Thursday Seminar

Air Commodore Jasjit Singh concentrated on the military and technological implications of the anti-missile test conducted by China on 11 January, 2007, though he admitted that it had political implications. He began by describing the importance of space in human affairs and the demerits of its weaponisation. However, he stressed on the term “capability”.

According to him the fact remained that China had achieved the capability to knock down a satellite by a ground based rocket. This was a serious advantage in terms of military capability vis-à-vis any adversary, since today’s warfare largely depended on communication enabled by the satellites.

With this, China joined United States and Russia in becoming the third country to have this capability. However the methodology adopted by Russia and United States vary from that of China. United States uses fighter jet (F-16) to fire a mother missile which in turn fires another mini missile to knock down the satellite in space. Russia on the other hand uses the orbit path to intervene on a satellite moving in its orbit.

In the latter part of his lecture, Mr. Jasjit Singh focused on the implication that this test may have for India’s security concern. The lack of coordination between the research organizations and the end users-the armed forces, and lack of forward planning were stressed as the significant demerits with respect to India’s ambition to catch up with this kind of high technology.

However, he agreed that it was quite possible to achieve this feat in terms of technology, given the fact that there was no serious dearth of funds. The speaker said he believed that a similar test by India would not disrupt the growing political ties between China and India, since the China would always encourage the idea of a powerful India. Sighting the 1998 nuclear tests conducted by India, he said China never condemned the test but strongly disagreed on China being an excuse for these tests

Ms Aiyar initiated the morning seminar by drawing attention to the Chinese political ‘landscape’: that our view of the one party system in China as being extremely efficient in comparison to India’s chaotic and inefficient democracy, is a ‘gross misperception’. On the contrary, the Communist Party (CCP) leadership is in a constant state of mediation and negotiation amidst factionalism and tensions within the CCP.

Though the ideological debate and dissent within the CCP has been effectively contained at least under Deng and Jiang’s leadership, the current landscape seems to be proving quite difficult for Hu Jintao and Wen Jiabao, owing to China’s economic reforms that have necessitated painful structural adjustments. Though China has emerged as the world’s 4th largest economy, its Gini Index is 0.447 (it is a commonly used statistical measure of inequality where 0=perfect equality and 1=perfect inequality), worse than that of India’s (0.325).

Ms Aiyar drew attention to the contending voices within the CCP: emergence of New Left voices and the Right/reformist camp. She invoked the debate over the recent private property bill to validate her argument. She also highlighted the conflict that the CCP encountered in balancing the interests of the property owning urban elite on the one hand and the peasantry on the other. There is also tension while implementing central policies by local officials who are often corrupt and inefficient. The lack of an effective conflict resolution mechanism and its current mode of dissent management through use of force during peasant protests, etc., makes the country vulnerable and unstable; here, she drew the analogy of a pressure cooker with no safety valve. However, she clarified that she is not in support of the thesis that China would disintegrate owing to its mammoth problems.

Nonetheless, she concurs that the CCP is in a constant act of juggling and consensus-building, with the consequence that the emergent tensions have been thrown into the open.

Ms Aiyar emphasized the importance of the peasant constituency for the CCP as they constitute about 700-800 million of the total population and is solely responsible for bringing the CCP to power. She cautioned that if this constituency, which formed the earlier power base of the CCP, is unhappy for too long, then it might be a problem.

Hu’s and Wen’s strategy has been to develop a more left-oriented rhetoric in order to stay in power, while ‘quietly’ pushing the reform agenda. According to Ms Aiyar, the government must give paramount priority to actual implementation of ‘socialist goals’, ‘new socialist countryside’ and ‘social justice’ alongside economic growth.

She concluded with the optimism that as long as China is able to overcome its socio-economic hurdles, it will not face any overt calamity; also the political spectrum is showing signs of much desired maturity, pragmatism and internal debate.

As far as the 17th party Congress is concerned, Hu is likely to consolidate his power base and get rid of the remaining ‘Jiang clique’. Personally, she feels that Hu is a conservative and not a reformer. Therefore, ‘we will see little political reform, continued but slightly tempered economic reform and a continuing embrace of pragmatism’.

On 11 February 2008, Ms. Guo Suiyan, Research Fellow from the Institute for South Asian Studies, Yunnan Academy of Social Sciences in Kunming, Yunnan Province, and a Visiting Scholar at the Centre for East Asian Studies, made a presentation on 'Regional Cooperation: Yunnan’s Perspective'. In her presentation, she introduced how Yunnan, a frontier province in South West China, actively involves in regional economic cooperation with South East Asia and South Asia. Being one of the least developed provinces in China, Yunnan shares international border with Myanmar, Laos and Vietnam, and adjacent to India and Bangladesh. Economic Integration with ASEAN and the cooperation among Bangladesh, China, India and Myanmar (BCIM) are the two “prongs” for Yunnan to play an increasingly prominent role in the regional cooperation.

