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India - China: Relations And Developments
Panchsheel was a long time ago by G. PARTHASARATHY

<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Former US deputy secretary of state, Strobe Talbott, has now revealed that it was <b>China that drafted the UN Security Council to adopt the highly condemnatory and one-sided Resolution 1172 after our tests. </b>
<b>China as a paper tiger</b>

The biggest problem with China's economy is that its national accounts are in shambles and the accounting system is totally unreliable. Many china experts may not be aware that (apart from the absence of a credible justice system), there is no accounting or auditing system in China, whether it be for the corporate entities or for the government which controls the commanding heights of the economy with the army generals wearing caps as company managing directors or chairmen. If there is one area where China can do with Bharatiya expertise it is in recruiting Chartered Accountants and IT experts from Bharat (say, through TCS, Infosys and Wipro).

It is also no common secret that many of these generals have their numbered swiss bank accounts into which contract moneys get laundered rapidly.

One positive aspect of the economy is the speed which the contract packages for large scale development projects are organized and executed. To this extent, the loans channeled from the international financial institutions are very efficiently drawn down with limited time and cost over-runs. This is the only silver line for an otherwise overheated economy that the projects which may be highly inflated in terms of costs involving technological components, say, from Germany, are implemented with remarkable efficiency to the full satisfaction of foreign capitalists. The foreign direct investment regime also has been tailored to benefit the foreign capitalists who have virtually total freedom to take back the profits from equity investments in quick time.

Another silver lining is the high level of productivity of land which is virtually double that of bharatiya agriculture; it is notable though that the agro-economy is monoculture based on feedstocks for pigs and very little production of rice as a percentage of the daily nutrition content. China is able to supply a substantial requirement of food, pork and wool products to Russia using the Beijing-Moscow Trains and continuing to get the military industry supplied with the Russian arms technologies. The production of leather products, plastic products, bicycles, building hardware, small electronics and textiles continue to flood the American departmental stores

I hope members have seen the incisive articles which appeared in the Economist. I am reproducing a few samples hereunder, so that we can get a flavour of the perilous economic situation in the country which is all set for a hard landing. With the help of institutions such as the IMF, this hard landing will surely be hard, as it happened with the tiger economies of South East Asia when the investors withdrew their investments in concert, leaving the stock markets high and dry. IMF is already building up pressure for the devaluation of Chinese currency, curbs on bank lendings and generally, to slow down the growth rate.

Given the situation that 50% of the land area of China is Gobi desert, desperate attempts are being made to bring more areas under cultivation to re-settle the growing Chinese population living in abject subsistence conditions.

China's economy?
The great fall of China?
Time to hit the brakes
<b>Chinese official killed by suicide bombing</b>
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->A disgruntled villager, who was dissatisfied over a compensation amount he got for his land, killed a local official by triggering a suicide bombing in southwest China's Sichuan province, police said on Saturday<!--QuoteEnd--><!--QuoteEEnd-->
<b>Military might and political messages</b>

Military might and political messages
By Mac William Bishop

TAIPEI - Military exercises often have as much political use as tactical utility, and this week, China, Taiwan and the US all have conducted major exercises in or around the Taiwan Strait. These maneuvers send messages about the various countries' intentions in the Taiwan Strait.

China's exercises began on July 16 and were scheduled to end Friday, July 23. Meanwhile, the United States' global Summer Pulse 2004 exercises, which began in mid-July and will last until mid-August, have moved to the Western Pacific region this week. Taiwan also is holding its annual Han Kuang (Han glory) exercises, which began on Wednesday, July 21, and will last until July 28.

The fact that the exercises are being conducted virtually simultaneously is neither an accident nor coincidental. It is also no accident that former Chinese president Jiang Zemin, now the chairman of the Communist Party's Central Military Commission, was quoted in a Hong Kong daily Wen Wei Po last week as in essence promising to attack Taiwan (seen as a wayward province) before or around the year 2020. The comments were made as China kicked off a major military exercise on Dongshan Island near China's southeast coast, only 280 kilometers from Taiwanese territory.

Yet even as China was showing off its military might near the Taiwan Strait, the US was conducting its own show of force in the Western Pacific, with an exercise called Summer Pulse 2004. This exercise is one of the largest naval drills the US has conducted in years, involving seven carrier strike groups - more than 120 warships, all over the world. The Pacific aspect of the exercise was widely interpreted by Taiwanese, as well as some Chinese and US pundits, as constituting a direct challenge to China.

The commander of US Pacific Forces, Admiral Thomas B Fargo, was in Beijing on a routine regional tour, and he was warned on Friday by Chinese Foreign Minister Li Zhaoxing to stop military exchanges and arms sales to Taiwan. This is precisely what Li told US National Security Adviser Condoleezza Rice last week. Li said nothing about Summer Pulse 2004.

US military officials confirmed that the exercise was serving a purpose in this regard, but said it was an exaggeration to say that Summer Pulse was being held exclusively for the benefit of Taiwan and China. "It's a lie to say that the exercise is directed at China, but then again, it's a lie to say that it is not," a senior US defense source told the Asia Times Online.

Scheduling exercises no coincidence
The scheduling of these exercises is no accident, the source said, speaking on condition he not be identified further. There were very clear reasons that the US would choose to conduct parts of Summer Pulse in the Western Pacific at the same time that China and Taiwan were conducting their own exercises: to demonstrate the United States' ability to project power and to show China that the US can still play a deterrent role in the region, despite its other operational commitments worldwide, as in the Middle East.

