Changing China

from Pakistan: Now or Never?:

Brzezinski on U.S.-India, Pakistan, Afghanistan and China

The Real News had an interview last week with former National Security Adviser Zbigniew Brzezinski who talks about how U.S. policy is playing out across Afghanistan, Pakistan, India and China. The second part of the interview covers his support for the mujahideen fighting the Soviets in Afghanistan, but here is what he has to say about Pakistan and the regional dynamics: 

"We are in Afghanistan because we have been there for 8 years, now getting out is easy to say, but by now if we get out, quickly, the question arises, what follows? Is there going to be again a very sort of militant regime in Afghanistan which might tolerate al Qaeda's presence and beyond that is now a new issue, namely the conflict in Afghanistan has come to be connected with the conflict in Pakistan. Pakistan is an important country of 170 million people which has nuclear weapons, nuclear weapons, and delivery systems, delivery systems to the entire region around so we have to think much more responsibly on how to deal with this problem ... "

"We have to find a way of helping Pakistan cope with its problem in Pakistan but also help us cope with our problem in Afghanistan and that raises an extraordinarily complicated question, namely how do we give the Pakistanis the reassurance they want that if we leave Afghanistan there is not a regime in Afghanistan other than the Taliban which is more friendly to India than to Pakistan."

Asked about whether the linchpin of U.S. strategy in the region was based on an alliance between the United States and India:

"Well if it is then I don't understand what the Eurasia strategy is because if that is the alliance, then we are not going to solve the Afghan question and if we don't solve the Afghan question but the conflict continues, how will the relationship between China and Pakistan, which is quite close, be affected by an American-Indian alliance, and what will that do to the prospects for stability on a larger global scale between China and India?"

You can see the full interview here:

http://www.youtube.com/watch?v=bfikRg2jE6o

from Pakistan: Now or Never?:

Can China help stabilise Pakistan?

When President Barack Obama suggested in Beijing last month that China and the United States could cooperate on bringing stability to Afghanistan and Pakistan, and indeed to "all of South Asia", much of the attention was diverted to India, where the media saw it as inviting unwarranted Chinese interference in the region.

But what about asking a different question? Can China help stabilise the region?

As I wrote in this analysis, China -- Islamabad's most loyal partner -- is an obvious country for the United States to turn to for help in working out how to deal with Pakistan.

It already has substantial economic stakes in the region, including in the Aynak copper mine in Afghanistan and Gwadar port in Pakistan. Its economy would be the first to gain from any peace settlement which opened up trade routes and improved its access to oil, gas and mineral resources in Central Asia and beyond. It also shares some of Washington's concerns about Islamist militancy, particularly if this were to spread unrest in its Muslim Xinjiang region.

There is virtually no chance of Beijing sending military forces to Pakistan or Afghanistan. But Chinese support could come in the form of pressure on Pakistan, help for its economy, and at least tacit backing for U.S. actions and demands.

It already indicated a willingness to take a more nuanced approach to Pakistan when it supported a U.N. ban on the Jamaat ud-Dawa, the humanitarian wing of the Lashkar-e-Taiba, after last year's attack on Mumbai. It is also looking for ways to help bolster Pakistan's economy --a Pakistani finance ministry official said this week that Pakistan was in talks with China on a currency-swap deal with the aim of conserving its foreign exchange reserves.

But Chinese antipathy to interference in other countries' affairs, a divergence of views on exactly what needs to happen in Pakistan, and China-India rivalry all limit how far Beijing can be roped into helping on Pakistan.

from Global Investing:

What worries the BRICs

Some fascinating data about the growing power of emerging markets, particularly the BRICs, was on display at the OECD's annual investment conference in Paris this week. Not the least of it came from MIGA, the World Bank's Multilateral Investment Guarantee Agency, which tries to help protect foreign direct investors from various forms of political risk.

MIGA has mainly focused on encouraging investment into developing countries, but a lot of its latest work is about investment from emerging economies.

This has been exploding over the past decade. Net outward investment from developing countries reached $198 billion in 2008 from around $20 billion in 2000. The 2008 figure was only 10.8 percent of global FDI, but it was just 1.4 percent in 2000.

Not surprisingly, the lion's share comes from the BRICS -- Brazil, Russia, India and China -- which together made up 73 percent of outflows last year. BRIC outward investment jumped to $144.3 billion in 2008 from $29.6 billion three years earlier.

Perhaps the most interesting data, however, concerned political risk insurance. MIGA studied the kind of insurance BRICs outward investors were taking to see what kind of things worried them.

Brazil had a mixed of concerns, but Indians were most worried about transfer and convertibility restrictions, the Chinese concerned themseves with war and civil disturbance and Russians were extremely worried about breaches of contract.

Sceptics might be tempted to see this as a reflection of national concerns. But MIGA said it was more micro than that. Russian investment, for example, is dominated by commodity exploration, an area said to be more subject to contract problems than others.

from Global Investing:

Time to kick Russia out of the BRICs?

