Monday, August 07, 2017

Fault lines of China - A Great Leap Backward

Image result for pla tank wardrobe malfunction
(Pic courtesy: Bharat Rakshak Forum)

Fault lines. Few days ago, China pulled of a majestic stunt. Celebrated PLA's 90th Raising day. This, in itself a fault line of sorts. Let me explain why.

Faultine PLA:
Back in time, before proclamation of freedom, this was just a nomad / noman's Army. It was nothing more than a militia that evolved as group of militias. That means, proclaiming freedom with sheer muscle power & at the barrel of gun. Before we proceed further, let's first understand who were these militias and why it is a fault line.


"Late in 2014 President Xi Jinping went to Gutian, a small town in the south where, 85 years before, Mao had first laid down the doctrine that the People’s Liberation Army (PLA) is the armed force not of the government or the country but of the Communist Party." - Source: The Economist

After World War I, the advent of Soviet Union like totalitarian Communist State sent a few young farmers of Communist Party of China to take brute force to gain sympathy & support of people to proclaim Independence & form a copycat Soviet Union adapted by Manchurian ways.

Fast forward to today, these very same Communists have little support these days. Communist party leaders who came to power in 1949, without any experience in leadership. Even if we ignore that, these people are barbarians with too much man & muscle power. Leave alone planned development. The "Build, build & build" strategy is clearly failing. Pushing the country into debt trap by it's own deeds. This won't last long. The much celebrated "development" & "GDP growth" has clearly failed to empower it's people. Many of whom are still living sub-standard lives.

Okay, so when was the last time PLA saw action? 5yrs ago? 10yrs ago? 20yrs ago? 30yrs ago? World doesn't think, you're good enough to fight. Soon, PLA's worthiness would be tested.

The mighty army is nothing better than a terracotta army of their emperor few centuries ago.

Inner-Mongolia:

The Inner Mongolian region has more Mongols than Mongolia itself. Of late, there's been demand for redrawing boundaries & merging itself with parent Mongolian Nation. This idea has fallen silent for a couple of decades now. But, with a anti-Chinese President in Mongolia, things are expected to heat up. Two pointers here: 1) Mongolia wasn't part of Qing Dynasty (as they parted ways). 2) Inner Mongolia is first successfuly population jihad project by China. With making Inner Mongolia a 79% Han population. Change demographics, claim land & resources. An inch a day.

Not without a reason PM Modi visited Mongolia recently. During that trip, a strong & balanced effort has been forged with Mongolia - including defense cooperation.

Xinjiang

This province, bordering Inner Mongolia is China's root of all troubles in it's West. The province with significant Muslim population is subjected to inhuman methods of governance. Needless to say, daily abuse of even the basic human rights. I would leave you to read up on this yourself. This report (among several others) on The Diplomat shares more insight in this issue.

Hong Kong SAR:

Hong Kong SAR is corner stone of sorts, of China's "One Country, Two Systems" & "One China" policies. Needless to say, the Asian Powerhouse, thanks to British Democratic values, want to be democratic. And, independent. Something that Chinese would oppose big time. Any pro-democracy Government / person is harassed. Recently, there were street protests when the Chinese President was there. 

Taiwan:

Historically, it won't be wrong to say that Taiwan is first nail in China's coffin. Till date, an ally of West, Taiwan has stood up to the Chinese leadership & dictatorship. Taiwan is an Independent Nation. Though with very little diplomatic support against the giant neighborhood, the thin numbers Taiwan has are powerful enough to stand up to Chinese. Of late, Taiwan Cultural Center in India is seeing heightened activity.

South China Sea:

It's like a giant nation's giant mistake. To make enemies out of 7 neighboring Nations in one go & over a single issue. Claiming & stealing almost entire South China Sea from neighboring nations is not going to end in a good way. Problem is, China, as of today has moved away from "peaceful rise" & "peaceful co-existence". Seems like it. 