In short, the exercises are being held by the US to remind China that it is still serious about its commitment to defend Taiwan.

China has consistently vowed that it would unify with the democratic island of Taiwan at any cost. High-ranking party officials and senior People's Liberation Army (PLA) officers in the past have said that Beijing is willing to go to war to prevent Taiwan from becoming an independent country, and Taipei and Beijing have yet to agree to formal negotiations about Taiwan's status.

Political tensions between the two rivals have increased with the controversial re-election of Taiwanese President Chen Shui-bian, and his administration's plan to formulate a new constitution is particularly worrying to Beijing. Chen promised in his inauguration speech on May 20 to confine the constitutional revisions to matters of administration and governance, and to avoid sensitive topics related to sovereignty.

"I am fully aware that consensus has yet to be reached on issues related to national sovereignty, territory and the subject of unification versus independence," Chen said. "Therefore, let me explicitly propose that these particular issues be excluded from the present project of constitutional re-engineering."

This pledge, however, did not assuage Beijing's fears that Chen had, in effect, established a timeline for independence.

China has, therefore, sought to employ various forms of pressure on Taiwan to remind the island's leaders that it was and remains deadly serious about preventing any slide toward independence. Jiang Zemin's comments and the publicity surrounding the PLA's military exercises can be interpreted in this light.

The exercises, in which 18,000 troops reportedly took part, have been conducted only 280km from the Taiwanese-controlled Penghu islands, also called the Pescadores. China's exercises are designed to demonstrate that country's ability to carry out joint operations, or missions involving naval, air and ground forces. These would be vital in carrying out a successful attack on Taiwan.

China seeks to demonstrate air superiority
According to Hong Kong's Ta Kung Pao newspaper, one of the primary goals of the exercises was to demonstrate China's ability to gain air superiority over Taiwan. Proving that it could control the air over the Taiwan Strait is of paramount importance to China, as the PLA Air Force (PLAAF) has long been outclassed by its Taiwanese counterpart, both in terms of the quality of its aircraft and the training of its pilots, according to some defense analysts.

However, the combination of increased defense spending by China and structural problems with Taiwan's military is beginning to erode the qualitative superiority of Taiwan's Air Force, according to the US Department of Defense's most recent report to the US Congress on China's military capabilities.

"The [Taiwanese] Air Force's recently completed transition from 1960s fighter aircraft to modern 'fourth generation' [advanced aircraft such as the US-made F-16 or the French-made Mirage 2000-5] units retains many of the qualitative advantages over the PLAAF. However, fighter pilot shortages are stressing personnel, and training is conservative and overemphasizes defensive counter-air missions," according to the report, Fiscal Year 2004 Report to Congress on PRC Military Power.

Correcting China's relative lack of "fourth generation" fighter aircraft is one of Beijing's top priorities. And as China's 2004 arms budget is about US$26 billion (many analysts believe China's arms budget is much higher than the official figures indicate), the PLAAF will probably not have to go begging to acquire advanced weapons systems.

"The PLAAF and the PLANAF [PLA Naval Air Forces] are undergoing significant upgrades, which include acquiring fourth-generation aircraft, air defense systems, advanced munitions, and C4ISR [command, control, communications, computers, intelligence, surveillance and reconnaissance] equipment," the US Defense Department's report noted.

One of the reasons Beijing wants more capable air forces is due to the Chinese strategy of preventing intervention by "third parties" (ie the United States) in the event of a Taiwan Strait conflict.

The US, which is by law committed to providing for Taiwan's defense by selling weapons to the island, has in the past shown its willingness to intervene in crises in the Taiwan Strait. Notably, in 1996, former US president Bill Clinton dispatched two aircraft-carrier battle groups to the region after China began firing missiles into the waters of the Taiwan Strait. The missile tests were apparently designed to prevent the people of Taiwan from voting for Lee Teng-hui, an avowed pro-independence presidential candidate. The threats were unsuccessful - in fact, some analysts believe they had an effect opposite to that intended by China - and Lee won the election.

Strategic cross-Strait balance shifting to China
However, the cross-Strait strategic balance has been rapidly shifting in China's favor over the past 10 years, and many analysts - including experts at the Pentagon - are starting to believe that the US would have a difficult time intervening on Taiwan's behalf should China decide to attack. Therefore, some elements of the US military want to show China that the US could respond - in a very substantial way.

Official statements from the US Navy confirm that the primary purpose of the drills was to demonstrate the US's ability to get ships where they were needed as quickly as possible.

"We've moved from our standard deployment pattern to the Fleet Response Plan, where we promised the president of the United States that we can put six carriers anywhere in the world within 30 days, and [two more carriers] shortly after that," Vice Admiral Michael McCabe, the commander of the US Navy 3rd Fleet, said in a statement on the US Pacific Command's website. "We've changed the way we maintain, the way we train, the way we equip and the way we deploy. As an example of that, this summer, in what's called Summer Pulse, we will have seven different aircraft carriers with their supporting ships operating in five different theaters."

However, a number of strategic assessments of possible "Taiwan scenarios" indicate that many US defense officials believe China is gaining the ability to defeat Taiwanese forces before foreign militaries could intervene. The US, then, is not relying on a purely military containment strategy.

"Washington does not in any way ignore China's military buildup and the possibility that it might in the long term pose a strategic challenge to the United States," said Richard Bush, the director of the Center for Northeast Asian Policy Studies at the Brookings Institution in Washington, DC. Bush is also a former director and chairman of the American Institute in Taiwan, the US de facto embassy in Taipei.

