An IDC Analysis


New Delhi, 03 November 2002

In the last two weeks Indian media evinced great interest in China's future. We saw that Rediff did a series on China, Mohan Guruswamy did pieces for us and we stated that China was zooming ahead just when Chairman Jiang Zemin visited USA. Jiang made an impact in USA and at the APEC conference at Mexico. Yet Ramesh Jairam whom we regard as a balanced economist made little of China's progress in the Financial Times. He did not explain how Hong Kong and Macau had impacted increases in China’s coffers and now Taiwan is doing the same with exchange of business and technology. We disagree with Ramesh Jiaram that China’s progress is more hype than real.

In 20 years China is slated to be the super power of the East and in USA all strategists are agreed on it. China’s totting up of imports of cars, telephone density, infrastructure, GDP of $800 billion and imports and exports touching $300 billion cannot be denied. Most of the shoes, apparel, light electronic goods and necessities seen in mid level stores in Europe and USA are now labeled ‘Made in China’ and Chinese diaspora is increasing.

Ramesh wrote GE has exported over Rs 4000 crores of equipment from India and we have not been able to get this confirmed from GE HQ in New York at Schentady and they claim it is not even half. We also have an E-mail from Singapore from the person who helped script the article that China's Military can be Asia's No. 1.

We are convinced, as are many all over the world, that India has all the potential to move alongside China. Good governance and emulating some of China’s policies may help us achieve that. The targets should be to attract some 5 million tourists annually and an FDI of approx.$12 billion a year for the next few years with attention being paid to increasing and modernizing infrastructure. However it may not be easy for the present Government split as it is into two camps –– one progressive and liberal the other pulling it back to socialism.

The bureaucrats are still in control of the Armed Forces and they have no impetus or ability to accelerate India’s growth, and like Ramesh Jairam, are happy with India’s mediocre progress, which is noticeable but not enough to emulate China’s progress. Ex Finance Minister Chidambaram had written a piece in Financial Times that foreign investors were losing interest in India because it changes policies at the drop of a hat or as we say at the whim of a Naik or a George. Hence we reproduce a piece from Strait’s Times of Singapore.

China has now ordered more Kilo class submarines, Su 30s from Russia besides the Su 27, imported Sunburn missiles for its Sovermenny destroyers and spares and radars and UAVs from Israel. Now they are looking forward to import of defence equipment from USA and they are happy to see Taiwan armed as they feel in the end that will help China. In India we see George Fernandes has woken up to amend the NEGATIVE LIST for exports of Defence Materials but will the bureaucrats be able to do it.

IDC has always supported openness and transparency and hopes that that too will follow.

China's Military Can't Be Asia's No. 1

By Felix Soh

Straits Times, Oct. 29, 2002

Smaller but more efficient, more flexible and more mobile.

China's military will be all these and more as it undergoes a radical modernisation process.

Between 2005 and 2010, it will gain military superiority over Taiwan but, at the end of the day, it will never be the predominant military power in Asia. 'The United States will in the future remain as robustly deployed in Asia as it is now,' said respected China expert Professor David Shambaugh.

In fact, American military deployment in Asia will increase, not decrease,' he said, citing the stationing of US attack submarines on Guam.

Prof Shambaugh, who is in Singapore to deliver three lectures and meet senior government officials, is director of the China Policy Programme at George Washington University and a Senior Fellow at the Brookings Institution.

His new book, ‘Modernising China's Military: Progress, Problems and Prospects’, will be out in the bookstores in January. In an interview with The Straits Times yesterday, he gave four reasons why China will not be the region's No. 1 military power:

  • The US will maintain its pre-eminent military position in Asia;

  • Japan is also modernising its military, which is not an insubstantial force. In the next 10 years, it will play a more active military role by, for instance, deploying its warships in the region to protect the sea-lanes.

  • The economies of South-East Asian countries will recover and their military will purchase new defence equipment and increase joint training with US forces;

  • India will increase its defence capability while at the same time deepen its military cooperation with the US.

Prof Shambaugh detailed how China's military was modernising comprehensively not just its hardware but, more importantly, its software as well.

One key feature of the modernisation is the downsizing of the People's Liberation Army (PLA). Ten years ago, it was 3.6 million strong. Today, it is 2.35 million - and still shrinking.

The Chinese have come to the conclusion that smaller is cheaper and more efficient.'

Operational units have become smaller. The basic unit used to be the group army or corp (50,000–70,000). Now, it is the brigade (15,000).

This means the PLA is becoming more flexible, more mobile, cheaper, more easily trained,' he added.
No stone is left unturned. The PLA is modernising professional education, logistics, command and control systems and training regimens.

Professionalism is the buzz word.

The PLA understands that you must have a professional officer's corps and a non-commissioned officer's corps, which they are forming for the first time,' he said.

On the hardware side, it is buying weapons from Russia - aircraft, ships, submarines and missiles.
The Russians are driven by their thirst for cash. So, they are merely transferring weapons but not the means of producing them as they don't want China manufacturing arms on their southern periphery.
Will China be a benign power as it develops its military and economic clout?

Commented Prof Shambaugh: 'I don't see anything to suggest an aggressive world view or expansionist ethos in Chinese strategic thinking. China does believe its own propaganda of peaceful coexistence.'

Two exceptions to this policy are Taiwan and the South China Sea. They are issues which can make China militarily 'more coercive'.

What China wants is regional political pre-eminence and veto power so that any issue in East Asia must take Chinese views into account,' added Prof Shambaugh.

Leaner and Meaner

Remaking the Peoples Liberation Army

The Situation

  • The Chinese ground forces underwent a tumultuous two decades, marked by significant personnel cuts and organisational restructuring.

  • The army also suffered an important diminution in institutional reputation, thanks to its disastrous performance in Vietnam in 1979.

  • But it has established the parameters for the type of force it would like to become: A smaller, more rapidly deployable, combined arms force equipped with weapons that increase the range from which it can strike the enemy.

  • To achieve this goal, many of the organisational changes will need to be continued and even expanded.

  • In particular, the downsizing of the ground forces remains the necessary pre-condition for modernisation, since a smaller force frees up budget monies for the army's essential equipment and training goals.


  • From 1985–1988, more than one million personnel were trimmed from the ranks.

  • At the 15th Party Congress meeting in September 1997, President Jiang Zemin announced an additional cut of 500,000 personnel over three years.

  • The July 1998 Defence White Paper revealed that ground forces will be reduced by 19 per cent, naval forces by 11.6 per cent and air force personnel by 11 per cent.

  • These percentages amount to a reduction of about 418,000 ground forces, 31,000 naval personnel, and 52,000 air force personnel.

  • Of the 500,000 personnel to be reduced, the ground forces will account for nearly 84 per cent.

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