India-US: The Democracies That Are Natural Partners
In less than 40 years, China has become the world's largest industrial producer and trading power. It holds the largest foreign exchange reserves in the world.
Whether anyone appreciates it or not, China is contributing more than any other country to global growth. It is a global power with all the bells and whistles required. Beijing now splurges $10 billion a year on overseas propaganda and at $28 Bn, China’s aid budget is the largest in the world. There are now Confucius Institutes covering every continent. Xinhua, its state news agency, has 180 bureaus, making it the world’s 4th largest behind the Associated Press, Reuters and Agency France-Presse. Its trillion dollar belt and road initiative is more than 10 times larger than America’s postwar Marshal plan in present dollar valuation.
It has the world’s largest co-existent public and private sector.
The US accuses China of practicing “state capitalism” and supporting state owned enterprises at the expense of the free market. But honestly, even in the US the government has never ceased to intervene. The US government rightly fostered the growth of the internet, bio-technology and shale gas. Likewise, during the grave financial crisis of 2008, the US rescued banks and provided fiscal stimulus.
State owned enterprises are present across the developed world including in the US especially in capital intensive sectors viz infrastructure, public services and scientific and technological research. Chinese public sector mega-corps are run by elite cadres. Many are listed joint-stock companies
China has a ‘socialist- market’ economy. The Government overrides the market and has a decisive role in resource allocation. China’s industrial and credit policies dictate results even if its macro-regulation follows WTO rules.
We have evidence about China’s economic miracle in the private sector. It contributes more than 50 percent of China’s tax revenue, 60 percent of gross domestic product, 70 percent of technological innovation and 90 percent of new jobs and businesses. Chinese private businesses and companies with foreign investors accounted for 83.7 per cent of imports and exports in 2017, up from 57.5 per cent in 2001.
This is the context for the simmering that has now come to a boil in US – China relationship.
Of course, there was cordiality on display when Donald Trump met President Xi Jinping in Osaka at the G20. But no one is under any illusion that one of the biggest trade wars that the world has seen in recent years is on. The US has imposed tariffs on $250 billion of imports from China. Beijing has retaliated in like measure.
The tariff fight is only an overt sign of a much larger struggle - The struggle for world domination.
The struggle itself, forget the outcome, will change the world forever.
Trump has enough critics. But even critics acknowledge his administration has put US policy into gear and blown the whistle on China. It seems to be in the “national interest”. What that means in the present world of transnational cross holdings, global capital flows and distributed worldwide innovation merits an article on its own.
China has risen inexorably to become the most powerful strategic rival to the US but under successive Republican and Democratic presidents George H.W. Bush, Bill Clinton, George W. Bush and Barack Obama, China was given a wide berth and accommodation.
The US had a $375 billion trade deficit in 2017 vis a vis China. It is unsustainable.
Trade flows aside, the US needs to challenge China’s rise comprehensively including but not limited to economic muscle, foreign aid, soft power and diplomacy.
The assumption that bringing China into the WTO and other such global regimes makes it conformist with international norms in trade and business was simply invalid.
The US has now upped its attack to Beijing’s human rights record, its Belt and Road Initiative and military presence in South China Sea.
This could be a long haul. The US- USSR attrition ran its course from 1945 -1991. But China is already an established and flourishing economic power as they start off
China is also one of America’s biggest creditors.
Therefore, the US strategy is multi-pronged.
First, restrain and challenge China’s technological growth. Stop intellectual property or technology transfer. This is why Huawei was deemed to be a ‘national emergency’ for the US. China has made huge advances in certain areas – artificial intelligence, material science, avionics and military technologies.
Secondly, to reduce US economic dependence on China. Transfer investments and manufacturing elsewhere into Asia. Growing partnerships with key allies such as Japan, South Korea, Vietnam and the Philippines is to act as a counterweight.
Finally, critical to leverage India.
We, in India , have a good position to favourably exploit this attrition too.
No other Asian power has the size, growth, population, domestic market, physical expanse, intellectual and material resources and soft power that India does.
America –India is a natural partnership. Through mutual economic pursuits and collaboration a glorious tomorrow is within sight.