"But successive administrations, Democratic and Republican alike, believe that US interests will be best served by a PRC [People's Republic of China] that is deeply integrated into the international community," Bush said. "If, on the other hand, the United States starts out by treating China as our enemy, it will surely become our enemy."

US not trying to 'surround' China
Another US defense expert concurred with this assessment.

"The United States policy toward China is still an engagement policy. The long-term intentions of China toward Taiwan and the rest of Asia are not clear, but the US does not actively seek to contain China," said Larry Wortzel, the director of the conservative Heritage Foundation's Davis Institute for International Studies in Washington. Nor is the US "surrounding' China", he said.

Taiwan, meanwhile, appears to be trying to adapt to the changing military balance in the Taiwan Strait, despite its relatively limited resources. Taiwan's Legislative Yuan has approved a nearly US$10 billion defense budget for this year, not including a "special budget" of approximately $16 billion earmarked for the procurement of a number of high-profile advanced weapons systems from the US. The special defense budget is at present the source of bitter debate within the Legislative Yuan, as many in Taiwan feel the money could better be spent elsewhere.

Despite the lack of a consensus on priorities, the military establishment in Taiwan is attempting to carry on as usual. The country began conducting its annual Han Kuang series of military exercises on Wednesday. The exercises, criticized by some observers as unimaginative and pointless, include a mock counter-landing operation, a rehearsal of an airborne assault, and several live-fire exercises.

But one of the most highly anticipated events in this year's exercise took place on Wednesday, when Taiwan's air force landed two Mirage fighter aircraft on the Sun Yat-sen Freeway in central Taiwan. When the freeway was built in the 1970s, several portions were designed to be used as temporary or emergency runways in the event of a war with China. Taiwan has five such freeways, several portions of which could theoretically be used as emergency airfields.

But the hype surrounding the landings was dismissed by some observers. "Landing on the freeway is no different from landing on a regular runway," said retired Taiwanese army general Shui Hua-ming. "The only difference is, well, it is the freeway, not an airport."

One foreign defense analyst held a different view. "The freeway landings are good, because it shows that Taiwan's military is trying something different," the analyst said, on condition of anonymity. "Usually, every year it was the same thing. They hold the same anti-amphibious landing exercise, blow up the same beach, and then turn around and everyone claps," he said.

Taiwan still hasn't fortified its airfields and hangars to increase their survivability in the event of a "saturation attack" by the PLA's Second Artillery Corps (China's missile forces), so the country was still vulnerable to the more than 500 short- and medium-range missiles that are deployed across the Strait, targeting Taiwan.

"This is a good sign," the analyst said. "It shows that Taiwan's military is willing to take a few risks and look for new alternatives to defend Taiwan."

Mac William Bishop is a journalist based in Taipei. Comments or queries may be sent to mwbtaiwan@hotmail.com .
China is building an all-weather road near the Nathu La pass, giving it a strategic edge
The Future of China’s Middle Class
Milton Kotler
President, Kotler Marketing China
Shenzhen, November, 2002

A middle class is growing in China. By most estimates, it numbers 15 percent of the population and totals 110 million people. It is estimated to reach 200 million by 2005 and 490 million by 2010. China can become the largest middle class of any country in the world.

“Middle class” has a relative meaning. In terms of the buying power of an average or quartile income, it does not mean the same thing in every country. In China it begins with an income floor of 100,000 – 150,000 RMB ($12,000 USD). The U.S. middle class base level is higher. Whatever the country income differences may be, it does mean a generalized expectation to buy goods and services that every middle class around the world has to some degree or other – homes, autos, furniture and appliances, electronics, vacations and travel and education. It is a life style of things and values distinguished on the one hand from laboring poverty and on the other from opulence. China also has a small new opulent class and a massive old class of laboring poor.

The middle classes of different countries buy things in different degrees of quantity, quality and frequency. An American may replace his vehicle more frequently than a Chinese owner. The square meters of a Chinese condominium may be less than a U.S. condo. A Chinese middle class family will spend a greater percentage of their income on the early development and education of their child than an American. A vast landscape of differences of degree appear when you look at the middle classes of Japan, U.K., India, France, Germany, and other developed and developing countries.

But the middle class in each case is the anchor of the economies of these countries. This class buys the goods and services that represent the greatest portion of their own country’s GDP. This is different from the laboring poor who produce goods and services for others which they cannot buy themselves. The opulent buy everything they desire without concern for cost. The middle class increasingly gets more of what it wants, but with increasing concern for cost.

The middle class today in every country comes from earlier generations of laboring poor and rural classes. The opulent come from earlier generations of middle class families. There are exceptional leaps during a single generation.

All countries have a problem with these different classes. They want a big middle class to consume what is produced and imported. They want a rich class to invest risk capital in new enterprises. They want a laboring class to be more productive than any other, so that they can produce at lower cost.

But the relationship between classes can become distorted, as is happening in the U.S. China must watch this trend closely to avoid the pitfalls.

The U.S. situation has been well described recently in the New York Times by Paul Krugman in his article “The Disappearing Middle Class”. Krugman cites some surprising data, which argue that the U.S. economy of 2002 has returned to basically the class distribution of the 1920s. The keynote of that distribution was a large laboring and rural class, a small middle class and a visible plutocracy that owned the greatest portion of the wealth of the country.

