India china chronicle march 2014

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March 2014 x ` 100

CHINA’S CAPITAL ACCOUNT LIBERALIZATION

Gradually Moving Towards Complete Openness

SMEs

Trying to Re-Create the Growth Wonder

INTERVIEW: C. RAJA MOHAN

HUMAN RIGHTS

“Our Relationship with China is Underdeveloped”

Human Trafficking in China

www.icec-council.org

Opening a New Chapter in Capital Reforms? Vol 4, Issue 2, March 2014 EDITOR-IN-CHIEF Mohammed Saqib EXECUTIVE EDITOR Urmila Rao EDITORIAL BOARD Mani Shankar Aiyar P.S. Deodhar Dilip Cherian Amir Ullah Khan Chen Si (China) EDITORIAL TEAM Irfan Alam Shawahiq Siddiqui Namrata Hasija Vinny Sachdeva Garima Arora DESIGN Manoj Raikwar OWNED, PRINTED AND PUBLISHED BY Mohammed Saqib Registered with the Registrar of Newspapers of India under RNI No: DELENG/2011/43423 PUBLISHED FROM A-82, Zakir Bagh, New Delhi - 110025 ADDRESS FOR ALL CORRESPONDENCE India China Chronicle B-59 (GF), South Extension - II, New Delhi - 110049 Telefax: 011-46550348 PRINTED AT Anne Print Solutions B-32, Okhla Industrial Area, Phase-I, New Delhi-110020 Tel. 011-40525878, 011-65690940 Email: info@anneprintsolutions.com All Rights Reserved. Reproduction in whole or in part without written permission is prohibited.

All advertising enquiries, comments and feedback are welcome at info@icec-council.org The information contained in this magazine has been reviewed for accuracy and is deemed reliable but is not necessarily complete or guaranteed by the Editor. The views expressed in this digest are solely that of the writers and do not necessarily UHĂ HFW WKH YLHZV RI WKH PDJD]LQH

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CONTENTS

3

Feedback

4

Brief News

FOREIGN POLICY 8 Three Neighbours and

an Agreement The concept of Five Principles (Panchsheel) was inherently present in the Chinese foreign policy doctrine. But how relevant is the concept today? While some may argue that Panchsheel is overrated, others believe that Panchsheel is still relevant in improving the equation among the three neighboring countries and enhancing mutual trust; particularly between India and China, in the wake of differing perceptions about their shared borders

FOREIGN POLICY 12 India’s Tightrope Walk

Between Japan and China

COVER STORY

16

China’s Capital Account Liberalization:

Gradually Moving Towards Complete Openness Opening the capital account is not only an important mission of China’s economic reforms, but also an indicator of the level of China’s openness. While transitioning from a planned economy to a market based economy, the Chinese government has chosen a gradual mode of reform, from simple to complicated, from the surface to deeper levels.

|2| India-China Chronicle March 2014

Increasing positive vibes between India and Japan is leaving China restless. Or perhaps it is the other way round; China’s rise on the political firmament is propelling India and Japan to re-evaluate their strategic ties. New Delhi knows that it is walking a foreign policy tightrope at the moment as it is balancing China against Japan and Japan against South Korea whilst officially keeping a neutral position

MARINE 22 Gearing up for High Tides

on The Indian Ocean The People’s Republic of China (PRC) has not come out with a well-defined official document on its Indian Ocean Strategy so far. The reason for this may perhaps be the fact that China’s strategic focus continues to be on the Pacific, and not on Indian Ocean. However, it is becoming clear day by day that the Indian Ocean Region is becoming more and more important for the PRC, against its growing imperatives to protect its Sea Lanes of Communications (SLOCS) vital for energy imports, especially through Malacca straits.

INTERVIEW 26 “Our Relationship with

China is Underdeveloped”: Dr. C. Raja Mohan Dr. C. Raja Mohan is a distinguished Fellow at the Observer Research Foundation, Delhi. He is also a contributing editor for the daily ‘The Indian Express’ and has a column that monitors the developments in China. An author, he dons other hats too. He is a

visiting research professor at the Institute of South Asian Studies, Singapore and is a non-resident senior associate at the Carnegie Endowment for International Peace, Washington DC. Urmila Rao caught up with him to explore the nuances of SinoIndia relations in the light of contemporary issues.

SPACE 28 The Race for Space

Africa normally isn’t the major focus of attention for most food and agribusiness strategists and it is true that in the short– term horizon, Africa will not make any news. However, in the next twenty years, Africa with multi-pronged changes will come to play an important role. Several African countries are full of production resources and majority of African land available will be brought to production. In the coming years, African help will be required to feed the Chinese and even the Indian people.

between the Neighbours

MISSING PIECE 46 Developing Tourism

Cluster Akin to China Tourism activities can be strategized for local development. But the challenge is to search for competitiveness. Clusters, a competent tool to assess companies’ performance, can be used for the same.

SME 49 Shanghai Pilot Free Trade

=RQH %HQH¿WV *DORUH IRU Indian SMEs

Both India and China are basking in the glory of their respective space missions. India’s Mangalyaan mission to Mars and China’s Jade Rabbit Rover to Moon has again brought forth the question, on whether India and China are re-igniting the Space Race or whether they are on the road to cooperation.

The newly established Shanghai FTZ offers several incentives to SMEs looking to establish business presence in China. A reduced capital requirement, single-window clearance, ability to obtain business permit after registration and relaxation of sectorial caps on foreign investment are some of the incentives. Indian SMEs too can establish business presence.

ENERGY 30 Zou Chuqu Strategy in

Augmenting Oil Supplies: Is it Sustainable? China’s National Oil Companies are securing oil assets abroad. This ‘Zou Chuqu’ or ‘Going Out’ strategy is the result of domestic constraints in hydrocarbon sector, such as lower reserves-to-production ratios, aging oil fields and peaking domestic oil production. Is ‘Zou Chuqu’ a good long-term strategy or should China reduce its crude oil dependency with a clear articulated shift towards unconventional energy sources?

RURAL POLICY 34 Analysis of Rural

Programs: Gansu’s Poverty Reduction and India’s MGNREGA On comparison between the two popular social welfare programs, China’s Gansu poverty reduction project and India’s MNREGA, the question arises is which one is performing better to reduce poverty and to provide improved livelihood options to the rural poor. In this context, the article makes a comparison between the targets, development policies’ and strategies adopted by both the countries. The write-up examines if the programs have been able to achieve their targets and provides a comparative learning experience.

AGRICULTURE 38 Will India and China be

fed by Africa?

AGRICULTURE 52 Will India and China be fed

by Africa?

SME 38 Chinese Small and

Africa normally isn’t the major focus of attention for most food and agribusiness strategists and it is true that in the short–term horizon, Africa will not make any news. However, in the next twenty years, Africa with multi-pronged changes will come to play an important role.

Medium Enterprises: Trying to Re-Create the Growth Wonder SMEs have served as a major driving force in augmenting China’s export-led growth as well as in creating avenues for the promotion of innovations in science & technology. However, the sector is battling against several constraints such as lack of funding, professionalism and poor labor relations. The Government is taking measures to revitalize the SMEs. Apart from the Central government, even the local governments are displaying keenness in allocating separate funds to promote and develop the SMEs.

HUMAN RIGHTS 42 +XPDQ 7UDI¿FNLQJ

in China Years of one-child policy and the resultant skewed male female ratio has given rise to trafficking of women and children in China. In June, 2013, China National Radio reported that around 200,000 children disappear every year. The main targets are baby boys though girls are also abducted and sold as labourers and for prostitution. The government has formulated an action plan 2013-2030 with relevant international conventions and Chinese laws to fight the menace.

CINEMA 54 Cinemascope in China’s

Soft Power Strategy The film industry is a primary tool that is used by the Chinese Party-State to portray an attractive image of China to the outside world. At the time of Cultural Revolution, however, the film industry was highly regulated with regard to plot and characterization.

58

Exhibitions & Trade show In India & In China

TOURISM 60 Friendship Year:

Inauguration Ceremony of 'Beautiful China 2014' in Kolkata CHINESE NEW YEAR 61 Xin Chun Kuaile Happy New Year March 2014 India-China Chronicle |3|

F E E D B A C K

x ` 100 January 2014

am The Chinese Dre

FIRST PERSON FEATURE PEOPLE

China’s NGO Sector: A Reality or an Illusion?

a’s

Dam issue: Chin Concern and India’s Fear

A Lion Dancer is not a Disney Character

Asia must not fall prey to Islamophobia

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slamophobia is a strictly Western QRWLRQ WKDW KDV EHHQ HQJXO¿QJ several countries since the 9/11 attacks. Mr. Ganapathy correctly points out that Muslims have lived in Asia for over 1000 years and any country or group patronizing the notion of ‘Islamophobia’ in China & India are falling prey to the global North’s divisive tactics. I personally feel that the problem has been given a religious color by external agencies ZKR ZDQW WKHLU VKDUH RI EHQH¿W IURP the separatist movements in XUA regionto exploit the oil rich zone. The Uighurs rebellion is similar to Maoist movement in India and the correct step to address the issue is by bringing in more development and connectivity with the rest of China. The two Asian countries (India and China) should acknowledge that Muslims have played an integral part in their history and shall continue to contribute in the future as well. Rishav Mathur, Hyderabad

Non State Actors to play their part in India

I

thank Namrata Hasija for providing such a compelling piece with insight into the Chinese NGO sector

|4| India-China Chronicle March 2014

as it is. It is clear that these so-called “non-governmental” bodies have hardly escaped the grip of the government. The core purpose of an NGO is defeated when it has to be ‘accountable’ to the Government and Chinese NGOs have become a mockery of the medium. The Government’s imposiWLRQ RI GLI¿FXOW FODXVHV FRXSOHG ZLWK the citizen’s lack of inclination to be associated with anybody that skirts the Government agency functions has led to a ‘chicken oregg’ situation. Here, I would proudly point out the success of Indian NGOs which have taken up several pressing causes and got into the heart of several controversial issues as well despite political pressures. The article sheds light on China’s totalitarian system and leaves me in awe of the Indian democracy, QR PDWWHU KRZ ÀDZHG LW PLJKW VHHP to be. Preeti Jain, Ahmedabad

Is the Chinese Dream truly benign?

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he interpretation of the ‘Chinese Dream’ by Ms. Jash seems overtly optimistic to me. The Dream mentions ‘construction of a better society’ and ‘military strengthening’ in the same breath. I agree with the author that there lies a huge potential in India-China cooperation and that they can play a major role in bringing about the Asian Dawn WRJHWKHU +RZHYHU &KLQD KDV WR ¿UVW stop its aggression along the border to earn trust in the area west of the Himalayas. The Chinese Dream currently falls in the dubious domain where it could either increase its global hegemony or actually nurture mutual coexistence. The ‘peaceful rise’ claim did not hinder the South China Sea dispute and it will be very naïve to believe that the Chinese Dream will not try to suffocate its neighbor’s aspirations. At best we can hope to continue along the path of mediation and dispute settlement but it will be in our best interest to keep an eye out for yet another country marching towards neo-imperialism. Harish Kumar, Mumbai

The Trio’s agenda

M

r. Deodhar’s article on IndiaChina-US relationship is crystal clear in its purpose and explains the complicated intricacies of the trio’s agenda in a very lucid language. He has very correctly pointed out that USA is an ally as long as we serve their strategic interests. India’s root cause of mistrust towards : A Tangled Triangle A China dates back US d India, China an to 1962 and so far the country R has done little to prove itself to be a friend to the Indian masses. The democratic machinery in India requires the Chinese to create trust among the billions of Indians and not only diplomats and government agencies. India and China united will always make USA uncomfortable and US’s current ‘friendship’ with China is just a veiled version of ‘divide and rule’. Dev Ganguly, Kolkata |MY VIEW INFOCUS|INDIA-CHINA

China’s role as world affairs. While geo strategic player emerged as a new, an economic and region. China has is recognized, India and military power is more widely strong economic , itself as a regional the US hegemony trying to establish that can challenge far behind. Howcompetitor. thus leaving India has countries in in a limited way elations among ever, India too conof a drapower undergone Asia have China-USA Tensions emerged as a regional after the now, the U.S. ZLWK LPSUHVVLYH matic change over For several decades VLGHUDEOH LQÀXHQFH The military Cold GDP. the nted of terms During in has had an unprecede and the Asia economic growth demise of USSR. as were rather Asia of China as well presence in South growing strengths War, Indo-US relations approve of KDV QHYHU EHHQ by their impressive did not 3DFL¿F UHJLRQ &KLQD India are evinced estranged. The US of this US supremacy the development d policy, close relacomfortable with economic growth, India’s non-aligne would never Soviet Union and their expressed in its waters. Americans nuclear arsenals, tions with the erstwhile the LQÀXHQFH LQ WKH WR LQÀXHQFH WKH with Pakistan. On ZDQW HURVLRQ RI WKHLU DPELWLRQV VHHNLQJ and its tensions deallispeedy economic US had a strong region. But the other hand, the a decade and its It is only during cline of the US since ance with Pakistan. situathis nt with China, years that deep trade engageme the last twenty US. problems for the ely changed due have created big tion has progressiv ecofought wars that ing strategic, Since 2003, it has to some correspond it from its economic interests of India have distracted nomic and political ip of trillions desUS-India relationsh problems, and wasted and the US. The GROODUV LQ ¿JKWLQJ ‘engaged’ nations SHUDWHO\ QHHGHG is now as happily else but spoil its mutually suspicious wars that did little than ‘estranged’ to community. These course, has a lot image in the world nations. This of be to and appears US strategy days American system do with the changed the However, even today, India as well as in deep trouble. policy towards the militarily, the US South Asia and strategically and other nations in that a super power indeed remains $VLD 3DFL¿F remarkable During this period |33| place in the Asian India-China Chronicle January 2014 changes have taken

P.S. Deodhar

SINCE 2010, INDIA IS INDEED S THE LEANING MORE TOWARD US. TO SOME EXTENT, CHINA HAS ONLY ITSELF TO BLAME, BY FOR PUSHING INDIA AWAY TIVE PROVOCA ITS OF SEVERAL CES POSTURES AND UTTERAN WHICH DO NOT BEFIT ITS ES. FRIENDLY OVERTUR

China’s reforms in light of Indian Changes

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hina is currently undergoing a similar reform period similar to what India went through in the 1990s. The difference is the reason for bringing in these changes. For us it was a ‘do or die’ situation and for China now, it is to make good things even better and in some cases take a step back to allow some space to its population. The Indian reform era ushered in globalization and the Chinese reforms are in some ways retracing of certain steps taken in the past that hindered inclusive growth and led to widespread inequality. While in India the reforms have been proved to be a boon in most scenarios, in China it is a wait and watch situation and only time can tell ZKDW EHQH¿WV WKH &KLQHVH FDQ H[WUDFW from this measure. Ujwal Chandra, Gurgaon

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INFOCUS | INDIA-CHINA | NEWS

China Raises Defence Budget

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hina will raise its defence budget by 12.2 per cent this year. This announcement was made by Beijing DV LW RSHQHG LWV DQQXDO SDUOLDPHQW VHVVLRQ LQ 0DUFK ÂżUVW week. The increase in budget is to the tune of $131.57 billion and will be used partly to develop more high-tech weapons and to beef up coastal and air defences. The country has also announced country’s growth target of 7.5 per cent. The 7.5 per cent target is aimed at ‘building a moderately prosperous society in all respects’, Premier Li Keqiang said. China wants to focus on boosting market and providing stable growth that ensures employment. However, to accomplish the growth task, ‘painful structural adjustments’ will be needed said Premier Li. The focus on economic growth has further raised concerns on the country’s notorious pollution situation in the country. Addressing this concern Li said that strong measures will be taken to strengthen pollution prevention and control. An amount of $35 billion has been pledged to combat toxic smog that frequently engulfs Chinese cities.

Chinese Cargo Ship in Space

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his could be China’s another major step towards the destination Space. China is expected to launch a cargo ship into the space by 2016 to serve the Tiangong-2 space laboratory, state media Xinhua reported in early March. The announcement underlines the space ambitions of China, bent on making its mark, even as the US and some European countries are busy working on their space station technology. The cargo transportation is an important part in supplying materials on the space. The Tianzhou cargo ship can send supplies to the space station, including propellants, living necessities for astronauts and HTXLSPHQW IRU VFLHQWL¿F UHVHDUFK ,W FDQ GHVWUR\ YDULRXV ZDVWH PDWHULDOV 7LDQJRQJ &KLQDœV ¿UVW VSDFH ODE DQG target orbiter, was sent to orbit in September, 2011.

Surge in Consumer Complaints

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atest data from the China’s State Administration for Industry and Commerce (SAIC) shows that consumer complaints on Internet shopping experiences have registered and increase. The complaints totaled around 17,000 in 2013 marking a rise of 60 per cent. These complaints were about discrepancies between product quality and advertisement as well as cases involving counterfeit products, slow after-sales service, long repair and delivery period. The report stated that the rise in complaints shows that consumer rights violations in China are still a pronounced problem. The report also suggested that Chinese consumers are increasingly aware of their interests and will report to authorities if their interests and rights are infringed upon.

|6| India-China Chronicle ƒ March 2014

No Impediments in Software Cooperation

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ndia and China’s third round of Strategic Economic Dialogue (SED) held in March has brought some cheer to the Indian IT software companies, who would now have access to the Chinese market. The countries signed a Memorandum of Understanding on IT cooperation, marking a formal recognition from the Chinese government to promote Indian software companies. Indian companies have long struggled to obtain contracts from Chinese state-run companies. Yang Xueshan, Vice Minister in the Ministry of Industry and Information Technology (MIIT) and one of &KLQD¶V VHQLRU PRVW RI¿FLDO LQ FKDUJH RI ,7 SROLF\ VDLG WKDW China’s State- owned Enterprises (SOEs) do not pose any impediments for Indian software companies.

Mumbai University Set to Start Martial Arts

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hina offered to start a programme in martial arts through Mumbai University. This was announced by the Consul General of China, Liu Youfa, during a meeting with Maharashtra Governor K Sankaranarayanan in February. Youfa told the Governor that having established a Confucius Institute at the University of Mumbai last year, China is now considering offering a programme in martial arts through the varsity. The programme will train students in self defence, he said. He also highlighted that China was seriously considering setting up an Industrial Park in Nashik. An area of 2,000 DFUHV KDV EHHQ LGHQWL¿HG IRU WKH SXUSRVH $FFRUGLQJ WR <RXfa, the China Industrial Park will have 20-30 non-polluting, high-end manufacturing and IT companies which will provide direct employment to nearly 3,000 people. Youfa, an economist by training, said the trade volume between India and China was USD 64 billion last year. Efforts are being made to increase the same, he added. Youfa said he has been conducting market research in Mumbai and Bangalore to identify new areas of co-operation for trade and investment.

The meeting was presided by Xu Shaoshi, head of China’s National Development and Reform Commission, and Montek Singh Ahluwalia, Vice Chairman of the Planning Commission of India. India also sought Chinese support in substantially raising the speed on three rail corridors and in developing modern stations. China has rapidly modernised its rail network in the last 30 years. India has sought assistance in raising speed on three lines, between New Delhi Agra, .DQSXU DQG &KDQGLJDUK &KLQHVH UDLO RI¿FLDOV VDLG WKH\ could help raise speeds from the current 130 kilometres per hour to 160 or even 200 kilometres per hour. 7KH ¿UVW 6(' GLDORJXH ZDV KHOG LQ %HLMLQJ LQ 6HSWHPEHU 2011 and the second in New Delhi in November 2012.

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ccording to Centre’s urbanization plan, the permanent urban residents of China’s total population will reach 60 per cent by 2020. The proportion of urbanites holding household registration will increase to about 45 per cent at the end of 2020, up from 35.7 per cent of 2013. This implies that about 100 million migrants from rural China will settle down with equal access to public services in cities. ................................................................................................................ Chinese man from Northern city of Beijing has become the first person in the country to sue the government for air pollution. The resident, from Hebei province, submitted his complaint to a district court asking the municipality to control the air pollution according to the law. He is also seeking compensation. ................................................................................................................ he Chinese film ‘Bai Ri Yan Huo’ (Black Coal, Thin Ice) won the Golden Bear for best picture at the Berlin International Film Festival. Chinese actor Liao Fan, who played a role of detective Zhang in the film, won the Silver Bear for Best Actor. ................................................................................................................ ndia’s Central Board of Secondary Education (CBSE) has introduced Mandarin language in 22 schools across the country. The schools are from three metro cities besides Bangalore, Raipur and Jaipur. For this pilot project, CBSE has tied up with Hanban-China’s national office for teaching Chinese as a foreign language.

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Three Neighbors and an Agreement 60th Anniversary of Panchsheel and its Relevance for China, India and Myanmar The concept of Five Principles (Panchsheel) was inherently present in the Chinese foreign policy doctrine. But how relevant is the concept today? While some may argue that Panchsheel is overrated, others believe that Panchsheel is still relevant in improving the equation among the three neighboring countries and enhancing mutual trust; particularly between India and China, in the wake of differing perceptions about their shared borders Dr. Rahul Mishra

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n January 24, 2014, India and China launched the ‘Year of Friendly Exchanges’ in Beijing. The event, which was attended by the Chinese Vice President Li Yuanchao, VLJQLÂżHV WKH LPSRUWDQFH &KLQD KDV started attaching to India. During the event, Vice President Li emphasized that China will commemorate the 60th year of Panchsheel, along with India and Myanmar.

