CHINA FIRST, SECOND AND THIRD CANNOT ENDURE by Lt Gen P R Shankar (R)

General
Things are moving quite rapidly globally. The Virus is raging on, under control or making a comeback depending on where you are. Equally Chinese aggression, Chinese Diplomacy, and China led New World Order are being debated hotly. Makes one wonder. Is China the only country in the world? However certain events suggest that things are not rosy. Outward appearances could bely the actual inside health. Within China itself things seem to be “IFFY”. Hence it is time to take a dive into China to see what is happening there.

Corona Virus Scene
Has the virus come back home to roost in Wuhan? The entire city of 11 million is now being tested. Shulan, in Jilin Province has seen an outbreak. It has set off alarm bells in neighboring provinces. Typical Chinese reaction. A Party official(s) has been sacked. 100 million under lock down. The point is that China is not out of the woods. The Chinese reaction represents a paranoia. The Virus will haunt them. Unfortunately, it does not react to communist edicts. As the Virus continues to rage globally, as it will, the stigma on China will keep magnifying. The danger China faces is that the power of democratic politicians to sway people and deflect their shortcomings. The Chinese Communist Party has vastly underestimated. Democracies can be more venal than autocracies since politicians practice survival and blame game on a daily basis. If Governments must survive their failings, China and Corona offer perfectly legal targets to aim at. Politicians will not miss it.

100 Nation Effort
100 nations have backed a joint Australian and European Union proposal to inquire into the origins of the Virus. Xi Jinping has offered a comprehensive review after the Pandemic recedes. That might never happen. These democracies have suffered, and their people hold China responsible for the pandemic. India has also joined in. These are also the more affluent nations. Hitherto fore China has been dealing independently with each and squaring them off. Things seem to be changing. Can China hold off countries whose determination stems from the suffering of their people? How determined are these countries? It is already being assessed internally that the aggression of Chinese ‘Wolf Warrior” diplomats who have often derided and threatened other systems and countries has only succeeded in stiffening the anti-China sentiment. A push for an independent inquiry into the coronavirus outbreak is significant. It will either force China to be more transparent or harden anti-China sentiment depending upon how things play out. Chinas rise and attitude is viewed as a threat to national interests. That is coming across very clearly unless of course one is from Pakistan.

Global Leadership Role
There is a question mark on the Chinese global leadership. China contributed just US$50 Million to WHO after USA withdrew support. Even Bill Gates, an individual, has donated six times more. The EU leaders raised US$8 billion to develop drugs and vaccines to fight the pandemic. China made no financial commitment. China is now offering US$2 billion to WHO. State media propaganda praises Chinese Leadership, Communist Party, and China as a world power. It highlights decisive Chinese response and shows the rest of the world as struggling. China saving the world is a great theme when failed mask diplomacy, rejection of substandard kits and PPE sold at exorbitant prices is hidden. An internal debate has however started where views are that, no matter what the international situation is, China must manage its own affairs well (which is a tacit admission that it has not). Xi Jinping has urged Chinese to be “mentally and professionally prepared for the worst-case scenarios”. Chinese expect a global backlash. More hostile than the Tiananmen crackdown backlash. Overall the fact is that China is not only unwilling to assume leadership but does not have the capacity, resources, and experience. This is co related by the fact that it contributes truly little to the UN also. The entire outlook of China can be summed up as – ‘China First, Second and Third’’. Rest be damned.

Unemployment and Loss of Jobs
It is reported that 80 million people have lost jobs, 20% Chinese households can survive 2-3 months without income and 40% a couple of months more. This is based on a survey of 120000 people by China Household Finance Survey and Research Centre, Chengdu. The situation is so serious that South China Morning Post has run a series of six articles on job loss and unemployment. Estimates of migrant workers in China vary from 175 to 290 million. Around 1/3^rd are out of jobs. 8.7 million new graduates have come out of universities. Very few have jobs. 150 million self-employed business are facing steep fall in revenues. Many are folding up. Even before the pandemic, factories were closing but people could get jobs in an expanding service sector. That virtuous transformation is disrupted. Service sector jobs are vanishing, factories are closing and workers facing layoffs. Salaries are down to a quarter in many cases. Many jobs are traditionally under the radar and hence there is no unemployment insurance. China’s regional disparity is huge. The situation in smaller inland cities and rural areas is believed to be worse. People in inland provinces and poverty-stricken areas are losing their lifelines. Overall the situation is not dissimilar to our migrant scene. Ours has been magnified by international media. Severe censorship has hidden theirs. It is my hunch after reading the entire series of six articles that our social welfare schemes and benefits seem far better. However the stark issue is that China has major problem. Most of the jobless people of this generation have not faced this situation before in their lives. The unrest and instability potential is huge.