The distribution changed radically from World War II to the 1970s. Krugman argues that government economic and fiscal policy deliberately advanced the expansion of the middle class, until it dominated U.S. economy and society. Tax policy and public economy drove private and public investment to internal development, until it built a huge middle class consumer market that reached its apogee in the 1970s. Everybody thought they were middle class! They had a home, a car, a refrigerator, a TV, an air conditioner, vacations and vacation homes. The super-rich did not publicly display their opulence. The middle class was big in size and the dominant social norm of the society. Suburban America replaced Café Society.

Krugman argues convincingly that this has been changing since the 1980s. Today opulence has returned front stage and center. The plutocrats are in the spotlight. 13 thousand U.S. families own the same wealth as the lower 20 million of American society. In fine-tuning statistical deciles, Krugman shows that the bell shape is inverting. The rich are getting richer and fewer, the poor poorer and more numerous, the middle class more constrained than ever to remain middle class, as they face job loss, real income decline and ponderous debt.

What caused the government to change its policy course toward another social norm. Krugman, as an economist, dares a social thesis. The answer is twofold: first, conservative politics and new economic theories; next, the explosion of mass media that can promote any new change a million-fold.

Thirty years ago in America it did not look good to be a plutocrat. Mansions were for eccentrics and idiots. The proud life was middle class suburbia. Today, Krugman argues, this ideal is perishing. Every youngster strives for a Ferrari and a mansion and acknowledges, if not approves, whatever it takes to get there – greed, chicanery, sex, violence, drugs. There is a new plutocratic mass culture that abjures moderation and middle class family values and esteems opulence. Krugman thinks this is bad and knows that most people are afraid to admit it. They prefer denial.

What can China learn from this? A Middle class life style is growing rapidly in China. The good life becomes more accessible and visible. Condominiums grow like gorgeous flowers in Shanghai and Shenzhen. Cars are numerous. Department stores are carrying better lines and there are boutique shops in malls for the great world brands. The East Coast of China is getting a middle class look and attitude. Family life remains strong. But great wealth is also rising.

The big question is what will great wealth do? Will it invest its private and controlling capital in the value that can be extracted from a growing middle class through competitive markets? Or will the super-rich deflect their fortunes away from competitive domestic investment in a consumer market and instead spend it on display or send it abroad for safety and external development? Allowed to pursue its own course, great wealth will monopolize industrial and commercial power, as it did in the U.S. in the period of 1890s to 1920s. The super-rich will aggregate fortunes for monopolistic control of feeble markets.

Will a middle class economy and social norm evolve in China? Krugman suggests that depends on government policy and mass media. Will the Chinese government advance or retard the emerging middle class of China? Will they encourage the media to set a middle class tone for the society? Will they encourage the investment of foreign and domestic wealth in the expansion of domestic consumer markets? Or will they allow new plutocrats to enrich themselves through domestic monopolies and external trade and consign China to a laboring future?

China has built its wealth for two decades on an export economy generated by wealthy people, government managers and laboring classes. A middle class future for China requires educated professionals and skilled technicians who build internal markets for domestic prosperity. Domestic mass markets are the key to the middle class norm. That was a lesson that America learned from the 40s to the 70s with an American public policy that encouraged competitive internal investment balanced by export growth. But now America’s global focus on external investment and its media profligacy is retarding the middle class and returning power and aspiration to a new plutocracy. The U.S. is losing its balance and along with it the massive middle class that it has cherished. China must be careful to maintain its balance between export led growth and domestic mass market investment. Only then can China achieve the great scale of middle class toward which it aspires.

<b>The grand plans to reopen the Nathula Pass linking Sikkim and Tibet have been put off by at least a year owing to security concerns. </b>


The decision to reopen the pass, announced with much fanfare in 2003 during then prime minister Atal Bihari Vajpayee's Beijing visit, appears to have been put on the backburner by the new United Progressive Alliance government following objections raised by the Indian army and concerns over the lack of trade infrastructure at Nathula.

The decision to reopen the pass was also seen as de facto Chinese recognition of Sikkim as a part of India.

Vajpayee's China Tour: The Complete Coverage

Although no one is willing to comment officially on the reasons for the postponement, the Eastern Army Command, more specifically, the Siliguri-based XXXIII Corps, had drawn the government's attention to the construction of two new parallel roads opposite Nathula Pass by China's People's Liberation Army.

The Chinese are also upgrading the existing road into a two lane and hard metal one, capable of carrying heavy armour, which the Eastern Command believes will give a major military edge to the Chinese in the eastern sector.

Last month, Sikkim Chief Minister Pawan Chamling, a strong proponent of resumption of trade between the two countries through Nathula, announced that 'the trade through the pass is likely to take one more year to start.' Prime Minister Manmohan Singh had told him that that the pass would be reopened only next year, as all the issues relating to trade agreement had to be reviewed, he said.

Barely 54 km from Gangtok, the capital of Sikkim, Nathula is located at 15,000 feet (4,500 meters) above sea level. "Our main emphasis initially will be on improving infrastructure. The road link has to be strengthened. We are considering various options for improving the roads and are also looking at possibilities of new alternative routes to Nathula," Chamling said.

This main pass -- through which trade was traditionally conducted between Tibetans and Indians -- was closed in 1962 following the outbreak of the Sino-Indian war.

The decision to reopen it following Vajpayee's visit to China last year had enthused the region, with Sikkim and neighbouring West Bengal planning a joint strategy to take advantage of the new opportunity. The twin cities of Jalpaiguri and Siliguri in West Bengal would be the main hubs once the pass is reopened.

