An IDC Analysis


New Delhi, 04 April 2002  

The Media is doing the rounds on China and Indians are gloating!

China –– The Myths

The world's biggest mystery today is the Chinese economy. On the surface it appears to have survived the Far East's economic turbulence and appears to be expanding at the rate of 8% a year. Meanwhile, Japan's economy contracted and the Nikkei declined. The purported reason for this is that Japan's banking system is technically bankrupt, with $266 billion in non-performing loans. But China's banking system is rumoured to be in a similar state, having kept afloat countless inefficient state-owned businesses with loans that cannot possibly be repaid. A $300 billion figure has been mentioned, though the true total, concealed by Communist accounting, cannot be known. How, then, does China continue to expand –– if it really does? An expert has said that until Japan writes off its BAD DEBTS it cannot progress. In India too we see that banks like ICICI, IDBI and some others have written off bad debts.

Foreign Investment

A recent account in “The China Dream” by Joe Studwell (Atlantic Monthly Press, $27) claims that $300 billion has been swallowed by China in the last ten years alone. The reason Western banks and businesses are willing to invest so heavily in this Communist state, despite their dreadful experiences in the former Soviet Union, is that they are mesmerized by the magic phrase "a market of a billion consumers" –– the largest market in world history. But all the evidence, historical and actual, shows this market to be a mirage. Since Roman times China has tended to swallow the West's gold, selling silks and other luxury consumer goods but buying virtually nothing in return. China's is an ancient civilization, and it retains some primitive economic notions. The Chinese believe that it is a sign of economic strength to sell vast quantities of goods to foreign buyers, while buying few in return –– in theory that’s healthy world trade which all cannot and should not follow.

The media has another view:

China, at the beginning of the 21st Century, appears to be the hare. But what of the tortoise? ––India. India appears to have moved extremely slowly in its nearly 60 years of independence. But it is sound on fundamentals. It has kept its working democracy; maintained the rule of law; and has, in recent years, scrapped many of the socialist controls that held its economy back. India's people enjoy freedom of speech, assembly and worship, and India has a free press –– all rights that China lacks. India is a natural ally of the US in its war against terrorism. India's population is virtually as big as China's and will soon surpass it.

Once again articles are appearing in the media and a noteworthy one on Rediff website was that China was in a bit of a mess. This is wishful thinking, so we decided to take a closer look at INDIA–CHINA.

China –– The Realities

For most Indians, China has remained an enigma and Indian diplomats consciously urged and strived to see that not many Indians visited China from the 60s to the 80s. It was the Enemy and even George Fernandes alluded to it in 1998, calling China as threat No 1, which he later retracted. China was kept veiled and even if one went to China the Embassy told you to restrict your movements.

China is still on the negative list for Defence business and if they bid for a civil project or give business to an Indian software firm we are up in arms. RM keeps objecting to China supplying nuclear help and arms to Pakistan. Now Gwadar port is being developed with some $ 200 million –– like the Russians helped us to develop Vishakapatnam –– yet we are angry.

Media reported that George Fernandes had been invited to visit China, close on the heels of the visit of Jaswant Singh, who was promised enhanced business. The Chinese would have tried to read his mind, which is what they were unable to fathom otherwise about Indian policy. Last time the Chinese dignitary Zhu Rongji came visiting Delhi, George was conveniently absent as the media put it. Jaswant Singh and the Chinese Vice Premier Quin Quichen have stated that the Border problem will be solved soon as maps of the middle sector have been exchanged. IDC wonder what if at all China has conceded! The Western sector maps will follow and then Eastern and IDC perceives a status quo in the main.

IDC is convinced and worried that India would have to accept the LAC as the international border with very minor modifications as China has been clever, single minded and has not given up an inch and knows India does not have cogent thinking on what it wants and is beset with other more demanding problems.

The same was the case in 1962 and no one believed China was serious and it gave the Indian Army a drubbing, which was a politco-military failure. Again today Indians do not believe China is well ahead. In the cocktail circuits Indian diplomats and media keep repeating that China is doing well outwardly but is in a mess and will collapse some day as private ownership is still denied. Well, private ownership and democracy has given us happiness but not great GDP growth or stability and there lies the difference.

Chinese Strengths

China today has the economic, military and diplomatic means to get a better border deal vis a vis India. A recent book by Wignall if true in its facts highlights the differences between the Indian Military and the Ministry of External Affairs in thinking and knowledge of the border in the late 50s. Today too there is little change –– in that the Military has no clout in policy making and attends various meetings as an observer only and the way Generals are being promoted, there is no continuity. We will now have a CDS with no teeth, as he will be quite old too.