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2014: 60th Anniversary of Panchsheel The year 2014 marks the 60th anniversary of the signing of the landmark Panchsheel agreement. Panchsheel or ‘Five Principles of Peaceful Coexistence’ were jointly proposed by China, India and Myanmar (formerly known as Burma) and were fundamentally put forth to offer newly independent Asian and African countries with a rule of conduct vis-Ă -vis their foreign policies. These Five Principles include:

Mutual respect for each other’s territorial integrity and sovereignty, mutual non-aggression, mutual non-interference in each other’s internal matWHUV HTXDOLW\ DQG PXWXDO EHQHÂżWV DQG peaceful coexistence. Panchsheel forms the basis of India-China relations since early V DQG ZDV RIÂżFLDOO\ H[SRXQGHG RQ April 29, 1954 in the “Agreement between the People’s Republic of China and the Republic of India on trade and intercourse between Tibet Region of

China and Republic of India. The basic objective behind signing the agreement was to promote trade and cultural exchanges between Tibet and India and to facilitate pilgrimage and travel for the people of China and India. Additionally, these principles became the main reference point in China-Myanmar bilateral relations and ODWHU LQ $SULO WKHVH ÂżYH 3ULQFLSOHV were also incorporated in the 10-point declaration on ‘promotion of world peace and cooperation’ issued in the %DQGXQJ &RQIHUHQFH 7KH VLJQLÂżFDQFH of Panchsheel can be gauged from the IDFW WKDW WKHVH ÂżYH 3ULQFLSOHV ZHUH unanimously adopted by the United Nations on December 11, 1957, as a code of conduct in international relations. Six decades back, in the year 1954, Chinese Premier Zhou Enlai paid friendly visits to both India and Myanmar. The two countries signed

TO ALLAY SKEPTICISM WITH REGARD TO THE FIVE PRINCIPLES; CHINA, INDIA AND MYANMAR SHOULD WORK TOGETHER TOWARDS DEVELOPING GREATER UNDERSTANDING AND EXPANDING THE SCOPE OF THE PRINCIPLES TO ACCOMMODATE EACH OTHERS’ INTERESTS. March 2014 ƒ India-China Chronicle |9|

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agreements with China on June 28 and June 29, 1956 respectively and promised to comply with the Five Principles of Peaceful Coexistence. In fact, Zhou Enlai and the heads of these two countries issued a joint statement stating that “Five Principles of Peaceful Coexistence will be the guiding principles of China’s bilateral relations with India and Myanmarâ€?. For Beijing, however, these principles were not RQO\ FRQÂżQHG WR LWV UHODWLRQV ZLWK these two countries, but it became the foundation of its bilateral relations with 160 other countries as well. Panchsheel in Chinese Foreign Policy While Five Principles were inherently present in the Chinese foreign policy doctrine, these principles |10| India-China Chronicle ƒ March 2014

played a greater role in shaping its relations with two of its most important and immediate neighbors, India and Myanmar, and ushered them into an era of friendship and bonhomie. In fact, this was the time when the catch phrase Hindi-Chini Bhai Bhai (Indians and Chinese are brothers) became prominent. In retrospect, 1954 and 2013 are also important in the history of India-China relations because these two years were the only two calendar years in the past six decades, when the exchange of high-level diplomatic visits from both sides took place. In June 1954, Zhou Enlai was on a state visit to India and later in the month of October, Indian Prime Minister, Jawaharlal Nehru, in a reciprocal gesture, paid a historic visit to Beijing. The seeds of the relations were,

undeniably, sown by the visionary leaders, Nehru and Enlai. India and China have come a long way in nurturing bilateral ties. For instance, the strategic and cooperative partnership was established in 2005. Later, in 2006, a ten-pronged strategy was proposed, while 2008 witnessed the formulation of ‘a shared vision for 21st century’. Intriguingly, as soon as the Chinese President Xi Jinping took charge of his responsibilities in 0DUFK KH SURSRVHG D ÂżYH SRLQW formula to boost ties with India. Nevertheless, India and China have also gone through rough patches in the six decades of their relations. Half-a-century old border problem between these two states has been a major irritant. In addition to this, the Panchsheel principles have been violated in the wake

of numerous military stand-offs along the India-China border since late 1950s. However, in spite of the ups and downs in the relationship, the two sides have been doing their bit to move the relationship forward including the endeavor to adhere to the principles of Panchsheel. Border Defence Cooperation Agreement (BDCA), signed during Indian Prime Minister Dr. Manmohan Singh’s Beijing visit in October 2013, can be seen as a way of reinforcing the principles of Panchsheel. Five Principles and China, India, Myanmar In the context of China-Myanmar relations, it is apparent that these two countries have barely violated the Five Principles vis-Ă -vis their bilateral ties and the principles have certainly stood the test of time. In 1954, Zhou Enlai’s landmark visit to Myanmar and, Myanmar’s Prime Minister U Nu’s reciprocal visit to Beijing in the later part of the same year proved crucial in alienating apprehensions, realizing their mutual aspirations and in giving a new direction to their relations. In the 1950s, the bonhomie led Myanmar to regard its bilateral relations with China as the relation of that of PaukPhaw (a Burmese word for kinsfolk). Further, in the 1960s, the 2,200 km long Myanmar-China boundary dispute resolution turned out to be the watershed event in their relations. Two important agreements, namely, ‘Question of the Boundary between the Two Countries’ and the treaty of ‘Friendship and Mutual Aggression’ were signed on January 28, 1960. Further impetus has been provided by the forging of ‘China-Myanmar Comprehensive Strategic Cooperative Partnership’ in 2011 during Myanmar’s current President U Thein Sein’s Beijing visit. Like any other bilateral relations, China-Myanmar relations have also been a mix bag. However, there has not been any apparent breach of the principles by any of the sides. In fact, at the broader level, China, despite the Mytsone dam controversy, is Myanmar’s biggest trade partner and source of foreign investment. The China-Myanmar

oil and gas pipeline, which is now fully operational, substantiates that point. Myanmar and China continue to remain important for each other and in the coming years, relations are going to take a more constructive shape. The year 2014 holds immense importance for China, India and Myanmar as the year has been designated as the ‘Year of Friendly Exchanges’. In addition to this, these three countries are exploring ways to celebrate 60 years of the Panchsheel agreement. Yet, many would argue that Panchsheel is overrated. To allay skepticisms with regard to the Five Principles, China, India and Myanmar should work together and work towards developing greater mutual understanding. However, the fundamental requirement for that is

be seen as a prospective option for maximizing their gains. Importantly, China should invest heavily in India and Myanmar as both the countries are in a dire need of foreign direct investments. MoreoYHU &KLQD DQG ,QGLD FDQ JLYH D ¿OOLS to Myanmar’s economy by increasing investments, trade and aid. Finally, harmonious relations between these three countries are the prerequisite for their peaceful coexistence in the times of uncertainties. In essence, one may thus argue that Panchsheel is still relevant in improving the equation among the three neighboring countries and enhancing mutual trust; particularly between India and China in the wake of differing perceptions of their shared

INDIA AND CHINA HAVE GONE THROUGH ROUGH PATCHES IN SIX DECADES OF THEIR RELATIONSHIP. HALF-A-CENTURY OLD BORDER PROBLEM BETWEEN THESE TWO STATES HAS BEEN A MAJOR IRRITANT. PANCHSHEEL PRINCIPLES HAVE BEEN VIOLATED. the boundary dispute resolution between India and China. As Myanmar is strategically located at the junction of India, China and Southeast Asia, their shared interests will pave the path for future cooperation. In order to revive the Five Principles in their relations in a more meaningful manner, these countries can adopt D ¿YH SURQJHG DSSURDFK LQ WKHLU policies towards each other. Firstly, though the 1954 agreement was not a tripartite agreement, China, India and Myanmar together can expand the scope of the Five Principles to accommodate each others’ interests. Secondly, long and short-term measures should be taken to resolve all the protracted issues such as the India-China border questions and the huge trade imbalances between India and China. Thirdly, these countries require formulating a trilateral arrangement so as to leverage their relations with each other. However, such an arrangement should not be aimed at any third party. Fourthly, trilateral economic cooperation can

borders. As these Asian countries have SRWHQWLDO VWDNHV LQ WKH $VLD 3DFLÂżF region, they, need to adopt a more pragmatic approach pertaining to the Five Principles which will preserve their key economic and strategic interests at both regional and global levels. If redesigned and reinvigorated carefully, the 60th anniversary of the Five Principles will set new trends in shaping the China-India-Myanmar equation. A lasting peace between the two biggest powers of Asia and with Myanmar will not only lead to the peace and tranquility in the Asian region but will also contribute substantially to the realization of the ‘Asian century’. ‰

Dr. Rahul Mishra is a Research Fellow at Indian Council of World Affairs, Sapru House, New Delhi. Views expressed are of the author and do not QHFHVVDULO\ UHĂ€HFW WKH YLHZV RI ,&:$

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India’s Tightrope Walk Between Japan and China Increasing positive vibes between India and Japan is leaving China restless. 2U SHUKDSV LW LV WKH RWKHU ZD\ URXQG &KLQD¶V ULVH RQ WKH SROLWLFDO ¿UPDPHQW LV propelling India and Japan to re-evaluate their strategic ties. New Delhi knows that LW LV ZDONLQJ D IRUHLJQ SROLF\ WLJKWURSH DW WKH PRPHQW DV LW LV EDODQFLQJ &KLQD DJDLQVW -DSDQ DQG -DSDQ DJDLQVW 6RXWK .RUHD ZKLOVW RI¿FLDOO\ NHHSLQJ D QHXWUDO SRVLWLRQ |12| India-China Chronicle March 2014

Narayani Basu

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W KDV EHHQ D OLYHO\ FRXSOH RI PRQWKV IRU ,QGLDœV IRUHLJQ SROLF\ PDFKLQHU\ 6WDUWLQJ IURP 1RYHPEHU NH\ VWDWH OHYHO GLJQLWDULHV IURP -DSDQ DQG South Korea have visited the country LQ UDSLG VXFFHVVLRQ )URP WKH YLVLW RI WKH -DSDQHVH (PSHURU DQG (PSUHVV LQ HDUO\ 'HFHPEHU WR WKH YLVLW RI WKH Japanese Defense Minister Itsunori 2QRGHUD 6RXWK .RUHDQ 3UHVLGHQW 3DUN *HXQ +\H DQG -DSDQHVH 3ULPH Minister Shinzo Abe – all in January this year – India is looking at a foreign policy scenario that has quite a few UDPL¿FDWLRQV 2Q WKH RQH KDQG LW LV D YLDEOH SODWIRUP IURP ZKLFK ,QGLD FRXOG UHMXYHQDWH LWV PXFK YDXQWHG /RRN (DVW 3ROLF\ ZLWK UHJDUG WR (DVW $VLD 2Q WKH RWKHU KDQG WKH YLVLWV FRXOG PDNH ,QGLD walk the proverbial tightrope with UHJDUG WR &KLQD LWV QHLJKERU DFURVV WKH +LPDOD\DV India’s relationship with China has EHHQ URFN\ WR VD\ WKH OHDVW ¹ WKH PDLQ IDFWRU EHLQJ RI FRXUVH WKH XQUHVROYHG and contentious border issue. This week has been a busy one for India. 7KH th round of border talks was held LQ 1HZ 'HOKL RQ )HEUXDU\ th DV WKH special representatives of both countries – India’s National Security Advisor Shivshankar Menon and Chinese 6WDWH &RXQFLOORU DQG WRS GLSORPDW <DQJ -LHFKL PHW WR GLVFXVV WKH ERXQGary question. Indo-China Border Talks: What is Different? 7KH IDFW WKDW )HEUXDU\ th herDOGHG WKH th round of border talksVSHDNV YROXPHV DERXW WKH ORQJ GUDZQ out state of affairs between India and China. The talks between both sides KDYH ORQJ FURVVHG WKH ¿UVW VWDJH WKDW LQYROYHG DJUHHLQJ WR WKH VHWWOHPHQW RI the boundary question. This session of border talks are part of the ongoing VHFRQG VWDJH ¹ GLVFXVVLQJ WKH ³IUDPHwork for the resolution of the boundary question� – a stage which has continued for the past eight years. Once WKLV TXHVWLRQ LV UHVROYHG WKH WKLUG VWDJH ZLOO IRFXV RQ WKH ³GHPDUFDWLRQ RI DQ\ IUDPHZRUN DJUHHPHQW RQ PDSV

JAPAN IS COURTING INDIA’S ALLIANCE IN THE BACKDROP OF ITS TERRITORIAL TUG OF WAR WITH CHINA. CHINA IS DOMINATING JAPAN’S MIND TO SUCH AN EXTENT THAT TOKYO HAS DECIDED TO END ITS 47-YEAR-OLD SELF-IMPOSED EMBARGO ON ARMS EXPORTS TO INDIA. and on the ground delineation.� Spokespersons of both sides have acknowledged that there is still a long way to go before that stage is reached. :KDW LV VLJQL¿FDQW WR QRWH KRZHYHU LV the fact that while the scope for border talks between Beijing and New Delhi KDV SUHYLRXVO\ UHPDLQHG QDUURZHG GRZQ WR MXVW WKH LVVXH RI WKH ERUGHU WKLV WLPH WKH VFRSH KDV EHHQ ZLGHQHG Both Menon and Yang discussed counWHU WHUURULVP GLVDUPDPHQW DQG PDULWLPH DIIDLUV EHVLGHV WUDGH ¿QDQFH DQG FOLPDWH FKDQJH DV ZHOO DV UHJLRQDO DQG international issues like cooperation LQ WKH (DVW $VLD 6XPPLW DQG $IJKDQLVWDQ :KDW LV HYHQ PRUH UHPDUNDEOH LV that the subject of territorial disputes in East Asia was on the agenda. It was a clear indicator of Beijing’s concerns DERXW -DSDQœV UHFHQW GLSORPDWLF RXWreach to India.

Greater East Asian Geopolitics: The China Factor 7KDW (DVW $VLD LV FXUUHQWO\ D UHJLRQ LQ Ă€X[ LV SXWWLQJ LW PLOGO\ 7KHUH DUH D QXPEHU RI IDFWRUV DGGLQJ WR WKH YRODWLOLW\ RI WKH VLWXDWLRQ SDUWLFXODUO\ with regard to Japan and China. Japan’s ongoing spat with China over the Diaoyu/Senkaku Islands in the East &KLQD 6HD KDV EHHQ QXPHURXVO\ DQG YDULRXVO\ DQDO\]HG &HUWDLQ FRPPRQ GHQRPLQDWRUV VWDQG RXW $ QDVW\ PL[ RI KLVWRULFDO UHVHQWPHQWV XQUHVROYHG ZDU GLVSXWHV DQG DPELJXRXV WHUULWRULDO FODLPV KDYH UHVXOWHG LQ WKH FXUUHQW strained state of bilateral relations between Beijing and Tokyo. ,QGLD LV KRZHYHU D GHÂżQLWH IRUHLJQ policy opportunity as far as Tokyo is concerned. Its desire to build and cePHQW WLHV ZLWK WKH UHVW RI (DVW DQG 6RXWKHDVW $VLD KDV QHYHU EHHQ VRPHthing that New Delhi has cared to hide. Japan is clearly seizing the initiative to court India’s alliance in what is turning out to be a territorial tug of war ZLWK &KLQD 6R PXFK LV &KLQD RQ -DSDQÂśV PLQG WKDW LQ D ELG WR JDLQ ,QGLDQ VXSSRUW 7RN\R KDV GHFLGHG WR HQG LWV \HDU ROG VHOI LPSRVHG HPEDUJR RQ DUPV H[SRUWV WR ,QGLD WKRXJK ZLWK conditions attached. In return for the WZR DUPHG YHUVLRQV RI WKH 8 DPSKLELRXV DLUFUDIW 7RN\R LV VHHNLQJ WR rope in Indian support over what it March 2014 ƒ India-China Chronicle |13|

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WHUPV ³WKH UHFHQW &KLQHVH SURYRFDWLYH actions”. In his visit to India earlier WKLV PRQWK 'HIHQVH 0LQLVWHU 2QRGHUD VDLG WKDW ZKLOH &KLQD UHPDLQV LPSRUWDQW IRU ERWK ,QGLD DQG -DSDQ LWV UHFHQW SURYRFDWLRQV GHPDQG WKDW WKH HQWLUH LQWHUQDWLRQDO FRPPXQLW\ VHQGV D FROOHFWLYH PHVVDJH RI ZDUQLQJ +RZHYHU ,QGLD PD\ QRW EH TXLWH DV HDVLO\ SHUVXDGHG ZKHQ LW FRPHV WR VHQGLQJ PHVVDJHV WR %HLMLQJ 1HZ Delhi knows that it is walking a foreign SROLF\ WLJKWURSH DW WKH PRPHQW DQG LW LV EDODQFLQJ &KLQD DJDLQVW -DSDQ DQG -DSDQ DJDLQVW 6RXWK .RUHD ,WV RI¿FLDO SRVLWLRQ RQ WKH PDWWHU KDV EHHQ FDUHIXOO\ QHXWUDO DQG DOO FRQÀLFWV PXVW EH SHDFHIXOO\ UHVROYHG YLD GLDORJXH ZLWKout the use of force. China is certainly WKH ODUJHU IDFWRU RQ ,QGLD¶V PLQG 1HZ Delhi has been leery of China’s growLQJ LQÀXHQFH IRU D ZKLOH QRZ DQG LW ZRXOG SUHIHU WR PDLQWDLQ SDQ $VLDQ bilateral ties across the board with Southeast and East Asian countries. Putting it in Perspective: India and Japan’s Ties Of Late -DSDQ KDV RI ODWH EHHQ IRFXVLQJ RQ UDPSLQJ XS WLHV ZLWK ,QGLD DQG WKH JHVWXUHV KDYH EHHQ ZHOFRPHG E\ 1HZ Delhi. India’s ties with Japan have a

|14| India-China Chronicle March 2014

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The disputed islands, called Senkaku by Japan and Diaoyu by China

JAPAN HAS EXTENDED SUPPORT TO INDIA FOR SEVERAL INFRASTRUCTURAL PROJECTS, SUCH AS THE METRO RAIL, INDUSTRIAL CORRIDORS, HIGHWAYS, BRIDGES AND POWER PLANTS. RI DQ $LU 'HIHQVH ,GHQWL¿FDWLRQ =RQH $',= RYHU WKH UHJLRQ 1DWXUDOO\ WKHQ %HLMLQJ LV DQG ZLOO EH DQ\WKLQJ EXW SOHDVHG DV 7RN\R UHDFKHV RXW WR ,QGLD 1HZ 'HOKL KDV WKH GRXEWIXO SULYLOHJH RI EHLQJ D µEDODQFHU¶ IRU WKH UHJLRQ ,W LV WKH RQO\ FRXQWU\ WKDW GRHV QRW KDYH GLUHFW VWDNHV LQ WKH UHJLRQ ,WV SRWHQWLDO WR DFW DV D EXIIHU DJDLQVW WKH SHUFHLYHG WKUHDW WKDW China presents to the rest of East and 6RXWKHDVW $VLD KDV EHHQ UHFRJQL]HG E\ -DSDQ $EH LQ SDUWLFXODU UHJDUGV ,QGLD WR EH D SRZHUIXO FRXQWHUZHLJKW WR &KLQD¶V VWUDWHJLF ULVH LQ WKH UHJLRQ ,Q µ7RZDUGV D %HDXWLIXO &RXQWU\ 0\ 9LVLRQ IRU -DSDQ¶ $EH VLQJOHG ,QGLD RXW IRU VSHFLDO DWWHQWLRQ UHPDUNLQJ WKDW LW ZRXOG QRW VXUSULVH KLP LI µLQ DQRWKHU GHFDGH -DSDQ ,QGLD UHODWLRQV RYHUWDNH -DSDQ 86 DQG -DSDQ &KLQD WLHV ¶ India-China Ties: The Road Ahead 7KH NH\ZRUG IRU ERWK SDUWLHV DV far as the road ahead is concerned

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Narayani Basu is a freelance journalist with special interest in Chinese foreign policy and China-India relations. Her other areas of interest include resource diplomacy in Africa, Antarctica and US-China relations.

March 2014 India-China Chronicle |15|

INFOCUS|CHINA|COVER STORY

CHINA’S CAPITAL ACCOUNT LIBERALIZATION

Gradually Moving Towards Complete Openness Opening the capital account is not only an important mission of China’s economic reforms, but also an indicator of the level of China’s openness. While transitioning from a planned economy to a market based economy, the Chinese government has chosen a gradual mode of reform, from simple to complicated, from the surface to deeper levels.

|16| India-China Chronicle March 2014

Dr. Tu Yonghong and Dr Wang Wen Towards A New Beginning: Carefully and Cautiously For over thirty years reform has been the reason for the takeoff of the Chinese economy. Corresponding with this, China’s mode of capital account liberalization has also been gradual. The opening of trade and direct investment DFFRXQWV FDPH ¿UVW DQG WKHQ WKH DFFRXQWV that could be arbitraged or speculated on were opened while others are still left closed.

During the planned economy era, the mandatory planning management of China’s foreign exchange reserve and balance of payments was highly concentrated. There was not only no foreign debt, but also no foreign direct investment, and the capital account was very strictly controlled. In 1978 China began the gradual loosening of FDI regulations that allowed for the HVWDEOLVKPHQW RI WKH ÂżUVW IRUHLJQ LQYHVWHG enterprise. To satisfy the demand for imports, the Chinese government created 10 foreign borrowing enterprises and XQLÂżHG WKH ÂżQDQFLQJ IURP LQWHUQDWLRQDO ÂżQDQFH PDUNHWV The 1984 Mexican debt crisis and the subsequent declarations of 37 developing countries that they could not repay foreign debts was a strong warning to China. The Chinese government quickly rolled out the “Regulations on Foreign Debt Administrationâ€?, which monitored and regulated the scale, use, and ability to repay foreign debts for enterprises. For 30 years China has never defaulted on foreign debt and maintains an excellent market reputation. In 1992 Chinese leader Deng Xiaoping’s South Tour Speeches reasserted China’s belief in developing the productive force and the market economy, by bringing China’s reform and opening up into a new stage of development. In 1994 the Chinese government cancelled controls over foreign exchange in the current account, implementing a foreign exchange settlement system for imports and exports, with free convertibility for foreign exchange receipts and payments created by the enterprise’s trading. This foreign exchange regime reform greatly stimulated the participation of enterprises and pushed forward powerful progress in trade and the economy (See Charts 1 and 2). The RMB exchange rate also underwent a big reform by establishing a VLQJOH DQG PDQDJHG Ă€RDWLQJ H[FKDQJH rate regime based on market supply and demand. Local governments increased the introduction of foreign capital, and foreign direct investment was basically completely opened, with no restrictions placed on the ability of foreign invested enterprises to borrow from abroad. Just when China was preparing to further lib-

IN 1985, THE GOVERNMENT ELIMINATED INTERNAL TRADE SETTLEMENT PRICING, AND BEGAN TO ENFORCE A SINGLE EXCHANGE RATE FOR THE RMB, WHICH IN EFFECT SET THE COURSE FOR THE CONVERTIBILITY OF THE RMB CAPITAL ACCOUNT.

eralize the capital account to participate in the convergence of capital in emerging PDUNHWV WKH $VLDQ ¿QDQFLDO FULVHV erupted. The over-borrowing of Southeast Asian countries, currency mismatch of bank assets and liabilities, the implicit guarantees offered by governments and the rigidity of mechanisms gave hot money the perfect opportunity for arbitrage. Southeast Asian economies under attack experienced currency devaluation crises. Falling stock market and real estate prices exceeded 2/3, losing over 10 years of economic growth in the process and forcing the governments of many countries to step down. The cost of opening the capital account too quickly in these countries caused the Chinese government to approach the opening of its own capital account more carefully, value strengthening controls over short WHUP FDSLWDO ÀRZV SURKLELW WKH SXUFKDVH of foreign exchange for the advance redemption of loans and strike against un-permitted capital withdrawals via phony foreign currency transactions through trade channels. The Chinese FDSLWDO DQG ¿QDQFLDO DFFRXQW EDODQFH turned negative, reaching $6.3 billion in 1998 (See Chart 4).