Business worth Rs 500 cr expected through Nathu La

The West Bengal government has asked the Siliguri-Jalpaiguri Development Authority to look into areas that need improvement. In the short term, customs, warehousing, storage and freight handling infrastructure will have to be developed.

The opening of the route is also likely to benefit Chinese traders. This traditional Silk Route is the shortest between the two countries. The Tibetan town of Yatung is just 52 km away from Nathula, and Lhasa only 525 km away. The Kolkata and Haldia ports would give China easy access to the Bay of Bengal, allowing it to step up trade with other South Asian countries.

It is advantage China, says expert

Sikkim has identified 29 items of export through Nathula. They include agricultural inputs, blankets, tea, coffee, clothes, textiles, watches, shoes, canned food, tobacco, rice, and dry fruit. From Tibet items like goat skin, sheep skin, sheep wool, raw silk. yak tail, china clay, goat wool are likely to be imported into India.

The reopening of the pass will also be a boon to the tourism sector. To reach Mansarovar by car through Nathula will take just two days, compared to the 15 days it now takes. "Lakhs of tourists from both sides will be benefited," said tour operators in Gangtok.
Great read by Brahma Chellaney about them smug and viperous Chinese, when it comes to these never-ending and never-going-anywhere border talks.

<b>Forever shanghaied</b>

Drawing the line with China By BRAHMA CHELLANEY
Drawing the line with China


NEW DELHI -- India and China have held regular border-related negotiations since 1981 in the longest such process between two nations since the end of World War II. Yet, after 23 years of negotiations, the two Asian giants have not achieved the bare minimum -- a mutually defined line of control separating them -- even as they deceptively call their disputed front line the "line of actual control."

The latest round of border negotiations in New Delhi on July 26 and 27 testified to the lack of real progress.

Since negotiations first began, China has emerged as a global economic and political force and strengthened its leverage vis-a-vis India, both directly and through transfers of weapons of mass destruction to Pakistan and strategic penetration of Myanmar.

As the negotiations have proceeded, Beijing has shown a weakening inclination to settle the border or even clarify the front line. This is because the unresolved, partially indistinct Himalayan frontier fits well with Chinese interests.

First, the status quo keeps India under strategic pressure. Second, it pins down, along the Himalayas, hundreds of thousands of Indian troops who otherwise would be available against China's "all-weather ally," Pakistan -- a "third party whose interests China cannot disregard" (as a Chinese official admitted at a "track 2" dialogue in Beijing). And third, it arms China with the option to turn on the military heat along the now-quiet frontier if India were to play the Tibet card or enter into a military alliance with the United States.

More importantly, China is sitting pretty on the upper heights, having gotten what it wanted, either by furtive encroachment in the 1950s or by conquest in 1962. It certainly sees no strategic imperative to accommodate India, a potential peer competitor. By persisting with the border dialogue with India and singing the virtues of give and take, Beijing seeks to influence Indian policy and conduct through engagement while looking to take more, such as the Buddhist Tawang region -- which China claims as a cultural-continuity extension of its annexation of Tibet.

Given these realities, a succession of Indian governments put priority on fully defining the line of control (LOC), even as they remained open to any Chinese proposal for an overall border settlement.

The complementary process of confidence building since the 1980s was pivoted on the elimination of ambiguities along the LOC to stabilize the military situation on the ground and ensure peace and tranquillity permanently. But with the Chinese dragging their feet on defining the line, the confidence-building process has overtaken the line-clarification process. The two countries, for example, farcically prohibit certain military activities at specific distances from the still-blurry line.

India and China are the only known neighbors not to be separated even by a mutually defined LOC, as their entire 4,000-km frontier is in dispute. By contrast, the India-Pakistan frontier is an international border -- except in Kashmir -- where a clearly delineated LOC exists.

China, by and large, has settled land-border disputes with its neighbors other than India. For one, its dispute with India involves larger tracts of territories than any other land-border problem. For another, China has a track record of clinching land-border settlements with declining states (except in the case of Vietnam) so that it can impose the majority of its claims, as it did with a rudderless Russia before Vladimir Putin and with three internally troubled Central Asian states.

It took China two decades of border talks with India before it agreed to exchange maps of just one segment -- the least-controversial middle sector. This step was to be followed up with a promised exchange of maps of the western sector in 2002, and finally of the eastern sector. The Chinese side reneged on its promise to exchange maps of the western and eastern sectors.

China also injected deliberate confusion by suggesting that the two sides abandon years of laborious efforts to define the LOC and instead focus on finding an overall border settlement. This was clearly a dilatory tactic intended to disguise its breach of promise: If Beijing is not willing to even clarify the LOC, why would it be willing to resolve the border problem through a package settlement?

Clarification of the LOC, after all, would not prejudice rival territorial claims. A border settlement, on the other hand, would be a complex process that would involve not only a resolution of territorial claims but also agreement on a clear-cut front line through a lengthy three-part process to define, delineate on maps and demarcate on the ground the border. Put simply, a disinclination to define the LOC translates into a greater aversion to clinch an overall border settlement.

Yet, in a surprise decision before being swept out of office in national elections, Prime Minister Atal Bihari Vajpayee decided during a China visit to turn Indian policy on its head and shift the focus from LOC clarification to the elusive search for a border settlement. His concession to the hosts in agreeing to initiate a new framework of discussions between "senior representatives" has not only sidelined and stalled the process of clarifying the front line, but also taken India back to square one -- to discussing "principles" of a potential settlement, as the just-concluded discussions show.

