China today is different! Quite different to what I saw seven years ago. The economic boom has not only changed its socio culture, at least in the Eastern and Southern part of China, but also the peoples' attitude, style of governance, and geo political outlook. That is the impression I gathered when I visited China recently. <br /> <br /> The China Eastern Airline direct flight from Delhi to Shanghai is like an Indian bus journey. But that is forgotten as soon as one arrives at the Shanghai International Airport. The size, cleanliness, modern facilities and the quiet efficiency are impressive. While leaving the Airport, the well-groomed exit along the expressway to the city keeps you awake despite the jetlag and lack of sleep. <br /> <br /> Pudong was a farmland 15 years ago. Today, with towers displaying almost all the multinationals of the world, this part of Shanghai earns the highest income per capita in China. More than 25000 of its population are from Taiwan, which China, without reciprocity, regards as its integral part. People from Taiwan do not fly across the Taiwan Straits. They have to come via Hong Kong, or other routes. The 88 floors Grand Hyatt Hotel has more Chinese living guests than Westerners. Shanghai has a very large industrial area, with assured power, water supply and other infrastructure. Manufacturing houses do not consider captive power to be necessary. Shanghai is not just the most well developed industrial and business centre. It is a lively metropolitan city and has think tanks like the Shanghai Municipal Centre for International Studies. <br /> <br /> In Beijing, the expressway from the Airport to the city is no different. Beijing appears to have overtaken Shanghai in frantic construction activity. Multistory buildings that appeared fairly new seven years ago are giving way to skyscrapers with multinational names. Builders are giving compensation to flat dwellers to move out to the suburbs. The hotels are bigger and cheaper than in India. All main arteries in the city have six lanes, and yet are choked during office hours. The bicycles are still around, but can be counted, unlike cars. Old drivers blame the proliferating red taxis, and women drivers, for the vehicle accidents that are lesser than construction site accidents. Beijing is preparing for the next Olympics. The construction boom will go on for four years at least. <br /> <br /> China today hogs the maximum steel and cement in the world. It guzzles over 250 million tons of oil annually, with oil consumption growing 10% annually. It is partly if not wholly responsible for the recent price rise of steel and other construction materials, and inflation. A small picture of Chinese economy is: - <br /> <br /> <strong>Emerging to Be A World Economic Power </strong> <br /> </font> </p> <p align="justify" class="greytext1"> <font size="2" class="greytext1"> </font> </p> <div align="justify"> <table class="bodytext1" cellspacing="0" cellpadding="0" width="100%" border="0"> <tbody> <tr> <td valign="top" nowrap="nowrap" align="center"> <strong> <font size="2" class="greytext1">Economic Indicator</font> </strong> </td> <td valign="top" nowrap="nowrap" align="center"> <strong> <font size="2" class="greytext1"> 2003 Performance</font> </strong> </td> <td valign="top" align="center"> <strong> <font size="2" class="greytext1"> Global Status </font> </strong> </td> <td valign="top"> <p align="center" class="greytext1"> <strong> <font size="2" class="greytext1">Report Card</font> </strong> </p> </td> </tr> <tr> <td valign="top"> <font size="2" class="greytext1">GDP</font> </td> <td valign="top"> <font size="2" class="greytext1">$1.4 trillion <br /> +9.1% vs. py <br /> per cap $1,087 (#10) </font> </td> <td valign="top"> <font size="2" class="greytext1"># 7 </font> </td> <td valign="top"> <font size="2" class="greytext1">Maintaining 8-10% over last 15 years <br /> Projected to be the biggest economy by 2027</font> </td> </tr> <tr> <td valign="top"> <font size="2" class="greytext1"> </font> </td> <td valign="top"> <font size="2" class="greytext1"> </font> </td> <td valign="top"> <font size="2" class="greytext1"> </font> </td> <td valign="top"> <font size="2" class="greytext1"> </font> </td> </tr> <tr> <td valign="top"> <font size="2" class="greytext1">Government Revenue</font> </td> <td valign="top"> <font size="2" class="greytext1">$261 billion <br /> +14.7%vs py</font> </td> <td valign="top"> <font size="2" class="greytext1">---</font> </td> <td valign="top"> <font size="2" class="greytext1">Government relying more on tax as source of income</font> </td> </tr> <tr> <td valign="top"> <font size="2" class="greytext1"> </font> </td> <td valign="top"> <font size="2" class="greytext1"> </font> </td> <td valign="top"> <font size="2" class="greytext1"> </font> </td> <td valign="top"> <font size="2" class="greytext1"> </font> </td> </tr> <tr> <td valign="top"> <font size="2" class="greytext1">SOE (PSU) Profit</font> </td> <td valign="top"> <font size="2" class="greytext1">$45.5 billion <br /> 45.7% vs. py</font> </td> <td valign="top"> <font size="2" class="greytext1">--</font> </td> <td valign="top"> <font size="2" class="greytext1">Rapid SOE profit growth being a good sign for asset restructuring & privatization.