Chart 1: China’s GDP (in hundreds of millions RMB) Ď°Í•ĎŹĎŹĎŹ ĎŻÍ•ϹϏϏ ĎŻÍ•ĎŹĎŹĎŹ ĎŽÍ•ϹϏϏ ĎŽÍ•ĎŹĎŹĎŹ Ď­Í•ϹϏϏ Ď­Í•ĎŹĎŹĎŹ ϹϏϏ ĎŹ ͲϹϏϏ

'ŽŽÄšĆ? ĂŜĚ ^ÄžĆŒÇ€Ĺ?Ä?ÄžĆ? dĆŒÄ‚ÄšÄž Ä‚ĹŻÄ‚ĹśÄ?Äž ÍžĹ?Ĺś ,ƾŜÄšĆŒÄžÄšĆ? ŽĨ DĹ?ĹŻĹŻĹ?ŽŜĆ? h͘^͘ ŽůůÄ‚ĆŒĆ?Íż

Chart 2: China’s Trade Volume (in Hundreds of Millions U.S. Dollars)

From FDI to Securities Exchange After China joined the WTO in 2001 it dramatically reduced tariffs, opened the services market, and worked hard to acclimatize itself to the new rules of international trade. Through FDI and techMarch 2014 ƒ India-China Chronicle |17|

INFOCUS|CHINA|COVER STORY

nology transfer, accompanied by entry into the global division of labor and innovations in both production organization and management, the international competitiveness of Chinese enterprises continuously increased, with resultant growth in import and export trade increase by more than 30 per cent every year. Since 2002, the current account and capital account have both maintained large surpluses, causing China to accumulate the world’s largest amount of foreign exchange reserves (See Charts 3, 4, and 5). Since the supply of foreign exchange reserves greatly exceeds the demand for them, the pressure on the RMB to appreciate is huge. In 2005 the Chinese government again reformed the RMB exchange rate regime, emphasizing an RMB exchange rate determined by market supply and demand, and from here the RMB entered into a period of appreciation (See Chart 6). In order to increase the productivity |18| India-China Chronicle ƒ March 2014

ϰϹϏϏ ϰϏϏϏ ϯϹϏϏ ϯϏϏϏ ώϹϏϏ ώϏϏϏ ϭϹϏϏ ϭϏϏϏ ϹϏϏ Ϗ ͲϹϏϏ

ĹšĹ?ŜĞĆ?Äž ĆľĆŒĆŒÄžĹśĆš Ä?Ä?ŽƾŜĆš Ä‚ĹŻÄ‚ĹśÄ?Äž ÍžĹ?Ĺś ,ƾŜÄšĆŒÄžÄšĆ? ŽĨ DĹ?ĹŻĹŻĹ?ŽŜĆ? h͘^͘ ŽůůÄ‚ĆŒĆ?Íż

Chart 3: Chinese Current Account Balance (in Hundreds of Millions U.S. Dollars) ĎŻÍ•ϹϏϏ ĎŻÍ•ĎŹĎŹĎŹ ĎŽÍ•ϹϏϏ ĎŽÍ•ĎŹĎŹĎŹ Ď­Í•ϹϏϏ Ď­Í•ĎŹĎŹĎŹ ϹϏϏ ĎŹ ͲϹϏϏ ĹšĹ?ŜĞĆ?Äž ĂƉĹ?ƚĂů ĂŜĚ &Ĺ?ŜĂŜÄ?Ĺ?Ä‚ĹŻ Ä?Ä?ŽƾŜĆš Ä‚ĹŻÄ‚ĹśÄ?Äž ÍžĹ?Ĺś ,ƾŜÄšĆŒÄžÄšĆ? ŽĨ DĹ?ĹŻĹŻĹ?ŽŜĆ? h͘^͘ ŽůůÄ‚ĆŒĆ?Íż

Chart 4: Chinese Capital and Financial Account Balance (in Hundreds of Millions U.S. Dollars)

of capital and give full play to the capital advantage of China’s growing income, &KLQHVH ÂżUPV IHOW WKH VWURQJ LPSHWXV to invest abroad, and residents also had demands to invest in foreign markets to receive a higher return on investments. In 2002 the liberalization of the Chinese capital account took a giant step from )', WR VHFXULWLHV H[FKDQJH $W ÂżUVW RQ the foundation of FDI the Chinese government encouraged Chinese businesses to “go outâ€? and directly invest abroad. From 2001 to 2007, the net amount of Chinese FDI increased from $37.4 billion to $139.1 billion (See Chart 7). Secondly, opening the securities market and LPSOHPHQWLQJ WKH 4XDOLÂżHG )RUHLJQ ,QVWLWXWLRQDO ,QYHVWRU 4),, DQG 4XDOLÂżHG Domestic Institutional Investor (QDII) plans permitted foreign capital to enter the Chinese capital market within D FRQÂżQHG UDQJH SHUPLWWHG &KLQHVH residents to invest in securities markets abroad, and thus individual investment

income could be freely converted and transferred across borders. By 2007 the Chinese securities investment balance was $16.4 billion (See Chart 8). A major reason for the 2008 LQWHUQDWLRQDO ¿QDQFLDO FULVLV ZDV WKDW WKH :DOO 6WUHHW ¿QDQFLDO LQVWLWXWLRQV had raised leveraged rates without FRQVWUDLQWV LQ RUGHU WR PD[LPL]H SUR¿WV 6XFK DFWLRQ UHVXOWHG LQ LQÀDWLQJ UHDO estate prices, mortgage bonds and other asset bubbles, the bursting of which OHG WR WKH ¿QDQFLDO FULVLV ,Q IDFW WKH PDVVLYH LQÀRZ RI LQWHUQDWLRQDO FDSLWDO is a necessary condition for raised leverage rates and expanded risks from Wall Street. Even in developed countries such as the United States, without effective guidance and management of FURVV ERUGHU FDSLWDO ÀRZV WKLV ZRXOG ultimately result in the occurrence of D ¿QDQFLDO FULVLV $Q LPSRUWDQW OHVVRQ

SINCE 2002, THE CURRENT ACCOUNT AND CAPITAL ACCOUNT HAVE BOTH MAINTAINED LARGE SURPLUSES, CAUSING CHINA TO ACCUMULATE THE WORLD’S LARGEST AMOUNT OF FOREIGN EXCHANGE RESERVES. for China is that in the process of promoting capital account liberalization it should focus on monetary security and ¿QDQFLDO VHFXULW\ ZKLOH LPSURYLQJ LWV macroeconomic policy and management ability according to the needs of economic development in international markets and the allocation of resources in order to acclimatize to the rhythm of capital account liberalization. In the post-crisis era, in a bid to eliminate the hazardous effects of an unreasonable international monetary system on its trade and economic development and to improve monetary DQG ¿QDQFLDO VHFXULW\ &KLQD ODXQFKHG cross-border trade settlements in RMB in 2009. At of the end of 2012, the cumulative bank cross-border RMB trade settlement business reached 2.94

ϯϹϏϏϏ ĎŻĎŹĎŹĎŹĎŹ ώϹϏϏϏ ĎŽĎŹĎŹĎŹĎŹ ϭϹϏϏϏ Ď­ĎŹĎŹĎŹĎŹ ϹϏϏϏ ĎŹ ͲϹϏϏϏ ĹšĹ?ŜĂΖĆ? &Ĺ˝ĆŒÄžĹ?Ĺ?Ĺś džÄ?ŚĂŜĹ?Äž ZÄžĆ?ÄžĆŒÇ€ÄžĆ? ÍžĹ?Ĺś ,ƾŜÄšĆŒÄžÄšĆ? ŽĨ DĹ?ĹŻĹŻĹ?ŽŜĆ? h͘^͘ ŽůůÄ‚ĆŒĆ?Íż

Chart 5: China's Foreign Exchange Reserves (in Hundreds of Millions U.S. Dollars)

Ď­ĎŹĎŹĎŹ ϾϏϏ Ď´ĎŹĎŹ ϳϏϏ ϲϏϏ ϹϏϏ Ď°ĎŹĎŹ ĎŻĎŹĎŹ ĎŽĎŹĎŹ Ď­ĎŹĎŹ ĎŹ ϭϾϴϹ ϭϾϴϳ ϭϾϴϾ ϭϾϾϭ ϭϾϾϯ ϭϾϾϹ ϭϾϾϳ ϭϾϾϾ ĎŽĎŹĎŹĎ­ ĎŽĎŹĎŹĎŻ ĎŽĎŹĎŹĎą ĎŽĎŹĎŹĎł ĎŽĎŹĎŹĎľ ĎŽĎŹĎ­Ď­ ZD džÄ?ŚĂŜĹ?Äž ZĂƚĞ ͞ƚŽ Ď­ĎŹĎŹ h͘^͘ ŽůůÄ‚ĆŒĆ?Íż

Chart 6: RMB Exchange Rate (to 100 U.S. Dollars) ώϹϏϏ ώϏϏϏ ϭϹϏϏ ϭϏϏϏ ϹϏϏ Ϗ

ĹšĹ?ŜĞĆ?Äž Ĺ?ĆŒÄžÄ?Ćš /ŜǀĞĆ?ƚžĞŜƚ Ä‚ĹŻÄ‚ĹśÄ?Äž ÍžĹ?Ĺś ,ƾŜÄšĆŒÄžÄšĆ? ŽĨ DĹ?ĹŻĹŻĹ?ŽŜĆ? h͘^͘ ŽůůÄ‚ĆŒĆ?Íż

Chart 7: Chinese Direct Investment (in Hundreds of Millions U.S. Dollars)

trillion Yuan, accounting for14 per cent of China’s total trade volume. In January 2011, the Chinese government abolished limits on individual foreign direct investment. As a result, individuals were free to choose between foreign currency and local currency to conduct foreign direct investment like companies do. In 2012, RMB cross-border direct investment reached 284.02 billion Yuan, recording an increase of 173.15 billion Yuan or 156 per cent as compared with 2011. In addition, the control over domestic borrowing from a foreign source has also been substantially eased. Multinational corporations are allowed to issue RMB bonds abroad and foreign ÂżQDQFLDO LQVWLWXWLRQV DUH DOORZHG WR HQWHU &KLQDÂśV ÂżQDQFLDO PDUNHWV ZLWK their RMB reserves. In 2011, the scale of Chinese foreign debt grew to $695 billion. (See Chart 9) What is Next After Lewis Turning Point? China has already exhibited the Lewis Turning Point. The export-driven economic model that relied on cheap labor has almost come to an end, as export growth has fallen from the 30% level before 2008 to an average of 7% in 2012. If there is no stimulus for exports, the contribution of exports to March 2014 ƒ India-China Chronicle |19|

INFOCUS|CHINA|COVER STORY

China’s economic growth will become smaller, and thousands of people could lose their jobs. Among the three major elements of productivity, land and labor are low in mobility. The only factor that has a high mobility is capital. Through FDSLWDO Ă€RZV D FRXQWU\ FDQ DOORFDWH land and labor anywhere in the world to organize production as well as provide goods and services. Starting with the development trend of international trade, multinational corporations are the organizers of international production and trade. In other words, trade follows the footsteps of capital. The increase in foreign investment is accompanied by PRUH IUHTXHQW FDSLWDO Ă€RZV DQG ODUJHU volumes of trade. Free movement of capital is largescale, high-speed, high-impact and thus GLIÂżFXOW WR JUDVS ,W LV YHU\ OLNHO\ WR LPSDFW ÂżQDQFLDO PDUNHWV EUHHG DVVHW EXEEOHV increase exchange rate volatility and EULQJ ÂżQDQFLDO FULVHV WR WKH FRXQWULHV ZLWK VXEVWDQWLDO ÂżQDQFLDO PDUNHW fragility and poor macroeconomic management capacity. Therefore, many developing countries are imposing QHFHVVDU\ FRQWUROV RQ FDSLWDO Ă€RZV DQG China is no exception. So far, among the IMF statistics of 46 capital accounts, |20| India-China Chronicle ƒ March 2014

half of them, including securities and ¿QDQFLDO GHULYDWLYHV DUH QRW FXUUHQWO\ WUDGHG LQ &KLQHVH ¿QDQFLDO PDUNHWV ,Q addition, Chinese currency is not freely convertible. Although China’s capital DFFRXQW FRQWUROV VHW XS D ¿UHZDOO DJDLQVW WKH $VLDQ ¿QDQFLDO FULVLV DQG WKH 8 6 subprime mortgage crisis, it also cuts

ϲϏϏ Ď°ĎŹĎŹ ĎŽĎŹĎŹ ĎŹ ͲώϏϏ ͲϰϏϏ ͲϲϏϏ ͲϴϏϏ ĹšĹ?ŜĞĆ?Äž ^ÄžÄ?ĆľĆŒĹ?ĆšĹ?ÄžĆ? /ŜǀĞĆ?ƚžĞŜƚ Ä‚ĹŻÄ‚ĹśÄ?Äž ÍžĹ?Ĺś ,ƾŜÄšĆŒÄžÄšĆ? ŽĨ DĹ?ĹŻĹŻĹ?ŽŜĆ? h͘^͘ ŽůůÄ‚ĆŒĆ?Íż

Chart 8: Chinese Securities Investment Balance (in Hundreds of Millions U.S. Dollars) Ď´ĎŹĎŹ ϳϏϏ ϲϏϏ ϹϏϏ Ď°ĎŹĎŹ ĎŻĎŹĎŹ ĎŽĎŹĎŹ Ď­ĎŹĎŹ ĎŹ ϭϾϴϹ ϭϾϴϳ ϭϾϴϾ ϭϾϾϭ ϭϾϾϯ ϭϾϾϹ ϭϾϾϳ ϭϾϾϾ ĎŽĎŹĎŹĎ­ ĎŽĎŹĎŹĎŻ ĎŽĎŹĎŹĎą ĎŽĎŹĎŹĎł ĎŽĎŹĎŹĎľ ĎŽĎŹĎ­Ď­ ĹšĹ?ŜĞĆ?Äž &Ĺ˝ĆŒÄžĹ?Ĺ?Ĺś ÄžÄ?Ćš Ä‚ĹŻÄ‚ĹśÄ?Äž Íž Ĺ?ĹŻĹŻĹ?ŽŜ h͘^͘ ŽůůÄ‚ĆŒĆ?Íż

Chart 9: Chinese Foreign Debt Balance (Billion U.S. Dollars)

the channel for China to allocate global UHVRXUFHV ZLWK FDSLWDO DQG VDFUL¿FH WKH function of capital factors. The constraints on the capital DFFRXQW DQG FDSLWDO ÀRZV KDYH LQFXUUHG high costs for China in the current international economic restructuring. )RXU VLJQL¿FDQW FRVWV KDYH VWRRG RXW Firstly, China’s high household savings UDWH VLJQL¿HV VXSHULRU LQYHVWPHQW ability, and so capital has become China’s new international comparative advantage. Without alleviating controls over capital accounts, the comparative advantage of capital cannot come into full play. Thus, China will not harvest GXH EHQH¿WV IURP WKH LQWHUQDWLRQDO division of labor. Secondly, China is currently undergoing a transition in its economic growth model. The pressures of eliminating pollution and protecting the environment are overwhelming, and thus justifying adjustment in its stock of assets. Putting constraints on the foreign investments of domestic individuals and enterprises will undoubtedly hinder the pace of China’s industrial restructuring. Thirdly, the international ¿QDQFLDO VHFXULWL]DWLRQ DQG GLUHFW ¿QDQFLQJ LQ WKH PDUNHW DUH WKH PDLQ FKDQQHOV IRU FDSLWDO ÀRZ EHFDXVH WKH\

have the advantages of simplicity and low cost. Currently, the United States and Europe have an almost zero interest rate while the Chinese domestic lending rate has a difference of about 5 percent. There are many restrictions on issuing corporate bonds abroad and companies have to bear higher interest costs, DGYHUVHO\ DIIHFWLQJ WKHLU SURÂżWDELOLW\ Fourthly, with the introduction of the United States “Revitalize American Manufacturing and Innovation Act,â€? a number of multinational companies have begun to shrink their investment in China and have shifted production to the United States, taking away China’s export opportunities as a result. In the global market where trade is driven mainly by capital, limiting China’s capital Ă€RZV ZRXOG LQ IDFW ZHDNHQ WKH LQFHQWLYHV for import and export and therefore, China is likely to face tremendous unemployment pressure. Managing the Risk Currently, there are a considerable number of people who are fearful about China’s domestic capital account liberalization and worry that capital account liberalization might force the country to repeat the mistakes of Thailand and other Southeast Asian countries in the 1990s. The potential HPHUJHQFH RI WKH ÂżQDQFLDO FULVLV ZRXOG ruin the outcome of years of reform. In fact, this fear has exaggerated the risks of capital account liberalization without ZHLJKLQJ ULVNV DQG EHQHÂżWV DV ZHOO DV opportunities and challenges. A major IXQFWLRQ RI ÂżQDQFH LV WR PDQDJH DQG FRQÂżJXUH WKH ULVNV DQG GHULYH UHYHQXH DQG HIÂżFLHQF\ IURP WKHP $V WKH VD\LQJ goes, “Great skill brings along superior courage.â€? As long as we have the skills for the management of capital account liberalization, the risk associated with capital account liberalization is controllable. France, Germany, Japan and other countries did not experience ÂżQDQFLDO FULVHV IRU D ORQJ SHULRG RI WLPH after capital account liberalization. It is worth mentioning that the Chinese government is very careful about capital account liberalization. After liberalizing the current account, it has taken the government 20 years to prepare for the

AFTER CHINA JOINED THE WTO IN 2001, IT DRAMATICALLY REDUCED TARIFFS, OPENED THE SERVICES MARKET, AND WORKED HARD TO ACCLIMATIZE ITSELF TO THE NEW RULES OF INTERNATIONAL TRADE. capital account liberalization, during ZKLFK VHYHUDO PDMRU ¿QDQFLDO FULVHV WRRN place in the developing countries and developed countries. China has gained a lot of valuable experience and learnt some major lessons from these crises and has applied the experience to establish an effective mechanism for capital ÀRZ PDQDJHPHQW 6LQFH WKH ODXQFK RI cross-border RMB trade settlement in 2009, the control over capital accounts in Hong Kong has been greatly relaxed. Hong Kong’s offshore RMB market exchange rates and interest rates have QRW ÀXFWXDWHG VLJQL¿FDQWO\ 7KH &KLQHVH government has truly experienced DUELWUDJH FDSLWDO ÀRZV DQG KDV ZRUNHG out a number of practical methods in guiding capital liquidity. ,Q FRQFOXVLRQ &KLQD LV KROGLQJ D ¿UP attitude towards capital account liber-

alization and has established a gradual liberalization model that is compatible ZLWK HFRQRPLF GHYHORSPHQW DQG ¿QDQcial market liberalization. Since the interest rate liberalization, exchange rate marketization and RMB internationalization have laid a solid foundation for WKH RUGHUO\ ÀRZV RI FDSLWDO D IXOO OLEHUalization of China’s capital account is exSHFWHG ZLWKLQ WKH QH[W ¿YH \HDUV &DSLWDO account management by the Chinese JRYHUQPHQW ZLOO XQGHUJR VLJQL¿FDQW changes. Similar to developed countries like Britain and the United States, the implementation of a negative list management system will be implemented. Other than expressively limiting a handful of short-term speculative bond trading and derivatives trading, China will also enable other capital projects to be freely traded. ‰

Authors Dr. Tu Yonghong is Director, School of Finance, China Financial Policy Research Center, International Monetary Institute, Renmin University of China and Dr. Wang Wen is Executive Dean of Chongyang Institute for Financial Studies, Renmin University of China. The content has been translated from Chinese to English by Samuel Overholt, Yang Qingqing &Yang Fanxin

March 2014 ƒ India-China Chronicle |21|

INFOCUS|INDIA-CHINA|MARINE

Gearing up for High Tides on The Indian Ocean The People’s Republic of China (PRC) has not come RXW ZLWK D ZHOO GHÂżQHG RIÂżFLDO GRFXPHQW RQ LWV Indian Ocean Strategy so far. The reason for this may be the fact that China’s strategic focus continues to be on the 3DFLÂżF DQG QRW RQ WKH Indian Ocean. |22| India-China Chronicle ƒ March 2014

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Q WKH DEVHQFH RI DQ RI¿FLDO 35& IRUPXODWLRQ RQ WKH ,QGLDQ 2FHDQ the next best way to understand the Chinese communication of the Indian Ocean strategy would be to look into available indirect evidence – signals appearing in observations by Chinese leaders and authoritative VFKRODUV FRQWHQWV RI GRFXPHQWV LVVXHG E\ LQÀXHQWLDO WKLQN WDQNV LQ China and China’s actions at ground OHYHO 7DNH IRU H[DPSOH D VWDWHPHQW PDGH E\ 9LFH $GPLUDO 6X =KLTLDQ

Commander of the East China Sea )OHHW RI WKH &KLQHVH 1DY\ DW *DOOH Sri Lanka in 2012. He stressed on the ‘freedom and safety of the navigation in the Indian Ocean’ declaring that the Chinese navy will actively maintain the peace and stability of the Indian Ocean through carrying out ‘maritime security cooperation’ with the navies of various countries. He impressed that the Chinese navy would seek to establish a maritime security ‘code of conduct’ between the neighbours in the Indian Ocean under the ‘premise of respect for each country’s sovereignty

and maritime interests’. The Blue Book of the Chinese Academy of Social Sciences (CASS) UHOHDVHG LQ -XQH H[SUHVVHV DQ ,QGLDQ 2FHDQ VWUDWHJ\ IRU WKH 35& similar to India’s Look East policy and the US ‘pivot’ or ‘rebalancing’ line in Asia policy. The Blue Book asks China to deepen economic ties with the nations in the Indian Ocean region ZKLOH FDXWLRQLQJ WKDW LI &KLQD 8QLWHG States and India do not constructively HQJDJH HDFK RWKHU WKH ,QGLDQ 2FHDQ FDQ HQG XS DV DQ RFHDQ RI FRQĂ€LFW and trouble. According to Chinese academicians close to the Chinese DXWKRULWLHV DIWHU WKH HQG RI WKH &ROG ZDU WKH 86 EHFDPH WKH OHDGLQJ IRUFH in the Indian Ocean and began its military forward deployment there. ,Q UHFHQW \HDUV ZLWK WKH ULVLQJ RI WKH

VWUDWHJLF SRVLWLRQ RI WKH ,QGLDQ 2FHDQ the US has put forward the “Indo3DFLÂżF´ FRQFHSW DQG VWUHQJWKHQHG its strategic interests in the Indian 2FHDQ VXFK DV PDLQWDLQLQJ LWV GRPLQDQW SRVLWLRQ SURWHFWLQJ WKH safety of sea lines of communication and continuing to control strategic FKRNHSRLQWV HWF 'ULYHQ E\ LGHRORJ\ DQG HFRQRPLF IDFWRUV WKH 86 KDV

THE BLUE BOOK OF THE CHINESE ACADEMY OF SOCIAL SCIENCES (CASS) PREDICTED THAT NO SINGLE OR REGIONAL POWER INCLUDING RUSSIA, CHINA, AUSTRALIA AND INDIA, CAN CONTROL THE INDIAN OCEAN BY ITSELF.

obtained hegemony in the Indian Ocean via military deployment and institutional arrangements. In the Face of Evidence 7KH ODXQFK RI ,QGLDÂśV ÂżUVW indigenous aircraft carrier Vikrant on 12 August 2013 has been viewed by &KLQHVH DQDO\VWV DV UHĂ€HFWLQJ ,QGLDÂśV “ambition to dominate the Indian 2FHDQ´ DQG KHUDOGLQJ D JUHDWHU ,QGLDQ SUHVHQFH LQ WKH 3DFLÂżF 7KH DQDO\VWV alleged that the US wants to push India to integrate China into its system and encourages India to intervene in Asia3DFLÂżF DIIDLUV XQGHU WKH Âł,QGR 3DFLÂżF´ FRQFHSW EXW ,QGLD SUHIHUV EDODQFLQJ China naturally by ensuring peaceful and fruitful competition and has no intention of becoming a regional test balloon by going against China.