A specialty of Chinese diplomacy has been to discuss and lay out "principles," and then interpret them to suit Beijing's convenience, as the past half-century bears out. It is incomprehensible that India would weaken its own negotiating strategy by diverting focus from the practical task of clarifying the LOC to a conceptual enunciation of "principles" to guide future talks.

The first requisite to good-neighborly relations is a defined front line. It is time India insisted on mutually clarifying the LOC with China. Otherwise, China will continue to take India round and round the mulberry tree.

Brahma Chellaney is a professor of strategic studies at the privately funded Center for Policy Research in New Delhi.

The Japan Times: July 30, 2004

Just found this on BR.
Surprised no bloody newspaper carried this story.

25 August 2004: <b>The last piece in the Manipur puzzle has been found, the Chinese hand in the recent uprising in the state. While it was widely assumed that Thangjam Manorama’s rape and murder allegedly by Assam Rifles men set off the statewide agitation for withdrawal of the Armed Forces Special Powers Act, the provocation runs deeper, as separately discovered by the Intelligence Bureau, the Research and Analysis Wing, and the Military Intelligence Directorate</b>. Their individual reports have been sent to the prime minister’s office, and discussed by the cabinet committee on political affairs, and further details are awaited before the matter can be taken up by the cabinet committee on security.

<b>From the first, the security and intelligence agencies were convinced there was more to the Manipur agitation than the tragic Manorama rape incident, which obviously lit the fire</b>. The Chinese hand was suspected, but not explored, perhaps because since after P.V.Narasimha Rao visited China in September 1993, the Chinese backing to various North-Eastern insurgent groups, but especially the NSCN, ceased, which subsequently enabled the government to open a dialogue with the NSCN factions. Through the late Nineties and thereafter, China built one axis of opposing India, proliferating to Pakistan and selling missiles and technology via third parties like North Korea, while continuing with its encirclement policy on the other axis using countries like Myanmar and Bangladesh. Arming the insurgents was thought small beer, in comparison.

Even when China commenced pressuring Nepal to invite the PLA to stamp down Maoist insurgency, reported by this magazine in early July, preparing thereby to open a third axis against India, the agencies were not alerted to its possible subversive activities in the North East. It had somehow become an article of faith on the Indian side that China would stay away from sponsoring insurgency there, though what that touching faith was based on nobody knows. Subsequently, we reported that China was implementing a Communist-Party resolution in a swathe of North-East territories, with the aim to lay claim on them after 2010, and the first step in that direction was encouraging border trade with the North-Eastern states, followed by increasing Chinese tourism in these states, and simultaneously funding the Chinese Indian community to buy prime properties in the region (Commentary, “New game,” 16 August 2004)

In a bigger picture of Chinese subversion in the North East, all this would fit, but the Manipur agitation still remained curiously unfitted, and therefore unexplained. When the agitation grew uncontrollable was when perhaps the agencies decided to investigate the deeper causes, and came upon the first of the evidence linking China to it. <b>Raids on Manipur university professors and at least seven students unearthed details of telephone calls made to Hong Kong and visits to meet Chinese MID or military-intelligence department agents. </b>

<b>During questioning, one of the professors broke down and confessed to visiting Hong Kong nine times in the past six months. A proposal was recovered in the raid for Chinese mediation of the Manipur issue. A further trail led to five Manipuri insurgent leaders who had regular meetings with MID agents based in Myanmar, who were presumably roadmapping the agitation. Separately, RAW, the IB, and military intelligence came to common conclusions about the Chinese hand in the Manipur agitation, but not to compromise operations, officials are not disclosing names or details. </b>

Reports of the Chinese hand have been available with government for at least ten days, and possibly two weeks, but it has been stymied for a response. <b>While the issue has been discussed in the CCPA, the government is chary of taking it up to the CCS, a more select body than the CCPA, with an unwritten mandate to act on issues brought before it, and not just deliberate and forget</b>. Officials say the government has sought more details, and the agencies are complying, but there is also a feeling that the government is unwilling to face the truth.

Every government has its particular level of security consciousness, but this government’s low level has left agencies dissatisfied, disoriented, and cold. <b>“Prime minister Manmohan Singh,” said a top intelligence official, “does not regularly interact with the agencies, and there is little to suggest that he acts on our findings or recommendations. Unfortunately, we cannot varnish the truth to someone’s liking. This is not about politics or oneupmanship. We state things as they are, and the risk is yours if you don’t act.” </b>

In fairness to the UPA, it is only a hundred days old, put against the risk of questioning the basis of our hard-got friendship with China. China is not a pipsqueak but the most proactive big power after the United States, leagues ahead of united Europe or Russia, and an emerging power like India has to proceed with abundant action against it, if such be policy. But the agencies complain that there is no policy on China, not outside the agenda of resolving the border issue, and while we play ball, they move the goalposts to their advantage.

On the causes of the recent threatened flooding of Himachal Pradesh, for example, the government has a good idea, that indiscriminate rock blasting for railways and roads in the ecologically fragile Tibetan plateau produced landslides and the dangerous artificial Pareechu lake on the Sutlej. With the flood threat receded, it is extremely unlikely that India will interrogate the Chinese on the causes, even though there may a design in it to flood northern India in future and paralyse the political economy. Long-term Chinese plans for largescale Chinese settlements in the North East, preparatory to some sort of secession, have not received due attention or caused particular concern, although the agencies have dutifully monitored the Chinese Indian community since especially the 1962 war.

