Asia Times: It's India's economic muscle that China fears


	August 4, 2001	atimes.com

China

It's India's economic muscle that China fears
By Francesco Sisci

BEIJING - It is by no accident that India exploded its first atomic bomb in 1998 - signalling its power to the world - just a year after the financial crisis broke in Asia in 1997.

The 1997 crisis did not simply wipe out decades of development in the worst-hit countries, it also seriously dented people's trust in their economy as a way to regain pride lost in colonial times.

The example of Japan showed how countries such as South Korea, Indonesia, Malaysia and the Philippines could provide for their own people and become players on the international stage by concentrating on economic growth rather than on military build-up.

The negative example of Vietnam, however, was striking. It won the war with the United States, but it was a loser in peace time. A strong army could not make up for a weak economy.

The financial crisis of 1997, though, proved more powerful than a conventional war. It destroyed decades of accumulated fortune without damaging the aggressor, as is inevitable in conventional warfare. This doesn't mean to give credence to the conspiracy theory floating around Asia that the crisis was set off by Western financiers such as George Soros, it merely states a fact: billions of dollars migrated from Asia to more profitable shores, and the countries affected were left mired in deep trouble from which it will take years to recover.

On the other hand, India managed to weather the crisis, partly thanks to its protected currency, yet it had to look on as Russia was being admitted into the prestigious then-G-7 forum. The US, Japan and European countries were concerned about Moscow's huge atomic arsenal, and it was thanks to this, certainly not because of its economic muscle, that Moscow retained leverage in the Balkans. And it was because of its strong defense industry that the former Soviet empire could flourish in Asia, selling weapons to China and India.

In the face of this lesson and the treatment granted to Russia by the US, in 1998 the then newly-elected Indian Bhartiya Janata Party (BJP) government felt there was only one way to earn an assertive international profile - detonate nuclear devices and build missiles capable of carrying them as far as possible.

Yet, both the financial crisis and the Russian example have long-term as well as short-term implications. Russia is now a full member of the exclusive G-8 club, yet it is clear that it is a sort of a junior partner, unable to contribute equally when the senior members talk about the hot issues of international economic and trade trends because its economy cannot influence these issues.

Certainly, though, it can influence the sensitive issues of arms proliferation and international terrorism, largely because of its legacy of an advanced industry and technology. However, because of a lack of funds this has evolved little since the collapse of the USSR 10 years ago. Consequently, its influence is doomed to wane over the next decade unless its economy recovers.

India was able to forcefully stake its claim to being a nuclear power because of a decade of fast economic growth and rapid technological achievements, especially in the information technology field, where, incidentally, Russia lags far behind India. Indian's strong economic performance was also the reason why its nuclear blasts were taken more seriously by the international community than Pakistan's. Islamabad remains an impoverished country with a nonperforming economy.

In China's case, the government has for decades been building up its military muscle, and in a White Paper released by the People's Liberation Army in the fall of 2000 it was clearly stated that the economy was to be considered a military tool, and not only because one needs money to buy armaments, but because in today's global environment financial institutions can make or break an economy by moving billions of dollars in and out of a country in a flash.

This is no simple statement of principle. When the Bush administration said it would push on with its National Missile Defense (NMD) system, China voiced its strong opposition, but it also firmly renounced any arms race with the US, well aware that it was a costly such race that triggered the collapse of the USSR in the 1980s.

In other words, it is clear to China that the only way to catch up strategically with the US and at the same and to project its power is to continue with measures to ensure sustained economic growth.

China will adopt this approach with regards to India, and India would be advised to do the same. Delhi wants to be considered an equal with China, both by Beijing and by the international community, and certainly the 1998 blasts and its new Agni missiles will help it achieve this goal. But the country needs to beware of becoming too influenced by an obsession with China.

Even if it fears being contained by China, which is cultivating good relations with Pakistan on India's west and Myanmar to the east, it must not be pushed into a spiral of military build-ups which would drain its resources. Rather, it should concentrate on strengthening its economy to the point that it will perform as well, or even better, than China's.

The fact is, China is not much troubled by India's nuclear missiles. But if India were to show at least a couple of years a double-digit economic growth and a more friendly foreign investment environment, then China would be greatly concerned. India would become a direct competitor to China, drawing off coveted foreign direct investment and replacing many Chinese exports to Asia - and the world - with its own.

The lingering Indian rhetoric on a perceived Chinese threat and the necessity to counter it appears to ignore the real issue, and which is the international perception: China's economy performs better than India's and despite many obstacles investment is still pouring into China, but not into India.

India should tackle this issue rather than dig any deeper into its atomic arsenal.

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