March 2014 ƒ India-China Chronicle |23|

INFOCUS|INDIA-CHINA|MARINE

accordance with the shift of the global EDODQFH RI SRZHU WKH 86 ZLOO VHHN to sustain its strong presence in the Indian Ocean. Lou further articulated that alWKRXJK FRQIURQWDWLRQV DQG FRQĂ€LFWV EHWZHHQ &KLQD 86 DQG ,QGLD KDYH EHHQ SUHGLFWHG LQ WKLV UHJLRQ SDUWLFXlarly with the rise of China’s maritime SRZHU WKHLU GLIIHUHQW VWUDWHJLF JRDOV may lead to different results. He added WKDW JLYHQ &KLQDÂśV SROLF\ DLPV LQWHQW DQG FDSDELOLW\ WKH 35& FDQQRW DIIRUG to challenge either the United States or India. But with the rapid growth RI LWV HFRQRPLF DQG PLOLWDU\ SRZHU India is likely to adopt a more assertive maritime presence in the Indian 2FHDQ 7KXV FRQVLGHULQJ WKDW WKH 86 wants to maintain its maritime domiQDQFH D SRWHQWLDO ,QGLDÂą86 SRZHU struggle in the Indian Ocean rather than a ‘China threat ’is more likely to characterize the Indian Ocean region. More evidence can be picked up from an article written by Chun Hao /RX $VVLVWDQW 'LUHFWRU DW WKH ,QVWLWXWH RI 0DULWLPH 6WXGLHV China Institutes of Contemporary International Relations, a leading state-controlled Chinese think tank. It views merit a close examination. The write-up declared that China’s strategic focus is the PaFLÂżF UDWKHU WKDQ WKH ,QGLDQ 2FHDQ and the PRC lags far behind the US in terms of maritime power and does not enjoy India’s geographic advantages. The article asserted that China follows a naval strategy aimed at ensuring a ‘harmonious sea’ through capacity building and international cooperaWLRQ YLHZLQJ WKH UHJLRQ VXUURXQGLQJ the Indian Ocean as a vital energy and WUDGH URXWH DQG QRW D EDWWOHÂżHOG IRU power struggle. ‘China’s seaward polLF\ LV VWURQJO\ LQĂ€XHQFHG E\ WUDGH DQG HQHUJ\ PRWLYHV DQG LWV RSHQ HFRQRP\ is becoming more dependent on the RXWVLGH ZRUOG SDUWLFXODUO\ WKH ,QGLDQ 2FHDQ Âś WKH DUWLFOH VWDWHV 7KH DXWKRU &KXQ +DR /RX IXUWKHU articulated in this piece that Chinese involvement in building infrastructure in the Indian Ocean region littorals is part of the PRC’s economy-oriented ‘Going Global’ strategy. Interpreting |24| India-China Chronicle ƒ March 2014

AN INDIAN OFFICIAL DOCUMENT PREPARED BY THE INTEGRATED DEFENCE STAFF PREDICTED AN INTENSE RIVALRY BETWEEN THE INDIAN AND CHINESE NAVIES IN THE NEXT THREE YEARS. India’s views on the Indian Ocean region as a sum-up of senses of crisis DQG GHVWLQ\ /RX VD\V WKDW IRU FULVLV Indian politicians and strategists should pay a great attention to the linkages between Indian Ocean and ,QGLDœV QDWLRQDO VHFXULW\ $V IRU GHVWLQ\ India’s unique geographic location backs India’s aspiration to dominate the Indian Ocean or even transform the Indian Ocean into India’s Ocean. Contrasting India’s position with that RI WKH 86 /RX VDLG WKDW WKH 86 VHHNV WR be a hegemonic maritime power that is not only dominant in the Atlantic or 3DFL¿F EXW DOVR LQ WKH ,QGLDQ 2FHDQ Although it stresses the importance of D FRRSHUDWLYH PDULWLPH VWUDWHJ\ WKH US is still trying to maintain its status as a pre-eminent maritime power. In

Actions at the Ground Level As regards action at the ground OHYHO &KLQD LV UHSRUWHGO\ GHSOR\LQJ DWtack -submarines in the Indian Ocean. 1RWLQJ WKLV GHYHORSPHQW DQ ,QGLDQ RIÂżFLDO GRFXPHQW WLWOHG Âľ,QGLDQ 1DY\ 3HUFHLYHG 7KUHDWV WR 6XEVXUIDFH 'HWHUUHQW &DSDELOLW\ DQG 3UHSDUHGQHVVÂś SUHSDUHG E\ WKH ,QWHJUDWHG 'HIHQFH 6WDII LQ 1HZ 'HOKL SUHGLFWHG LQWHQVH rivalry between the Indian and Chinese navies in the next three years as the “implicit focusâ€? of the Chinese Navy appears to be on undermining the Indian Navy’s edge “to control highly sensitive sea lines of communication. The data gives enough hints to the likely shape of China’s Indian Ocean Region (IOR) strategy in the future. Given below is an estimate of the same and possible implications in the region depending on the responsHV RI WKH WZR LPSRUWDQW $VLDQ SRZHUV namely the US and India. (a) China’s priority will always be WR SURWHFW LWV HQHUJ\ VHFXULW\ LQWHUHVWV by way of securing the Sea Lanes of &RPPXQLFDWLRQV VSUHDGLQJ IURP WKH Gulf to the South China Sea. In the ORQJ WHUP &KLQD VHHPV WR KDYH DUULYHG at a conclusion that the situation in

the IOR will have two characteristicsIndia’s domination and assertiveness and the US’s strong presence. On this basis, the PRC’s Indian Ocean strategy to concentrate on gaining capabilities to project its own naval power into the IOR and compete with India and the US. This looks possible due to the shift that has taken place in China’s naval strategic focus – from that of coastal defence to inshore and offshore defence. The traditional coastal navy concept has given way to that of a blue water navy. Besides, military modernisation in China is also set to be completed by the middle of the current century. (b) In the interim period, realising its existing inferior position as compared to US maritime power and India’s strategic advantage in the IOR, China may persist with its ‘harmonious sea’ approach. Its push for ‘constructive engagement’ in the IOR between three powers – the US, China and India, needs to be understood in such a context. China’s concentration in this period will remain on

achieving ‘greater space’ in the Indian Ocean Region (IOR) by way of promoting maritime security cooperation with the Indian Ocean littorals. The PRC may even push for reaching a ‘code of conduct’ by the IOR littorals. (c) China’s current fears about the US trying to contain the PRC by roping in Indian Ocean littorals, under DQ Âľ,QGR 3DFLÂżFÂś IUDPHZRUN PD\ LQtensify. In this context, one can expect China’s increased efforts to woo these littorals through economic and other means so as to keep them away from WKH 86 LQĂ€XHQFH (VSHFLDOO\ LWV GULYH to build infrastructure in IOR littorals as part of its ‘going global’ strategy, may gain further momentum. Besides, in this context the PRC’s belief of being noticed is also notable. It believes that a strategically autonomous power like India will not gang up with the US against the PRC’s interests and its recent step aimed at rebalancing ties with India under a “Look Westâ€? strategy, gives primacy to ties with India (being publicised through highly placed scholars like Wang Jisi).

(d) India’s response to China’s Indian Ocean strategy is manifesting itself in its stepped up efforts to improve bilateral ties with Indian Ocean littorals. New Delhi’s participation in the multilateral fora like the Indian Ocean Rim Association for Regional Cooperation (IOR-ARC) and the IndiDQ 2FHDQ 1DYDO V\PSRVLXP LV VLJQL¿cant in this regard. The US has been invitated to join the IOR-ARC. (e) The developing IOR situation may need an institutional mechanism to address regional security concerns. 7KH ,25 $5& PD\ ¿OO WKLV UROH +RZ to involve China and the US in this mechanism appears to be the bigger question. ‰

Mr. D.S. Rajan is the Director of Chennai Centre for China Studies, India. He has held senior positions in the Ministry of External Affairs for 20 years. $ TXDOLÂżHG &KLQHVH DQG -DSDQHVH OLQJXLVW KH KDV edited six books on China.

March 2014 ƒ India-China Chronicle |25|

INFOCUS|INDIA|INTERVIEW

“Our Relationship with China is Underdeveloped� Dr. C. Raja Mohan is a distinguished Fellow at the Observer Research Foundation, Delhi. He is also a contributing editor for the daily ‘The Indian Express’ and has a column that monitors the developments in China. An author, he dons other hats too. He is a visiting research professor at the Institute of South Asian Studies, Singapore and is a non-resident senior associate at the Carnegie Endowment for International Peace, Washington DC. Urmila Rao caught up with him to explore the nuances of Sino-India relations in the light of contemporary issues.

Q: India is giving signs of increased closeness with Japan whereas Sino-Japan relations are not in the best of states today, given the maritime dispute and PM Abe’s recent visit to Yasukuni shrine. How does this situation affect IndiaChina relations? A: We should not over-estimate India’s relevance to the current dispute between China and Japan. Historically, they have a much closer relationship. China and Japan may have island issues, but their economies are very tightly interlinked. They are neighbours to each other and know each other very well. Does China worry about what India thinks about their relationship with Pakistan? Similarly, India must develop relations with Japan on its own merits. India’s interest lies in maintaining good relations with both China and Japan. Our relationship with both is underdeveloped today. We should not be taking sides or getting involved in their disputes. Why are we worried about their disputes? Our interest should be to develop a good economic and political relationship with both these countries. With Japan, for example, there is a whole range of things we can do on the maritime side, defence and infrastructure development. Similarly, trade with China is growing. There is a boundary dispute but we will manage those problems and build a good relationship. With Japan, we have no political problems. It is more open, and so our job is to have a good UHODWLRQVKLS ZLWK ERWK DQG ÂżQG ZD\V RI developing it further. |26| India-China Chronicle ƒ March 2014

Q: China says it is rising peacefully. Can it rise peacefully? A: Only history can say whether China will rise or be peaceful. It is a fact that China’s power is growing. Now, what we don’t know is how Beijing will use that power. So, I think India must hope for the best, but it also must be prepared so that in case things go wrong, India is not caught by surprise. We should be fully prepared and should strengthen our own position. On the boundary dispute, while we must continue to engage the China. A resolution of the problem is not at KDQG EXW DYRLG D FRQÀLFW DQG VHHN to maintain peace and tranquillity on the ground. At the same time, India must strengthen its civil and military capabilities on the frontier with China. A bigger challenge is the growing gap—economic, military and strategic—between China and India in

favour of Beijing. India, therefore, must ÂżQG D ZD\ WR PDQDJH WKLV UHODWLRQVKLS carefully while strengthening itself militarily, economically and politically.

Q: Now that you talked about the border dispute, you had also mentioned in one of your articles that the UPA government has not done enough to have a good relationship with China. Do you think it is a lost opportunity? A: The UPA government took over from where the NDA government had left. Mr. Vajpayee opened room for a political negotiation on the boundary dispute. Now under the UPA government, some progress was made, for example, in 2005 there was an agreement on the JXLGLQJ SULQFLSOHV IRU GUDIWLQJ D ÂżQDO settlement of the boundary dispute. Since then, things have slowed down Whether you blame the UPA government for it or the Chinese, is a different

issue, but the fact is that we had made some progress but the progress has not been enough. Meanwhile, in the last six to seven years we have seen increased tensions on the border though there has lately been an effort to stabilize the border. As we look ahead, irrespective of which party is in power, the China challenge will remain. How do we engage the Chinese, how do we maintain peace at the border, and at the same time, how do we continue to explore a case for a boundary settlement? Those are the questions that the next government will confront.

Q: If there were increased trade and commerce activities between India and China, do you think the border tension would become insiJQLÀFDQW" A: I am afraid not. Having a sound economic relationship doesn’t ensure that the boundary dispute will be solved. In fact, that is a lesson from the recent Chinese – Japanese experience. The Chinese and the Japanese have become each other’s biggest trading partners and yet there was no resolution of their disputes over territory and boundary dispute. That does not mean we should not seek stronger economic ties with China. China is increasingly emerging as an important factor in our own national strategy for development. Given Beijing’s new position as an exporter of capital and technology and its impressive capacity to execute large projects, India must shed its traditional reluctance to deepen economic ties with China. Meanwhile, the boundary management must be addressed on its own terms.

Q: Whose onus it is to resolve the border issue, who is to be blamed for not making enough effort? A: There is no point blaming anybody, as we have a historical legacy. Both sides have strong positions. Neither KDV PXFK ÀH[LELOLW\ LQ WKHLU GRPHVWLF arena. Right now our focus must be on keeping peace on the border so that the process might continue. At the same WLPH ZLWKRXW D ¿QDO UHVROXWLRQ RI WKH boundary dispute, the two countries might never be real friends. The new

government will have an opportunity to start all over again.

Q: As China is rising, do you think, it LV DEDQGRQLQJ WKH ÀYH SULQFLSOHV RI Panchsheel)? A: China has not abandoned any principle. In any case the Panchsheel is highly over-rated. The fact is that territorial issues are never easy to resolve. As new nations, we both are deeply averse to making major territorial concessions. Complicating the border dispute is the question of Tibet, which remains restive and has had a historic and special relationship with India. The Dalai Lama and the Tibetan movement for cultural and political autonomy deepen distrust between Delhi and Beijing. The two nations, however, have no option but to deal with this complex legacy.

CHINA WANTS TO BE A GREAT POWER IN THE INTERNATIONAL SYSTEM AND BECOME A STRONG NATION JUST AS US HAS BEEN THE GREAT POWER FOR THE LAST HUNDRED YEARS. CHINA WANTS TO SHAPE THE WORLD. THAT IS THE ‘CHINESE DREAM’. Q: Joseph Nye says that China and US have got strong incentives to cooperate on various fronts. Do you think both can manage a cordial relationship? A: China and United States already have a very strong relationship, underwritten by a profound economic interdependence between the two of WKHP 7KH\ DUH DOVR WKH ZRUOGÂśV ÂżUVW DQG second largest economies. They do more business with each other, than they do with India and anybody else. So, I don’t think we have to make a difference there. Now there are problems in that relationship and there are strengths in that relationship as well. But one thing is very clear, the relation between US and China is much deeper, and much wider than what India and China have or what India and the United States have. Here again, our interest lies in

developing strong cooperation with both, and improve our own national capabilities.

Q: As China’s regional dominance is increasing, will the regional countries side up with China or seek succour in the US shade? A: It depends from country to country. If the country doesn’t have any problems with China, there is no reason for it to worry about China. However, if a country has a boundary dispute, then it has reasons to feel concerned about Chinese power. Pakistan has no problems with China. They think they are friends and they are not going to worry about China’s rise. So, it varies from country to country and the various historical situations. As China’s economy will grow its military power will also grow. Hence, there will be concerns. What we don’t know is what the story of the next twenty years in this part of the world is going to be or how China is going to use its power’, or if it will strengthen the regional security order or change it in China’s favour? India will hope that China’s rise will be peaceful but nobody can give guarantee at this point of time. That is why what is important for us at this stage is to strengthen our cooperation with China. However, at the same time, be prepared to deal with the potentially negative consequences that might arise from China’s rise.

Q: Do you think media plays up issues based on nationalist feelings? A: 7KH PHGLDÂśV MRE LV WR UHĂ€HFW ZKDW LV going on. The media didn’t create the boundary dispute. There is, however, a professional shortcoming; India and its media has not paid enough attenWLRQ RU GHYRWHG VXIÂżFLHQW UHVRXUFHV to understand China. We need to understand what drives them. We must get a better appreciation of China’s interests and concerns. The problem is not limited to the Indian side. The Chinese have invested so much in understanding the United States, but they have not invested the same amount in understanding India. ‰ March 2014 ƒ India-China Chronicle |27|

INFOCUS|INDIA-CHINA|SPACE

The Race for Space between the Neighbours Both India and China are basking in the glory of their respective space missions. India’s Mangalyaan mission to Mars and China’s Jade Rabbit Rover to Moon has again brought forth the question, on whether India and China are re-igniting the Space Race or whether they are on the road to cooperation. Piyush Singh

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hina’s Jade Rabbit Rover was the ÂżUVW URYHU WR ODQG RQ WKH PRRQ in over 40 years and has shown the technical capability of China. Even Premier Xi Jinping took special interest in the project and declared it to be the realization of the ‘Chinese Dream’. During the last decade, China has made rapid strides into the frontiers of space and has quite an ambitious plan for the future. Ever since achieving WKH ÂżUVW PDQQHG VSDFH Ă€LJKW LQ China has made four similar missions and constructed a temporary space VWDWLRQ $ IXOO Ă€HGJHG VSDFH VWDWLRQ LV also on the cards and is supposed to EH IXQFWLRQDO E\ 7KH 6WDWH KDV YRZHG WR SXW D PDQ RQ PRRQ E\ and has recently started preparations IRU WKH VDPH 7KH FRXQWU\ÂśV TXHVW IRU supremacy in the Space has been demonstrated by the test of anti-satellite weapons system to destroy one of its own weather satellites. China’s unprecedented growth in the space sector has alarmed the US and EU. Is China Edging out the US and EU? China is a signatory to the Outer 6SDFH 7UHDW\ DQG KHQFH LW would be interesting to watch how China approaches the quandary of ‘Space Weaponization’ without raising fear amongst the other signatory nations. India, on the other hand, has been quietly and steadily taking baby steps in its quest to unravel the

|28| India-China Chronicle ƒ March 2014

CHINA’S UNPRECEDENTED GROWTH IN THE SPACE SECTOR HAS PUT IT AT LOGGERHEADS WITH THE US AND EU, THE TWO DOMINANT SPACE POWERS WITH LARGE COMMERCIAL INTERESTS.

mysteries of space. Riding high on its &KDQGUD\DDQ VXFFHVV ,QGLD KDV VHW KLJKO\ DPELWLRXV SODQV IRU LWVHOI 7KH recent Mars mission was built and GHVLJQHG IRU OLWWOH RYHU PLOOLRQ )XUWKHU ,QGLD DOVR VHHNV WR EH WKH ¿UVW Asian country to put a probe in Mars orbit after repeated failures by China, Japan and Russia. India’s low cost mission projects provide an excellent alternative to the developing countries for using Indian launchers to put their satellites in the orbit. India, however, had been repeatedly denied advanced space technologies by the United States and other western countries on the assumption that they would EH XVHG IRU PLOLWDU\ SXUSRVHV 7KLV was clearly demonstrated by the Geosynchronous Satellite Launch 9HKLFOH *6/9 TXDQGDU\ VXUURXQGLQJ WKH ,QGLDQ 6SDFH $JHQF\ LQ WKH œV But India is in no mood to back out. It recently unveiled the space capsule that will carry Indian astronauts into VSDFH DQG LQ IXWXUH WR WKH 0RRQ 7KH XQQDPHG 5V FURUH SURJUDP after seven years, may see the light of the day when the Government of India DSSURYHV LW 7KRXJK WKLV SDUWLFXODU program has been facing roadblocks for quite some time, it has received WKH &HQWHUœV ¿QDQFLDO VXSSRUW 6SDFH research agency, ISRO has received PLOOLRQ IRU GHYHORSPHQW RI FULWLFDO technologies for this human space ÀLJKW SURJUDP Further, the recent successful launch of GSLV after repeated failures shows that India is not backing out

anytime soon. It has the technological FDSDELOLW\ WR FRQTXHU WKH ÂżQDO IURQWLHUV of Space and shows a determination to OHDUQ IURP WKH PLVWDNHV DQG ÂżQG QHZ ways to increase the cost-effectiveness of a project. India has always been at the frontier of peaceful exploration of Space and for distribution of knowledge among member nations without any discrimination. It might be added that India’s proximity to the equator makes it a preferred destination for rocket launches and hence through this particular advantage India can attract huge HFRQRPLF EHQHÂżWV %DWWOLQJ IRU 6SDFH Many analysts believe that India and China are engaged in a new generation space race. National pride and mistrust is pushing the race to accelerated levels. Both India and China have a long history of boundary disputes, coupled with a growing race for supremacy in Asia. Thus, a race between the two might be an expensive proposition for both. Cooperation, LQVWHDG LV OLNHO\ WR UHDS EHWWHU EHQHÂżWV India’s cost effective technology and &KLQDÂśV ODUJH VFLHQWLÂżF SRRO ZKHQ integrated, can be advantageous to the world community. 7KH ÂżUVW VLJQV RI FRRSHUDWLRQ between the two countries came up in early February this year when Indian Space and Research Organization (ISRO) declared that it will be launching DMC-3 Earth observation satellites for China. Further collaboration between India and China is needed in order to pacify any qualms about the “Space Raceâ€?. The visit of the Indian Prime Minister Dr. Manmohan Singh to China in October 2013 PDUNHG D VLJQLÂżFDQW GHDO EHWZHHQ WKH two countries in sharing of satellitebacked water related data. This data, SHUWDLQLQJ WR Ă€RRG VHDVRQ ZDWHU IURP river Brahmaputra and Sutlej (May to October), was shared between their respective water resource ministries. Cooperation in sharing of data gathered by the satellites, built by respective space agencies, shows that there is collaboration. Though

THE FIRST SIGN OF COOPERATION BETWEEN INDIA AND CHINA CAME UP IN EARLY FEBRUARY THIS YEAR WHEN INDIAN SPACE AND RESEARCH ORGANIZATION (ISRO) DECLARED THAT IT WILL LAUNCH DMC-3 EARTH OBSERVATION SATELLITES FOR CHINA. the current cooperation is at a very miniscule level, this might as well be a new beginning of setting new benchmarks for stronger cooperation. %HQH¿WV RI &R RSHUDWLRQ Such collaborations would be effective in providing prior information to local people to safeguard themselves and will result in huge protection of resources. Both India and China need WR FROODERUDWH LQ WKH ¿HOGV RI ZHDWKHU and disaster management and should share data with each other frequently on unforeseen disasters. India’s commendable management of Cyclone Phalin in October, 2013 was due to the prior availability of information from weather satellites, which greatly helped in reducing casualties. China’s

management of Typhoon Haiyan in December 2013 was also up to the mark in reducing the loss of livelihood and casualties. Best practices adopted by both countries can be used to ward off disasters to which there were no solutions before. Both India and China have a growing interest in the space sector, similar on many counts. Collaboration between the two here will lead to further easing of tensions in other sectors as well. Parallels have been drawn in the Space race between India and China, comparing it to the 1960’s race between United States and the erstwhile Soviet Union. Even though the Chinese media has been skeptical of India’s recent success in the Space sector, Chinese Space agency China National Space Administration (CNSA) has welcomed cooperation from India and congratulated India on its recent Mars mission. Space programs across Asia, especially those of the big three i.e. India, China and Japan should avoid the tag of being nationalistic in nature. It should not make the same mistakes as their Western counterparts did. The aim, rather, should be to contribute to the development of mankind. ‰ Piyush Singh is a 3rd year B.A LL.B student at Hidayatullah National Law University, Raipur with interests in India’s China policy and India-China Relations

March 2014 ƒ India-China Chronicle |29|

INFOCUS|CHINA|ENERGY

Zou Chuqu Strategy in Augmenting Oil Supplies:

Is it Sustainable? China’s National Oil Companies are securing oil assets abroad. This ‘Zou Chuqu’ or ‘Going Out’ strategy is the result of domestic constraints in hydrocarbon sector, VXFK DV ORZHU UHVHUYHV WR SURGXFWLRQ UDWLRV DJLQJ RLO ÂżHOGV DQG SHDNLQJ GRPHVWLF RLO production. Is ‘Zou Chuqu’ a good long-term strategy or should China reduce its crude oil dependency with a clear articulated shift towards unconventional energy sources? Manish Vaid

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here has been a serious concern among some experts that the Chinese National Oil Companies (NOCs) through their overseas investments are “ORFNLQJ XSâ€? oil supplies and removing them from the global marNHW 7R H[DPLQH WKLV WKH ,QWHUQDWLRQDO Energy Agency (IEA) has assessed motivations and strategies of the NOCs and the relationship between them and the Chinese Government which is often believed to be a guiding force behind such ventures. However, in recent times there have been equal concerns and questions raised on China’s so called ‘going out’ (Zou Chuqu) strategy by the country’s SROLF\ PDNHUV &KLQDÂśV 7HQWK )LYH <HDU 3ODQ )<3 DGRSWHG QHZ PHDVXUHV to encourage overseas investments including that of hydrocarbon assets, ZKHUHDV LWV VXFFHVVLYH )<3V (OHYHQWK and Twelfth) cautioned China in continuing with this policy, as the same had started to slow down its economic growth. China’s increased energy consumption is the result of its rapid industrialisation and urbanisation which are geared to increase its economic growth |30| India-China Chronicle ƒ March 2014

rates that averaged 10 per cent during the last 30 years. It continues to hunt for resources overseas, to bridge its demand-supply gap of resources. China’s Intensifying Energy Imports China became one of the largest energy consumers in the world after LW KDG RYHUWDNHQ WKH 86 LQ ,WV dominance over the energy demand of the Asian region is expected to conWLQXH WLOO ZKHQ ,QGLD FRXOG WDNH over China, according to the International Energy Agency (IEA’s) World (QHUJ\ 2XWORRN :(2 )XUWKHUPRUH DFFRUGLQJ WR :(2œV 6SHFLDO 5HSRUWœV ¾6RXWKHDVW $VLD (QHUJ\ 2XWORRNœ &KLQD LV JRLQJ WR EHFRPH WKH

CHINA’S ECONOMIC BOOM RESULTED IN OIL DEMANDS THAT WENT BEYOND ITS PRODUCTION CAPACITY AND MADE THE COUNTRY INCREASINGLY DEPENDENT ON FOREIGN OIL ASSETS. CHINA BECAME A NET OIL IMPORTER IN 1993 AND HAS ALSO BEEN A NET CRUDE IMPORTER SINCE 1996.

largest oil importing country in the ZRUOG E\ China’s economic boom resulted in oil demands that went beyond its production capacity and made this country increasingly dependent on foreign oil assets. China became a net oil importer in 1993 and has been a net crude importer since 1996. Recent increase in China’s energy consumption and its increased dependency on foreign hydrocarbon assets is the result of the global economic crisis and civilian unrest in many parts of the Middle East and 1RUWK $IULFD LQ WKH HDUO\ These reasons have further prompted China to diversify its energy imports, and particularly rebalance its crude procurement, which was heavily inclined towards the Middle East and Africa constituting 50 per cent and SHU FHQW RI LWV WRWDO FUXGH LPSRUWV respectively. Therefore, to feed the ever increasing energy intensive manufacturing sector and to support its resultant economic activities, China went global. This has not only helped China in economic growth but has also served its countrymen with its rising energy needs. But how has China’s ‘going out’ strategy evolved?

