China After Huawei And Hong Kong

The fraught trade negotiations between China and the United States have run aground. The elephant in the room is Huawei, China’s telecom network giant. Washington has long suspected Huawei of cyber-spying.

Tensions seemed to have thawed during the meeting between Chinese President Xi Jinping and US President Donald Trump at the G20 summit in Osaka, Japan. Trump promised to lift part of the ban on US firms dealing with Huawei. Apple, Google, Facebook and other US tech companies have suspended their engagement with Huawei till the White House clarifies its stand.

The rupture between Beijing and Washington, following Trump’s designation of China as a currency manipulator, goes deeper than Huawei. It encompasses Taiwan, Hong Kong and “open navigation” in the South China Sea. How could this rift between the world’s two biggest economies work to India’s benefit?

In a theory advanced by Ravi Venkatesan, the former chairman of Microsoft, China’s “Sputnik moment” could prove to be India’s big break. Writing in Mint, Venkatesan elaborated: “The Trump administration’s decision to blacklist Huawei and cut off access to Western software and chip technologies has been called China’s Sputnik moment. It will now galvanise China to develop its own independent technology infrastructure. Commentator Fareed Zakaria has suggested that this may be the US’s Sputnik moment too, finally spurring it to wean itself off Chinese suppliers and outcompete China.”

So how could this help India? Writes Venkatesan: “Depending on how it plays out, this trade war could be an extraordinary opportunity for India and our new government. Many American firms and potentially even European and Japanese companies will be looking for new countries and new suppliers to source from. They will also need to find new markets, since they may no longer be welcome in China. Equally, Chinese companies will need to find new markets to reduce their reliance on the US. With our size and capabilities, India is a natural prize for both sets of firms. We are already seeing this in tech. India is the largest market outside China for smartphone vendors like Xiaomi, OnePlus and Lenovo. It is also a must-win market for US tech companies like Google, Facebook and Amazon, which find themselves shut out of China. Chinese firms like Alibaba, Tencent and Bytedance are some of the biggest investors in Indian internet startups like Ola, Paytm, Swiggy and Big Basket.”

Beyond disputes with the US over technology, China is on the back foot in Hong Kong. The former British colony continues to be wracked by violence. President Xi has threatened to deploy Chinese troops to quell the riots. That could set up a fresh confrontation with the West. The other tinderbox is Taiwan. Trump has been more aggressive than any past US president in backing Taiwan – which China regards as a renegade province – with military hardware sales and quasi-diplomatic access.

Beijing will, at a time of its choosing, integrate Taiwan with the mainland, either by military force or engineering the election of a pro-unification Taiwanese leader like Han Kuo-yu of the opposition Kuomintang (KMT) party who will face Taiwan’s anti-China president Tsai Ing-wen in a national election scheduled for January 2020. Hong Kong, despite the spate of violent riots, is bound by a treaty signed with the British government to revert to total Chinese sovereignty in 2047. For a country that counts its civilisational history in millennia, 28 years is a transitory blink of an eye for China.

Beset by a slowing economy, however, Beijing has softened its stand with India across a range of issues. Xi will make an unprecedented visit to Varanasi to meet Prime Minister Narendra Modi in October. This continuation of last year’s “Wuhan spirit” signals a significant shift in China’s bellicose approach to India. It was quick to congratulate the Indian Space Research Organisation (ISRO) a day after the successful launch of Chandrayan-2 and suggested India and China collaborate in space exploration.

And yet, the Indian government would do well not to be seduced by China’s charm offensive. Beijing’s long-term objective remains antagonistic to India’s economic and military rise. It views the disputes with the US as transient, specific to the Trump administration. The next US president, Beijing reckons, whether in 2020 or 2024, depending on the result of the 2020 Presidential election, will seek a pragmatic entente cordiale with China.

President Trump knows this and displayed his ire with China in a series of tweets on July 30: “…My team is negotiating with them now, but they always change the deal in the end to their benefit. They should probably wait out our Election to see if we get one of the Democrat stiffs like Sleepy Joe. Then they could make a GREAT deal, like in past 30 years, and continue… to rip off the USA, even bigger and better than ever before. The problem with them waiting, however, is that if & when I win, the deal that they get will be much tougher than what we are negotiating now…or no deal at all. We have all the cards, our past leaders never got it!”

China sees India both as a geopolitical and geoeconomic rival. By purchasing power party (PPP), India’s 2019 GDP, according to the IMF, is $11.4 trillion against China’s $27.4 trillion. By 2040, the gap will have narrowed further despite chronic socialistic mismanagement of the Indian economy. Beijing’s principal objective is to use Pakistan to keep India in check while it strengthens the capability of its armed forces to credibly neutralise America’s current military superiority and thereby block any future US intervention in Taiwan.

China’s duplicity over Pakistan-sponsored terrorism will meanwhile not abate despite the Wuhan spirit. For India, the best option to counter China’s hegemonic instinct is to grow its own strengths – economic, political and social. A combination of hard power (military) and soft power (culture) are needed to protect India’s geostrategic interests.

Meanwhile, New Delhi will have to make some tough decisions over the next few months on the role Huawei will play in India’s 5G rollout. That could set the template for the India-China relationship into the next decade and beyond even as Beijing comes to terms with its own Sputnik moment.—Authored by Minhaz Merchant for Businessworld