In this sorry background, the agencies expect little or no action on their current intelligence about the Chinese hand in Manipur. While it is legitimate for the government to seek more evidence of this, the past tells the agencies to keep expectations low. In the midst of A.B.Vajpayee’s much-published trip to China last June, the PLA grabbed two IB officers on a routine inspection tour of Arunachal Pradesh alongwith support staff of SSB jawans. Until this magazine and the newspapers exposed it, the government hoped to get the intelligence officers off quietly, and paper over the incident. “One reason to leak the Chinese hand in Manipur is so the government cannot cover up,” confessed an agency official frankly. “The various threats from China make a picture, and it is downright irresponsible to go about as though the picture does not exist.”

<b>The reaction to the Chinese subversion in Manipur cannot be knee jerk, and at least this expose should put the Chinese on the defensive. The Indian response has to be calculated and calibrated, and there must be some show of public concern to the evidence of the foreign hand in Manipur. Not showing even the most minimal concern now, not acting at all, would encourage China to worser subversion and maximum damage. The Chinese hand in the Manipur agitation is of a different order of its previous support to the Nagas, because the first involves some intellectual conversion to China’s present ideology of socialism with Chinese characteristics. As agency officials say, the arrested Manipur professors and their other intellectual sympathisers were impressed by the Chinese model of development. This should cause pain to a political-economist like Manmohan Singh about the North East and particularly Manipur’s neglect. </b>

Too much has gone wrong in the North East for any inimical foreign power not to take advantage, but simultaneously, we have to dramatically reassess our relations with China. In the centre of our relationship build-up or build-down with China cannot be the border issue, because it horribly limits our responses, and intimates our weakness, but our vision of our own future, because that will give reality and muscularity to our responses. Threatened by India’s future rivalry, China threatens us now, and we should respond in kind.
<!--QuoteBegin-amarnath+Aug 31 2004, 01:09 AM-->QUOTE(amarnath @ Aug 31 2004, 01:09 AM)<!--QuoteEBegin--> Link
Just found this on BR.
Surprised no bloody newspaper carried this story.
k.ram had posted it about a week ago in the another thread

<b>No right to work</b>

<b>China's official figures hugely understate a growing problem. But there is some good news as well</b>

“WE ARE a socialist country,” China's prime minister, Wen Jiabao, said to loud applause last weekend at a conference on the re-employment of laid-off workers. “If we don't solve the employment problem, the lives of the masses will not improve.” Mr Wen has declared unemployment to be a top priority for his administration. Most people agree that urban unemployment is growing, but a statistical quagmire of the government's making renders it difficult to assess how bad the problem really is.

Mr Wen's concerns about the problem appear to indicate that it is much worse than official figures suggest. Last year the government put the urban unemployment rate at 4.3%, which in most other countries would be regarded as close to full employment (see chart). The official target this year is to keep it under 4.7%. Officials do not seem worried about achieving this. But everyone knows the figure has little to do with reality.

It was only ten years ago that Chinese officials plucked up the courage to start using the word “unemployment”—a phenomenon previously regarded by the Communist Party as the preserve of exploitative capitalist countries. And none too soon. Over the past ten years, bloated state-owned enterprises and “collectives” (most of them in effect also state-owned) have shed much of their excess labour. Many have been simply closed. Between 1998 and 2002, such closures resulted in job losses for a staggering 24m workers, or about 10% of the urban labour force, by government reckoning.

The closures continue. Official newspapers reported this month that more big layoffs are imminent at some of the country's state-owned commercial banks, which have already shed some 250,000 staff and closed 45,000 offices since the late 1990s. The government says some 2,500 state-owned mines and large enterprises with a total staff of 5.1m are due to be shut in the coming four years.

So what is the real unemployment rate? The government's number only includes those who are officially registered as unemployed. It does not include those who have been laid off from state-owned enterprises but who still get a basic stipend for three years after losing their jobs. Taking them into account, and adjusting for other distortions, many Chinese analysts put the figure at around 8-10% in urban areas. A survey of five large cities conducted by academics at the University of Michigan and the Chinese Academy of Social Sciences found unemployment rose overall from 7.2% to 12.9% between 1996 and 2001.

Regional variations are considerable. By the government's very conservative calculations, Beijing's unemployment rate was 1.4% last year, compared with more than 6% in some cities of the north-east which have heavy concentrations of state-owned industries. The gap between the official estimate and reality is particularly evident in such areas, which have been plagued in recent years by frequent, albeit orderly, and mostly small, demonstrations by laid-off workers and retired employees. The unemployment rates in places like mining towns, dependent on just a few industries, are probably as high as 40%.

All this is unsettling to a government which still likes to call itself socialist (though many Chinese joke that America has a better claim to the description), which is struggling to buttress its legitimacy in the eyes of a cynical public, and which has an ingrained aversion to unrest. What Dorothy Solinger of the University of California at Irvine calls the government's “very efficient system of repression” helps keep high unemployment from triggering serious unrest. But in some areas at least, unemployment estimates may imply that the problem is more serious than it really is.

For one thing, the official figures cover only those who are registered urban residents. But in some big cities, 20-30% of the population is made up of migrant workers from the countryside, most of whom are not classified as city-dwellers. Migrant workers have very low unemployment rates, because if they cannot find work, they return to the countryside. A report published in 2002 said that some unofficial estimates putting unemployment at around 7% that year would have to be revised to 5% if the labour force were taken to include both registered residents and migrants. The migrants' numbers are also certainly higher than official figures show, although in recent weeks unusual labour shortages have been reported in some southern industrial areas, apparently because some migrants feel they are better off staying in the countryside where incomes are showing signs of recovery.

