Living next to China

1
Living next to China! Territorial and other
issues. Mohan Guruswamy
Centre for Policy Alternatives www.cpasind.com

2
Outstanding Issues with China

• Legacy issues. Border with Tibet and Annexation
  of Tibet.
• New Issues. Economic interests. Time and
  Technology.
• Congruence of Economic and Political interests?
• Market Democracy issues.
• Mistaken notions of Economic Power, in India and
  China. Boeing/Airbus. Wal-Mart. Emerging order of
  Monopoly and Monopsony.
• Is China subsidizing the USA?

3
The Great Game

• Treaty of Niemen in 1807 between Emperor Napoleon
  and Tsar Alexander.
• Annexation of Kashmir in 1846.
• Afghanistan and Tibet as buffer states.
• Demarcating borders.
• Shifting borders.

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The Many Lines

• 1865. WH Johnson. Incorporating the Aksai Chin
  into JK. Becomes Commissioner of Ladakh. Khotan
  silver? British India reservations.
• 1889. Capt. Younghusband meets Col. Grombchevsky
  in Yarkand. Maj.Gen. Sir John Ardagh endorses the
  Johnson Line.
• 1890. Chinese occupy Shahidulla. We are inclined
  to think the wisest course would be to leave them
  in possession as it is evidently to our advantage
  that the territory between Karakorum and Kun Lun
  mountains be held by a friendly power like
  China. Secretary of State, Whitehall.
• 1899. MacCartney-MacDonald line excluding Aksai
  Chin. Curzons border.
• 1940-41. Russians in Sinkiang.
• Britain reasserts Johnson line.

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Map 2d Boundaries in the Pamirs, 1888-1898
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Map 2a Historical Development of Western Sector
(Kashmir-Sinkiang-Tibet)
There were almost a dozen attempts by the British
to arrive at exactly where the barriers should
lie. And they varied with the prevailing
geopolitical objectives of British foreign
policy, vis-à-vis the perceived threat of Russian
expansion. For instance, when Russia threatened
Sinkiang, some British strategists advocated an
extreme northern Kashmiri border. At other
moments, opinion tended to favour a relatively
moderate border, with reliance being placed on
Chinese control of Sinkiang to balance Russia.
The closest the British came to articulating
their ideas to the Chinese on the matter was in
1898, 1899 (i.e. MacDonald).
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The Eastern Sector

• 1826. Annexation of Assam from Burma. Treaty of
  Yandabo.
• 1886. First foray out of Brahmaputra valley.
  Expedition into the Lohit valley.
• 1903. Curzon worries about Russian designs.
  Younghusband mission.
• 1907. Russia and Britain agree that it is in
  their interests to leave Tibet in that state of
  isolation from which, till recently, she has
  shown no intention to depart.
• 1910. Chinese Amban returns to Lhasa.
• 1913. Simla Conference. McMahon line. Amban
  protests.
• 1935. At the insistence of Sir Olaf Caroe ICS,
  McMahon line notified.
• 1944. JP Mills establishes British Indian
  administration in NEFA. Except Tawang.
• 1951. Maj. Bob Khating IFAS raises Indian flag at
  Tawang.