Evolving ‘Going Out’ Strategy To satiate its consumer demand as well as that of the world for Chinese manufactured goods, China has been investing heavily on energy-intensive raw materials, infrastructure and buildings. It is grappling with capacity shortages resulting in greater demandsupply gap of vital commodities. Grave environment concerns is prompting China to adopt ‘go abroad’ strategy, GHVSLWH GLIÂżFXOW EXVLQHVV FRQGLWLRQV Chinese NOCs VWDUWHG WR ORRN DW outside world around the time it became the net oil importer in 1993, for reasons such as domestic constraints in hydrocarbon sector, ranging from DJLQJ RLO ÂżHOGV ORZHU UHVHUYHV WR SURGXFWLRQ UDWLRQV DQG SHDNLQJ RI GRmestic oil production. Initially, these NOCs went solo in the quest for securing oil assets abroad after being given cold shoulder by their own government, which instead was concerned with falling domestic oil production.

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3 (QHUJ\ 2XWORRN SURMHFWV WKH JURZWK RI &KLQDÂśV RLO LPSRUW GHSHQGHQFH IURP SHU FHQW LQ WR SHU FHQW ZKLOH LWV JDV GHSHQGHQFH FRXOG LQFUHDVH IURP SHU FHQW WR SHU FHQW 7KLV RXWORRN IXUWKHU SURMHFWV WKDW &KLQD ZLOO RYHUWDNH WKH 86 DV ZRUOGÂśV ODUJHVW RLO FRQVXPHU E\ DQG ZRUOGÂśV VHFRQG ODUJHVW JDV FRQVXPHU E\

Chinese NOCs thus went ahead to inYHVW LQ 3HUX LQ DQG LQ 6XGDQ LQ ZLWKRXW DFNQRZOHGJLQJ WKHLU government. But Chinese leaders who were striving hard to boost domestic resource production soon realised the importance of overseas investment. As a consequence they came up with a series of policy changes, which underscored the importance of resource internationalisation. Hence, China’s endeavour from V WR WR LQWHUQDWLRQDOLVH LWV hydrocarbon business, faced severe ERWWOHQHFNV ODUJHO\ GXH WR ODFN RI H[SRVXUH WR WKLV ULVN SURQH EXVLQHVV The Chinese NOCs sans government

support tried to develop good relations with the host countries. &KLQHVH 12&V QRZ JHW IXOO Ă€HGJHG support of its government in its RYHUVHDV HQGHDYRXUV 8QGHU WKH DHJLV of the Chinese government, many state actors helped these companies in going outside. ‘Going Out’ Strategy and State Actors Involved 7KRXJK WKH UHVSRQVLELOLW\ RI PDNLQJ and implementing of energy policy in China rests on a number of different bodies at national and local levels, its ‘going out’ strategy is formulated WKURXJK WKH 6WDWH RZQHG $VVHWV March 2014 ƒ India-China Chronicle |31|

INFOCUS|CHINA|ENERGY

6XSHUYLVLRQ DQG $GPLQLVWUDWLRQ &RPPLVVLRQ 6$6$& WKH 0LQLVWU\ RI &RPPHUFH 02)&20 DQG WKH 0LQLVWU\ RI )RUHLJQ $IIDLUV 02)$ All these state actors including those involved in energy policy are ZRUNLQJ RQ WKH GLUHFWLRQ RI WKH 6WDWH &RXQFLO China’s highest governing body. :KLOH 6$6$& LV ODUJHO\ FRQFHUQHG ZLWK JURZWK DQG SUR¿W RI &KLQHVH 12&V 02)&20 DLGV RXWZDUG ERXQG LQYHVWPHQW 02)$ KRZHYHU SOD\V D critical role in diplomatic engagements of these Chinese NOCs overseas. Besides these state actors, overseas venturing of the Chinese NOCs would not have been facilitated to this extent if they had failed to receive appropriate ¿QDQFLQJ 7KLV MRE LV GRQH ZHOO E\ WZR UHQRZQHG EDQNV QDPHO\ WKH ([SRUW ,PSRUW %DQN RI &KLQD (;,0 %DQN DQG &KLQD 'HYHORSPHQW %DQN &'% (;,0 %DQN RYHUVHHV WKH FRXQWU\œV concessional loans while providing export credits for commercial under-

|32| India-China Chronicle ƒ March 2014

WDNLQJV RYHUVHDV SDUWLFXODUO\ IRU LQfrastructure development. CDB on the other hand provides inexpensive loans WR VWDWH RZQHG FRPSDQLHV VHHNLQJ WR PDNH ODUJH QDWXUDO UHVRXUFH LQYHVWments overseas. Chinese Investment Corporation, the country’s sovereign ZHDOWK IXQG DOVR WDNHV SDUW LQ EX\LQJ VWDNHV LQ IRUHLJQ UHVRXUFH FRPSDQLHV Therefore, China, which provides three types of economic assistance to the countries with which NOCs are doLQJ EXVLQHVV 02)&20 LV LQ FKDUJH RI WZR RI VXFK NLQGV RI DVVLVWDQFH QDPHly, allocating grants and providing inWHUHVW IUHH ORDQV ZKLOH (;,0 %DQN LV assigned to provide concessional loan. In the scheme of things the role of Communist Party of China in the activities of state owned enterprises cannot be ruled out as its members head the NOCs, while shaping China’s resource acquisition strategy. ‘Infrastructure deals’ and ‘loan for oil and gas deals’ are other means for

government support and incentives for overseas investment. China has already combined resource investment with infrastructure development in many FRXQWULHV OLNH /DWLQ $PHULFD $IULFD DQG 6RXWKHDVW $VLD DQG LW KDV EHHQ appreciated by their governments. On the other hand Chinese NOCs have already signed loan for oil and gas deals in nine countries, namely, Angola, Bolivia, %UD]LO (FXDGRU *KDQD .D]DNKVWDQ 5XVVLD 7XUNPHQLVWDQ DQG 9HQH]XHOD Question of Rebalancing Chinese Economy Chinese economy, which is energy intensive and inclined more towards manufacturing, is now witnessing an intense debate on curbing its growing energy consumption while decreasing its oil import dependency. Though, WKH FRQFHUQV DERXW &KLQD ³ORFNLQJ up� oil supplies and removing them IURP WKH JOREDO PDUNHW KDV EHHQ allayed by IEAœV VWXG\ LQ

China’s soaring energy demand due to extraordinary economic growth has EHFRPH D PDMRU VWXPEOLQJ EORFN LQ balancing its economy and its future increase in oil consumption. Imports SXWV WKLV FRXQWU\ RQ D KLJK ULVN 2LO consumptions eventually impacts the economy and energy emission goals severely. Interestingly, China’s communist leaders, who till now have advocated for the ‘going out’ strategy are now concerned about the same and have cited this as a probable strategic ZHDNQHVV of the future. The realisation of this fact has already been noted in the previous two )LYH <HDU 3ODQV DV DIRUHPHQWLRQHG 7KH (OHYHQWK )LYH <HDU 3ODQ IRU instance was aimed to balance the Chinese economy by curbing both exports and investments which were both energy and mineral intensive and focused more on the service sector. But China clearly missed those targets DQG WKHUHIRUH UHZRUNHG WKH VWUDWHJ\ to boost personal consumption. It also set a target of increasing service sector contribution to GDP by four SHUFHQWDJH SRLQWV E\ SHU FHQW WR SHU FHQW LQ LWV 7ZHOIWK )LYH <HDU

3ODQ WKHUHE\ SURYLGLQJ D VLJQLÂżFDQW shift from manufacturing economy to service economy. But despite these targets set by UHVSHFWLYH )LYH <HDU 3ODQV SURMHFWLRQV PDGH E\ DJHQFLHV OLNH ,QWHUQDWLRQDO (QHUJ\ $JHQF\ DQG %3 6WDWLVWLFDO 2XWORRN SRUWUD\V DQ DZU\ SLFWXUH for the Chinese economy. What Should China Do? Hence, it becomes extremely imSRUWDQW IRU &KLQHVH SROLF\ PDNHUV WR eventually strive hard to balance its economy in a way that is more tilted towards service sector and less inclined towards investments and exSRUW D PDMRU IDFWRU IRU &KLQDÂśV HQHUJ\ intensive economy. China should go all out to curb down its crude oil dependency with a clear articulated shift towards XQFRQYHQWLRQDO HQHUJ\ OLNH VKDOH gas and renewable energy through structured indigenous research and development approach which can optimise the use of its robust human FDSLWDO WKURXJK HGXFDWLRQ VNLOO development and training. China would be doing well if it also

LQWHQVLÂżHV LWV HIIRUWV LQ UHVKDSLQJ LWV Mergers and Acquisition strategies in a way which can provide Chinese companies with an access to gain WKH WHFKQRORJLFDO NQRZ KRZ DQG operations management, as they have been doing in case of shale gas while W\LQJ XS ZLWK WKH 86 FRPSDQLHV This would be of immense help for China in dealing with technological challenges in their own country, thereby increasing the prospects of their own unconventional energy resources which are estimated to be in abundance, as estimated by the IEA. Innovation besides technological expertise will prompt China to do away with its ‘business as usual’ approach in dealing with its energy insecurity DQG PDNLQJ LWV GHYHORSPHQW HIIRUWV more sustainable. ‰

Manish Vaid is Junior Fellow with Observer Research Foundation and may be contacted at manishv@orfonline.org

March 2014 ƒ India-China Chronicle |33|

INFOCUS|INDIA-CHINA|RURAL POLICY

ANALYSIS OF RURAL PROGRAMS

Gansu’s Poverty Reduction and India’s MGNREGA On comparison between the two popular social welfare programs, China’s Gansu poverty reduction project and India’s MNREGA, the question that arises is which one is performing better to reduce poverty and to provide improved livelihood options to the rural poor. In this context, the article makes a comparison between the targets, development policies and strategies adopted by both the countries. The write-up examines if the programs have been able to achieve their targets. Neeraj Kapoor

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he concept of rural development has undergone a drastic change both functionally and structurally. What was ‘rural’ conventionally is not ‘rural’ today. Simultaneously, the concept of development has also undergone a qualitative change from a state-centric to people-centric approach. Besides, the 21st century initiatives of LPG (Liberalization, Privatiza|34| India-China Chronicle March 2014

tion and Globalization) have brought changes in the dynamics of rural development. However, the term ‘rural’ is characterized by non-urban style of life, occupational structure, social organization, and settlement pattern. The World Bank (1975) considers rural development as the process of modernization and the monetization of the rural society leading to its transition from traditional isolation to integration with the national economy.

India’s Rural Development Policy Vision A total of 300 million people live below the poverty line in India, and out of them, 87 million are rural agricultural laborers. Unemployment and out- of- labor days of rural agricultural laborers is 104 days (76 days for male and 141 days for female). Lack of adequate employment opportunities and the minimum trickle-down effect of the economic expansion due to large-

scale corruption have been the prime reasons of poverty in India. Though poverty has reduced from 37.2 per cent (2004-05) to 29.8 per cent (2009-10), however, the absolute number of the poor continues to remain high. Having said that, any discourse on development without the participation of rural people, particularly rural poor, is clearly incomplete. In this regard, India’s major policy document of 12th Five Year Plan (2012-17) focuses on ‘inclusive growth’. The plan is expected to encourage the development of India’s agriculture, education, health and social welfare through government spending. The 12th Five Year Plan has proposed an allocation of Rs.490, 000 crore to the rural development ministry. There are major components of rural development including Integrated Rural Development Program (IRDP), Employment Assurance Scheme (EAS) and Food for Work Program. This is besides the rural housing schemes, social security programs and wage employment programs that include the largest employment guarantee program of the worldMGNREGA scheme. It is the major program of GoI, which not only develops rural areas but also provides employment to the rural people. In an article published in the Wall Street journal, Saurabh Tripathi, a partner with

Major Difference Between Policy Vision of India and China

I

QGLDÂśV WK ÂżYH \HDU SODQ SURPLVHV D ORW IRU UXUDO GHYHORSPHQW DQG JURZWK &KLQDÂśV ODWHVW ÂżYH \HDU SODQ DOVR VHHNV WR LPSURYH UXUDO &KLQD E\ increasing urbanization and industrial efforts in Central and Western China. While the Chinese government seems to be continuing with nation-wide industrialization efforts, the Indian government is attempting to promote a policy of reverse migration by making rural living more attractive. The two policy approaches are distinct in their vision, but again, only time can tell which will work better in their geographical space.

Boston Consulting Group, shares that rural infrastructure, which serves 70 percent of the population, doesn’t get the attention it deserves. “As the Planning Commission sets out to draft the country’s planned investments for the QH[W ÂżYH \HDUV LW LV LPSRUWDQW WR WDNH note of this gap, as well as the innovaWLYH VROXWLRQV QHHGHG WR ÂżOO LW ´ KH VD\V China’s Rural Development Policy Vision China is home to more than 1.3 billion people. Since the economic reforms of late 1970s, China has witnessed unparalleled economic growth that has fuelled a remarkable increase in per capita income. China is WKH ÂżUVW GHYHORSLQJ FRXQWU\ WR DFKLHYH

the United Nations Millennium Development Goal of reducing extreme poverty and hunger. But despite this remarkable progress, China still faces many challenges in curbing poverty. Income disparity among provinces and between urban and rural areas have been widening. Urban incomes are now more than three times higher than rural incomes, and poverty remains primarily a rural phenomenon. Economic growth has been more rapid in the Eastern provinces than in the West. About 40 per cent of China’s poor people live in its seven autonomous regions and provinces. These areas are mostly situated in the Central and Western parts of the country, where the poverty March 2014 ƒ India-China Chronicle |35|

INFOCUS|INDIA-CHINA|RURAL POLICY

incidence in 2008 was 11 per cent, as compared to the national average of 4.2 per cent. In its white paper titled ‘New Progress in Development-oriented Poverty Reduction Program for Rural &KLQDÂś WKH ,QIRUPDWLRQ 2IÂżFH RI WKH State Council the People’s Republic of China describes China’s vision of rural development as: The government’s current ten-year (2011-2020) rural poverty reduction and development program recognizes rural poverty as a long-term challenge – especially in border regions, areas inhabited by ethnic minority groups, and former revolutionary bases that were settled from the 1920s through the 1940s in remote, mountainous locations.

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Mahatma Gandhi NREGA: The Rural Employment Revolution 12.7 crore job cards have been issued VR IDU SHU FHQW EHQHĂ€FLDULHV RI this scheme have been women, Wages almost doubled from Rs 65 per day at launch to Rs 128 now.

|36| India-China Chronicle ƒ March 2014

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13*

3.78 6.48 10.01 11.25 11.98 12.50 12.70

Figure showing the progress of MGNREGS so far

Criticism and Applaud Go Together: Gansu’s anti-poverty program and MGNREGA

oth programs have been severely criticized at the national and international levels but as they have progressed, they have achieved the desirable results. The Gansu Western Poverty Reduction Project focuses on Inner Mongolia Autonomous Region P FRVW EHQHÂżWLQJ SHRSOH *DQVX P FRVW EHQHÂżWLQJ 930,000 people) and Qinghai ($40m FRVW EHQHÂżWLQJ SHRSOH ZKR are moving out, 110,000 people who are staying, and 4000 people in and around the host area). The project SURYLGHV VLJQLÂżFDQW KHDOWK HGXFDtion, employment and farming benHÂżWV WR SHRSOH LQ UHPRWH DQG LQDFcessible villages. They now have incomes between $25 and $60 a year. According to World Bank’s, James D. Wolfensohn, “This has been a particularly grueling project for all of us, in view of the criticisms that have been leveled at the Bank with regard to the handling of environmental and miQRULW\ LVVXHV LQ &KLQD ´ The year of 2012 marks the sixth anniversary of the implementation of the Mahatma Gandhi National Rural Employment Guarantee Act (MGN-

MGNREGA - Total Job Card Issued (In Crore)

REGA), India’s landmark right-towork program. The Act guarantees 100 days of paid employment to every rural household in India (up to 850 million people), regardless of eligibility criteria, and establishes the govHUQPHQWÂśV Ă€DJVKLS ZHOIDUH SURJUDP with an allocated central government cost of Rs 401 billion (or US$8.9 billion) in 2010-11, which accounts for 3.6 per cent of the total government expenditure. The program has many supporters as well as critics, with the former suggesting that it would transform rural areas, and the latter bemoaning large-scale graft. 7KH ÂżUVW WKUHH \HDUV RI WKH SURJUDP have also shown that MGNREGS suffer from many ills such as delays in wage payments, non-payment of statutory minimum wages among others. According to Rural Development Minister Jairam Ramesh, “There are three objectives of MGNREGA; to provide wage employment, to create durable community assets and to empower gram panchayats. In states where MGNREGA has been successful, only two out of the three objectives have EHHQ IXOÂżOOHG ,Q QR VWDWH KDYH DOO WKH WKUHH REMHFWLYHV EHHQ IXOÂżOOHG ´

Comparing MNREGA and Gansu Poverty Eradication Program %RWK DUH ÀDJVKLS SURJUDPV RI ,QGLD and China respectively and are aimed at bringing social development. They target various aspects of rural poverty that have been most noticeable in their respective countries. The programs KDYH EHHQ IRUPXODWHG DQG ¿QDQFLDOO\ supported by the central government. The state governments have implemented them through decentralized mechanisms that operate at the lowest administrative level of the country concerned. Additionally, each program has a short-term goal of reducing poverty and a long-term goal of breaking the intergenerational cycle of poverty. Gansu’s Poverty-Reduction Program The Western Poverty Reduction Project (popularly known as Gansu Poverty Reduction Program) aims to reduce the incidence of absolute poverty in the remote and inaccessible villages of Gansu and Qinghai Provinces as well as the Inner Mongolia Autonomous Region in China. The project aims to enhance the income through increased grain and livestock production. This also generates a marketable surplus to improve the living standards other than meet the basic needs of food and clothing. Besides,

it also aims to establish alternative income generation activities in poor rural areas, improvement of rural infrastructure and enhanced access to basic social services such as health and education. The Gansu Program is designed to support the Chinese Government’s Eight-Seven Poverty Reduction Plan (In 1994, China launched a far-reaching poverty reduction strategy under the 8-7 Plan, which targets 592 designated poverty counties located in inaccessible mountainous and semiarid areas in the Central and Western parts of China). The aim is to improve rural incomes by moving households away from agricultural activities to alternative income generation activities within the rural areas. This is where the Chinese strategy and program to develop rural areas is different from that of India’s MNREGA program that tries to develop rural areas other than agricultural resources in order to avoid migration. Mahatma Gandhi National Rural Employment Guarantee Scheme In 2005, GoI came up with an ambitious national anti-poverty program, known as Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) to provide extra earnings for poor families. About 120 million families out of 200 million are directly employed in agriculture, whereas about 40 million additional families EHQH¿W DV ODERUHUV DQG RWKHU VHUYLFH providers. A National Sample Survey conducted a few years ago reported that 60 per cent of the farmers interviewed wanted to leave farming as a livelihood option and 80 per cent of the farmers found farming non-viable. About 70 per cent of the farming in India is only rain-fed, making it a veritable gamble at times. MGNREGS is the government’s largest scheme, providing employment to 25 per cent of rural households, 50 per cent of which goes to SC/ST, and 47 per cent to women. The priorities of the work to be undertaken include watershed management and water conservation, droughtSURR¿QJ ÀRRG SURWHFWLRQ ODQG GHYHO-

SKILL Training The logical next step, from manual to skilled. One person from each household that completes 100 days of work will be trained under NRLM on a range of skills like carpentry.

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RURAL Sanitation NREGA funds will be developed to promote rural hygiene. For every toilet built (estimated cost of Rs 10,000) Rs. 4,500 will go out from the NREGA kitty. The mandatory 60:40 labour-tomaterial ratio will be maintained at the gram panchayat level.

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CAG Audit An annual CAG audit – limited to the utilisation of NREGA funds – will help bring in more transparency. This year’s report will be in by November, to be submitted to Parliament by December.

Ways NREGA 2.0 will Address Legacy Challenges 3 4

MoRD funds for MoPR The rural development ministry will transfer 1% of its entire budget of Rs 99,000 crore to the panchayati raj ministry for capacity building and training of panchayats. This, it hopes will bring in a sea change in NREGA implementation at the ground level.

opment, minor irrigation and rural connectivity. Such work is important in order to strengthen the ecological foundations of sustainable agriculture. The MGNREGA is probably the world’s largest ecological security program. A report by the Centre for Study of African Economies, Oxford University that looked at monthly data from 2000-2011 for 249 districts across 19 states concluded that since the poorest of the poor are agricultural wage laborers, rural public works like MGNREGS constitute a potentially important anti-poverty policy tool. The report, released in March 2012, states that on an average, the scheme boosts the real daily agricultural wage rates by 5.3 per cent. Economists like Pranab Kumar Bardhan, professor at the University of California, Berkeley, say that allegaWLRQV RI 0*15(*6 IXHOOLQJ LQÀDWLRQ are heavily exaggerated. MNREGA 2.0, the second generation reforms show that MGNREGS has come a long way to provide livelihood security. MGNREGS: A Dismal Performance? After seven years of its launch, MGNREGA scheme has become the largest welfare program of the world.

END to Minimum Wage Row The AP High Court ruling that NREGA payments below state minimum wages amounted to forced labour had put Gol in a quandary. The ministry will now amend the NREGA Act to put an end to the controversy. Safeguards to ensure that states don’t arbitrarily jack up minimum wages will put in place.

However, it is not the best program because the potential of the scheme has not yet been realized fully. Shailaja Fennell, in her article ‘A richer approach to poverty reduction’, argues that MGNREGS lacks the dimenVLRQV RI OLYHOLKRRG GLYHUVLÂżFDWLRQ and new non-farm rural income generation which are the cornerstones of the Gansu poverty reduction program. India should learn from the Gansu program which has been successful in UHGXFLQJ SRYHUW\ WR D VLJQLÂżFDQW OHYHO Besides, the conditional cash transfer programs which have been experimented with in Latin America (Progressa in Mexico and Bolsa Familia in Brazil) and around the world, have also put forward effective examples to reduce poverty levels by developing human resource base in rural areas. All these programs have been implemented by their respective governments keeping in consideration their geographical and social/local conditions, demands of the people and ideology of the nation. Every nation has its own history and social temperament and it has to carve out its own path. ‰ Neeraj Kapoor is an independent research scholar. His area of interest includes Strategic Affairs and Development Issues.

March 2014 ƒ India-China Chronicle |37|

INFOCUS|CHINA|SME

CHINESE SMALL AND MEDIUM ENTERPRISES

Trying to Re-Create the Growth Wonder SMEs have served as a major driving force in augmenting China’s export-led growth as well as in creating avenues for the promotion of innovations in science & technology. However, the sector is battling against several constraints such as lack of funding, professionalism and poor labor relations. The Government is taking measures to revitalize the SMEs. Apart from the Central government, even the local governments are displaying keenness in allocating separate funds to promote and develop the SMEs.