BRI
The BRI continues in a state of virtual standstill. Projects remain on the backburner for most countries. Lockdowns and closures continue to disrupt supply chains including from China. Migrant Chinese workers have been quarantined or repatriated or banned. Most African nations are asking China to forgive the debt. Countries include Angola, Nigeria, Congo, Equatorial Guinea, South Sudan, Seychelles, Mauritius, Zambia, Botswana, South Africa, Zimbabwe, Ethiopia, Kenya, and Sudan. China has lent US$143 billion to 49 African governments and their state-owned companies between 2000 and 2017. All this is under threat. Of course the status of the Flagship CPEC in Pakistan is too well known. China is now shifting focus to concentrate on two nonphysical components of BRI namely “Health Silk Road (HSR)” and “Digital Silk Road (DSR)”. These are salvaging attempts. I do not see revival of work this year. The burden of the BRI will be heavy and a drag on China.

Decoupling and Self Sufficiency
The decoupling and self-sufficiency process has started. Our own ‘Atma Nirbhar Bharat Abhiyaan ’ has been outlined. USA has started talking to Chip Makers to shift out of China. Japan has offered 2 Billion to its firms to move out. In fact most countries are coming out with their own ‘Atma Nirbharta’ programs as per their requirements. There is a resolve not to put health and other core security interests’ hostage to China anymore. There will be second order effects. Relocation of global supply chains has also commenced with companies looking for alternatives. The culmination will be less dependency on China. Which means China has less/ reduced leverages. Also China will lose that chunk of business for ever. Amidst all this one more thing which is clear is that Huawei is being blocked very aggressively by USA. If Huawei is blocked, areas /loopholes which China used to exploit for IPR theft will also get blocked.

Military
There was news that modernization of their military is likely to continue unabated. That is something I will take with a pinch of salt. During recessionary conditions, one starts looking at life extension / upgradation to match budgets. Replacing an old system with a new one is a very costly and extensive process since an entire ecosystem must be changed – new weapons, new storage, ammunition, spares, maintenance, and new production. This cycle would have been interrupted. Most important is training. PLA is a Conscript Armed Force. It needs high turnover rates of recruitment and training. This part has been disrupted. The longer the virus lasts, greater will be the problem for PLA which is a 2.3 million force. At some point combat efficiency will get hit.

Hongkong
The Hong Kong issue is still playing out. Demonstrations are happening and people are being arrested. It continues to be a festering sore. China views it as a weak link in its security. Things are working to a head.

Taiwan
There are repeated nationalistic calls within the mainland to capture Taiwan. Everyone knows that it is beyond China to do so now. It is like the Indo Pak scene. Whenever an incident happens, the clarion call of nationalists is to sort out Pakistan or retake POK by force. Such calls divert the attention of the masses from the main issue. Same there.

Economy
There is a lot of debate whether China will have a V (quick rebound), U (deep and prolonged), L (slow) or W (up and down) recovery. There is no clear answer. Which ever way it goes, it will not be rosy. Its huge debt fueled economy makes it tough to start infrastructure growth. There are suggestions that regional governments should start major infrastructure projects. It is like asking Orissa or MP to build an international airport instead of AAI. China has held back any major stimulus unlike other nations. The official view is that it is not needed. The opposite view is that any stimulus will only end up servicing debt. There is an export shock which is expanding with the feeling that the worst is yet to come. The export economy supports 112 million jobs. These are at risk. Recent South Korean data showed that in May, in ten days, exports fell 46.3 %. Chile’s export of copper (used in everything from cars to power transmission equipment to smartphones) fell by 7.8% in April mainly due to poor demand from China (worlds biggest buyer). These events are virtual canaries in the coal mine for global trade and manufacturing. China is part of the coal mine.

Conclusion
One thing for sure, 20 years back, when I wrote my first dissertation on China, it was a matter of ‘when’ and not ‘if’. Today there is more ‘if’ in the China story and ‘when’ seems indefinite. Its superpower journey has hit a detour. Whichever way it swings, there are implications for India’s security interests and consequently for the Indian Armed Forces. I reiterate – Ten feet tall Chinese do not exist. We should not build up our adversary based on figments of imagination but should assess him based on facts. The content for this article has been drawn from sources within China and written mostly by China watchers in China. The facts are presented as quoted and are available in references below. Please draw your conclusions. Kahani Abhi Baaki Hai!

“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”
― Sun Tzu, The Art of WarTime to keep track of the enemy as he is changing colors like a chameleon.Not in the Art of War. Plain common sense.

CHINA FIRST, SECOND AND THIRD CANNOT ENDURE by Lt Gen P R Shankar (R)

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