</font> </td> </tr> <tr> <td valign="top"> <font size="2" class="greytext1"> </font> </td> <td valign="top"> <font size="2" class="greytext1"> </font> </td> <td valign="top"> <font size="2" class="greytext1"> </font> </td> <td valign="top"> <font size="2" class="greytext1"> </font> </td> </tr> <tr> <td valign="top"> <font size="2" class="greytext1">FDI</font> </td> <td valign="top"> <font size="2" class="greytext1"> $53.5 billion</font> </td> <td valign="top"> <font size="2" class="greytext1"> # 2</font> </td> <td valign="top"> <font size="2" class="greytext1">Continuing to be the magnetic attraction of foreign capital. <br /> Gradual opening up of retail telecom services, finance, education </font> </td> </tr> <tr> <td valign="top"> <font size="2" class="greytext1"> </font> </td> <td valign="top"> <font size="2" class="greytext1"> </font> </td> <td valign="top"> <font size="2" class="greytext1"> </font> </td> <td valign="top"> <font size="2" class="greytext1"> </font> </td> </tr> <tr> <td valign="top"> <font size="2" class="greytext1">Trade</font> </td> <td valign="top"> <font size="2" class="greytext1"> $850 billion </font> </td> <td valign="top"> <font size="2" class="greytext1"># 4</font> </td> <td valign="top"> <font size="2" class="greytext1">Becoming a major outsourcer of world manufacturing.</font> </td> </tr> <tr> <td valign="top"> <font size="2" class="greytext1"> </font> </td> <td valign="top"> <font size="2" class="greytext1"> </font> </td> <td valign="top"> <font size="2" class="greytext1"> </font> </td> <td valign="top"> <font size="2" class="greytext1"> </font> </td> </tr> <tr> <td valign="top"> <font size="2" class="greytext1">Foreign Exchange Reserve</font> </td> <td valign="top"> <font size="2" class="greytext1"> $403.3 billion <br /> +$116.8 bn vs. p y</font> </td> <td valign="top"> <font size="2" class="greytext1"># 2</font> </td> <td valign="top"> <font size="2" class="greytext1">Ample foreign reserve helping maintain stable currency.</font> </td> </tr> </tbody> </table> </div> <p align="justify" class="greytext1"> <br /> <font size="2" class="greytext1"> <br /> <br /> The affluence is visible in stores, cheap markets and large ultra modern shopping malls. These are full of wide ranging consumer products, catering to different pockets. All people are dressed in western clothes. The number of local Chinese visitors to the Great Wall and other historic sites appears to have increased manifold compared to seven years ago. Chinese faces are more scrutable! The eye-to-eye contact is expressive and confident. Talk of sports and Olympics brings instant smile, and pride. They want to be number one when these are held in their country. And they all want to learn English before that. USA is a dreamland destination for education. <br /> <br /> "What has caused this economic transformation in such a short period?" I ask a friendly (foreigner) CEO of a multinational company. His explanation is: - <br /> </font> </p> <ul> <li> <div align="justify"> <font size="2" class="greytext1">Stable political environment with communist party monopoly holding on to power for the foreseeable future. <br /> Abundant/cheap labour. <br /> </font> </div> </li> <li> <div align="justify"> <font size="2" class="greytext1">Heavy foreign direct investment inflow. <br /> </font> </div> </li> <li> <div align="justify"> <font size="2" class="greytext1">Tax incentives by the government. Emphasis on improving productivity. Focus on exports. <br /> </font> </div> </li> <li> <div align="justify"> <font size="2" class="greytext1">Robust domestic demand and consumption. Low inflation rate. <br /> </font> </div> </li> <li> <div align="justify"> <font size="2" class="greytext1">High savings rate. <br /> </font> </div> </li> <li> <div align="justify"> <font size="2" class="greytext1">Government adopting more pragmatic policies though still authoritarian in structure and ideology. Much less involved in private sector governance.