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Map 5a Historical Development of Eastern
Sector Extent of British and Tibetan penetration
into the tribal areas of the Assam Himalaya by
1909
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Map 6 Chinese version of entire frontier, 1962
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Map 7 Chinese version of entire frontier, 1962
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Map 10 Indian Maps of 1948 and 1950, published
by Home Ministry. Kashmir as it was shown in
1950. The McMahon Line is clearly shown as
Indias boundary in the east (See Map 11). But
for the entire western sector, right from the
Sino-Indo-Afghan trijunction to the
Sino-Indo-Nepalese trijunction, the legend reads
Boundary Undefined.
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World GDP Historical Trends
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Growth of World Economy since 1980
Source World Watch Institute 2002 World
Economic Outlook Database, 2005, IMF
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Top Traders of the World
Values are in US bn
Source Leading Exporters in World Merchandise
Trade, 2004, World Trade Organisation website
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USA China India
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USA China India
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India and China A Comparison
Continued
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China India GDP per capita (nominal)
China India GDP per capita (PPP)
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Per cent share in GDP-2004
Source China Statistical Year Book 2005
Statistical Outline of India 2005-06,Tata
Services Ltd.
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Employment break-up ()
Source China Statistical Year Book 2000 NSS
55th Round Employment-Unemployment
Survey,1999-2000
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Sectoral growth rates from 1990-2003 ()
Source World Development Indicators 2005
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FDI Inflows ( bn.)
Source World Development Indicators, China
Statistical Yearbook and Statistical Outline of
India 2005-06, Tata Services Ltd.
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FDI Inflows (in US bn)
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China Top 5 sources of FDI in 2003
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China Indias Manufacturing vis-à-vis World
Source Data calculated from World Development
Indicators 2005
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Share of major regions in global manufacturing
value added 2002 ()
Source OECD Science, Technology and Industry
Scorecard 2005
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Structure of Output in China India
Source World Development Indicators 2006
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Manufacturing Value Added (USD Billions)
Source Source OECD Science, Technology and
Industry Scorecard 2005
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China Top 5 trading partners in 2004
Top 5 export partners as a of total exports
Top 5 import partners as a of total imports
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India Top 5 trading partners in 2003
Top 5 export partners as a of total exports
Top 5 import partners as a of total imports
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China Trade Balance
Source China and India A Visual Essay, October
2005, Deutsche Bank Research
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India Trade Balance
Source China and India A Visual Essay, October
2005, Deutsche Bank Research
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Foreign Exchange Reserves
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In everyones interest!
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Chinas Economic Interests

• Secure oil supply from Middle-east, Central Asia,
  Russia and Africa
• Retain leadership in world trade and increase
  share in global manufacturing
• Meet Indian challenge with aggressive price
  cutting and financial aid
• Increase trade with India
• Uncomfortable dependence on USA?
• Increase share in 1 trillion world arms trade
• Therefore has acquired a major vested interest in
  Harmony?

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Projected GDP ( bn) and P/C GDP () by Goldman
Sachs
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Projected PCY for IndiaChina till 2050 ()???
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Tweaked Indian GDP Projections and China till
2050 ( bn)
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Defence Exp. Proj. - actual trends ( bn)
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China and Japan Mirror Image Demographics

• Japan has entered the most daunting phase of its
  demographic transition. Savings rates will likely
  decline after 2005 and the old-age dependency
  ratio will surge by 2020. A surge in public debt
  compounds the problems.
• This decade, Chinas demographics are at their
  most favourable for economic growth. By 2020, the
  population will have aged a bit more, and its
  dependency ratio would be past its trough. But
  Chinas demographics will still look a lot better
  than Japans.

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India Finally the right numbers?

• The massive numbers of young people in the
  population today will reach the working age over
  the next 15-20 years. By 2020, India will have
  270mn people (more than todays total US
  population) between the ages of 15 and 35.
• Savings rates and productive potential will be at
  their highest. The challenge for India is to
  develop a more labour-intensive growth model to
  take full advantage of the productive potential
  of these vast masses .

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Population projections of working age cohort (mn)
Sources United Nations World Bank
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Future population trends

• Chinas working population will peak in 2015
• By 2050 India will have 220 million more workers
• Indias population will stabilize at 1.65 billion
  in 2050 while China will stabilize in 2020 at 1.3
  billion. Aging process begins
• Fecundity is Power!

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Largest Economies in 2050( bn)by Goldman Sachs
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Decentralization in China till 2004
Source Chinese Statistical Yearbook 2005
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Centralization in India Administrative
Expenditure
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De-centralization in India till 2004
Source National Accounts Statistics, Government
of India, Various Sources
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Research and Development Indicators 2002