It has become fashionable to blame Prime Minister Manmohan Singh for everything that goes wrong in India. But in doing so, we lose sight of the many occasions on which he has steered the country out of harm’s way. The recent confrontation with China is a case in point. The dispute was by far the most serious that the two countries had faced since the signing of the Agreement on Peace and Tranquility in the Border Regions in 1993. Unlike numerous intrusions and counter-intrusions that occurred in the ensuing years, this one did not arise from differing perceptions of where the Line of Actual Control (LAC) lies in the as yet undemarcated portions. This time, the Chinese had intruded 19 km into Ladakh with a specific purpose: to cut the only supply route to the strategic Indian Air Force base at Daulat Beg Oldi, and thereby force India to dismantle it.
Just over 50 years ago, Jawaharlal Nehru had reacted to a similar intrusion across the McMahon Line in Arunachal Pradesh by ordering the Indian Army to clear the ridge that overlooked the Dhola post. This plunged an unprepared army into a war, and a humiliating defeat. In sharp contrast, Singh decided to make no accusations and to activate the dispute resolution process that the two countries had set up in 1994. When flag officer meetings failed to break the deadlock, India and China moved to level two of the process — discussions at a political level. This bore almost immediate fruit: on 5 May, while the Chinese folded their tents and pulled out from the Depsang Valley, Indian troops began to dismantle bunkers built at the Chumar post, a strategic lookout point that overlooked Chinese communication lines in Aksai Chin. This has been regarded by many as a major concession, but it is, in fact, a belated dismantling of structures that had been put up during the years of rising tension on the border between 2006 and ’09. These had outlived their purpose after the meeting between Singh and the then premier Wen Jiabao in Thailand in 2009.
The 5 May pullout cleared the way for Premier Li Keqiang’s visit to India. But the spate of conjecture in the Indian media about what the two leaders would discuss showed that New Delhi was still somewhat mystified by China’s sudden decision to change the status quo on the border. One explanation, put forward by Madhav Nalapat in The Sunday Guardian, put the blame on a group of generals loyal to former president Jiang Zemin, who chose the border dispute as a litmus test of the nerve and resolve of new President Xi Jinping. Nalapat surmised that these generals and others in the PLA, who had amassed fortunes abroad, were feeling threatened by the rising clamour against corruption and Xi’s frequent references to the need to purify the State, and wanted to use a confrontation with India to bring him to heel.
This hypothesis is credible because ever since Jiang came to power in 1993, every new leader has faced a challenge to his authority from within the party in the early months of his ascendancy. Jiang faced one from the then Beijing mayor Chen Xitong in 1995, while former president Hu Jintao faced it from the powerful party secretary of Shanghai, Chen Liangyu, in 2006. Both overcame the challenge and jailed the challengers on charges of corruption. Xi could be facing his baptism by fire now.
But there is a second possibility: that Xi wishes to free his government from the shackles of the past in order to deal with the challenges he faces, and regards the border issue as a stumbling block that needs to be removed. He gave an early indication of this change of mindset in March at the BRICS summit in Durban, when he urged that it should be resolved not just “very soon” (Hu, 2006), or “gradually” (Wen, 2009), but “as early as possible”. In other words, unlike his predecessors, he no longer considered it necessary to keep the issue alive in order to keep India in line over Tibet.
At Durban, Xi also signalled the importance he attached to India by dispensing with protocol and informing Singh that Li would visit India first in his maiden foreign tour. This was no sudden shift of policy. Chinese scholars who attended a seminar on India-China ties in Singapore in April had delineated five possible levels of relationship ranging from competition and hostility (Level 1) to long-term strategic cooperation (Level 5), and observed that while China wanted to take the ties to Level 5, India seemed content with Level 3 — a deepening economic relationship and diplomatic cooperation on specific issues.
A senior Chinese official, who visited New Delhi a week before Li, emphasised China’s growing sense of urgency when, speaking on condition of anonymity to The Hindu, he urged New Delhi to move “as quickly as possible” towards a resolution of the border issue. In Ladakh, “the timely deployment of the joint border dispute resolution mechanism and opening of several communication channels had stopped a local issue spreading to vitiate bilateral relations in other spheres”, he observed. But this only underlined that “the border question must not be put on the backburner”.
This desire springs not from sentiment but a hard-headed assessment of the challenges that Xi is facing. While the West continues to regard China as an industrial behemoth, Chinese decision-makers see challenges arising in virtually every sphere of governance. Beijing faces growing resistance to cultural assimilation in Tibet and Xinjiang. In its international relations, it faces not only a flare-up of hostility in its neighbourhood, subtly encouraged by the US, but a growing pressure to accept a new version of a unipolar world, now governed jointly by the US and EU through NATO.
But by far, the most serious challenge has arisen at home from a sharp slowdown in its growth. This is not only posing the familiar problems of unemployment and insolvency but, due to its unique form of “cadre capitalism”, in which Chinese Communist Party (CCP) cadres have been the prime movers and beneficiaries of industrialisation, it has begun to erode the CCP’s legitimacy just when it can least afford to let this happen.
The roots of this destabilising interaction can be traced back to the winding up of central planning in the first half of the 1980s. This shifted the power to invest into the hands of more than 60,000 provincial and local government bodies and set off a race to invest that became the prime cause of China’s breathtaking rates of growth in the ’80s and from 1991 until ’96. But this scramble to invest ended by creating huge excess capacities in virtually every major industrial sector that forced the Chinese economy into a steep, and only partially acknowledged, slowdown that lasted until 2002.
The stresses this sharp “recession” created sowed the first seeds of disillusionment with the CCP. It dried up the revenues that local governments had garnered from more than seven million “collective” enterprises set up between 1978 and ’95 and forced them to fill the budgetary gap through unauthorised taxes, fees and fines levied upon the rural population. Since these did not suffice, most local authorities also set up rural credit societies that offered huge returns to depositors, who were mostly moderately well-off peasants and small entrepreneurs. But by 2002, all but a few of these had lost their savings.
The cumulative impact of these measures was to transfer most of the burden of recession onto the shoulders of peasants, migrant workers and redundant State enterprise workers. Their resentment was reflected by a 10-fold rise in mass protests against State authorities from 8,700 in 1994 to 87,000 in 2005.
Today, Xi faces a repeat of this cycle. The economy has entered another sharp slowdown and the number of protests has risen to between 1.8 lakh and 2.3 lakh a year. Only this time, he does not have the option of reflating the economy through a fiscal stimulus, which was employed by Jiang in 1997 and Hu in 2008.
This got used up when Hu announced a 4.3 trillion yuan ($586 million) fiscal stimulus programme for 2009-10, but the provinces invested close to 12 trillion yuan in 14 months. In July 2011, Wen said, “The last stimulus programme left us with excess capacity in 21 industrial sectors; a build-up of stockpiles; a reduction in investment efficiency; increased environmental costs; worse inflation; a build-up of local government debt; plus an asset bubble.”
China may be entering a long period of adjustment similar to what Japan endured in the early 1990s. Therefore, it is all the more important for China to consolidate its international position and reach out to other growing markets to shore up its exports. India can help it do both. But it can only do so when the two countries have cleared the obstacles that litter the road to the future.