</font> </div> </li> </ul> <p align="justify" class="greytext1"> <font size="2" class="greytext1">Our economic discussion brings out China's 'one country, many markets'. There is tremendous economic diversity that manifests itself in wide disparity in incomes and purchasing power. The urban per capita income is three times the rural level. The Huo Quo system (inter state migration) is still prevalent though fairly relaxed. Other socio-economic problems indicated are: -</font> </p> <ul> <li> <div align="justify"> <font size="2" class="greytext1">Loss-making SOEs (State Owned Enterprises: our PSUs). These were the pillars of China's national economy at one time. Now a large number are suffering losses. <br /> </font> </div> </li> <li> <div align="justify"> <font size="2" class="greytext1">Indebted financial sector. Government admits about 25% of state bank's loans are non-performing assets. <br /> </font> </div> </li> <li> <div align="justify"> <font size="2" class="greytext1">Increasingly competitive pressures from rest of the world. <br /> </font> </div> </li> <li> <div align="justify"> <font size="2" class="greytext1">Widening gap between the east and west, urban and rural areas. <br /> </font> </div> </li> <li> <div align="justify"> <font size="2" class="greytext1">Government is plagued with corruption despite serious crackdowns. But suing the Government is not a practical proposition. <br /> </font> </div> </li> </ul> <p align="justify" class="greytext1"> <font size="2" class="greytext1">Unlike India, one does not see much of the ubiquitous security personnel or even policemen on the roads. It appears as if their senior political leaders and administrators stay put in offices and do not come out on roads. <br /> <br /> In Beijing, I visit the China Institute of International Studies (CIIS) and China Institute for International Strategic Studies (CIISS); two well known think tanks. In the CIIS, I meet the Vice President and two scholars engaged in writing a book on 'rising India'. The discussions are very friendly. I promise to help them. China has started to play a more proactive role in international matters. Their positive interest in India, and prompt concurrence to establish communication between think tanks of our two countries is very satisfying. <br /> <br /> The interlocutors in think tanks do not ask questions about Sino-Indian border issue, Tibet, Sikkim, or other Sino-Indian issues. They ask about Indo-Pakistan relations and terrorism in Kashmir. They do not try to cover the 'lip and teeth' Sino-Pak relationship. I ask them about Taiwan. The response is assertive, without ambiguity. 'Reunification of motherland' is a national goal. <br /> <br /> My impression is that despite underlying differences- strategic, military, human rights, environment, and adverse impact on the US economy & outsourcing- the US continues to engage China positively instead of isolating it. There appears to be a constructive ambiguity on Taiwan. <br /> <br /> China has entered new phase of development for building a well off society. A developing China needs a peaceful international environment, a favourable climate in its periphery. It desires Panchsheel based international relations, particularly with all its neighbours. However, there is no let up on compulsory military service or military modernization. The defence expenditure last year was around $ 25 billion. It is concentrating on missile forces, rapid deployment forces, creating amphibious warfare capability, improving joint services operational and logistics capabilities and developing information warfare systems- to be able to fight a 'limited war in high tech conditions'. The old timers in the PLA are making way to younger, more professional officers. <br /> The declared national defence policy is defensive in nature. But it is 'active defence'! <br /> <br /> My visit ends with an impression that in China today there is much lesser socialism, political bigotry and wastage of peoples' energy than we have in India. The goals are clear and focussed: a well-off society and comprehensive national power. The means matter little. Alongwith economic upsurge, greater military capability and assertiveness, there is a greater sense of responsibility in international affairs, as required of a budding power. <br /> <br /> I leave China with a feeling of envy. The return journey from Beijing is once again uncomfortable on a China Eastern plane via Shanghai. It dilutes that envy! <br /> <br /> <strong>Gen V P Malik is a former Chief of Army Staff, and President,, ORF Institute of Security Studies.</strong> <br /> <br /> <em>* Views expressed in this article are those of the author and do not necessarily reflect those of Observer Research Foundation.</em>
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
PREV