It may end up sounding like a famous ball-point pen maker, but an argument is being made that Goldman Sach's famous marketing device, the BRICs, should really be the BICs. Does Russia really deserve to be a BRIC, asks Anders Åslund, senior fellow at the Peterson Institute for International Economics, in an article for Foreign Policy.

Åslund, who is also co-author with Andrew Kuchins of "The Russian Balance Sheet", reckons the Russia of Putin and Medvedev is just not worthy of inclusion alongside Brazil, India and China  in the list of blue-chip economic powerhouses. He writes:

The country's economic performance has plummeted to such a dismal level that one must ask whether it is entitled to have any say at all on the global economy, compared with the other, more functional members of its cohort.

I have just returned from Moscow, which is always dreary around this season. But this year, the mood among the capital's eloquent liberal economists has hit a new low. For the last seven years, Russia has undertaken no significant economic reforms. Instead, the state has been living off oil and gas, like a lucky but undeserving rentier."

Economically, Åslund has the numbers on his side. The International Monetary Fund estimates that the Russian economic will contract by 6.7 percent this year, while China will grow 8.5 percent and India 5.4 percent. There is less of a case for Brazil, with a contraction of 0.7 percent projected, but it is still doing far better than Russia.

But the BRICs concept is not just about economics. As mentioned, it is a marketing device to urge investors to focus on the big emerging players. From an investment standpoint, it could be argued that Russia is leading the BRICs. Its stock market is up 128 percent this year versus around 80 percent for the other three.

At very least, however, Russia's economic underperformance and stock market outperformance does suggest it is the outlier of the group.

from Global Investing:

Another nail in the Malthusian coffin?

All the talk of addressing the global imbalances throws a spotlight on contrasting demographic trends in the world's two most populous nations -- China and India.

Prior to the financial crisis, India's annual growth rate of about 9 percent seemed positively moribund next to China's double-digit economic expansion. But purely on demographics, the dimming power of the US consumer could give India an edge over its neighbour in the longer run.

That's what India's trade minister Anand Sharma seemed to suggest last week when he reminded the audience at a London conference that the country had "20 percent of the world's children":

We know that when we talk about emerging countries the consumption patterns are different. Most of China's production is meant for (markets) abroad. India consumes two-thirds of what India produces.

Indeed, Goldman Sachs projects that India's middle class will outstrip China's by 2045. This is some 15 years after half of China's population becomes either too old or too young to be part of the workforce.

Beijing's mandarins are taking note of this monumental shift in dependency ratios. After decades of enforcing a 'one-child' policy in the face of an human rights outcry, China appears to be relaxing its stance on population control. Family-planning officials in Shanghai have begun to urge eligible couples to have two children.

from India Insight:

India, China take a measure of each other at border row talks

China and India are sitting down for another round of talks this week on their unsettled border, a nearly 50-year festering row that in recent months seems to have gotten worse.

China's Vice Foreign Minister Dai Bingguo and India's National Security Adviser M.K. Narayanan are unlikely to announce any agreement on the 3,500 km border, even a small one, but their talks this week may well signal how they intend to move forward on a relationship marked by a  deep, deep "trust deficit", as former Indian intelligence chief B. Raman puts it.

While the entire Himalayan border is disputed, including the Aksai Chin area, it is the row over large parts of India's Arunachal Pradesh in the eastern stretch of the mountains that has strained ties in recent months.

The Chinese, says Raman,  are demanding that at least the Tawang tract of Arunachal Pradesh, if not the whole of it, should be transferred to it.  They are apparently adamant that if that doesn't happen, there won't be any border settlement, he says.

India's position is that there can't be a transfer of populated areas in any border settlement. Tawang is a populated area, its citizens are Indians, New Delhi says.

So firmly have the Chinese dug their heels in, that they refused to endorse an Asian Development Bank  irrigation project in Arunachal Pradesh in June on grounds that it was its territory. Last month, India's Foreign Minister S. M. Krishna confirmed to parliament in a question-answer session media reports about the Chinese objection to the project which appeared to have stung India.

from India Insight:

Xinjiang – the spreading arc of instability

China's troubled Xinjiang region shares borders with eight countries, which is perhaps one reason President Hu Jintao dropped out of the G8 summit to head home, underscoring the seriousness of the situation and the need to quickly bring the vast oil-rich region under control.

Xinjiang touches Russia, Pakistan, Afghanistan, India, Mongolia, Kazakhstan, Kyrgyzstan, Tajikistan, besides the Tibet Autonomous Region.

China, as this piece for the Council on Foreign Relations points out, has long been concerned that these states on its periphery both in central and south Asia may be tempted to back a separatist movement in Xinjiang because of the Uighurs' cultural ties to its neighbours.

To that extent it has cultivated close ties with some of these neighbours, even trying to promote direct trade between Xinjiang and the provinces of neighbouring countries just over the border.