P.K. Anand

O

ver three decades of economic growth and transformation by China has not only caught the world’s attention and generated considerable cons co nsid ider erab able le interest, int inter eres est, t, but but has has also als also o led to focus on studying the trajectory in order to probe possibilities of emulation of the ‘model’. One of the major engines of China’s economic progress is the industrial sector. The model of China’s economic growth since the onset of reforms has shifted from high agrarian growth and stateled heavy industrial production towards the empowerment of

|38| India-China Chronicle March 2014

non-state sectors through the encouragement of market forces. Sharply departing from the model of centralized command planning in the period preceding 1978, a dual track approach was formulated wherein, while the state still held primacy, greater encouragement was shown towards developing productive

forces through the impetus of market reforms. China’s contemporary growth model has been pegged at two critical forces, namely Industrialization and Urbanization. Focus on SMEs The initiation of reforms has been VLJQL¿FDQWO\ PDUNHG E\ VKLIW LQ HPphasis from heavy industries or the State-Owned Enterprises to the Small and Medium Enterprises. ChartLQJ RXW D GH¿QLWLRQ RI &KLQD¶V 6PDOO

and Medium Enterprises (SMEs) is a complicated task, as it is driven by complexities in arriving at generalizations. According to China’s State Economic and Trade Commission, State Development Planning Commission, Ministry of Finance and the National Bureau of Statistics, SMEs are roughly characterized as those having less than 200 employees, with sales lower than 300 million yuan or capital value lower than 400 million yuan. The broad categorization of SMEs in China includes all Township and Village Enterprises (TVEs), private enterprises and household enterprises. In the market-based socialist economy, SMEs were visualized as supplementary

BY FORMULATING THE SMALL AND MEDIUM-SIZED ENTERPRISES PROMOTION LAW IN JUNE 2002, THE CENTRAL GOVERNMENT SOUGHT TO REMOVE INSTITUTIONAL BARRIERS THAT HINDERED DEVELOPMENT OF PRIVATE SMEs AND PROMOTE INNOVATIONS. entities. Following the initial round of reforms to boost agriculture, the TVEs were increasingly encouraged for closer association with rural communities and boosting of production that would be linked to agriculture. Thus, the TVEs were understood in the broad sense as including all rural enterprises and over time, came to incorporate those engaged in construction, commerce, services, and communication other than agriculture and industries. The TVEs were thus marked out as promoting community entrepreneurship in the rural sector. 7KH RWKHU VLJQLÂżFDQW FDWHJRU\ LQ WKH SME sector was the Private EnterprisHV 3(V ZKLFK ZHUH IXUWKHU FODVVLÂżHG as household/family or joint-household enterprises. While the SMEs

were encouraged in a general sense in post-1978 reforms, their invigoration started in 1992, with the initiation of a series of reforms in ownership and governance structures. By formulating the Small and Medium-sized Enterprises Promotion Law in June 2002, the central government sought to remove institutional barriers that hindered development of private SMEs, SURPRWHG VFLHQWL¿F DQG WHFKQRORJLcal innovations as well as enhanced their overall quality and competitiveness. Playing a vital role in stimulating economic growth and increasing employment, the SMEs have served as a major driving force for augmenting China’s export-led growth as well as creating avenues for the promotion

of innovations and science & technology. The SMEs are dominant in food, paper making and printing, garment, WDQQHU\ UHFUHDWLRQ DQG VSRUWV RXWÂżW This is apart from plastic, metalwork and wood-furniture industries. Developed around the three major industrial zones in China namely the Pearl river delta, Yangtze river delta and Bohai Rim region, the SMEs are mainly concentrated in Jiangsu, Zhejiang, Guangdong and Shandong provinces, along with Shanghai. Clustering – An Important Strategy for the SMEs One of the major strategies adopted by the SMEs for their sustainability, improving and sharing of innovative March 2014 ƒ India-China Chronicle |39|

INFOCUS|CHINA|SME

ideas and production resources, is Clustering. The Clustering, which is mostly associated with the labourintensive manufacturing enterprises, refers to regional agglomerations of SMEs with close business relations and frequent interactions within a locality. Essentially, this cluster-based model is largely based on private enterprises, with towns and villages functioning as production hubs, with one or more of them focusing on one product. The Clustering helps in facilitating information exchange and knowledge sharing, thereby laying the ground for attracting talent and newer enterprises. Wenzhou Model – Another String in the Bow Publicized as an alternative strategy by the party-state, this PRGHO ZDV ¿UVW DGRSWHG E\ :HQ]KRX a prefecture-level municipality in Zhejiang province, wherein the backdrop of its mountainous terrain and high population density along with natural resource shortage, encouraged the households to set up household workshops and measures were undertaken to explore business DI¿OLDWLRQ guahu). Under this, household industrial and commercial ¿UPV ZHUH OLQNHG WR WKH HVWDEOLVKHG and collectively – owned or stateowned enterprises, paying a fee for

|40| India-China Chronicle ƒ March 2014

using its name and the former, thus JDLQLQJ PRUH ÀH[LELOLW\ DQG DXWRQRP\ The Governmental Support and Financing of SMEs 5DWKHU WKDQ JHWWLQJ ¿QDQFLQJ IURP the market, the SMEs have to strongly rely on loans from the government and SXEOLF ¿QDQFH DJHQFLHV 3UHIHUHQWLDO taxation policies have been adopted with the dual aims of promoting employment and hi-tech enterprises as well as the service industries. Several funds have also been established by the Ministry of Finance over the years to boost technological innovations, commercialization, technology transfers and expansion of exports through exploration of new international markets. Some of the local governments have also displayed keenness

DESPITE THE GOVERNMENT’S EFFORTS TO CREATE FAVORABLE CONDITIONS TO ENCOURAGE LENDING, THE CHINESE BANKS HAVE SHOWN RELUCTANCE TO OFFER LOANS TO SMEs, AS LOW CONFIDENCE PREVAILS ON REPAYMENT CAPACITIES.

in allocating separate funds to promote the development of SMEs, and instituting subsidies on interest payments. Adjusting credit structure, bringing about a capital turnover system and establishing a national credit guarantee system were some of the other measures implemented WRZDUGV SURYLGLQJ JUHDWHU ¿OOLS WR WKH SME sector. Constraints and Challenges – Hurdles for SMEs However, while there is a general level of enthusiasm shown by the government to further the potential offered by the SMEs in powering the country’s economic growth, there are still constraints that these enterprises face. The chief amongst them comes ZLWK UHJDUG WR WKH DVSHFW RI ¿QDQFing. Despite the government’s efforts to create favourable conditions to encourage lending, the Chinese banks for some years now have shown reluctance to offer loans to SMEs, as small single loans were considered QRQ SUR¿WDEOH DQG ORZ FRQ¿GHQFH prevailed on the repayment capacities conditioned by the amount of risks involved. The latter was essentially due to lack of proper information on the SMEs, even though efforts have been undergoing to simplify the procedure and terms for enterprises to obtain loans on collateral. Further, there are issues regarding the imposition of higher interest rates and the enterprises re resorting to informal/ XQGHUJURXQG ¿QDQFLDO LQVWLWXWLRQV for loans, thus adding the shroud of illegality on the dealings and causing more hassles for fo the managements of WKH VP VPDOO DQG PHGLXP ¿UPV Ano Another key challenge w which is also inherent LQ WKH ¿QDQFLDO FRQstraints is the lack of iinformation intermedia diaries, or marketing/ UHVHDUF UHVHDUFK ¿UPV ,W KDV EHHQ VHHQ WKDW WKHVH ¿UPV DUH ODUJHO\ restric restricted to the bigger urban centre centres and even the existing QDWLRQD QDWLRQDO RU ORFDO VHPL RI¿FLDOV are ill-eq ill-equipped to offer proper

information. Among the various solutions offered for these varied set of issues, is one where greater linkages between universities and enterprises have been espoused. This would entail attracting the best of the graduates as managers and entrepreneurs by setting up programmes to cultivate skilled personnel. This works towards inculcating substantial professionalism and sophistication of the managerial workforce. The presence of a workforce in plentiful with absence of skills creates imbalances in the labour market. The linkages with the higher educational institutions also help in enhancing the innovative capabilities, especially those concerning patents and Research and Development that become prominent, post China’s entry into the WTO. Marketing is also another area that needs greater focus of attention from the SMEs. ECommerce is suggested by experts and DQDO\VWV LQ WKH ¿HOG DV D ZD\ IRUZDUG for the SMEs in terms of greater accessibility and higher level of visibility which would also be in some ways, a prudent strategy given the limited EXGJHWV DQG WLJKWHU ¿QDQFHV XQGHU which the SMEs operate currently.

ONE OF THE MAJOR STRATEGIES ADOPTED BY THE SMEs FOR THEIR SUSTAINABILITY WAS CLUSTERING. CLUSTERING REFERS TO REGIONAL AGGLOMERATIONS OF SMEs WITH CLOSE BUSINESS RELATIONS AND FREQUENT INTERACTIONS WITHIN A LOCALITY. Challenges in Labor Relations Another key challenge for the SMEs is that of labour relations. The economic restructuring has also led to the reorganization of labour in the country, with greater amount of mobility and aspirational factors driving migration from hinterland into the new industrial zones and urban centres. Much of the migrant workers are absorbed in many of the labour-intensive manufacturing enterprises as well as within the services sector. While contractualization prevails in terms of employment in the SMEs, classifying them as long-term and short-term on the basis of the work and skills and a Labour Contract Law guaranteeing the IXOÂżOOPHQW RI WKH FRQWUDFWV WKH ODERXU relations have mostly been informal

Ă€H[L DQG Ă€H[LEOH 7KH HQWHUSULVH PDQDJHh ments have also, frequently tried to circum circumvent the prevailing laws and bypass their contractual obligations o proper wages and welfareof social security entitlements. While the constant mobili of the migrant labour has ity b been often cited as a reason for the managements adopting such measures, the workers are mostl skeptical of the employers, mostly le thus leading to a fractious confronr tational relationship. With most of the SMEs no not under the proper monitorth local governments, the lack ing of the of accou accountability also drives workers to resort to measures of spontaneous a strikes and collective actions, even t though the party-state clearly seeks to avoid and prohibit any such means im which impede with economic production and lead to disharmony. A solution sugg suggested is the western concept of Human Resources Management (HRM). On the lines of the larger harmonious relations discourse, the Chinese have also tended to blend the indigenous elements of Confucianism with HRM practices, thus working towards achieving more durability and growth. While the SMEs are increasingly realizing the importance of the HRM aspect, there is still scope for further and deeper engagement in RUGHU WR PDNH LW VWDQG PRUH ÂżUPO\ Today China is categorized as the ‘factory of the world’, with the manufacturing sector on the upward progression. Despite the variations in the manufacturing indices from time to time, the growth has been steady, with SMEs acting as the key engine powering it. However, in order to sustain the momentum and move to the next level of productive and increased outputs, there has to be a dialectical understanding between both the enterprises and the government to understand the challenges and explore common grounds for overcoming them for muWXDO EHQHÂżW DV ZHOO DV IRU WKH FRXQWU\ÂśV healthy economic outlook. ‰ P.K. Anand is Research Assistant at Institute of Chinese Studies, Delhi

March 2014 ƒ India-China Chronicle |41|

INFOCUS|CHINA|HUMAN RIGHTS

Human 7UDIÀFNLQJ LQ &KLQD Years of one-child policy and the resultant skewed male female ratio has given rise to WUDI¿FNLQJ RI ZRPHQ and children in China. In June, 2013, China National Radio reported that around 200,000 children disappear every year. The main targets are baby boys though girls are also abducted and sold as labourers and for prostitution. The government has formulated an action plan 2013-2030 with relevant international conventions DQG &KLQHVH ODZV WR ¿JKW the menace. |42| India-China Chronicle March 2014

Namrata Hasija

T

KH 8QLWHG 1DWLRQV 2IÂżFH RQ 'UXJV DQG &ULPH GHÂżQHV 7UDIÂżFNLQJ LQ 3HUVRQV DV WKH recruitment, transportation, transfer, harbouring or receipt of persons, by means of the threat or use of force. The other forms include activities related to coercion, abduction, fraud, deception, and the abuse of power. Giving or receiving of payments or EHQHÂżWV WR DFKLHYH WKH FRQVHQW RI D person for the purpose of exploitation DUH LQFOXGHG LQ WKH GHÂżQLWLRQ RI 7UDIÂżFNLQJ ([SORLWDWLRQ DOVR LQFOXGHV prostitution, other forms of sexual exploitation, forced labour or services, slavery or practices similar to slavery, servitude or the removal of organs. &KLQHVH FULPLQDO ODZ GHÂżQHV 7UDIÂżFNLQJ DV WKH DEGXFWLRQ NLGQDSSLQJ trading and transporting of women and children for the purpose of selling. Offences such as forced labour and RWKHU WUDIÂżFNLQJ UHODWHG RIIHQFHV DUH punished as ‘other’ crimes and are not LQFOXGHG XQGHU WUDIÂżFNLQJ RIIHQFHV +XPDQ 7UDIÂżFNLQJ $ 6HULRXV 7KUHDW LQ &KLQD According to the 2008 U.S. State 'HSDUWPHQW 7UDIÂżFNLQJ LQ 3HUVRQV 7,3 5HSRUW &KLQD UHPDLQV ÂłD VRXUFH transit, and destination country for PHQ ZRPHQ DQG FKLOGUHQ WUDIÂżFNHG for the purposes of sexual exploitation and forced labour.â€? After spending IRXU \HDUV RQ 7LHU RI WKH 7,3 UDQNLQJV from 2001 to 2004, China was dropped to the Tier 2 Watch List in 2005, where it has remained due to its non-compliance with the minimum standards for HOLPLQDWLQJ WUDIÂżFNLQJ 2Q -XQH 2013 the State Department released LWV DQQXDO Âł7UDIÂżFNLQJ LQ 3HUVRQV 5Hport.â€? China received an automatic downgrade to the lowest ranking, Tier (YHQ WKRXJK WKLV UHSRUW FDQQRW EH used as the authority on the issue but KXPDQ WUDIÂżFNLQJ KDV EHHQ UHFRJQLVHG as a serious threat in China and itis acknowledged by state media and also E\ WKH RIÂżFLDO PDFKLQHU\ 0DQ\ SDUWV of China are experiencing large scale WUDIÂżFNLQJ RI ZRPHQ LQFUHDVLQJ VH[X-

DO YLROHQFH EDE\ WUDI¿FNLQJ DQG SURVtitution. According to the UN Children’s Fund, about 250,000 people ZHUH YLFWLPV RI WUDI¿FNLQJ 5HFHQWO\ D UDFNHW ZDV EXVWHG LQ ,QQHU 0RQJROLD where 76 babies were bought for trading in other provinces. Chinese statistics reveal that around 42000 women and children were freed from human WUDI¿FNHUV ODVW \HDU The one-child policy continues to FUHDWH D GHPDQG IRU WUDI¿FNLQJ DQG FUHDWH VRFLDO ¿VVXUHV LQ WKH &KLQHVH society.The imperative for one child meant that there was room only for the male foetus. This policy was LQWURGXFHG LQ VRRQ DIWHU WKH liberalization of the economy in order

RECENTLY A RACKET WAS BUSTED IN INNER MONGOLIA WHERE 76 BABIES WERE BOUGHT FOR TRADING IN OTHER PROVINCES. CHINESE STATISTICS REVEAL THAT AROUND 42000 WOMEN AND CHILDREN WERE FREED FROM HUMAN TRAFFICKERS LAST YEAR.

to control the growing population exempting only ethnic minorities and relaxing some norms for rural couples. ,W ZDV UXWKOHVVO\ HQIRUFHG DQG RIÂżFLDOV cite numbers to point to its success PLOOLRQ ELUWKV DYHUWHG (DV\ DFFHVV to ultrasound enabled easy gender determination leading to abortions of female foetuses. The gender ratio ZDV LQ LQ 116:100 in 2000 and 118:100 according to the 2010 census,which is above the global average of 105:100. It has been estimated that by 2020 almost 30 million Chinese men will be unable to ÂżQG EULGHV The gender ratio is especially skewed in the 1 - 4 age groups standing at 130:100 in some provinces. Another facet is that for the second RUGHU ELUWKV WKH ÂżJXUHV KDYH UHDFKHG up to 146:100 in rural areas according a Zhejiang University report. Thus, government policies which are meant to enable rural couples to choose their FKLOGÂśV JHQGHU KDV VLJQLÂżFDQWO\ H[DFHUbated the problem. Additionally many unregistered female births are hidden from the authorities to enable a second chance at producing a male heir. This complicates data collection making accurate measurement of the problem impossible.

March 2014 ƒ India-China Chronicle |43|

INFOCUS|CHINA|HUMAN RIGHTS

7KLV KDV JLYHQ ULVH WR WUDIÂżFNLQJ LQ women for marriage and prostitution. Resultant social tensions are rife as many men remain unmarried while some purchase brides from Vietnam and other neighbouring countries. 0RVW ZRPHQ DQG FKLOG DUH WUDIÂżFNHG from Vietnam, Russia, North Korea DQG 0\DQPDU DV ZHOO DV WKH YDULRXV provinces within China. The price for a Burmese wife, for example, is somewhere between US$ 600 and US$ 2400. The Kachin issue has also given ULVH WR WUDIÂżFNLQJ .DFKLQ ZRPHQ LQWR China, by luring them with promises of good jobs and marriage prospects. 0HQ DUH SXWWLQJ RXW DGYHUWLVHPHQWV in major newspapers, emphasizing on their wealth and begging women to respond to their proposals. Those who do not have enough money turn to illegal brokers who trick rural women with bogus job offers and sell them to these men. These trends are expected to worsen once the current generation hits a marriageable age as there are already many bachelor villages in China. For example, there is one in Banzhushan in Hunan where there is not even a single unattached woman. There have been reports citing examples of young men selling blood to pay for large houses so as to stand a chance in the materialistic Chinese marriage market. The problem is acute in rural areas such as Hainan Island, with reports suggesting that the orphanDJHV DUH ÂżOOHG ZLWK JLUOV ZKHUHDV WKH FODVVURRPV DUH ÂżOOHG ZLWK ER\V 0DQ\ women migrate to urban areas in search of better jobs. However, not PDQ\ ÂżQG D MRE DQG WKXV EHFRPH HDV\ WDUJHWV IRU WUDIÂżFNLQJ JDQJV %HVLGHV many women lured from neighbouring countries often land up in a brothel. &KLOG 7UDIÂżFNLQJ This has also led to an increase LQ FKLOG WUDIÂżFNLQJ ERWK LQVLGH DQG outside China. China National Radio reported in June 2013 that around 200,000 children disappear every year. Only 0.1 per cent of them are found and returned to their families. An art exhibition was organised on 1 June 2013 by Li Yueling, where volunteers |44| India-China Chronicle ƒ March 2014

AROUND 200,000 CHILDREN DISAPPEAR EVERY YEAR OF WHICH ONLY 0.1 PER CENT ARE FOUND AND RETURNED TO THEIR FAMILIES. CHILDREN ACROSS CHINA ARE BEING ABDUCTED BY HUMAN TRAFFICKERS AND SOLD FOR ADOPTION, LABOUR OR PROSTITUTION. working for the cause displayed photos of 61 missing children along with documentaries of their parents. 7KRXJK RIÂżFLDO GDWD LV SDWFK\ EXW D substantial number of these children DUH WUDIÂżFNHG ZLWKLQ &KLQD Children across China are being DEGXFWHG E\ KXPDQ WUDIÂżFNHUV and sold for adoption, labour or as household servants or for prostitution. A major reason due to which the problem germinated and has become so entwined with the Chinese society is the one-child policy. The one-child policy has led to a burgeoning black market of stolen children, at least 70,000 a year. Due to the cultural

bias for a male child, couples having WKH ÂżUVW FKLOG DV D GDXJKWHU DQG UXUDO households having two daughters desire a male child. This bias coupled with the lax in adoptive laws has also led to the thriving of this social evil in China. The main targets are baby boys though girls are also abducted for the purpose of selling them as labourers and for prostitution. Although some DUH VROG WR EX\HUV LQ 6LQJDSRUH 0Dlaysia and Vietnam, most of the boys are purchased domestically by families desperate for a male heir. The chain of kidnapping, transferring and selling has become so strong that in some provinces such as Guangdong, children are kidnapped and transferred RXW RI WRZQ ZLWKLQ KDOI DQ KRXU DQG Âżnally sold in another town. Su Qingcai, D WHD IDUPHU LQ WKH )XMLDQ 3URYLQFH DGPLWWHG WR EX\LQJ D ÂżYH \HDU ROG boy for the equivalent of $3,500, even WKRXJK 0U 6X DOUHDG\ KDG D WHHQDJH GDXJKWHU Âł$ JLUO LV MXVW QRW DV JRRG DV D VRQ ´ 0U 6X VDLG LQ DQ LQWHUYLHZ WR WKH 1HZ <RUN 7LPHV Âł,W GRHVQÂśW PDWter how much money you have. If you don’t have a son, you are not as good as other people who have one.â€? There are large criminal gangs which have nationwide networks. These gangs are

DOVR LQYROYHG LQ FURVV ERUGHU WUDIÂżFNLQJ ZLWK RWKHU FRXQWULHV OLNH 9LHWQDP DQG 0\DQPDU ,Q 0D\ RQH VXFK UDFNHW ZDV EXVWHG DQG WHQ 9LHWQDPHVH FKLOGUHQ ZHUH UHWXUQHG WR 9LHWQDP Efforts to Check the Menace 7KHUH KDYH EHHQ QXPHURXV UHports of cases where children born in violation of the one-child policy were IRUFHIXOO\ WDNHQ E\ RIÂżFLDOV DQG UHJLVtered in orphanages to be further sold DEURDG IRU DGRSWLRQ ,Q D UHSRUW WKH &DL[LQ &HQWXU\ PDJD]LQH GLVFORVHG WKDW VL[WHHQ EDELHV ZHUH VHL]HG LQ +Xnan as they were born in violation of WKH RQH FKLOG SROLF\ 7KH RIÂżFH ZRXOG JHW WKRXVDQG UHQPLQEL IRU HDFK FKLOG whereas the orphanage would receive 86 WR DV DGRSWLRQ IHHV Parents interviewed in this report FODLPHG WKDW DIWHU LI WKH YLRODWRUV of one- child policy are unable to pay WKH ÂżQH WKHLU FKLOGUHQ DUH DEGXFWHG E\ WKH RIÂżFLDOV 7KH QHZ GHSDUWPHQW VHW XS WR ORRN LQWR FKLOG DEGXFWLRQV LQ VD\V WKDW WKH\ KDYH VROYHG FDVHV RI WUDIÂżFNHG FKLOGUHQ IURP WR 7KH JRYHUQPHQW KDV WDNHQ VRPH PHDVXUHV WR FRQWURO WKH JURZLQJ PHQDFH $Q DFWLRQ SODQ IRU ÂżJKWLQJ KXPDQ WUDIÂżFNLQJ KDV EHHQ

