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Discomforts with China

Its military adventurism and economic uncertainty open opportunities for India

The Chinese incursion into our territory was disturbing. The world is troubled by the nationalism and authoritarianism of China. Yet, going by feedback from senior executives in American and Japanese corporations, it offers great opportunities for India.

China’s rise as an economic superpower has been a source of concern for the West and for neighbours like India. The accusation levelled against China is that it has not played fair on the economic battlefield. Through a combination of artificially undervalued exchange rates, subsidies to state enterprises routed through its state-controlled banking system, rigid wage controls and dubious trade practices, it has decimated one industry after another in competing economies.

Things have changed over the last three years. Wages have increased, international pressure has forced it to ease its draconian control on the exchange rate. The possibility of its financial system imploding has forced it to reconsider its usual policy of using massive doses of credit to ward off any downturns in its business cycle. Rising political and social tensions, underpinned by growing inequality, have forced China’s politicians to focus more on domestic markets and buttressing domestic consumption, instead of devoting all their attention to exports. While this transition in its basic economic model is incomplete, it has slowed growth to 7-8 per cent for a while to come.

With its economic momentum slowing, Chinese politicians appear to be repackaging the Chinese dream through a mix of strident nationalism and regional authoritarianism based on military might. It seems to be a throwback to the days of imperial China. The fracas with Japan over the disputed Senkaku/Diaoyu islands in the East China Sea is an example of China’s new military adventurism. The recent military incursion into Indian territory is yet another.

For India, this presents a massive economic and business opportunity. China has been among the biggest recipients of global FDI. In 2012 alone, it received $112 billion. This could change in future. The world, particularly the US and Japan, seem deeply troubled by China’s rising nationalism and its aspirations to hegemony in the Asia-Pacific region.

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