Will China collapse for lack of inclusive institutions?

"India, USA and their satellite' are trying to isolate China in economic field. Already, they have hung isolationist Financial-Action-Task-Force Sword of Damocles over China's all-weather ally Pakistan's head."

China India

In his book ‘The Age of the Economist’, Daniel R. Fusfeld tells how economics governs our life today. In today’s market or quasi-market economies, no country can live in economic isolation (sakoku). India, USA and their satellite’ are trying to isolate China in economic field. Already, they have hung isolationist Financial-Action-Task-Force Sword of Damocles over China’s all-weather ally Pakistan’s head.

India’s defence purchases 

Through its economic relations and defence purchases, India scuttled Pakistan’s effort to draw the world’s attention to Kashmiris in prison. India’s defence ministry approved purchase proposals amounting to an estimated Rs 38,900 crore. Heretofore is a bird’s-eye view of her shopping itinerary.

Procurement of 36 Rafales and 12 Su-30 MKI aircraft and 21 MiG-29. Upgrading Indian Air Force’s existing MiG-29 aircraft. The MiG-29 procurement and upgradation from Russia will cost Rs. 7,418 crore. Producing the Su-30 MKI at the Hindustan Aeronautics Limited will cost Rs. 10,730 crores.

India and Sri Lanka underhand operations

In Sri Lanka, India, through its underhand machinations, managed to remove Mahinda Rajapaksa from office in 2015. Rajapakse had leased out strategic Hambantota port to China and allowed docking Chinese submarines in Sri Lanka. Now Sri Lanka has handed over control of Humbantota to India. India gave Sri Lanka $45.27 million aid to develop KKS harbour (Jan 12, 2018).

India extended 2.1-billion Nepalese Rupee (NR) aid to Nepal as reimbursement of the first tranche of housing support to 42,086 governments of India- supported beneficiaries in Nuwakot and Gorkha districts. It pledged Nepal US $1 billion aid and soft loan (25%) for Nepal’s post-earthquake. India bears pension liability of Gorkhas equivalent to Nepal’s annual budget.

But, offended at the occupation of Kala Pani territory by India, Nepal enacted law to affirm its territorial sovereignty. Nepalese prime minister Oli  is tottering because of India’s underhand effort to topple him.

Read More: India’s show of power to China: new ‘Fighter Jets’ from France

India’s help to Bhutan

India has no border at Doklam with China, yet it, like a super power, jumped in at Bhutan’s request’ to stop China from constructing a road there. It  pledged to contribute Rs 4,500 crore to Bhutan’s twelfth five-year plan (2018 to 2023). It completed Mangdhechu Hydroelectric project and Ground Earth Station for South Asia Satellite and launch of RuPay card in Bhutan.

Besides, it committed assistance of Rs 4,500 crore for implementation of development projects and Rs 400 crore for transitional Trade Support Facility during Bhutan’s 12th Five Year Plan (2018 – 2023).

Under the 12th 5-Year Plan, 51 large and intermediate projects and 359 Small Development Projects (SDPs)/High Impact Community Development Projects (HICPDs) are being carried out. India’s commitment to the 12th Plan constitutes about 14.5 per cent of the Plan outlay which is around 38.75 per cent of the capital outlay and 71 per cent of the total external assistance.

India and Bangladesh friendship

To Bangladesh, India extended three $8 billion loans. A total of 1.16 Gigawatts of power is now being supplied by India to Bangladesh. The increase, in the reckoning of the Prime Minister, signifies a “quantum jump from megawatts to Gigawatts and is symbolic of a golden era” in bilateral ties. Markedly, Mamata Banerjee has pledged to raise the power supply to Bangladesh to 1,000 MW.

Though electricity will not be a substitute for Teesta water, the plan to boost power supply is on anvil.Bangladesh is however annoyed at dillydallying at Teesta Accord, and India’s inability to brief her about the Glawan situation (rebutted by India).

Launching the ‘Act Far East’ policy, India’s Prime Minister Narendra Modi announced (September 5, 2019) that India will give a line of credit worth US$ 1 billion to Russia for the development of the Far East.India provided Lines of Credit worth $ 96.54 million to Niger for projects in transport, electrification, solar energy and potable drinking water. It granted $15 million to Niger for organising African Union Summit.

India and Japan joint initiative China India 

India and Japan have launched their own joint initiative in the shape of Asia-Africa Growth Corridor (AAGC) vis-a-vis China’s Belt-Road Initiative for undertaking development and cooperation projects in the African continent.

Read More: Is Pakistan building biological weapons with China? FO says no!

India’s knee jerks to Malaysia and Turkey: Malaysian prime minister Mahathir Mohammad had said in September last that India had “invaded and occupied” Kashmir. He was joined by Turkey’s President Recep Tayyip Erdogan, who said that India had virtually imposed “a blockade” on Kashmiris.Their views on Kashmir and the Citizenship (Amendment) Act (CAA) irked India.India punished

Turkey by not allowing it to bid for construction contracts. Import of palm oil from Malaysia was truncated.

Will China’s economic bubble burst for lack of institutions?

