil Asia’s enormous infrastructure needs.

In connection with China's emphasis on innovation, technology, green economy, and sustainable society, digital projects have much room to grow. Countries on good terms with Beijing could be rewarded with digital infrastructure such as cellular towers, undersea cables, and satellites. Other places deemed to have commercial potential could benefit from Chinese assistance in the establishment of smart cities, e-commerce, and other digital services. In terms of the health sector and crisis management, the pandemic has demonstrated that China and East Asia share strong capacities. They can jointly grow fast, involving dense networks across governments, companies, and think tanks in East Asian countries. 

How can India respond to China’s new planning?

Economic-wise, India can benefit from China’s new development objectives due to its large industry, human capital, and market potential. However, given the geopolitical tensions between the two, India is not likely to profit much. First, China's rapidly expanding capabilities present India with vital concerns about its national and economic security. New Delhi will be reluctant to welcome China's investment in important sectors such as research and development, and infrastructure. It will also likely discourage its home-grown technologists and tech companies from operating in China. Second, as China develops new supply networks in Asia, India is likely to miss out, as such production networks require infrastructure, labour, and free trade across the region. Unfortunately, as the synergy deepens in East Asia, India's position in Asian trade is likely to deteriorate, intensifying geopolitical concerns in New Delhi.

To offset the negative impacts, India should pursue three clusters of measures, as consistently as possible, in the next 5-15 years. First, it needs to work with China in nonessential technology and market cooperation to achieve rapid and visible gains for Indian companies and workers. Second, to address economic security, it needs to work closely with Japan, South Korea, and other advanced democracies to develop parallel technology, infrastructure, and supply networks. To do so, India has to open its market forces extensively to such like-minded investors. Finally, India can leverage its technology and resources to offer competing projects and programmes to countries in Asia, preventing their over-dependence on China. India can do so with other democracies in Asia and Europe, creating a more diverse and competitive regional environment.

Min Ye is an Associate Professor at the Frederick S. Pardee School of Global Studies at Boston University. Her publications include The Belt, Road and Beyond (Cambridge University Press, 2020), Diasporas and Foreign Direct Investment in China and India (Cambridge University Press, 2014), and The Making of Northeast Asia (with Kent Calder, Stanford University Press, 2010).

The views expressed in the article are solely those of the author(s) and do not necessarily reflect the position or policy of the Lee Kuan Yew School of Public Policy or the National University of Singapore.

News Reports

Bilateral relations

"Working With India For Further De-Escalation": China On Border Row
NDTV, December 8

The Chinese and Indian armies held the 8th round of Corps Commander-level meeting on November 6 to resolve the border standoff that erupted in early May.

Post-Doklam, China developing military camps in depth areas along LAC
The Times of India, December 8

Around 20 of such camps have been observed with some civilians also around these places," government sources have said.

China-India border row: prepare for the long haul in talks, Indian foreign minister says
South China Morning Post, December 4

Indian External Affairs Minister S. Jaishankar says the situation is complicated and he won’t be ‘stampeded’ into a resolution.

India will not accept less than bottom line in talks with China, says Jaishankar
The Hindu, December 2

External Affairs Minister S. Jaishankar said for India, the bottom line is that China has violated past agreements by amassing troops at the border and that if “peace and tranquillity” at the border is disturbed the rest of the India-China relationship is affected.

China planned Galwan Valley incident, says US report
India Today, December 3

The Chinese government had planned the Galwan Valley incident in June, potentially including the possibility of fatalities, the US-China Economic and Security Review Commission said in its latest annual report to Congress.

China and Pakistan ink military MOU to counter US-India pact
Nikkei Asia, December 8

Gen. Wei Fenghe, China's defense minister and state councilor, visited Islamabad last week for three days and signed a memorandum of understanding (MOU) to enhance defense cooperation between the Pakistan Army and the People's Liberation Army.

India Accuses China of Helping Rebel Groups on Myanmar Border
Bloomberg, December 7

Armed groups in Myanmar—including the United Wa State Army and the Arakan Army, which was designated a terrorist organization this year—are acting as Beijing’s proxies by supplying weapons and providing hideouts to insurgent groups in India’s northeastern states, according to Indian officials.

China’s defence chief pledges military support for Nepal amid border disputes with India
South China Morning Post. November 30

General Wei Fenghe, China’s defence minister and a state councillor, made the pledge when he met Nepalese Prime Minister KP Sharma Oli and held talks with Nepali Army chief Purna Chandra Thapa in Kathmandu on Sunday (November 29).

Japan to help India with 5G to counter China's growing influence
Nikkei Asia, November 29

Tokyo will receive cooperation in nurturing digital technology professionals.

India assures Vietnam of all help in military modernisation
The Times of India, November 27

With an eye on China, India has assured Vietnam of all possible help in modernising its armed forces.

India steps up efforts to draw neighbours closer to counter China
The Straits Times, November 27

India has stepped up efforts to mend strained ties with its South Asian neighbours as it seeks to wrest back its waning regional influence from China.

