Global Courant
On June 21, the U.S. entered the summer of 2023 with multiple foreign policy challenges that influenced each other and had to be dealt with alone. They all run through China.
The most important and troublesome one is the visit to Washington Prime Minister Narendra Modi of India. President Joseph Biden rolled out the red carpet for him. Modi is expected to be almost to Biden what Mao was to Nixon in 1972: a game-changer in a Cold War – then against Russia, now about China.
India has surpassed China in population size and its people are nearly a decade younger than the Chinese. India speaks English as its official language, the courts apply Common Law, and it is a democracy, albeit shaky at times. This last issue is the most controversial.
Some in the US accuse Modi of wanting to destroy democracy in India and supporting human rights abuses against Muslims and minorities. These voices are not to be trifled with; they are certainly a stumbling block on the road to smooth bilateral relations in America’s rights-sensitive society. But the US lives and thrives between realistic and idealistic traits.
When Nixon toured Beijing, the roads were filled with organized crowds chanting “Down with America.” While American experts were advising the People’s Liberation Army (PLA) on better tactics and weaponry against the Soviets in the mid-1970s, the American press was preoccupied with the Cultural Revolution in the Middle Kingdom. Incidentally and coincidentally, one of those American experts on China, Edward Luttwak, now openly advises India.
Now the US and India have signed several cooperation agreements on defense procurement, joint weapons production and development of critical technologies.
Allied enough
Also, China never really became an ally of the US during its political honeymoon with America in the 1970s and 1980s. Still, it played a vital role against the Soviets.
As India surpasses China in terms of population, it lags behind in other ways. Image: Settamana News
Speculating too much that concerns about human rights and India’s longstanding nonalignment policy will derail bilateral relations could miss the point. The US needs India as a global counterweight to China; India needs the US to resist multiple military and political challenges from China.
Moreover, the risk reduction policy is a boon for India as the country stands ready to receive foreign investment from China. India is one of the biggest beneficiaries of US policy towards China. If the US makes amends with China, India stands to lose on many fronts.
This Indian vulnerability is reinforced by the loss of weight from Russia after the humiliating action in Ukraine. Moscow was a star in the Indian firmament for more than 70 years. Without the US, India would miss a rare economic and political growth opportunity. Thus, India has a vested interest in fostering anti-Chinese competition.
This blurs Indian concerns about US policy towards Iran, Pakistan and Myanmar. Delhi and Washington disagree on those matters.
But India is not just looking at America. It has deep and deepening economic and military ties with Japan, Vietnam and South Korea – all partners in America’s new allies against China.
The real problem with India is its capacity to deliver. Here, China is unbeatable so far. In 20 short years it built more railways, highways, ports, airports and other infrastructure than the rest of the world. India’s performance here is mediocre at best. India needs an infrastructure boost similar to China’s and at the same speed. It’s not happening. If India does not gain strength in the coming years, much hope could evaporate.
In fact, China is quite a busy bee moving around the world, entering all the weak spots of US diplomacy. It brokered a deal between Saudi Arabia and Iran, opening up a potential corridor from Afghanistan to Eritrea and Djibouti.
It pleased the Palestinians and sent a signal to all Arabs. It expands ties in Africa and Latin America. It set up surveillance structures in Cuba and sent Premier Li Qiang to Germany and France this week to remind Europeans that their economies are linked to China and that they are better off avoiding risk. All of these actions tell the world that China is not in American grip; it has a lot of room to move.
All of these Chinese actions are problematic for the US and its apparent strategy to tighten its grip on China, but even more so for India. Delhi may only get the leftovers if Beijing strikes back with effective global policies.
Three Chinese strengths
China has three strengths against attempts to corner it.
The US needs China’s exports; they are not just part of the market, but part of the production cycle. Chinese components are in many industrial products in America and the world, and they end up in the US one way or another. It is not easy to remove Chinese elements from global imports to America.
The US needs China to buy government bonds. Without Chinese purchases, the US market would contract and interest rates would shoot up.
The US needs China’s help with fentanyl, the chemical components of which are exported from China. Fentanyl is one of the leading causes of the drug epidemic that is tearing every fiber of American society apart.
Chinese-manufactured fentanyl precursors are shipped to Mexico and spill over the US border as illegal and deadly narcotics. Photo: Serenity Bee
These are, of course, tools that China cannot easily handle. It has every interest in continuing to export its goods to the US and the world. Chinese goods are essential to the US, but global money is just as necessary to China.
It needs US T-bonds and dollars as currency to trade. It has no interest in being tarnished as a “drug dealer” with regard to fentanyl.
However, China’s biggest problem is that it doesn’t really have a currency that can replace the dollar. If it promotes the use of the renminbi abroad, its value will fluctuate relative to the domestic renminbi, controlled by the Beijing Central Bank, undermining Beijing’s cherished currency stability. If it doesn’t, it cannot escape the tyranny of the dollar, as money is the primary means of communication; it comes with rules and norms that China labels “American centrism.”
As Prime Minister Zhu Rongji foresaw in the late 1990s, China would have to come up with plans for a fully convertible renminbi to escape this trap, which brings political changes. With a fully convertible RMB, money comes in or flows out. For example, governments can fall as a result of a financial crisis. In a democracy it is manageable; if a government falls, there will be elections. In an authoritarian system it can be more complicated.
Moreover, China has no technological superiority. Technology is catching up; the value for money is excellent. But it does not exclusively own a technology vital to the entire world. Replacing its technology products can be costly, but it is manageable. In less than a year, Europe has weaned itself of all Russian gas imports, which made up a large share of EU needs (60% of gas in Germany and 40% in Italy), and gas is more important than consumer goods.
Thanks to these three elements, China thinks it will be able to negotiate for some time – and thinks that many things can change with time. Maybe it’s true. But it also gives India a time constraint. Delhi wants to play out its new role in the world before China arrives, and could strike a new deal with America.
In this light, the actual game is between India and China, winding around America and Japan. Then, in theory, an agreement between China and India could steer all politics in a completely different direction. Yet India has been trying to bet on China for over 20 years and has failed miserably; possibly it feels it wants to use the next 20 years to try something different. But for this, cozying up with America could be just part of the game for both the US and India.
This essay first appeared on Settimana News and has been republished with permission. The original article can be read here.
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