Related image
(Pic courtesy: cabinflooresoterica.com) 

Far East:

So, if we turn to believe that China enjoys a good relationship with it's bigger neighbor, Russia, we're in for a shock. It is NOT! China is doing what it did to Inner Mongolia, in Russia's far east. Part of Russian Far East is being claimed by China. Historically, Chinese say, it belonged to Manchuria - including oil rich Sakhalin region.

OBOR initiative:

As mentioned in my earlier post, the project would push more nations into debt trap. The cash surplus would move away nations. The project is funny. It's similar to swiping credit card, get cash & spend it on luxury projects that can't be built over a century, at least. You see what the implications are? You can afford a lot, if one's credit card limit provides cash limit of say 10x of your salary. It may make you look rich with say, buying a few luxury car. But, would you be able to repay? NOT! That's what is happening with OBOR. 

Devil is in the detail. Wherever GDP growth hasn't uplifted / reached common man, it has fallen flat. Even Greeks & Spaniards are facing it. US too will. GDP growth should also be of some quality. If not, not worth it.

Debt bubble: Chinese Debt trap is linked to the OBOR / BRI project. The more they push others into debt trap, the Chinese themselves are pushing them into one. Slowly, yet consistently. Their real estate market is going in for a burst - within months, if not weeks. Matter of time. Many experts are predicting it. One such published report today.

Cultural hegemony

So, taking into all the above pointers, people of China need a safety valve. In India, similar discontent resulted in the massive defeat for Congress party. In China, in the absence of any such safety valve of Democracy, would need at least cultural well being. THAT TOO is neutralized by the Chinese. Recently, there was a plan to destroy an ancient Buddhist site for mining copper. This is no different from what Taliban did in Bamiyan. (Note: Months after Bamiyan was destroyed, Taliban fell!)

Hans Vs other ethnic minorities:

Hans are as common ppl like anyone. They too have this tendency to push more people & earn a decent living. In pursuit of that, they push into new territories & antagonize natives of that place. Something like what they did in Inner Mongolia, Xinjiang & Tibet.

Party Vs PLA:

The rift between the PLA & the Party is going in for a big time showdown. Expect it sometime around Chinese Party Congress (in October 2017). The anti-corruption in military has deprived Chinese of experienced commanders. I highly doubt that there are any top Generals who have seen combat battle / action in their long service. (If any, let me know!). The ill-advised PLA is depending on the terror state of Pakistan to help it on India. It is all alone when it comes to other nations - when put together. None would come to save Communist Party. They'll not even have their own people, who are facing high turbulent & suppressed life under communists.

Vietnam:

Vietnam holds the distinction of fighting a perfect war in the 1970s. Was patient for years together when the Peace Talks were held in Paris. Until after SEVEN long years, Paris Agreement was signed. It defeated the mighty US militarily. Soon after it gave a tough fight to Chinese, who were stopped by Vietnamese Armed Forces from it's excursion. A land grab, averted.

Tibet:

Tibet. Independent weak neighbor of China (before it was forcefully occupied), was the first Nation to fall for China's 'peaceful rise'. Dalai Lama stays in INdia running a Government in Exile. I don't expect an armed uprising against the Chinese. But, I do see the Lamas of Tibet rising peacefully against Han PLA & Communists.

India:

India. The name that gives China nightmares. Growing & emerging India - a Democratic, Culturally diverse, Strong Nation is a definite threat to China. China occupies part of India's Jammu & Kashmir province in two parts - in Aksai Chin & partly in Pakistan Occupied Jammu & Kashmir.

The long standing border dispute & the war of 1962 has given bad taste among Asian super powers. The problem is, only in 1962, in 5000yrs of existence China has ever won a war. With anyone! India didn't lag behind much. In 1967 & 1987, Chinese got a bloody nose. Even in 1962, Rezang La is a place that Chinese would have dreaded dreams even today.