Chinese exports to India decline 13%; India's trade up 16% in 2020
Business Standard, December 8

The bilateral trade in the first 11 months of 2020 touched $78 billion, amidst border tensions between the two countries in eastern Ladakh.

China's Ant mulls Paytm stake sale amid tensions with India: Report
The Economic Times, December 3

Chinese fintech giant Ant Group is considering selling its 30% stake in Indian digital payment processor Paytm amid tensions between the two Asian neighbours and a toughening competitive landscape, people with direct knowledge of the matter said.

China buys first Indian rice in decades amid scarce supply
Reuters, December 2

China has begun importing Indian rice for the first time in at least three decades due to tightening supplies from Thailand, Myanmar and Vietnam and an offer of sharply discounted prices, Indian industry officials said.

Centre may not allow direct listing of Indian companies in China, Hong Kong: Report
Deccan Herald, December 2

Indian companies may not be permitted to opt for a direct overseas listing on exchanges in China and Hong Kong, on account of rising tensions among the Asian economies.

India refuses to support China’s Belt and Road project at SCO meet
Hindustan Times, November 30

India has repeatedly said it will not join BRI because it does not offer a level playing ground to the country’s businesses.

China dominates world export markets despite US trade war
Nikkei Asia, November 29

China's share of global exports is rising, and is now even exceeding the level before the Sino-U.S. trade war broke out in 2018.

China to expand weather modification program to cover area larger than India
CNN, December 4

For years, some in India have speculated that weather modification could potentially give China the edge in a future conflict, given the importance of conditions to any troop movements in the inhospitable mountain region.

PoK government signs agreements with Chinese firm to build 700MW hydropower project
The Economic Times, December 2

The government in Pakistan-occupied Kashmir has signed agreements with a Chinese company and a local renewable energy firm for the construction of 700MW hydropower project at an estimated cost of USD 1.35 billion in the region as part of the ambitious China-Pakistan Economic Corridor, a media report said on Wednesday (December 2).

India plans dam on Brahmaputra to offset Chinese construction upstream
Reuters, December 1

India is considering a plan to build a 10 gigawatts (GW) hydropower project in a remote eastern state, an Indian official said on Tuesday (December 1), following reports that China could construct dams on a section of the Brahmaputra river.

In research preprint, Chinese scientists claim COVID-19 may have originated in India or Bangladesh
Firstpost, November 29

The scientists have argued that since India and Bangladesh reported the least number of mutations and are neighbouring countries to China, the Indian subcontinent may be the origin of the first COVID-19 transmission.

Tibet hydropower plans will boost international cooperation, says Chinese state company boss despite risk of Indian backlash
South China Morning Post, November 29

A hydroelectric project in Tibet will protect China’s national security and foster international cooperation, the head of a leading state-owned construction firm has said. But the Yarlung Tsangpo project risks further inflaming India, which shares the waterway, amid the prolonged border stand-off between the two countries.

COVID19 & War? Do India and China only have two choices?
Observer Research Foundation, December 7

By Liu Yushu, Director, Macro Research Department, Chongyang Institute for Financial Studies, Renmin University of China

The COVID-19 virus cannot be a reason to hinder close communication between China and India but should be an opportunity for friendly cooperation.

What China Hopes to Gain From the Present Border Standoff With India
The Wire, December 6

By Shivshankar Menon, Former National Security Adviser of India

China's actions have brought about what it should be trying to deter, i.e. closer India-US coordination. This means the decision was taken at the highest level in China for larger strategic reasons, not just tactical military convenience.

India ridiculous to clamor about China-Pakistan MOU
Global Times, December 2

By Lan Jianxue, Deputy Director, Department for Asia-Pacific Studies, China Institute of International Studies

The security and defense cooperation between China and Pakistan can help to enhance the confidence of other South Asian countries to strengthen their strategic independent capability by reinforcing their national defense construction. This is conducive to promoting the rebalance of power in South Asia.

India’s no-first-use dilemma: Strategic consistency or ambiguity towards China and Pakistan
Stockholm International Peace Research Institute, December 2

By Lora Saalman, Associate Senior Fellow, SIPRI; and Senior Fellow, Global Cooperation in Cyberspace Program, EastWest Institute

While the majority of Indian experts surveyed stated that both India’s and China’s NFU remain in place and unyielding, upon further discussion, they raised exceptions to and questions about aspects of both countries’ nuclear postures.

Why India needs to give some troubled Chinese companies a nest here
The Print, December 1

By Tara Kartha, Former Director, National Security Council Secretariat in India

By allowing Chinese private companies into non-strategic areas, India can turn Beijing’s weakness into our strength.

India must give up zero-sum mentality, accept China's hydropower project
Global Times, December 1

By Liu Zongyi, Secretary-General, Research Center for China-South Asia Cooperation, Shanghai Institutes for International Studies; Visiting Fellow, Chongyang Institute for Financial Studies, Renmin University of China; and Distinguished Fellow, China (Kunming) South Asia & Southeast Asia Institute

China's plan to build a large hydropower project on the Yarlung Zangbo River has raised concerns in India over "potential political and ecological threats" as the river intersects Southwest China, India and Bangladesh.