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Minhaz Merchant

Minhaz Merchant is the biographer of Rajiv Gandhi and Aditya Birla and author of The New Clash of Civilizations (Rupa, 2014). He is founder of Sterling Newspapers Pvt. Ltd. which was acquired by the Indian Express group

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Meeting China’s Tech Challenge

China’s long-term mission is to replace the United States as the pre-eminent geoeconomic and military power. It won’t be easy. America’s defence budget is now over $700 billion – more than four times China’s


It pays to be a one-party Communist dictatorship like China. There’s no bureaucracy to delay weapons purchases, no consensus needed to cut bank interest rates, no Opposition to satisfy on foreign policy and no electorate to be held accountable to. 

Since 1979, when Deng Xiaoping initiated economic reforms, China has in less than 40 years transformed itself from a low-income country (with a per capita income similar to India’s) into a middle-income country with a per capita income of over $8,000 – roughly four times India’s.

China now leads the world in artificial intelligence, machine learning, robotics, electrical vehicles, computing and telephony. It has the world’s fastest supercomputer, the Sunway TaihuLight, that can perform 93,000 trillion calculations a second. China’s high-tech giants Alibaba and Tencent are valued at over $500 billion, roughly 25 times the valuation of Flipkart.

But it’s in 5G broadband networks that China is racing ahead. While 4G networks in India still struggle with speeds far below 40 Mbps/second available in developed countries, 5G promises lightning-fast download speeds of 20 GB/second. The 2020 Tokyo Olympics will showcase a worldwide rollout of 5G broadband services with China in the forefront. Phil Twist, vice-president and global head of marketing (mobile networks) of Finland’s network equipment maker Nokia, recently sounded this warning: “China has announced nearly a year back the appropriate spectrum band for running 5G trials and it’s likely to be allocated in the second half of 2018, post-which, the pre-commercial 5G rollouts could happen by early 2019, whereas the Indian government is yet to announce its 5G roadmap or make the spectrum available.”

The problem in India of course is cash-strapped telecom firms. Spectrum auctions have been delayed because even the top three mobile network operators – Idea-Vodafone, Airtel and Reliance Jio – have sought time till 2020 to bid for 5G spectrum. By then, they hope, the ecosystem around 5G would have evolved, the technology standardised, and their own balance sheets strengthened. The Idea-Vodafone merger will make the Indian telecom market financially viable. All three major players are deep-pocketed. Idea-Vodafone has the Aditya Birla Group’s and Vodafone’s global resources to fund a 5G rollout. Reliance Jio is well-funded by its parent Reliance Industries while Airtel’s profitability should recover now that its Africa venture has turned the corner and the price war set off by Jio in India is easing. 

Beyond 5G networks though lies a raft of innovations that China is pressing ahead with. China’s long-term mission is to replace the United States as the pre-eminent geoeconomic and military power. It won’t be easy. America’s defence budget is now over $700 billion – more than four times China’s. The US has troops, warships, nuclear submarines, missiles and air bases in every major region of the world: Western Europe, Japan, South Korea and the Middle East. Economically too, the US is booming. After eight years of sub-three per cent GDP growth under President Barack Obama, the economy is growing at nearly four per cent a year. Unemployment is 4.1 per cent, the lowest in decades. Chinese GDP is roughly half America’s at current exchange rates. Its growth rate is beginning to slow to around 5 per cent a year. Bad bank loans, empty ghost towns with unoccupied buildings and a looming trade war with Washington can derail the China story. 

As Kenneth Rogoff, professor of economics and public policy at Harvard University, writes: “Many economists worry that robots and artificial intelligence (AI) will eventually take away most jobs, leaving most humans to while away their time engaged in leisure activities. As the rising importance of robotics and AI blunts China’s manufacturing edge, the ability to lead in technology will become more important. Here, the current trend towards higher concentration of power and control in the central government, as opposed to the private sector, could hamstring China as the global economy reaches higher stages of development.” 

President Donald Trump has adopted new strategies to deal with China’s rise. He has vowed to punish China’s intellectual property theft. He is simultaneously pressing Beijing to de-nucleurise North Korea. A summit between North Korean leader Kim Jong-un and Trump is set for May 2018. India meanwhile has meandered over its policy towards China. Its flip-flop over celebrations to mark the 60th anniversary of the Dalai Lama seeking refuge in India from persecution of Tibetans by China is symptomatic of New Delhi’s flaccid diplomacy. It first appeased China by shifting the celebratory events from Delhi to Dharamshala. Faced with sharp criticism, it sent two senior leaders (BJP General Secretary Ram Madhav and Culture Minister Mahesh Sharma) to Dharamshala to join the celebrations, promptly angering China. 

India’s first Prime Minister Jawaharlal Nehru is widely regarded as having been soft on China by in effect gifting India’s UNSC seat to Beijing in 1950. But Nehru provoked the Chinese with his “forward policy” on the border that led to the 1962 war. Nehru did not trust the Chinese “one bit”, according to a new book by G. Parthasarthy (GP) who in 1958, just a year before the Dalai Lama fled to India, was sent by Nehru as ambassador to China. GP’s son Ashok Parthasarthy (who was science and technology advisor to Indira Gandhi) quotes in the book from notes GP had made of a conversation in which Nehru said: “So GP, what has the Foreign Office told you? Hindi-Chini Bhai-Bhai? Don’t you believe it. I don’t trust the Chinese one bit. They are an arrogant, untrustworthy, devious and hegemonistic lot. Your watchword should be eternal vigilance. On important matters, you should send your telegrams only to me. You must ensure that Krishna (Menon) does not come to know of these policy guidelines of mine to you. Krishna believes that no socialist country (read China) would ever attack a non-aligned country (read India).” 

Not much has changed since Nehru’s unflattering assessment of China except that Beijing is in the process of transforming itself into a technological and economic powerhouse. For Indian policymakers, it’s time to double down on the economy. It is in the realm of geoeconomics that the future battles over technology will be won or lost.

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