Unlike it's bullying with smaller neighbors, it can't do the same with India. China can't occupy India for a long time. Nor it can keep it's own flock while it is doing it. More so, India's close relations with Japan, Russia, US & ASEAN would complicate the issue. Global pressure would bring them down.

Conclusion:

Though only time would tell what would China be doing 5years down the line. For now, I can safely conclude that China has opened itself too many fronts. Within & outside. 

If China thinks, by posturing big against it's neighbors - all at once, they're in for a shock & are broadly mistaken. Money can buy you friends. For time being. Not for long & good ones. You reap what you sow. Stop this land grab to make good friends. Until China does that, it is a problem for their very existence.

If they are doing so much land grab citing so many of their old books that are written few centuries ago, India has the right to claim entire China. The word "China" itself was first used in Indian Epic, Mahabharata.
"Cīna was first used in early Hindu scripture, including the Mahābhārata (5th century BCE) and the Laws of Manu (2nd century BCE)."
(Source: The Polity of Yelang (夜郎)and the Origins of the Name ‘China’)
So, it is a matter of time, that all of China's problems implodes - one at a time, leading to a huge firework show. Let's watch the show "Fault lines of China - A Great Leap Backward" from pavilion.

Zhù nǐ hǎo yùn!

Wednesday, August 02, 2017

One DEBT, One Road – The Silk Road to Debt Trap


(Pic courtesy: Internet. For representation purposes only.)

China. What immediately comes to our mind are those grand shows they put up on world stage. But, as they always say, devil is in the detail. That is, GDP growth of China has been relatively high compared to other countries, over past two decades. This may sound very good at the gist of it. Until you do a health checkup on the quality of GDP Growth. The growth on numbers, which is not necessarily good growth. For example: GDP numbers go up, basis what you manufacture. But, whether it is consumed or not matters a lot – for health of a Nation.
Investing cash surplus generated out of trade deficit with foreign nations. Well, it is not necessarily an investment. It is just a foolish method to control cash surplus by making more cash! Insane! Let me explain.

Internal financial health of China:

Following pointers:
  1. There are close to 13 Million flats unsold per this 2016 news report of Reuters.
  2. There are fully built cities that are having everything – but people. Like the one in Zhengzhou. Watch video here. (For more such videos on youtube. Just type in “Ghost Cities China”.)
  3. Sustainable growth is totally dependent when you consume what you produce. China CANNOT consume what it produces, even a significant percent of it. 
  4. Growth in China is inversely proportional to the quality of living. This leaves Chinese people frustrated.
  5. Workers keep building BIG things like gigantic apartment complexes, which the Chinese middle class can’t consume. Similarly, the vast network of High-speed railway network. Hardly 10% is being used. Why was it built then?
  6. When not consumed within, and this high over-production leads to trade & cash surplus.
  7. It is a vicious cycle. If they stop production now, they would crash in a matter of days. So, best thing to keep the production machinery running. And churn out products that none consume.
  8. Who would then consume it? There comes “One Belt, One Road” project. Now, let’s see the devil in OBOR.

Obligations for Chinese:

  1. It is the obligation to keep paying the nations to keep them in check. Be it Pakistan, Sri Lanka, Bangladesh, Myanmar or African Nations. Strategy is same.
  2. Keep offering money to them that they can’t even think of, to be strategically with Chinese.

Sustainable? NOT. That’s because, “One Belt & One Road” will have it’s own set of issues. More pointers:

  1. Imported Chinese workers for Chinese investments abroad have routinely run into problems with local population. This happened in Myanmar (Sittwe-Kunming Pipeline project), Sri Lanka (Hambantotta) & Bangladesh (Chittagong / Cox’s Bazar port projects). Even several African nations (Tanzania / Zimbabwe / Congo / Kenya). Pakistan is no exception. It has security related issues
  2. Ultimately, to keep the Chinese GDP & power to grow, we need more CPECs & debts.
  3. China, as a Nation will crash & disintegrate, the moment the “constructions” & “debt traps” stop. Within & abroad.