In April this year, the Xinjiang Uygur autonomous region signed an agreement to establish friendly provincial relations with Pakistan's North West Frontier Province, according to this report in the state-run China Daily.

The two sides agreed to explore partnership in oil and gas resources, bilateral trade and agriculture besides vowing to accelerate work on a long-planned direct rail link.

More importantly, Pakistan's ambassador to China, Masood Khan, who signed the agreement, said the two sides must deepen their partnership to oppose "terrorism, extremism and separatism."

from MacroScope:

Why the BRICS like Africa

There is little doubt that the BRICs -- Brazil, Russia, India and China -- have become big players in Africa. According to Standard Bank of South Africa, BRIC trade with the continent has snowballed from just $16 billion in 2000 to $157 billion last year. That is a 33 percent compounded annual growth rate.

What is behind this? At one level, the BRICs, as they grow, are clearly recognising commercial and strategic opportunities in Africa. But Standard Bank reckons other, more individual, drivers are also at play.

In a new report, the bank looks at what each of the individual BRIC countries is trying to do. To whit:

-- Brazil's immediate intererest in Africa is securing access to natural resources, particularly oil. But is also motivated by a desire to create a new "Southern Axis" with itself at the forefront.

-- Russia is also interested in Africa's natural resources. But it faces a problem because of the sullied reputation of the Soviet Union during the Cold War. So Moscow has also embarked on a rebranding programme within the continent by ramping up its aid programmes.

-- India is attracted to Africa in part because of long historic ties. Commercial engagement, however, is also motivated by a need to guarantee the natural resources it needs for its own growth. Furthermore Africa is seen politically as a key ally in the pursuit of a competitive advantage over its Asian competitor China.

-- For China, Africa provides a long-term partner in its ongoing bid to gain global economic ascendancy, providing it with the resources, markets, geopolitical support, and, eventually, food and social security in the form of a growing and engaging diaspora.

from India Insight:

India, China leaders move to ease new strains in ties

While Indian Prime Minister Manmohan Singh's meeting with Pakistani President Asif Ali Zardari in Russia captured all the attention,  Singh's talks with Chinese President Hu Jintao may turn out to be just as important in easing off renewed pressure on the complex relationship between the world's rising powers.

India said this month it will bolster its defences on the unsettled China border, deploying up to 50,000 troops and its most latest Su-30 fighter aircraft at a base in the northeast.

While upgrading the defences has been a long-running objective, the timing seemed to suggest New Delhi's renewed fears of "strategic encirclement" by China by deepening ties with all of its neighbours, not just Pakistan but also Sri Lanka and Nepal.

The chief of the Indian air force, reflecting the anxieties in the security establishment, said China was a far bigger threat than Pakistan because so little was known about Beijing's combat capabilities.

Predictably enough, the Indian military moves and statements drew a strong response from China's official media warning that New Delhi's tough new posture was dangerous if it thought it would compel China to cave in. Beijing was in a different league, both in terms of national power, economic scale and global influence, the media said.

On Monday, Hu and Singh met on the sidelines of the Shanghai Cooperation Organisation and the BRIC meeting that followed in the Urals city of Yekaterinburg. Details from the meeting were sketchy, but the Press Trust of India said the two leaders supported an early meeting of a joint economic group to push trade ties. 

They also touched on the border dispute at the heart of the more than four decades of distrust, noting that top negotiators were due to meet in August. The People's Daily said Hu stressed on expanding economic cooperation and investment flows and aims to take bilateral trade to $60 billion in 2010. It stood at $51.8 billion in 2008, the paper said.

from Pakistan: Now or Never?:

More churning in South Asia : India bolsters defences on China border

Power play in South Asia is always a delicate dance and anything that happens between India and China will likely play itself out across the region, not the least in Pakistan, Beijing's all weather friend.

And things are starting to move on the India-China front. We carried a report this weekabout India's plan to increase troop levels and build more airstrips in the remote state of Arunachal Pradesh, a territory disputed by China.  New Delhi planned to deploy two army divisions, the report quoted Arunachal governor J.J. Singh as saying.

Other reports in the Indian media said the air force was beefing up its base in Tejpur in the northeast with Su-30 fighter planes, the newest in its armoury. The HIndustan Times said it was part of a decision to move advanced assets close to the Chinese  border.  The IAF base in Tejpur which is in the state of Assam is within striking distance of the border with China in Arunachal Pradesh.

Arunachal evokes especially painful memories for India - for this is where the Chinese advanced deep inside, inflicting heavy casualties on poorly-equipped Indian soldiers in the 1962 war. The Chinese retreated but have refused to recognise Arunachal as part of India, and that along with other disputed stretches of their 3,000 km border has remained at the heart of more than four decades of distrust.

Indeed the renewed Indian defence deployment comes days after the air force chief said China posed a bigger and more potent threat than Pakistan.