China on the other hand has decided on youthful leadership, dedicated experts with years of experience and a strategy with Military involvement to deal with the McMahon Line by repudiating it. Aksai Chin they say was always Chinese and they can prove it by maps and Chinese names and part of it had already been gifted away by Pakistan and Chinese have built roads there. Tibet they say was de facto agreed by Nehru to be theirs –– when China sent a telegram in the 50s and now Wignall’s book tells us more on the subject.

The Military Intelligence he claims sent him on a mission in the 50s. Another book titled ‘India’s China War’ from OUP, which was banned in India, tells us some home truths about the blunders of the India–China war, which are now proved.

Wignall in his book says while 'official' Indian history tells us that Chinese buildings in the Aksai Chin area were discovered in 1958, when an Indian patrol was arrested by the Chinese People's Liberation Army, for trespassing in Indian territory! The matter only became public in 1959 when it was raised in the Lok Sabha.

If one accepts Wignall's version, which is corroborated by several other facts, the Government of India kept the fact of the occupation of a part of Jammu and Kashmir State a secret for four/five years. In 1959, in Parliament, Nehru first dismissed the whole affair thus –– why 'fight for a few rocks?' or for a place ‘without a blade of grass’?' But later he had to admit the blunder.

 “Our illustrious Prime Minister Nehru, who is so busy on the world stage telling the rest of mankind how to live, has too little time to attend to the security of his own country. Your material was shown to Nehru by one of our senior officers, who plugged hard. He was criticised by Krishna Menon in Nehru's presence for 'lapping up American CIA agent-provocateur propaganda’. Menon has completely suppressed your information.” 'So it was all for nothing?' I [Wignall] asked. 'Perhaps not,' Singh [Wignall's contact in the army] responded. “We will keep working away at Nehru. Some day he must see the light, and realise the threat Communist Chinese occupation of Tibet poses for India.”

Indeed, it would take a few more years for the Indian prime minister to see the light. This sad incident is not complete without mentioning that Wignall's contact in Military Intelligence was killed at Sela Pass when the Chinese attacked India in 1962. It also perhaps explains why, when Timmy, (as General Thimayya was known by his junior officers), was forced to retire in 1961, he declared in his valedictory address to the Indian Army officer corps 'I hope I am not leaving you as cannon fodder for the Chinese Communists.'

Chinese Economic Growth

China today is an economic power and its growth model has beaten the logic of capitalism for making money and communism for governance. It has therefore confused the average thinking Indian who wonders how China with all its problems and confusion has made it and become a rich country with higher standards of literacy, health and less poverty than India, despite a huge population.

According to George Fernandes’ admission at the Navy Foundation Seminar on INDIA’s SECURITY, China now has a per capita income double that of India, exports of over $294 billion and reserves of over $400 billion. Indians are all so mystified by the functioning of China with its gigantic bureaucracy led by a clutch of leaders of the Politburo who now behave like elitists in their dress, diplomacy and confidence –– even with USA. Therefore it is surprising for Indians to see how a corrupt structure has produced results, which are unbelievable, because corruption has eaten away India’s wealth.

Chinese Leadership

The answers are very simple and lie in the Chinese leadership and how the Chinese logic in the main has used the means at their disposal to ensure success. They are a proud race and practical. Indians are more philosophical and as Admiral Shekhawat at the Naval seminar said –– we do not have the will to be great. That will take time.

To understand China one has to understand the actions of President Jiang Zemin post the Mao Zedong era –– in supporting the liberalisation of its economy in a controlled manner, from Communism in the late 70s. He actually shaped China on to a path of liberalisation and Chinese Military power is not far behind and Indians refuse to believe it. Indian economic thinking is still socialist and military thinking steeped in World War II tactics, with accent on the fine manpower the Army has. A recent example is that of the Kargil war and now Mobilisation, where the Army has laid thousands of mines.

President Jiang’s rise to power was a defining period for China –– he was able to do a deft balancing act of economic liberalisation and authoritarian rule permitting the basic social freedoms to the young of China and yet controlling any dissidence with harsh measures. The VHP and Bajrang Dal and terrorism would all have been treated differently in China –– like the Falungong. If one is to appreciate that the route followed did ensure phenomenal success it was because of Leadership and vision.