Strategic issues:

  1. India is opposed to CPEC, as India thinks, it is being encircled. So, the counter-encirclement process has begun. Diplomatic overdrive with Taiwan, Vietnam & others in ASEAN.
  2. The Torkham gate clashes between Pakistan - Afghanistan has signaled a looming threat to CPEC / CASA / TAPI projects. Which, are to be part of OBOR. Read here.
  3. Kunming – Sittwe pipeline project has run into issues with Myanmar worried about Chinese gaining importance in peace process among rebels with Myanmar Government. Read here.
  4. China’s African problem is well known. Investing in places under Politically unstable leaders threatening the very investments. The Diplomat report sums up very well.
  5. In Thailand – Laos, there has been quite a few anti-China protests over Mekong River ecosystem. Read here.

Classic example: Pakistan. Pakistan is just one of the 68 Nations which would be part of OBOR project. To give you a gist of it, let’s look at the sheer number of issues with OBOR in Pakistan alone.
  1. China-Pakistan signed an agreement to create what is known as China – Pakistan Economic Corridor.
  2. China promised to invest an estimated USD 46 Billion in the project, which is part of One Belt, One Road.
  3. China is investing in ports, power plants, roads / railways to name a few. All seems good, until you read the details.
  4. CPEC doesn’t benefit ALL the provinces of Pakistan.
  5. CPEC comes with a repayment obligation that no learned person would ever take it. For example: Guaranteed rate of return @ 17% per annum.
  6. Equipment & labor would be from China. So, overall not more than one-fourth would be spent on local services. You can read this Dawn.com article for more details.
  7. Rest of 2/3rd cost of CPEC would go back to China in oiling it’s over-production machinery. This is just helping to consume part of that HUGE machinery.
  8. So, to keep significant amount of that machinery running, they need more Pakistans & more CPECs.
  9. This is not all. China has pledged an additional USD 50 Billion today on Indus River Cascade. Report here.
  10. Mind you, most of the said Billions has already made it’s way to China through “purchases of equipments” & “cost of labour” by Chinese Contractors.
  11. At a rate of 2% interest, with a dwindling Pakistani economy, you can imagine how long it will take to repay the debt of USD 96 Billion. Until then, Pakistan would do whatever China asks it to do. Just a gesture enough from China.
  12. On the other side, there are inter-provincial ramifications within Pakistan that they’re beginning to feel the heat of CPEC.
  13. Balochistan, KP-FATA are against CPEC as that doesn’t benefit them much. And, there’s a perception that Chinese are looting their resources.
  14. People of Sindh & Pakistan Occupied Kashmir think Chinese are colonizing them. Recently even Karachi’s Power supply & Stock exchanges are being taken over by Chinese Cos.
  15. In a year or two, CPEC would be dubbed as Curse on Pakistan's Existance by China.
  16. Chinese President Xi Jinping’s pet project OBOR is not showing Chinese prowess. But, it is a sign of desperateness at an unimaginable level. OBOR meet today is one such. Look at their body language. They even brought several world leaders in “China Eastern Airlines”.

Conclusion:

China’s “One belt, One road” is like a cash surplus person. Buying things that one can’t maintain / building home which one won’t live in are similar. things than betterment of self. The investment is to buy people just by pouring in money.

Fact is, it is not sustainable.
"People coming near you for money, won’t stick for long. They will use your money, enjoy good times with you. When you are unable to pay them enough, they’ll move away from you." - Indian proverb
So, when I view through Indian philosophy, “One Belt, One Road” is a trap for both the Chinese & the nations part of it.

In a nutshell: “One Belt, One Road” is, the coalition of cash surplus. Should be renamed as: “One Debt, One Road – The Silk Road to Debt trap.”

(The above got published on OneIndia on July 10, 2017. Read here.)