ALTHOUGH THE ONE-CHILD POLICY HAS BEEN EASED IN THE THIRD PLENUM, HOWEVER, NO IMMEDIATE EFFECT CAN BE SEEN IN AREAS OF SOCIAL FISSURES THAT THE POLICY HAS CREATED. IRUPXODWHG ZLWK UHOHYDQW LQWHUQDWLRQDO FRQYHQWLRQV DQG &KLQHVH ODZV 7KH PLQLVWU\ DOVR NHHSV D PLVVLQJ FKLOGUHQ GDWDEDVH ZLWK WKHLU '1$ SURÂżOLQJ 6SHFLDO RIÂżFHV WR LQYHVWLJDWH FKLOG abduction cases have been set up and increased coordination across twenty different provinces has led to D GHFUHDVH LQ FKLOG DEGXFWLRQ FDVHV 7KH RIÂżFLDOV DFWLYLVWV DQG SDUHQWV KDYH WDNHQ WKH KHOS RI VRFLDO PHGLD WR VKDUH LQIRUPDWLRQ DERXW WKH DEGXFWHG children and draw public attention to WKH SUREOHP 7KH\ SRVW SKRWRJUDSKV RI NLGQDSSHG FKLOGUHQ RQ ZHEVLWHV DQG LQ VRPH FDVHV SDUHQWV KDYH EHHQ DEOH WR ORFDWH WKHLU FKLOGUHQ 3HRSOH DOVR SRVW SLFWXUHV RI FKLOGUHQ ZKRP WKH\ VXVSHFW PLJKW KDYH EHHQ NLGQDSSHG DQG VROG LQ WKHLU QHLJKERXUKRRG 'HVSLWH HIIRUWV IURP RIÂżFLDOV

DFWLYLVWV DQG FLWL]HQV WKH SUREOHP LV LQFUHDVLQJ WKRXJK WKH QXPEHUV RI NLGQDSSHG FKLOGUHQ KDYH FRPH GRZQ GXH WR VRPH UHFHQW FUDFNGRZQV 7KH UHDVRQV DUH RI¿FLDO FRUUXSWLRQ RQ WKH one hand and the raison d’être which has initiated the whole process in the ¿UVW SODFH 7KHUH KDYH EHHQ UHSRUWV RI RI¿FLDOV EHLQJ LQYROYHG ZLWK WKH WUDI¿FNLQJ JDQJV DV WKH EXVLQHVV LV OXFUDWLYH 7KRXJK WKH DFW RI EX\LQJ DQ DEGXFWHG FKLOG LV D FULPLQDO DFW KRZHYHU QR FULPLQDO OLDELOLW\ KDV EHHQ DI¿[HG WR LW 3HRSOH JHW DZD\ ZLWK SXQLVKPHQW LQ IRUP RI PRQHWDU\ ¿QHV (YHQ WKH RUSKDQDJHV VRPHWLPHV IDLO WR WDNH WKH '1$ RI WKH FKLOGUHQ WKH\ UHFHLYH DQG HYHQWXDOO\ JLYH WKHP DZD\ for adoption which lessens the chances of verifying whether the children were DEGXFWHG RU QRW Though stricter laws and FUDFNGRZQV PLJKW OHDG WR D ORZHULQJ RI KXPDQ WUDI¿FNLQJ EXW WKH 2QH Child Policy still continues to create D GHPDQG IRU LW $OWKRXJK LQ WKH 7KLUG 3OHQXP WKH RQH FKLOG SROLF\ has been eased out wherein couples that have one parent or those who grew up as an only child can have a VHFRQG EDE\ 0DQ\ KDYH WRXWHG WKLV DV D PDMRU GHFLVLRQ WKDW ZRXOG WXUQ WKH GHPRJUDSKLF GLYLGHQG DURXQG IRU &KLQD DQG DOVR VWDELOL]H WKH JHQGHU LPEDODQFH ZKLFK ZLOO XOWLPDWHO\ VROYH PDQ\ VRFLDO SUREOHPV LQ WKH FRXQWU\ +RZHYHU QR LPPHGLDWH HIIHFW IURP WKLV FKDQJH FDQ EH VHHQ 7KH NLQG RI VRFLDO ¿VVXUHV FUHDWHG E\ WKH RQH FKLOG SROLF\ ZLOO WDNH \HDUV WR IDGH DZD\ DQG RQH DOVR QHHGV WR UHPHPEHU that the policy has been relaxed not DEROLVKHG +XPDQ WUDI¿FNLQJ ZLOO WKXV UHPDLQ D VHULRXV SUREOHP LQ &KLQD IRU \HDUV WR FRPH ‰

Namrata Hasija is Research Associate at Center for China Analysis and Strategy, New Delhi. She has published a book titled ‘Medieval Chinese Perception of India: Two Medieval Chinese Accounts of Foreign People and Places, and their Representation of India. She is also visiting faculty at Jindal Global University.

March 2014 ƒ India-China Chronicle |45|

MISSING PIECES

Developing Tourism Cluster Akin to China Tourism activities can be strategized for local development. But the challenge is to search for competitiveness. Clusters, a competent tool to assess companies’ performance, can be used for the same. This article aims to propose a conceptual model to analyze how a tourism cluster can encourage its regional competitiveness.

T

he tourism economy in India and China is at present both under- networked and under- served. However, the ability to integrate those networks into clusters for creating wealth is a far more attractive offer that elevates the common issue of township parochialism. Tourism in India and China tends to be state driven and then regionally run in terms of destination marketing. Tourism clusters can range from a single location to multiple locations crossing state borders and beyond. The networking and collaboration for this innovative idea is complex, with an emphasis on collaboration rather than competition

|46| India-China Chronicle March 2014

between locations and regions. Mission Hills Shenzhen and Mission Hills Hainan are good examples of tourism FOXVWHUV LQ WKH FRXQWU\¶V ÀHGJOLQJ WRXULVP LQGXVWU\ 7KH WZR locations employ approximately 14,000 people across its two clusters.

Home Course of Golf In inheriting the world’s largest golf club that cannot be replicated, Mission Hills has established itself well in the international tourism island with its architectural model and high quality assets. It is at the center of the

Luxury Unlimited: ‘Mission Hills’ Shenzhen and ‘Mission Hills’ Hainan The Largest Volcano Course Cluster: The 10 largest volcano golf courses, an enduring legend on the bare volcanic rocks. Three major theme water parks: water park, adventure land and children’s paradise Three 5-star golf resort hotels: The Mission Hills Resort Hotel is now open, and the Ritz-Carlton Hotel and Renaissance Hotel are under construction. Mission Hills: Lankwai Fong and Haikou: Built together with top international fashion and entertainment brands, with a total construction area of up to 240,000 sq. m. 7KH ELJJHVW YROFDQLF URFN PLQHUDO KRW VSULQJ LQ $VLD 0RUH WKDQ FROG DQG KRW VSULQJV WKDW LQWHJUDWH ÂżYH continental styles. Top club: A 22,200 sq. m. luxurious club that leads the trend in golf resort. Global gourmet: An exchange of Eastern and Western cuisines takes place here. SPA Center: 90 spa treatment suites provide the latest and most classic spa treatments. Low–Carbon Town Center: Integrates the functions of shopping, food & beverages, tourism, commerce and culture to showcase the latest in lifestyle and consumerism trends.

largest cluster of volcano golf courses in the world. Using the unique ecological environment of the volcanic region, Mission Hills has invited masters of the golf circle to design volcanic architectures to present the central address for the home course of Golf World Cup. It features luxurious facilities worth tens of billions of yuan, the only large-scale volcanic rock golf course clustering the world. Volcanic rock WKHPH KRWHOV FKLOGUHQÂśV SOD\JURXQG ÂżOOHG ZLWK ZRQGHUV DQG fantasy, the biggest mineral hot spring in Asia, a theme spa WKDW IHDWXUHV ÂżYH FRQWLQHQWDO VW\OHV JOREDO FXLVLQHV DQG

TOURISM CLUSTERS CAN RANGE FROM A SINGLE LOCATION TO MULTIPLE LOCATIONS CROSSING STATE BORDERS AND BEYOND. THE NETWORKING AND COLLABORATION FOR THIS INNOVATIVE IDEA IS COMPLEX, WITH AN EMPHASIS ON COLLABORATION RATHER THAN COMPETITION. shopping towns are a few attractions that Mission Hills offers. It rather takes enjoyment beyond your imagination. The Mission Hills aim to create a dream lifestyle for the global intellectual and wealthy class by opening a new era of travelling and living in Hainan where peaks join peaks and legends join legends. It is a dream resort destination for the entire family.

The Conceptual Model of Regional Competitiveness of a Tourism Cluster: Existence of Related and Supporting Industries Accommodation, bars, restaurants, nightclubs, varied leisure, tour operatos, travel agencies, sports and cultural activities, diverse trade.

Destination Management - Promotional Marketing; - Tourist Information; - Entrepreneurship and proactiveness; - Tourist support services; - Staff hospitality.

Resources and Attractions - Cultural, Natural and Historic - Events/Festivals - Entraintainment - Traditions - Touristic and Accessibility Infrastures

Factor Conditions Human resources (training, labor law), capital resources, hygience, physical and tourism support infrastructures, accessibilities, safety, natural, historic and cultural resources.

GOVERNMENT

Tourism Cluster

UNIVERSITIES

Demand Conditions

Business Strategy, Structure and Rivalry

Sophistication, education, tourists preferences and motivation; institutionalized marketing, quality control, increased leisure time.

Barriers to entry and exit from the market; dense business tissue, consisting of companies in permanent competition, but when necessary they know how to cooperate; differentiation and motivation.

REGIONAL COMPETITIVENESS

Tourism Clusters in Jammu & Kashmir Kashmir has been known as the heaven on earth. The tourism industry plays a vital role in the development of the regions of Jammu, Kashmir and Ladakh. The state has also been a place of religious activities and shrines that have their own religious values and attract thousands of pilgrims every year. With the arrival of winters, the state offers a multitude of options for winter sports activities. The chief attractive locations in Kashmir region are Srinagar, Gulmarg,

Pahalgam and Sonamarg. The others include Yusmarg, Aharbal, Watlab, Verinag and Lolab Valley. Daksum and Kokernag are worth a visit too. Challenges in tourism development in Jammu & Kashmir revolve around human resource development to take the industry forward, a sustainable orientation towards development, marketing and branding of tourism March 2014 ƒ India-China Chronicle |47|

products, and an absence of heritage and cultural-tourism festivals. Tourism infrastructure and connectivity remains an issue. The development, however, has other limitations too, such as the hotel DFFRPPRGDWLRQ LQ FODVVLÂżHG FDWHJRU\ ZKLFK LV FRQÂżQHG WR RQO\ WKUHH ORFDWLRQV i.e., Jammu, Udhampur and Srinagar. There is a lack of adequate choice for varied accommodation for visitors belonging to different income groups. For instance, though Srinagar is the most popular destination within Jammu and Kashmir, the maximum number of accommodation available LV LQ WKH ÂľXQFODVVLÂżHGÂś FDWHJRU\ )XUWKHU WKRXJK maximum tourists stay in Jammu and Kashmir and seek good accommodation facilities yet hotel accommodation is limited only up to three and four star categories, with merely two exceptions.

Issues Galore The safety and security of tourists is questionable. Connectivity is dismal. There is a need for improvement in present hotel accommodation in view of existing as well as increasing tourist demands. The maintenance and use of tourist infrastructure is poor. The current infrastructure FUXPEOHV DV WKH VHDVRQDO LQĂ€RZ RI WRXULVWV UHDFK WKH SHDN

Ten aspects requiring a serious study in the tourism cluster: 1. Expectations versus reality in the grade of accomplishment. 2. The market expectations versus market reality; cause - effect. 3. The role of Government and its promises versus real support. 4. The private sector role - how many businesses grew and how many went down; cause - effect. 5. Measurement of the competitiveness factors of the region versus other clusters with high ranking in India and in the region. 6. Use of ICT in the tourism business 7. Human resource enforcements or the lack of them. 8. Social conditions and their impact in the cluster Economic impact in the cluster 9. Ideal conditions for the tourism cluster development and a measure of satisfaction level 10. Assessment of the different gaps/pain points in the cluster to give a weight value.

|48| India-China Chronicle ƒ March 2014

While a good potential exists, there is need for promotion and quality maintenance. Most of the selling points seen in China are missing in Jammu & Kashmir, though both are endowed with natural beauty. A combination of natural beauty and man- made comforts can create competitiveness for a tourism cluster. Tourism reveals itself as one of the activities with the greatest potential for China and India. A local development strategy can help the sector in realizing its full potential. Examples of new and contemporary approach to tourism development in Kashmir are the paintings of Pashmina goat. One such painting exhibition was organized by Kashmiri Babar Fzal. If such artworks can be permanently displayed in Srinagar, it will help promote global tourism as Pashmina is a globally-known product. Looking at the role that the tourism sector plays in regional, national and global development competitiveness, it is necessary to study it closely and develop models that are adapted to its strengths. This comparative model articulated in the article is a small step towards the study of clusters in tourism in China and India. If tourism clusters want to ensure their survival in the medium and long term, they need to promote competitive practices in a systematic way. ‰

JAGAT SHAH The writer is Chairman, India China Economic & Cultural Council (ICEC), Gujarat

INFOCUS|CHINA|SME

SHANGHAI PILOT FREE TRADE ZONE

%HQHĂ€WV *DORUH IRU ,QGLDQ 60(V The newly established Shanghai FTZ offers several incentives to SMEs looking to establish business presence in China. A reduced capital requirement, single-window clearance, ability to obtain business permit after registration and relaxation of sectorial caps on foreign investment are some of the incentives. Indian SMEs too can establish business presence. It has hardly been six months since the launch and more than 1500 businesses from several countries are already in the queue. Santosh Pai

,

W KDV EHHQ RYHU ÂżYH PRQWKV VLQFH VLQFH the Shanghai Pilot Free Trade Zone mber (FTZ) was launched on September 29, 2013. Anyone familiar with the hina history of economic reforms in China unch will vouch for the fact that the launch of each such a special trade zone repLQDÂśV UHVHQWV D VLJQLÂżFDQW VWHS LQ &KLQDÂśV ation continuing economic liberalization process. In the past, several such sped as cial trade zones have been used atory testing grounds for new regulatory le is measures in China. The rationale sures that if liberalized regulatory measures ithin realize their stated objectives within vernthe special zones, the Chinese government is likely to adopt any or all such cross measures in several trade zones across ntry. China or uniformly across the country. ar of As per Clause 2 of the Circular work the State Council on the Framework Plan for China (Shanghai) Pilot Free es of Trade Zone, the stated objectives rovithe Shanghai FTZ include the provisions of: a) convenient investmentt and tibiltrading procedures; b) full convertibilLW\ RI FXUUHQFLHV F HIIHFWLYH DQG HIÂżnvescient goods supervision and d) invesnt. tor friendly regulatory environment. tions The Shanghai FTZ regulations place special emphasis on certain sec-

WRUV VXFK DV ÂżQDQFLDO VHUYLFHV SURfessional services, shipping services, business services, cultural and social services. In these sectors certain enhanced relaxations have been made. +RZHYHU PRVW RI WKH EHQHÂżWV RIIHUHG by the Shanghai FTZ are applicable to all sectors uniformly except those on the restricted list (described below). %HQHÂżWV IRU ,QGLDQ 60(V For Indian SMEs looking to establish a business presence in China the Shanghai FTZ offers several incentives which are not available elsewhere in

March 2014 ƒ India-China Chronicle |49|

INFOCUS|CHINA|SME

China. One is the reduced capital reTXLUHPHQW 8QGHU QRUPDO FLUFXPstances, at present, the minimum paid-up capital required to register a domestic company in China is RMB 30,000 (approx. INR 300,000) and it can go up to RMB 5 million (approximately INR 50,000,000) for a company limited by shares. Moreover, an Indian company that registers a subsidiary in China is required to bring in a substantial proportion of the registered capital into China within a speciÂżHG WLPHOLQH DIWHU FRPSOHWLQJ WKH UHJistration formalities regardless of their actual capital requirements of their business. However, under the ShangKDL )7= JXLGHOLQHV IRU WKH ÂżUVW WLPH LW is possible to incorporate a company with a nominal capital of RMB 1 or 7KLV VLJQLÂżFDQWO\ ORZHUV WKH FDSLtal investment required to establish a business presence in China and offers a relief to SMEs for whom access to capital is a major obstacle when entering foreign markets. Single window clearance is another positive aspect. Before commencing business in China a subsidiary of a foreign company is required to obtain multiple approvals, licenses, consents DQG FHUWLÂżFDWLRQV MXVW DV WKH ZD\ LW LV in India. However, within the Shanghai FTZ such procedures have been streamlined into a “one-stop shopâ€? mechanism whereby the Administration of Industry and Commerce (AIC) will accept and process all required approvals at a single point. This should make life much easier for Indian SMEs who are often daunted by the bureaucratic procedures that need to be undertaken to register their companies in China. 8QGHU WKH )7= UHJXODWLRQV EXVLQHVVHV FDQ ÂżUVW JHW D OLFHQVH DQG WKHQ can apply for a permit. This does away with one of the biggest procedural anomalies faced by foreign companies in China when forming a legal entity; which is the question of whether to REWDLQ D EXVLQHVV SHUPLW ÂżUVW DQG WKHQ apply for a business license or vice versa. This chicken and egg type of situation was especially acute in business sectors where a prior approval |50| India-China Chronicle ƒ March 2014

THE ABILITY TO OPERATE LEGAL ENTITIES ON A LAISSEZ-FAIRE BASIS IS BOUND TO BOOST ECONOMIC ACTIVITIES IN THE SHANGHAI FTZ. FOR LONG, BEWILDERINGLY COMPLEX REGULATIONS HAD PREVENTED FOREIGN BUSINESSES FROM ESTABLISHING OPERATIONS IN CHINA. for foreign investment was required. This occurred because an application for business permit (pre-approval) could not be made without forming a legal entity and at the same time LQ PDQ\ LQVWDQFHV LW ZDV GLIÂżFXOW WR complete formation of a legal entity without having a prior approval for a VSHFLÂżHG DFWLYLW\ 8QGHU WKH 6KDQJKDL FTZ regulations this conundrum has been resolved by making it possible for foreign companies to register a legal entity and then apply for a busiQHVV SHUPLW $JDLQ WKLV VLPSOLÂżFDWLRQ of procedure will make it easier for SMEs to overcome the logistical challenge of registering their business presence in China. 6RPH 0RUH %HQHÂżWV Ever since China opened its economy to the rest of the world in the early 1980s the general principle followed in matters related to foreign investment has been that anything

WKDW LV QRW VSHFLÂżFDOO\ DOORZHG PXVW be construed as being prohibited. In other words, if foreign investment is QRW VSHFLÂżFDOO\ DOORZHG LQ D FHUWDLQ industry or segment then it must be understood that it is prohibited. Now IRU WKH ÂżUVW WLPH D QHJDWLYH OLVW WKDW VSHFLÂżHV RQO\ VHFWRUV LQ ZKLFK IRUHLJQ investment is disallowed has been introduced. For SMEs operating in certain niche areas of business, this is D VLJQLÂżFDQW VWHS LQ LQWURGXFLQJ FODULW\ in their business planning process. For the purposes of the Shanghai FTZ, as long as a particular business is not VSHFLÂżHG LQ WKH QHJDWLYH OLVW RQH FDQ assume that such a business can be registered in the FTZ. From a procedural perspective, perhaps the biggest relief offered to SMEs has been the measure taken to exempt businesses from having to obtain prior approval for several secretarial steps involved in the establishment, operation and dissolution of their business entities in China. To start with, the requirement to obtain prior approval when establishing a wholly-foreign owned enterprise, Sino-foreign equity joint venture or a Sino-foreign contractual joint venture has been done away ZLWK ,QVWHDG RQO\ D SRVW IDFWR ÂżOLQJ needs to be made after such establishment. Similarly, the operation period of all the above-mentioned types of enterprises can be extended without obtaining prior approval. Further, increases or decreases in their registered

6HFWRUDO %HQHÂżWV The Shanghai FTZ is located along the outskirts of Shanghai city and comprise four distinct contiguous areas namely Waigaoqiao Free Trade Zone (established in 1990), Waigaoqiao Bonded Logistics Park (established in 2003), Yangshan Free Trade Port Area (established in 2005) and Pudong Airport Free Trade Zone (established in 2009). The total area of the Shanghai FTZ is around 28.78 square kilometers. ,Q FHUWDLQ KLJKO\ UHJXODWHG VHFWRUV VSHFLDO EHQHÂżWV DUH EHLQJ offered within the Shanghai FTZ to foreign and Chinese compaQLHV IRU WKH ÂżUVW WLPH 7KHVH LQFOXGH %DQNLQJ 6HUYLFHV 4XDOLÂżHG ÂżQDQFLDO LQVWLWXWLRQV ZLOO EH DOORZHG WR HVWDEOLVK EDQNLQJ RSHUDWLRQV 4XDOLÂżHG Chinese private investors will be allowed to establish joint YHQWXUHV ZLWK IRUHLJQ EDQNV 4XDOLÂżHG &KLQHVH EDQNV ZLOO be allowed to carry out offshore business. 3URIHVVLRQDO 0HGLFDO ,QVXUDQFH Foreign professional medical insurance organizations will be allowed to set up operations on a trial basis. )LQDQFLDO /HDVLQJ The minimum registered capital UHTXLUHPHQW ZLOO EH UHOD[HG IRU ÂżQDQFLDO OHDVLQJ FRPSDQLHV establishing a single aircraft or single vessel subsidiary. ,QWHUQDWLRQDO 6KLSSLQJ 0DQDJHPHQW Foreign companies will be allowed to establish international shipping management enterprises. 9DOXH DGGHG 7HOHFRPPXQLFDWLRQ 6HUYLFHV Subject to

share capital also do not require prior approval. Even a share transfer can be undertaken without a prior approval. Lastly, dissolution of these enterprises can also be affected without prior approval. In the rest of China, each step described above requires the prior approval of the relevant Chinese government agency. This ability to operate legal entities on a laissez-faire basis is bound to boost economic activity in the Shanghai FTZ since bewilderingly complex regulations are often-quoted as the reason for foreign businesses choosing not to establish operations in China currently. Indian SMEs must be familiar with most of these concepts at least in theory since they have been applied in India to varying degrees in one area of regulation or the other during the last twenty years or so of economic reform. It must also be remembered that these relaxations are available to businesses irrespective of which sectors they operate in as long as they operate within the Shanghai FTZ.

security guidelines, foreign companies will be allowed to engage in certain designated value-added telecommunication services *DPLQJ &RQVROHV Foreign companies will be allowed to manufacture game consoles which, subject to content restrictions, can also be sold in the domestic markets. &UHGLW ,QYHVWLJDWLRQ 6HUYLFHV Foreign credit investigation agencies will be allowed to register their businesses. 7UDYHO $JHQFLHV Sino-foreign equity joint ventures will be allowed to engage in outbound tourism business (except to Taiwan). +XPDQ 5HVRXUFH DJHQFLHV Sino-foreign equity joint ventures with up to 70% foreign ownership will be allowed to establish their business with a reduced minimum capital of only US$ 125,000. ,QYHVWPHQW 0DQDJHPHQW Foreign companies will be allowed to establish investment management businesses. &RQVWUXFWLRQ (QJLQHHULQJ 'HVLJQ 4XDOLÂżFDWLRQ and minimum capital requirements for foreign engineering GHVLJQ DQG FRQVWUXFWLRQ ÂżUPV UHVSHFWLYHO\ ZLOO EH UHOD[HG LI they are providing their services only in Shanghai. +HDOWKFDUH Wholly foreign-owned medical agencies will be allowed to establish operations (GXFDWLRQDO DQG 9RFDWLRQDO 7UDLQLQJ Sino-foreign joint ventures to provide educational and vocational training will be allowed to conduct business.