China had a spiritual tradition –– whether it was Confucianism, Buddhism or Taoism –– and the spirit of the past always returns searching for a deeper slogan than Deng Xiaoping's motto 'To become rich is glorious’.

India has solely lacked leadership in the practical sense or the will to be serious. Even today the nation that was built up on secularism is seeing itself in the hands of the few who do not believe in it.

Chinese Military Strength

It is good to remind the Indian public that everything is still not great between India and China. IDC now give snippets of China’s military progress. We have already shown the J 10 plane. They have XIA class nuclear submarines with crude ICBM launching capability and SSNs by somehow obtaining foreign technology –– aping/reverse engineering systems. They sent Chinese scientists abroad in various garbs and got them back. We are still struggling with the LCA and the ATV. Chinese have bought out Sovernmenny destroyers, Su 27s, SU 30s and latest missiles from Russia and their Nuclear force is in place. They are now carrying out exercises with the Americans to hone tactics and write out doctrines. We are still to get our CDS structure to hone the three Services. Hence China cannot be wished away as it is heading to become a super power.

Here are some examples of their long strides of progress:

Armed Forces

The Armed Forces of China are on a Modernisation spree. The Air Force is inducting the J-10 (J stands for Jangeui meaning ‘fighter’ in Chinese) and IDC have done a story on it. Navy is well ahead and now the Army is improving communications, firepower and command and control and has exercised with US Forces.

China in Space

In space China is well ahead. They are preparing for intensified space missions and international satellite launch services by developing a new family of powerful launch vehicles. Such carrier rockets will be used to launch a 20-ton, permanently manned space station. Launch capacity for the world's primary rockets exceeds 20 tons for near-earth orbits and ranges up to 7 tons for geo-stationary transfer orbits while for Chinese rockets, the figures stand at 9.2 tons and 5.1 tons respectively. China has tested two unmanned experimental space flights since 1999 to provide ground for sending astronauts into space. The new launchers will be built on a modular design based on three models of core stages –– 2.25 metres, 3.35 metres and 5 metres in diameter –– powered by liquid hydrogen, liquid oxygen and refined kerosene, which produces powerful propulsion and leaves no pollution or poison.

Civil Aviation

In modernisation of aviation China is on the march being the largest buyer of planes in the world –– some 700 in the coming decade and hence need for their safety. An advanced Raytheon B-3583 test plane landed in China to help test safety and reliability at the country's airports. The plane's full wingspan reaches 17.3 meters and the length of the fuselage is 14.18 meters. It is equipped with two turboprop engines and the most advanced test facilities on board. The aircraft is mainly responsible for testing the navigation, radar and telecommunication systems in domestic airports. They will guarantee the safety of flights taking-off and landing. The new plane brings China's total test aircraft to seven.


Pakistan and its old ally China recently signed  a memorandum of understanding on military cooperation and collaboration in the defence production sector. The signing ceremony was held during a visit by a Chinese delegation headed by General Xiong Guangkai, deputy chief of general staff of the People's Liberation Army. Xiong held talks on bilateral defence issues and the regional situation with Pakistani Secretary for Defence retired Lieut General Hamid Nawaz Khan. Xiong also met top army and air force officials to discuss regional geo-politics and defence matters. He also met President Pervez Musharraf. Islamabad and Beijing are old allies, with Pakistani leaders referring to China as the country's "most reliable and trusted friend." Pakistani leaders have stressed that growing ties with Washington in the US-led war on terrorism have not affected Islamabad's old friendship with Beijing. Now Gwadar is being developed into a modern naval port.


China and Myanmar have vowed to cooperate more closely in anti-drugs operations along their borders at a bilateral meeting on the issue recently in the capital of southwest China's border province of Yunan. China has developed substantial influence over the rulers in Rangoon and a major role for them in Myanmar cannot be ruled out.


The present posture of China towards Taiwan is outwardly warlike but will become one of cooperation over time. China has approved two Taiwan banks to set up offices in China for the first time. Once the synergy of Taiwan’s finances and technological prowess is meshed with China, in the next decade the Chinese will certainly be a super power ad an economic storehouse


Nehru did not want to fight over a few rocks where not a blade of grass grew and our present Leaders have never put out a white paper on the subject before the nation, so IDC offers this analysis to tell Indians that China has moved ahead. We need to accept this fact and work out our strategies. In summary India has to get its act together vis-à-vis China.

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