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BW Businessworld

Elephant In The Room, And Outside Too

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Not so long ago the question how to deal with China was an evolving conundrum. It is real now. As real as an elephant — looming large over all that it views, with a large appetite and largely prepared for a fight but peaceful until provoked. And just like the pachyderm, feared.
 
In an increasingly multi-polar world where American power is seen to be dissipating as its economy wobbles, China is still a nation that can surprise friends and foes alike. The West doesn’t understand it because it fears Beijing’s ambitions. Most in Asia, walloped on and off by China, fear the dragon due to historical reasons.
 
Read more columns by Rahul Sharma here
 
A recent meeting of ASEAN nations and India in New Delhi merrily skirted around the potential Chinese threat without mentioning it in so many words. Given Beijing’s strong trade linkages with the region, its economic might, military muscle and aggressive posturing, there are few who would want to upset the elephant.
 
Southeast Asian nations wouldn’t want to disrupt trade worth more than $360 billion. India, which is aiming for bilateral trade to reach $100 billion soon and is yet to solve its boundary dispute with China, is also pussy footing around like all others. There is too much at stake.
 
For the rest of the world, China is a huge opportunity that devours natural resources like nobody else as its factories spew carbon into the skies and vastly cheaper products into foreign markets. It is not easy to fully engage China, as it is dangerous to remain completely disengaged.
 
In 2013 China, coming out of serious political scandals that shook the Communist Party leadership and with a new president, will want to assert itself — slowly but surely. Xi Jinping, the new president who is seen to close to the military, could indulge in additional scaremongering in the South China Sea where Beijing is in a territorial spat with some Southeast Asian countries. Similarly, its differences over a bunch of islands with Japan could take a turn for the worst. A new government in Japan might be belligerent.
 
That China takes up a lot of time of policymakers in Washington and elsewhere was evident when the US National Intelligence Council (NIC) released its report on global trends in December. It took a long-term view of geopolitical trends and analysed the state of the world through 2030.
 
It surmised that we are moving away from a unipolar world as America’s hegemony erodes after the severe global financial meltdown that has left several Western powers waste in its wake and said that relations between Washington and Beijing would be the most important bilateral ties to shape the future.
 
The Americans are slow in accepting China’s inevitable rise, which may or may not be peaceful as it is difficult to point to the route the Chinese leadership will take to the top. However, what we know is that if China continues to grow at even slightly slower rate its economy will overtake that of the United States in about 15 years. We will then be pretty close to 2030 that the NIC is projecting.
 
To get there, China will have to have internal peace and stability. A widening rich-poor divide accentuated by wealth accumulation by party officials and their families and cronies and bridging the development levels between the countries coastal belt and interior will be the two major challenges for China. A seminal part of the exercise will be taking the large state-owned companies away from party officials.
 
When systems need to change, opposition rises and challenges the need to end a status quo. In China, skylines change faster than systems that have governed the country for decades. For sustainable change, the core has to change. In China, the core is the Communist Party that has ruled the country since Mao Zedong led a group of rag-tag revolutionaries to victory back in 1949.
 
In 2013, the party won’t change, nor would the systemic disadvantages China is battling. What will, however, change is the world around China. And in that change will lie reasons for China to make certain shifts that would allow it become slightly more patience with others.
 
The pushback is already beginning. The ASEAN meeting in New Delhi was a sign, as Southeast Asian nations and India agreed to cooperate on maritime security. Southeast Asian countries aren’t keen to see their region dominated by one or two global powers. They will be happy to have India play a bigger role to balance China.
 
Earlier, an ASEAN summit in Cambodia ended acrimoniously after leaders of member countries failed to come up with a joint statement at the end of the conference. The disagreement was over China’s increasing assertiveness in the South China Sea.
 
And Japan will push back too now that a more assertive prime minster is in place. China has asked Shinzo Abe to meet it half way, recognize that the islands in question were disputed and start negotiations. Abe is unlikely to give in quickly and that might make the Chinese uncomfortable and prone to more high-pitched rhetoric.
 
The initial months of the coming year will be important for China and the world, as Xi settles in and possibly changes tack to become more accommodating in his dealings with the neighbours. Alternatively, he can of course push hard and take a tough stand to gain brownie points at home.
 
Whatever be the case, the elephant will continue to be around — in the room and outside — and restless. All of us just have to find our own ways to deal with it.
 
(The columnist is president, public affairs, Genesis Burson-Marsteller and a former newspaper editor. He has a deep interest in matters related to China and Southeast Asia)