THE FTZ OFFERS SINGLE WINDOW CLEARANCE. UNDER THIS “ONESTOP SHOPâ€? MECHANISM THE ADMINISTRATION OF INDUSTRY AND COMMERCE (AIC) WILL ACCEPT AND PROCESS ALL REQUIRED APPROVALS AT A SINGLE POINT. 7KH :D\ )RUZDUG The measures described above are only the tip of the iceberg if the authorities are to be believed. Many more reOD[DWLRQV LQFOXGLQJ VLPSOLÂżFDWLRQ RI customs procedures, tax incentives, etc. have been promised in the near future. In many cases, announcements of such steps have already been made although detailed regulations describing these incentives are still awaited. Furthermore, at least 13 more local governments have applied for permission with the Central Government to establish such free trade zones in different parts of China. The response to the Shanghai FTZ

has been good especially from local Chinese companies. Within one month of the launch of the FTZ, 208 companies were registered out of which 188 were local Chinese businesses. Notable foreign companies which were quick to register legal entities within the Shanghai FTZ include Microsoft and BNP Paribas. As expected, a majority of businesses which have registered in the Shanghai FTZ are SMEs. The administration committee of the Shanghai FTZ was overwhelmed with the response of over 1,500 applications that had to be placed on the waiting list. Indian SMEs looking to tap the Chinese market can too, capitalise on this opportunity. ‰

Santosh Pai is a Partner at DH Law Associates, which is the only Indian law firm to have an active China practice since 2010. He is based in Beijing and can be reached at santosh@dhlawassociates.com

March 2014 ƒ India-China Chronicle |51|

INFOCUS|INDIA-CHINA|AGRICULTURE

Will India and China be fed by Africa? Africa normally isn’t the major focus of attention for most food and agribusiness strategists and it is true that in the short–term horizon, Africa will not make any news. However, in the next twenty years, Africa with multi-pronged changes will come to play an important role. Several African countries are full of production resources and majority of African land available will be brought to production. In the coming years, African help will be required to feed the Chinese and even the Indian people. Marcos Fava Neves

A

frica has had a continuous, but not homogeneous development in the last years. It is well recognized that the countries that retreated from the socialist economic models are performing better. Most African countries are now democracies. There has been empowerment of private business by Governments and in several countries violence is declining, due to the end of “Cold War” and increased media attention. There is awareness among society owing to access to information through the internet and development of institutions. Besides re-visiting policies related to education and improvement of living patterns, some countries also went through disarmament policies. This continuous improvement has attracted foreign investors to the African continent. In 2002, foreign direct investment (FDI) accounted for close to $ 15 billion. Ten years on, in 2012, these investments rose to $ 46 billion; accounting for an increase of more than three times in ten years. A very important amount of these foreign investments are coming from China. Africa normally isn’t the major focus of attention of most food and agribusiness strategists, and this is a huge mistake from two points of view: consumption and production. |52| India-China Chronicle March 2014

From the point of view of consumption, it is important to say that Africa, together with the Middle East, is the largest food importer of the world. So in the short term, my answer to the question is no, Africa will not be able to supply to China. At present, Africa holds 16 per cent of the entire world population, accounting for something around 1 billion people. According to the UN, by 2050 this proportion will rise to 23 per cent. The growth of Africa DV D IRRG LPSRUWHU LV MXVWL¿HG E\ WKH large economic growth of several countries (continuous growth of 6-10% in GDP per year) followed by some income distribution and growth of middle class. African countries are also witnessing urbanization and we must remember that some countries have very large populations like Nigeria (165 million inhabitants). Countries like Ethiopia, Egypt and Congo’s population range from 75 to 90 million, while that of South Africa, Uganda, Kenya and Sudan range from 35 to 50 million. Mozambique, Cameroon, Ghana, Cote D’Ivoire, Morocco, Algeria, Madagascar and Angola have population ranging between 20-30 million. Africa has 55 cities with more than 1 million inhabitants and 40 per cent of urban population. According to Rabobank, in the last

WHQ \HDUV WKHUH KDV EHHQ D VLJQL¿FDQW increase in consumption with regard to animal protein. However, the population still has limited access to this type of protein. Further, it is estimated that 40 per cent of the Brazilian production of sugar in the 2011-2012 season was destined for countries in Africa and Asia. It is expected that Africa and Middle East will respond for 50 per cent of the world’s meat import growth till 2022, along with 53 per cent of wheat, 50 per cent of rice and 25 per cent of soybean oil. With the food consumption in Africa continuing to rise, some countries are developing policies towards food security. Africa Producing for China and India In the area of food production, it is also a mistake for India and China not to pay attention to Africa. It is recognized that South America is growing fast and will be the future world food supplier, but I’d say that South America would not be enough. We will need Africa to play an important role, since several African countries are full of production resources. The majority of land available with the potential of being brought to production is based in Africa. So we will need Africa to help to feed the Chinese and even the Indian people. To feed the world within this consumption growth will put much more pressure over the resources a country or a region has for food production. I consider land (soil), water, people, technology, information, connectivity and credit as resources. This is apart from energy (sun and power), institutions and Government, storage capacity, agriFXOWXUDO LQSXWV ORJLVWLFV DQG ¿QDOO\ management capabilities. My general perception is that the society that has these resources and manages them better than others will be the ones to capture most of this food and agro related markets growth, promoting the development. This is where Africa is still struggling. Several issues regarding resources are perceived in Africa. Some countries

lack institutions, political stability, and quality people in governments while battling corruption. Logistics is also a huge issue. Some countries that have oil are not investing these resources towards more competitiveness. Countries like South Africa are carrying on unsustainable mining practices by reducing land for agriculture. The unsustainable agricultural practices are leading to resource degradation. This coupled with other reasons, has led productivity far below world average. Infrastructure is not present in the way food and agriculture needs it. Credit availability is low. Insurance is not high on the agenda. There are other issues as ZHOO LQFOXGLQJ GLIÂżFXOWLHV LQ PDUNHW access due to weak linkages. The smallholders are thus isolated from commercial markets. Message to Chinese and Indian Food Companies So there is a lot to be done in African agriculture and this brings several opportunities for Chinese and Indian companies and Governments. x There is an optimism towards biofuels, since they will empower African farmers and society and some countries are already adopting these policies. x There is an opportunity to engage smallholders, younger generations and women. Jobs can be created via agro-food business development. x Africa is pursuing investments that will result in sustainable job

creation, inclusion of people and economic development. x Opportunity lies in improved cross border conditions and trade, reducing transaction costs. x Africa can adopt quality standards, build more research capabilities, improve trade environment, laws and regulations and build up committed organizations. x Technology transfer, access to information, and improved data can also help in better usage of resources. In conclusion, I am positive about Africa. My view is that in the next 10 years we will talk a lot about Africa as a leading world food consumer, together with China. Several investments will be done, and a real laboratory of agribusiness experiences will develop. After the next 10 years, we will talk about Africa reaching food security and even becoming a food exporter, mostly to Asia and China. In Africa there are several opportunities and the real agribusiness entrepreneurs, the ones that view ahead are taking steps for building relationships and are also going ahead with investments. ‰

Marcos Fava Neves is a professor at the School of Business, University of SĂŁo Paulo, Brazil and an international speaker. Author of 25 books published in 8 different countries in 2013, he is also an International Visiting Professor at Purdue University, USA

March 2014 ƒ India-China Chronicle |53|

INFOCUS|CHINA|CINEMA

Cinemascope

in China’s Soft Power Strategy

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AT THE TIME OF JAPANESE OCCUPATION OF MANCHURIA IN 1931, CHINESE CINEMA WITNESSED A NEW WAVE OF ARTISTIC PORTRAYALS, WHICH DEALT WITH THE DOMESTIC CRISIS OF CHINA VIS-À-VIS JAPANESE INVASION, IMPERIALISM, FEUDALISM AND AN EMERGING SENSE OF NATIONAL IDENTITY. UHYROYHG DURXQG WKH JDPXW RI &3&¶V SROLWLFDO LGHRORJ\ DQG SURGXFHG PRYLHV VXFK DV Bridge DQG The White Haired Girl ZKLFK GHDOW ZLWK SHDVDQWV VROGLHUV DQG ZRUNHUV ,Q WKH \HDUV DIWHU DQG WLOO WKH &XOWXUDO 5HYROXWLRQ &KLQHVH FLQHPD VDZ D UREXVW JURZWK ERWK LQ LWV QXPEHU RI SURGXFWLRQ DV ZHOO DV YLHZHUVKLS DV IHDWXUH ¿OPV DQG UHHOV RI GRFXPHQWDULHV DQG QHZVUHHOV ZHUH SURGXFHG ZKLOH WKH YLHZHUVKLS URVH IURP PLOOLRQ LQ WR PLOOLRQ

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INFOCUS|CHINA|CINEMA

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SOME CHINESE MOVIES HAVE SUCCEEDED IN THE DOMESTIC MARKET BUT HAVE FAILED TO STRIKE BIG GLOBALLY. ZHANG YIMOU’S FLOWERS OF WAR (2011), A COSTLY HISTORICAL WAR DRAMA BASED ON THE NANJING MASSACRE AND STARRING HOLLYWOOD ACTOR CHRISTIAN BALE, FAILED TO APPEASE THE GLOBAL AUDIENCE.

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INDIAN MOVIES HAVE ENJOYED HUGE POPULARITY IN CHINA. THE SONG “AWARA HOON” IS STILL HUMMED AMONG THE CHINESE. BUT THE CHARM OF INDIAN MOVIES IN CHINA IS A ONE-WAY PHENOMENON, AS CHINESE MOVIES DON’T ENJOY A SIMILAR POPULARITY IN INDIA. FKDUP RI ,QGLDQ ¿OPV ZLWK D FDSWLYH DXGLHQFH LQ &KLQD LV D RQH ZD\ SKHQRPHQRQ DV &KLQHVH PRYLHV GR QRW HQMR\ D VLPLODU SRSXODULW\ LQ ,QGLD )RU ODUJHU ,QGLDQ SXEOLF &KLQHVH PRYLH LV UHODWHG WR LFRQLF ¿JXUHV VXFK DV %UXFH /HH DQG -DFNLH &KDQ ,W LV PRUH RI PRYLHV IURP +RQJ .RQJ DQG 7DLZDQ WKDQ WKDW RI 0DLQODQG &KLQD WKDW KDYH D SRSXODU LPDJH LQ ,QGLD 7KH PRYLHV WKDW EHFDPH UHFHQWO\ SRSXODU LQ WHUPV RI &KLQHVH OLQNDJH DUH Kung Fu Panda The Last Emperor DQG Life

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Amrita Jash is a Research Scholar, at Centre for East Asian Studies (Chinese Division), School of International Studies, Jawaharlal Nehru University

March 2014 India-China Chronicle |57|

Shows

Exhibitions&Trade INDIA EXHIBITION

DATE

VENUE

In India x In China

EVENT PROFILE

CONTACT PERSON

CBME India

03 - 05 Bombay Convention April 2014 & Exhibition Centre (BCEC), Mumbai, India

CBME India is one of the most prestigious and recommended baby and mother exhibition. The show has given a commendable platform to the retailers, wholesalers and product managers of maternity products and baby items.

Mr. Kranti Nagvekar ( 91-9820025715 )

Zak Interior Exterior Expo

03 - 06 Chennai Trade Centre, April 2014 Chennai, India

The Zak Interior Exterior Expo has emerged as one of the most awaited global exposition where over 200 exhibitors present Interiors, elaborating technology, innovations, equipment and concepts to architects & designers sector.

Mr. J.Sathish 91-9884036675

Wedding Asia

Ludhiana Majestic Park 04 - 06 April 2014 Plaza, Ludhiana, India

Wedding Asia will be a perfect bridal show featuring a wide variety of products and services which will be helpful for planning a dream wedding.

Mr. Maninder Singh Sethi 91-9876100047

Boutiques of IndiaWedding & Lifestyle

04 - 05 Hotel Clark Avadh, Lucknow, Boutiques of India- Wedding and Lifestyle showcases products like real jewellery, April 2014 India fashion jewellery, bridal wear, casual and ethnic wear, as well as footwear,fashion accessories etc. in the Apparel & Clothing, Gems & Jewelry, Leather & Leather Products, Fashion Accessories industries.

Ms. Rashmi Agarwal 91-9650070970

Sign Today Coimbatore 04 - 06 CODISSIA Trade April 2014 Fair Complex, Coimbatore, India

Sign Today Coimbatore is a significant international event that focuses on the both indoor and outdoor advertising sectors. The main aim of the event is to help the professionals and experts to connect and interact with each other as well as to open a platform for them to learn about the new and latest developments associated with the sector.

Pump, Valve & Compressor Expo

09 - 11 Chennai Trade Centre, April 2014 Chennai, India

Apart from materials, this event is also going to talk about the technology for valves Confederation Of and associated control equipments which have also changed drastically in last few Indian Industry, years. Various modern and innovative products are up here for display and some of (91)-(44)-42444555 those are Surge & Capacity control, PLCs, sensors, Filters, Fans, Forging & Casting, Expansion Joints, Pressure Regulators and more.

Chemspec India

10 - 11 Bombay Convention April 2014 & Exhibition Centre (BCEC), Mumbai, India

Chemspec India is a prime exhibition that deals in serving chemicals and dyestuffs which are used by diversified industrial sectors. The researchers and chemical analysts of several renowned firms will display standard quality of chemicals and also make sure that the relevant usage and advantages as well as applications are explained to each of the attending professionals.

Mr. Nathan Page 44-1737-855023

Home Expo India

15 - 18 India Expo Centre April 2014 and Mart Greater Noida, India

Home Expo India is a composite platform for showcasing Indias products for the Home segment, through 3 sub shows; Indian Furnishings, Floorings & Textiles Show (IFFTEX); Indian Houseware & Decoratives Show (IHDS) and Indian Furniture & Accessories Show (IFAS). More than 600 exhibitors will put their products and services on display and will attract the attention of all major stakeholders of the industry.

Mr. Rakesh Kumar 91-11-26135256

Diemould India

17 - 20 Bombay Convention April 2014 & Exhibition Centre (BCEC), Mumbai, India

Diemould India is the largest International Exhibition held in India which provides opportunities for business in the tooling industry. It is a prestigious platform to showcase and market the various products of this industry.

Mr. Bhaskar Kanchan, 91-2228526876/28508976

India International Medical Equipment Expo

02 - 04 May 2014

NSIC Exhibition Complex , New Delhi, India

India International Medical Equipment Expo New Delhi is the largest collection of cutting edge medical equipments, products and services. This trade show will strive hard to take advantage of the per capita income of the Indian households and the rising consciousness of people for the better care of their health.

Mr. Harish Arora 91-9814211848

Prime Life Education & 03 - 04 Immigration Exhibition May 2014

Park Plaza Ludhiana, Ludhiana, India

This event showcases Government Immigration Officials, Employers, Recruiters, Visa Prime Exhibitions Experts as well as Education Providers and Advisors etc. in the Education & Training Pvt Ltd industry. 91-011-32311767

Renewable Energy World India

05 - 07 May 2014

Pragati Maidan, New Delhi, India

Renewable Energy World India dedicates itself in offering a wide range of products related to renewable energy. The show will focus on the ways to prevent useless wastage of energy and will discuss about the effective mediums which will help in protecting the power and energy.

Mr. Avnish Seth 91-124-4524508

Aquatech India

06 - 08 May 2014

Pragati Maidan, New Delhi, India

Aquatech India 2014 features the best possible range of new and proven products for processing drinking and waste water. Come and find out about unique new novelties and advanced technological findings and make sure to attend the Aquatech Conference and the Aqua Stages, where you can learn about best practices and progressive solutions.

Mr. C.K.Arora 9910863683

Prompt Property Festival

06 - 08 Chennai Trade & Convention Prompt Property Festival provides unique opportunity to meet the leading Builders June 2014 Centre, Chennai, India & Flat Promoters to develop partnerships and obtain the latest trends in the property market. It will be held at Chennai Trade & Convention Centre, India and is being organized by Prompt Publications.

India Corrugated Show 11 - 14 Pragati Maidan , New Delhi, June 2014 India

|58| India-China Chronicle March 2014

This event showcases products like Corrugated Boxes, Manufacturers of Machinery, Heating Systems, Boilers, Adhesives, Stitching Wires, Inks, Anilox Rollers, Flexo Plates, etc., Manufacturers and Suppliers of Testing Equipment for Paper and Packages,Computer Software Developers for Box Design, Machine Operations and Administration, Paper Mills, Paper Dealers, Printers etc. in the Industrial Products industry.

Buysell Interactions Private Limited, (91)-(44)-42177899/ 28353739

Event Manager 91-44-42323362

Print Packaging. Com Private Limited, (91)-(22)-27812619 / 27812093 / 27812657

CHINA EXHIBITION

DATE

VENUE

EVENT PROFILE

CONTACT PERSON

Interzum Guangzhou

28 Mar-01 Apr 2014

Guangzhou, China

Interzum Guangzhou is a four day event that is scheduled to be held at China Import and Export Fair Pazhou Complex in Guangzhou in China. It is the leading furniture production fair of Asia.

China Foreign Trade Centre

Appliance & Amenities China

31 Mar-03 Apr 2014

Shanghai, China

Appliance & Amenities China event will exhibit latest products and services for related industry under single roof at the Shanghai New International Expo Centre(SNIEC). This is one of the unique trade show in the region which will be held between 31st March to 3rd April 2014.

Shanghai UBM Sinoexpo International Exhibition Co., Ltd

China International Furniture Fair (Guangzhau) - Office Show

28 Mar-01 Apr 2014

Guangzhou, China

The event is the largest exhibition of office furniture of the world. More than 50,000 professionals will visit the show in order to experience the new products and services that are offered by above 900 exhibitors.

China Foreign Trade Centre

Food & Beverage China

31 Mar-03 Apr 2014

Shanghai New International Expo Centre Shanghai, China

Food & Beverage China will offer a trade platform for worldwide manufacturers and buyers to seek high quality and standard equipments, supplies, food & beverages, techniques and services for the entire hospitality industry.

Shanghai UBM Sinoexpo International Exhibition Co., Ltd

China International Municipal Equipment Expo

01-03 May 2014

China Import & Export Fair Pazhou Complex, Guangzhou, China

The event will provides a best platform to meet all the professionals from related industry under single roof at the China Import & Export Fair Pazhou Complex.

China Municipal Engineering Association

Guangzhou International Apparel Fabric Accessories & Yarns

01-03 May 2014

Poly World Trade Center Expo. Guangzhou, China

This event showcases fabrics, accessories, textile yarn and fiber, garment auxiliary packaging materials and other supporting material, etc in the Textile, Fabrics and Yarns industry.

Guangzhou RHF Exhibition Service Co Ltd.

China International Energy Saving and New Energy Vehicle Technology Exhibition

07-09 May 2014

China International Exhibition Center, Beijing, China

This event showcases products like safety, comfort, energy conservation and environmental protection is the theme of exhibition, latest products and technologies on complete vehicles, component parts and interiors etc. in the Automotive, Power, Renewable Energy & Energy Conservation industries.

HNZ Media Group

CME - China( Shanghai)Mobile Phone Industry Exhibition

07-09 May 2014

Shanghai New International Expo Centre,Shanghai, China

China International Mobile Phone Industry Exhibition (CME), held twice a year with one in Shanghai in July and the other in Shenzhen in November, has come to be the top cell phone industry show in Asia

Shanghai Kuozhan Exhibition Service Co. Limited

China Retailers Convention & Exhibition

29 May-01 Jun 2014

Kunshan Convention and Exhibition Center,Kunshan China

China Retailer Convention & Exhibition has been promoting the development of Chinese retail industry, successfully hold for six years. 90% of the participant are middle-and-high-ranking administration and supervision authorities. Forty hundred million RMB in total business volume was made during the exhibition.

Beijing Olympic Exhibition Co., Ltd

China Aerial Work Exhibition

04-06 Jun 2014

Shanghai Everbright Convention & Exhibition Centre, Shanghai, China

The main aim of the event is to promote the exchanges and cooperation among aerial working industries and to promote industry norms. CAWPE -China Aerial Work Exhibition will be based on learning aerial work planning as well as exchanging aerial work equipments and technologies.

China Aerial Work Exhibition

TopWine China

04-06 Jun 2014

China National Convention Center(CNCC), Beijing, China

TopWine China is an event with a truly international flavor that seeks to explore and enhance the expanding wine market of China. This event provides a gateway to the global wine industry to penetrate the Chinese market and help it to gain a wider exposure.

Industrial Promotions International

Asia Luxury Travel Market

02-05 Jun 2014

Shanghai Exhibition Center, Shanghai, China

Asia Luxury Travel Market exhibits all the necessary services and discussion which are widely needed and used by the travel and tourism sector. The exhibitors find this platform to the absolute place where the respective firms can introduce new travel packages which comprise of attractive destinations and travelling services.

Reed Travel Exhibitions

China international High-performance Film Manufacture Technology Exhibition

04-06 Jun 2014

Shanghai New International Expo Center, Shanghai, China

China International high-performance film manufacture technology exhibition 2014 (Film Expo 2014), the top show for high-performance Film In China.

Shanghai Kuozhan Exhibition Service Co. Limited

March 2014 ƒ India-China Chronicle |59|

INFOCUS|INDIA-CHINA|FRIENDSHIP YEAR

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India-China Friendship Year: Inauguration of ‘Beautiful China’ ceremony in Kolkata by CNTA

anuary 25 witnessed the Inauguration Ceremony of ‘Beautiful China, 2014-Year of Smart Travel’. The 2-day public promotion of China tourism was organized E\ &KLQD 1DWLRQDO 7RXULVW 2IÂżFH 1HZ 'HOKL DW 6RXWK &LW\ Mall, Kolkata. In 2014, the campaign of ‘Beautiful China’ will continue in the Indian market, targeting not only the 1st tier, but also the 2nd and 3rd tier tourists-generating FLWLHV $FFRUGLQJ WR WKH ÂżJXUHV UHOHDVHG E\ &KLQD National Tourism Administration (CNTA), the Indian arrivals to mainland China reached about 6.77 lakh in 2013, recording an increase of 10.9 per cent over WKH \HDU RI 7KH ÂżUVW VWRS GLUHFW YLVLWV IURP PDLQODQG China to India were about 1.45 lakh, an increase of 6.2 per

|60| India-China Chronicle ƒ March 2014

cent over the year of 2012. Travel and tourism has made a great contribution to the bilateral exchanges between China-India. The ‘Year of Smart Travel 2014’ has been designated to CNTA to promote the optimal combination of information technology and tourism industry including travel products design, travel service upgradation and tourism market developments. Present at the inauguration event were Mr Wang Xuefeng, Chinese Consul General in Kolkata, Mr Zhou Zengrong, *HQHUDO 0DQDJHU &KLQD (DVWHUQ 'HOKL 2IÂżFH 0U - 3 6KDZ 5HJLRQDO 'LUHFWRU (DVW ,QGLD 7RXULVP 0U 6 / 6RQL Chairman, IATO Western Bengal Chapter, as well as some local tour operators. ‰

INFOCUS|INDIA-CHINA|FESTIVAL

Xin Chun Kuaile Happy New Year

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he Chinese Lunar New Year 2014 was celebrated with much fun and fervor at Sirifort Auditorium, New Delhi in February. Traditionally, the festival is a time to honour deities as well as ancestors. The year 2014 is the year of Horse and as per the Chinese idiom and cultural totem, Horse represents valor, hard work, strength and success. Year 2014 is marked as ‘Year of Friendship and Exchange’ between India and China. The celebratory evening, organized by the Embassy of China in association with India-China Economic and Cultural Council, was marked by splendid performance

RI Âľ*XDQJ[L $FUREDWLF 7URXSHÂś Ă€RZQ LQ IURP &KLQD The evening started with ‘Happy Spring Festival Dance’, and proceeded to showcase several jaw-dropping acrobatic feats keeping the audiences spell-bound all through the evening. The event was graced by Mr. Parvez Dewan Secretary, Ministry of Tourism, Government of India, Mr. H.E. Wei Wei Chinese Ambassador to India, Mr. Zhang Zhihong, Counsellor (Cultural), Embassy of China, Mr. Mohammad Saqib, Secretary General, India-China Economic and Cultural Council among other dignitaries. ‰

March 2014 ƒ India-China Chronicle |61|

INFOCUS|INDIA-CHINA|FESTIVAL

|62| India-China Chronicle March 2014

March 2014 ƒ India-China Chronicle |63|

INFOCUS|INDIA-CHINA|FESTIVAL

|64| India-China Chronicle March 2014

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