China, at 70, needs to be carefully watched

Abhijit Bhattacharyya
Commentator and Author

Once weak, and universally acknowledged as the ‘sick man’ of the Far East in the first half of 20th century (especially the 1930s),  the People’s Republic of China celebrates its 70th birthday on October 1. Such was China’s helplessness, first in front of the British and then other western powers, and subsequently by Japan’s brazen violation of Beijing territory and sovereignty, leading to the occupation of a large swath of land and the ultimate unethical rejection of China’s complaints by the League of Nations (predecessor of post-Second World War UN) that the official Chinese delegate was compelled to say: “China cannot be expected to admit that the operations of treaties, covenants and the accepted principles of international law stops at the border of Manchuria.”

Coming there from, therefore, it’s undoubtedly a supremely proud moment for the Hans, constituting 92 per cent of homogenous Chinese society, to celebrate. Nevertheless, the rise of Beijing, after long years of subservience and subjugation, also brings to fore the periodic (contemporary) unpredictability and erraticism which the non-Chinese gradually are getting used to, notwithstanding the fact that from the 1930s to 2019, China has moved on. Beijing today truly does have several landmark achievements on display. 

Beijing-2019 is the world’s second biggest economy with GDP $12.238 trillion (2017); biggest economy by purchasing power GDP-PPP (Gross Domestic Product-Purchasing Power Parity) of $23.190 trillion; one of the highest —  6.5 per cent — economic growth (compared to India’s dipping 5 per cent growth rate); third biggest exporter with 10.33 per cent of total world exports (goods, services, income) in 2017; numero uno trader of goods with highest exports and second highest imports; fourth largest surplus in balance of payments: current account at $1,95,117 million; highest official reserves at $3.168 trillion; largest industrial output with $4,950 billion (2017); largest manufacturing output of $3,591 billion and second largest, (behind the US), services output of $6,320 billion (2017).

Ironically, however, as China stands as the second most important global economic powerhouse, it also creates an uncertainty and over-stretching, thereby creating turbulence in world laissez faire market economics. Why? Because, China inherently has adopted a policy of ‘forward deployment’ in virtually every sphere, which is in line with what Britain did till the beginning of the decline of its imperialism in the 1930s and what the US has been doing across the globe after World War II.

As things stand, it appears well nigh impossible for an aspiring nation to impose self-restriction or resort to a self-imposed discipline and to curb its propensity to expand. And China, too, is no exception, as seen from her ambitious plan of action, the type of which Beijing despised and resented during its era of the ‘sick man’ of the Far East.

Indeed, China is just copying the American forward policy. The USA's forward deployment of forces is there for all to see. Being deployed to more than 50 places across the globe, and every station falling under the ‘US Command’. From Iraq, Saudi Arabia, Syria, Bahrain and Afghanistan to the Indian Ocean (fortunately, not India yet) fall under the ‘Central Command’. Under the ‘Pacific Command’ fall Japan, the Philippines, Australia, South Korea, Thailand and the Ocean. The ‘European Command’ consists of Romania, the UK, Germany, (not France), Greece, Bulgaria, Turkey, Hungary, Italy and more. The ‘US Africa Command’ spans Djibouti, Niger, Cameroon, Somalia and Central African Republic. The ‘US Northern Command’ has Canada and the US. Under the ‘US Southern Command’ fall Aruba, Cuba, Curacao, Honduras, Colombia and El Salvador. And, finally, falls Israel under the ‘US Strategic Command’.

In this existing formidable ring of iron pearls, how does China proceed? Through land. The great Euro-Asian heartland for the Belt and Road Initiative (BRI) and explore the possibility of empty spots, however small, in at least two oceans: the Pacific and Indian. And that’s exactly what China is trying to do, and, thus far, has been successful in establishing a base in Djibouti at the Red Sea-Indian Ocean confluence, connecting Asia, Africa, Europe (at the Suez side); and the second reportedly in Cambodia, adjacent to the Indonesia-Thailand-Malaysia-Singapore axis.

However, the most potent Chinese achievement lies in its economic rise and potential ability to involve or sway  countries which thus far were looking at the West-sponsored World Bank, IMF and Asian Development Bank for financing projects. With the establishment of several multi-nation banking and multi-state-funded financial institutions, Beijing being the fulcrum, the West looks concerned and rattled.  

Amidst all this comes the most audacious of all Chinese initiatives, though futile as of now. It happened on September 9, at the headquarters of the London Stock Exchange (LSE), when Laura Cha, Chairman of the Hong Kong Stock Exchange (HKSE), and chief executive officer, Charles Li, met their LSE counterparts. At the meeting came the bombshell. The world’s fifth largest, the HKSE, with a $3.94 trillion listed market capitalisation, offered to buy the seventh-largest, LSE, with listed $3.77 trillion, for £32 billion (or $36.6 billion). 

The ambushed LSE board bosses expectedly rejected the HKSE bid on September 13. But, the Communist China clearly has played the game well, deep into the citadel of the capitalist country’s capital-centre. Hans now psychologically loom larger than life in the LSE boardroom. 

Interestingly, though the Chinese haven’t succeeded in physically taking over the LSE, the official media thereof understood that sooner than later, China could strike big. If not London, may be somewhere else. Like the US, China’s password is ‘global’. How to acquire, attain and retain global power and position after 110 years (1839-1949) of national humiliation, subjugation and subservience to those from London!

 In a way, the Chinese attempt to take over the LSE could be likened to a parallel ‘market-BRI’. Thus, whereas the BRI ostensibly is a Chinese initiative for global ‘infrastructure development like port, road, rail and communication’, Beijing now appears bent on turning its aspired goal into an Economic-Commercial Structure to spread its wings and take under it the competing foreign stock markets, thereby turning them Chinese-owned and controlled financial-cum-market-access force-multiplier. 

The London Stock Exchange refused the Chinese offer in four days. What if the HKSE makes a lucrative offer to the world’s 10th biggest Bombay Stock Exchange, with listed market capitalisation of $2.05 trillion, and 11th-placed National Stock Exchange of India, with market capitalisation of $2.03 trillion? Will India go under the Hans’ stock exchange? Or will India be able to keep its financial, capital marketplace intact? China, at 70, needs to be carefully watched by India of 72.