Another distortion is the high level of hidden employment. Some analysts believe that as much as 60% of laid-off workers (those not yet formally labelled as unemployed by the government but who supposedly have no work) are in fact employed informally.

Assessing the size of China's burgeoning private sector has always been a headache for official statisticians. Armies of census-takers are now in training for the national census of the economy due to be held at the end of the year. It will be the country's first. The survey is sure to find that private-sector employment is much higher than currently reported.

And what of the countryside? China ignores rural areas when calculating unemployment figures in the belief that, since villagers enjoy land-use rights, they can make a living. Even so, 150m or so rural-dwellers have little or nothing to do and in the coming years may move to urban areas. This vast reservoir will add to urban employment pressures just as China faces a baby-boom surge in the labour force and, thanks to heavy investment in capital-intensive production, diminishing employment gains from growth. “Socialist” China will have its work cut out.


China for India’s entry in Security Council

<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->18 September 2004: Chinese will support India’s entry into the enlarged UN Security Council, provided it does not back Japan’s claim for it too, and this was conveyed to Indian foreign minister Natwar Singh by his Chinese counterpart, Li Zhaoxing, earlier this week.

China has also communicated this to the other four permanent Security-Council members, being so far the only one among them to hold out against India’s entry, and it prefers Germany to Japan as the developed world’s representative in the enlarged UNSC.

China and Japan are rivals in Asia, especially in the Asia-Pacific region, and China was a Japanese colony, and Japanese colonisation which was harsh and demeaning hurts Chinese psyche even today, but Japan is staking claim as an economic power.

Officials could not immediately explain the reason for the sudden aboutturn, but they believe India’s growing clout, and as the second most-populated country, ensures a place in the enlarged Security Council, which China can only resist at the cost of friendly ties with India.<!--QuoteEnd--><!--QuoteEEnd-->

<!--emo&:roll--><img src='style_emoticons/<#EMO_DIR#>/ROTFL.gif' border='0' style='vertical-align:middle' alt='ROTFL.gif' /><!--endemo--> <!--emo&:roll--><img src='style_emoticons/<#EMO_DIR#>/ROTFL.gif' border='0' style='vertical-align:middle' alt='ROTFL.gif' /><!--endemo-->
<b>China: Party Plenum and supreme leader Hu Jintao </b>
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Four new members and one Vice-Chairman were added to the CMC, increasing its total strength to 11,as against 8 in the outgoing. Various Military Regions including those of Lanzhou and Chengdu, relevant to Indian borders, the strategic force of Second Artillery, Navy and Air Force are represented in the new body. The intention seems to be the creation of a CMC capable of attending to the task of military modernization and managing crises, for e.g., the  emerging situation concerning Taiwan Straits<!--QuoteEnd--><!--QuoteEEnd-->
and possibly India.
2 Chinese spy ships seized off Andamans

30 November 2004: Two Chinese ships have been seized in and around the Andamans last week.

More than forty Chinese sailors with suspicious identities were carrying navigation equipment on board the ships.

They were also conducting a survey of the magnetic resonance of the seabed in the vicinity of the islands on which India plans to station a part of its strategic forces.

So far, the arrested sailors have said they are fishermen, who mistakenly entered into Indian territorial waters.

Officials said that the ships came from either the East China Sea or the South China Sea, a distance of more than two-thousand miles, which makes it not a case of casual, mistaken intrusion.

When informed about the seizures, the Chinese embassy in New Delhi buttoned up, and its officials refused to meet the arrested sailors.

Since some Taiwanese nationals were identified among the arrested, the Taiwanese diplomats were summoned, who promptly reached the island, confirmed their citizens, and exposed some of the Chinese with fake travel documents who were posing as Taiwanese.

While the intelligence agencies are investigating the spying, the government is keen to play down the incident.

Magnetic resonance of the seabed sheds light on its condition, its capacity to accept submarines, and the kind of weapons that can be used in case of hostility.

Do we have any info of what happened to these sailor after they were arrested? Did we release them or are they under interrogation?
China says, military ties with Russia not targeted at any third party

Beijing, Dec 14 : China today said its growing defence ties with Russia was not targeted at any third party, a day after both the sides finalised plans to conduct joint military exercise next year.

"The military cooperation between China and Russia is not targeted at any third party and it serves the interest of regional and world peace," Chinese Defence Minister General Cao Gangchuan said here.

Cao, during talks with his Russian counterpart Sergei Ivanov yesterday, observed that defence cooperation will help the two armies to learn from each other and said frequent meetings between Chinese and Russian military leaders was of great significance in deepening the strategic partnership, the Chinese media reported today.

China is ready to join hands with Russia to push forward bilateral military ties, Cao, who is also the vice-chairman of the Central Military Commission, said after a meeting with Ivanov, where they decided to conduct the first joint military exercise next year.

Both the leaders agreed that the exercise will be "an important event" and the significance and impact of which will be "far-reaching." Officials did not disclose the exact time and place of the manoeuvres, "China Daily" reported.

Chinese President Hu Jintao, during talks with Ivanov, pointed out that the bilateral ties between China and Russia have entered a new phase, with the two sides establishing a strategic co-operative partnership. PTI
The Andaman conspiracy

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