The Yunnan-ASEAN economic cooperation entered into a new phase with the establishment of China-ASEAN FTA, that comprehensive cooperation covering not only trade but also infrastructure, education, technology and border management has been enhanced. BCIM cooperation is the platform for Yunnan’s engagement on regional cooperation with South Asia, which has seen rapid progress in the resent years signified by the fast growing trade, better transport connectivity, more people-to-people interaction and, a long expected car rally which is designed to cover China (Yunnan), Myanmar, Bangladesh and India. Benefiting from China’s new strategy for more engagement with neighbouring countries, Yunnan has evolved from a far corner of the country to the forefront as a window opening to the world.

In the 1980s, when Chinese government introduced the open door policy, a number of small scale companies came into existence in all industrial sectors of China. Most of them were competing with each other on price rather than on product quality and their lack of resources and competitive advantage, led to the failure of most of these companies. The Chinese large firms were replete with outdated technology, obsolete skills and heavy debts. Owing to the state’s inspiration of growing larger and stronger, even the unrelated businesses merged resulting in unwarranted diversification.

Nature of the industrial policies
Therefore, the Chinese government came up with industrial policies, which have defined the framework for the opening of the sector while influencing at both macro and micro levels. The policies are said to be more open and more market oriented and closer to the Anglo-Saxon model rather than the Japanese-Korean model. The policies aim at launching new industries and make them internationally competitive through entry of FDI, standard setting, export subsidies/loans, and focus on R&D. A comparison of industrial policies for automotive and IT industry, one old/other new and both pillar industries, will explain the influence of the Chinese government in steering the industrial sector and its positive or negative effects.

Automotive sector
In automotive sector, which was mostly having state controlled companies, foreign companies were allowed to have joint ventures with maximum 50% partnership. The auto policy encouraged the technology transfer, growth of domestic parts industry and improvement of the quality as well as quantity of vehicles in China. This also led to the over investment in production capacity and some Sino-foreign JVs failed too. The geographical dispersion, unnecessary government interference and protectionism led to the limited scale of JVs and reduced their scope of synergy.

IT Sector
IT industry was hailed as ‘a driving force for innovation and growth of other industries’. The technological level of this industry has been raised by individual entrepreneurship, entry of leading foreign firms, global expansion of Chinese firms and also by rampant piracy. The state has, turned the ex-SOEs into IT enterprises, given them relative autonomy to manage their affairs, allowed conditional entry of foreign firms and invested heavily in R&D and science parks which continue in 11th five year plan.

Impact 
These policies have led to vertical integration in both sectors but stifled the cross-fertilisation. The approach has been interventionist and protectionist which is regarded unsuccessful by some, since no Chinese brand has emerged in auto sector, the R&D level still remains low and the exports are still minuscule. In IT sector, the progress in hardware sector is significant but in softwares, the development has been disappointing. The problems of inter-regional competition, centre-local disputes and SOE legacy persist. Overall, these industrial policies have achieved much yet further territory remains to be covered.

Comments and Questions:

1. Foreign partners of JVs in automobile sector have resisted the idea of sharing technology with their local partners.
2. The development in IT sector was given a strong push by 1986 ‘Torch programme’ which established many NTEs like Stone and Legend group.
3. The industrial policies of China show a strong inclination towards Japanese and Korean development models rather than Anglo-Saxon model.
4. Anglo-Saxon model of development is the not only the best one and China/India can come up with their own contextual models like industrialization with human face or sustainable industrial development.
5. Is the Chinese government trying to take the best models for all successful sectors of different states and copy them or has there been an effort for indigenizing the methods before implementation?
6. How far these industrial policies have tried to follow the sustainable development model? Has China focused on the use of green technology during formulation of these policies?
7. How far open and market oriented these policies are?

Response:

1. The lack of innovation in China is a recent phenomenon. Historically, China has been an innovative state and it has contributed some of the best technologies to the world.
2. The problem of piracy can be seen in the Chinese philosophical context. For Chinese people, as Confucius said, Knowledge is public good and should be shared in society. So many Chinese do not understand the concept of piracy.
3. Chinese government has tried to make these policies market oriented and open.
4. Indian companies have been performing better because India has a long history of entrepreneurship than China.