China-India Border Tensions Move From The Military To The Economic Arena

We have written extensively and often about the China-India military tensions and the border disputes, the most recent article being “China-India Tensions – Views Of The Pentagon & The Indian Military” on April 4. 2009 (see–views-of-the-pentagon–the-indian-military.aspx   ).

Last week, China escalated this dispute to the economic arena by effectively blocking a loan from the Asian Development Bank to India. This occurred ahead of a board meeting of the Asian Development Bank at the end of last month, when China used its right to postpone approval of the lender’s country partnership strategy for India.

According to the Financial Times, “The Chinese did not give a reason for their intervention. But the ADB said Beijing was unhappy that its Indian plan proposed lending to projects in the disputed north-eastern region of Arunachal Pradesh. People familiar with the plan said the projects were for flood management, water supply and sanitation.”

We think this step shows the tenacity with which China pursues what it wants. China has been demanding a more central role in multilateral organizations like the International Monetary Fund and pushing for a new global reserve currency. What does the Chinese action at the ADB signal to the world and especially to its partner countries about its future behavior?

A quote by Russell Moses, a Beijing-based political analyst, provides the answer. He says “This effort [to block the ADB’s plan for India] is a clear signal to partner countries that China sees partnership as sometimes less important than power projection,…There are powerful officials who have no problem injecting strategic considerations into multilateral financial decisions.”

This supports our longstanding belief that the current Chinese Political-Military leadership is hegemonistic at its core and it is clearly signaling to the world that China will project its power when and where it sees fit.

Recall that, recently, the Chinese Navy provoked an incident with a US naval ship. At that time, a Financial Times article quoted Michael Green, a former advisor to President Bush, as saying
“…This is also a signal to Vietnam, the Philippines and the smaller countries in the region, that look, if we can do this to the Americans, what chance do you think you have?” (see our article – “China – It’s Economy, It’s Leadership & It’s Military” – March 28, 2009 ––its-economy-its-leadership–its-military.aspx   ).

Now, China has escalated its power projection to the Asian Development Bank. As the Financial Times writes “Some analysts also worry that greater Chinese involvement in institutions such as the IMF could allow it to wield veto powers over rescue packages for countries that did not comply with its political demands, especially over issues such as Tibet and Taiwan.”

India, however, is in no mood to tolerate Chinese assertions of claims over the Indian state of Arunachal Pradesh. This was made clear by the recent three-day Presidential visit to Arunachal Pradesh by the President of India, Pratibha Patil in which she said that Arunachal Pradesh was “never far from the centre of the nation’s consciousness”.

Unfortunately, since the days of Jawaharlal Nehru, the first Indian Prime Minister, the Indian “intellectuals” have been viscerally anti-America. It is the leftist English liberal heritage that they cherish, even though England got rid of it during the Margaret Thatcher days.

These Indian “intellectuals” dream of uniting China and India into an anti-American, anti-Capitalistic, pro-Socialist economic coalition against American capitalism. This was Nehru’s dream of “Hindi-Chini Bhai-Bhai” (or “India-China Brothers-Brothers”). China’s leaders let Nehru dream on as long as it suited them. Then, after building up its military infrastructure in Tibet, China attacked Nehru’s India and humiliated it.

Yet, nearly 50 years after this war, the Indian “intellectuals” still dream of economic brotherhood with China and tend to dismiss China’s persistent demands and its behavior as tantrums.

If you do not believe us, read the editorial in the Times of India about China’s blocking of the loan for India. Titled “The China Tantrum”, the editorial, in what it considers as classic British understatement, describes China’ action as ” .. strikes a discordant note” and adds “Given the current international climate, this is regrettable.”

Then, the editorial lectures China by writing “Petty obstructionism has no place in a relationship between the only major economies that continue to show relatively healthy growth.” It then expresses its sadness about the damage to its China-India partnership dream “The pity is that recent developments in the bilateral relationship have revealed glimpses of the potential it (economic brotherhood between China-India) holds.”

But China has made such a habit of being publicly contemptuous of India that even the editors of The Times of India seem to have had it.

We had to pinch ourselves when we read the last paragraph of this editorial. It begins with “Perversely, New Delhi would do well to take a leaf out of Beijing’s book when it comes to formulating a muscular response….there is nothing to be gained from restraint based on a false perception of ground realities or needless appeasement.”

The editorial then proclaims “It must be made clear to Beijing that the relationship with New Delhi is based on quid pro quo.”

Is this a sign that the Indian “intellectual” worm is finally turning? We fervently hope so.

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