The spectacular economic growth in China in the past four decades has inspired a large strand of research to understand China’s unconventional growth path.  China is expected to suffer a sudden economic collapse because of lack of inclusive institutions, debt policies, and authoritarianism.

Daron Acemoglu and James A. Robinson in their book ‘Why Nations Fail’ argue that without economic institutions particularly private property, and competition, nations fail to promote economic growth and alleviate poverty. Powerful people should not seek to grab complete  control over government undermining broader social progress. It is freedom that makes people rich. Without political change, even sensible economic ideas and policies are doomed to fail.

To strengthen his rule, Xi Jinping has allegedly assumed absolute control over all the institutions of the country in the guise of national rejuvenation and reforms.

Norwegian political scientist Stein Ringen in his book “The perfect dictatorship: China in the 21st Century calls XI’s rule as “Controlocracy”.  Xi chairs, roughly, eight of the leading small groups including the national security commission. He also handles internal security directly, thereby reducing any possible chance of mutiny.

Read More: US and Australia unite against China

Tai Ming Cheung a professor at the school of global policy and strategy at UC San Diego alleges “No other Chinese Communist Party leader, not even Mao Zedong, has controlled the military to the same extent as Xi does today. Mao had to share power with powerful revolutionary-era marshals.” To show how “hands-on” he is, Xi has taken the new post of commander-in-chief of the PLA Joint Battle Command.

This view is debatable. Discussion papers are included in Allen, Franklin & Qian, Jun & Qian, Meijun, 2018. “A Review of China’s Institutions,” CEPR Discussion Papers 13269. Their paper focuses on the recent development of China’s institutions, financial markets, innovations and government-business relations in the context of their roles in supporting China’s growth. Alternative financing channels and governance mechanisms, rather than the markets and banks, continue to promote growth in the most dynamic sectors of the Chinesed economy.

Pro-China view China India 

Tom Orlik, chief economist – Bloomberg Economics and David Dollar, senior Fellow, Foreign Policy, Global Economy and Development, John L. Thornton China Center, do not agree. They trust China would tide over economic crises through out-of-box thinking and ingenuity of mind. Klaus  Muhlhahn in aking China Modern: From the Great Qing to Xi jinping highlight role of institutions in China’s rise.

During the nineteenth century, China suffered humiliation of defeats in the Opium Wars at the hands of Western imperialists. Like a sphinx, China rose from ashes to baffle the world, we live in, through its flabbergasting if not unprecedented economic growth and partricipation on the geo-political state as a powerful player.

Charismatic leaders (Sun Yat Sen, Mao to Xi Jinping) did contribute their effort in transforming China. China’s rise, per official line, began with Deng Xiaoping’s rule in 1978. But a dispassionate look at history reveals that China’s recovery was in the making for about a century. Historical legacy, cumulative experience, a desire to see a better tomorrow and resilience in overcoming adversity contributed to China’s emergence as a conundrum or a miracle during the twentieth or twentieth century.

Read more: Has normalization with US increased China’s power?

China’s rise is not an overnight exploit or legerdemain of some leaders 

Its present status is a cumulative product of its institutions in early modernity or late imperial period (mid-seventeenth through eighteenth century). Beginning in 1644 during the Qing dynasty reign, many core institutions were developed and the empire achieved its zenith. The social and cultural institutions of this period account for China’s brilliant trajectory into the nineteenth and twentieth century. The institutions of yesteryears, about three centuries , relate to key areas of government economy sovereignty, border security and exploitation of natural resources.

Inference: In cahoots with the USA, India wants to get China declared a pariah state. The aim is to impose economic sanctions, or aid or trade embargo on China. The USA uses a flexible format to dub or delete a country as axis of evil, money-laundering conduit, sponsor of terrorism or pariah (Tamil paraiyar,outcastes), or rogue (Iran, Sudan, North Korea, Cuba, Venezuela). Ottoman Empire was persecuted as an outcast by European States since the Treaty of Westphalia in 1648 until the nineteenth century on a religious basis’.

Deon Geldenhuys. points out multifaceted criteria for declaring a state pariah_ having ‘artificial borders’ (Iraq), siege mentality, anti-West sentiments and desire to subvert the international status quo, or not being a considerable `world power’(“Pariah States in the Post-Cold War World: A Conceptual Exploration,  March 5, 1997).  So far, China has eluded the pariah label proving it to be a `world power’.

Why India is hostile to China?

Indian Prime Minister Modi himself told an all-party conference, “Neither have they [Chinese] intruded into our border, nor has any post been taken over by them (China)”. Even former defence minister AK Antony and former foreign secretary Shyam Saran denied China had taken over 640 sq km of Ladakh territory. Even, “The Indian army denied that Ladakh had shrunk. Change in the river course was cited as a reason for the loss of 500-1,500 meters of land annually”. Then, why the storm in a teacup.

Mr. Amjed Jaaved is editor of the monthly magazine, The Consul. He has been contributing free-lance for over five decades. His contributions stand published in the leading dailies and magazines at home and abroad (Nepal. Bangladesh, et. al.). He is author of eight e-books including Terrorism, Jihad, Nukes and other Issues in Focus. The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.

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