China, better prepared for the post-COVID world

China, better prepared for the post-COVID world

By,M.K. Narayanan is a former National Security Adviser and a former Governor of West Bengal

Introduction

Several weeks before the advent of the COVID-19 pandemic, India’s Minister for External Affairs, S. Jaishankar, had observed that “what defines power and determines national standing is also no longer the same... Technology, connectivity and trade are at the heart of the new contestations....”

The Minister could never have imagined that within a few weeks, his prediction would be overtaken by a tectonic shift in the global situation thanks to a virus and a pandemic.

The Minister did mention a point about “known unknowns”, but what he could hardly have anticipated is how radical the changes would be, thanks to the phenomenon of “unknown unknowns”.

Deep economic impact

By now, India has surpassed China with regard to the number of confirmed COVID-19 cases, and has moved past the figure of 100,000 cases.

What distinguishes the present pandemic from earlier ones is its economic impact, which is perhaps even more threatening than the human costs involved.

Job losses have been massive, specially in urban areas. India’s exports in the month of April, for instance, were the worst in the past 30 years.

The harrowing plight of India’s migrant workers and the images of hungry, aimless, dispossessed migrant worker families trudging along the highways of the nation have seared the conscience of the nation. It could well have been equated to China’s May Fourth Movement (1919), except that, unlike in the case of China, the event has yet to catalyse the nation.

Flawed Fiscal Package of India

Prime Minister Narendra Modi’s announcement of a ?20-lakh crore stimulus package was, hence, timely even though economists now believe that in real terms it amounts to around 2% of GDP rather than 10% as the government makes out.

Finding resources for even this stimulus package will, however, not be easy.

The Centre’s finances are not in the best of health. It has already had to resort to a second tranche of $1 billion loan from the World Bank to support COVID-19 relief measures. The finances of States are, to say the least, in a perilous state.

Package is more a mosaic

Among the more important items are: providing a stimulus to Micro, Small and Medium Enterprises (MSMEs) through a ?3-lakh crore loan scheme; helping other stressed business sectors such as non-banking financial companies, or NBFCs, power distribution companies and the real estate industry; provisioning of free food grains to migrant workers for the next two months; provisioning of a ?1-lakh crore subsidy to agricultural cooperative societies; hiking the allocation for the Mahatma Gandhi National Rural Employment Guarantee Scheme, or MGNREGS, by ?40,000 crore; extension of credit facilities to street vendors; interest subvention for small businesses, etc.

Also, that these would be more relevant to a Budget discussion than a stimulus package.

In the list of items mentioned as part of the stimulus package are aspects such as throwing open of defence production and coal sectors to the private sector, references to opening up of defence and aerospace for private companies, support to budgetary provisions for domestic defence procurement, bringing out a negative import list of weapons and military platforms, etc.

China’s calibrated moves

China may not have anticipated the latest COVID-19 pandemic, but since its early recovery, China has followed a calibrated approach — one that stems from a policy of deliberate strategic progression conceived over the years.

Gaps between India and China

Almost five years ago, China’s President, Xi Jinping, had floated the idea of “a Community of Common Destiny of Mankind”, in the course of an address to the UN General Assembly (2015).

In this, he outlined China’s viewpoint on aspects such as economic globalisation and the information technology revolution.

The Belt and Road Initiative — which encompasses policy, infrastructure, trade, financial, and people-to-people connectivity, and, implicitly also, security ties — was an adjunct to it.

The 19th National Congress of the Communist Party of China (2017), thereafter, gave its imprimatur, considering it essential to enable China to achieve pre-eminence status within the global order.

Ever since, China has embarked on not only attaining economic and technological progress but also in defining how power would be determined in the new globalised era through devising new international norms in many emerging domains such as cyber, space, artificial intelligence, etc.

Setting the standards

China also set about rewriting international rules, premised not so much on governing where global goods are made, but on setting standards that define production, exchange and consumption.

China Standards 2035 plans to set new standards with regard to the Industrial Internet of Things (IIoT) and define next generation information technology and biotechnology infrastructure.

China is hoping, thereby, to reap the “early bird” advantage, even as other industrial nations struggle to recover from the devastation caused by the COVID-19 pandemic.

Internationalisation of Chinese standards would provide China a clear advantage by providing it an opportunity to set the standards in emerging industries such as high-end equipment manufacturing, unmanned vehicles, new materials, cybersecurity and the like.

This would enable it gain a dominant position in the global economy.

China has, for years, adopted a policy of gaining a strategic advantage not only in military matters but also in economic and technical areas.

India must plan well

India and China will certainly emerge from the pandemic more diminished than previously, but to varying extents.

Each country will, no doubt, suffer an economic setback, but while both nations would be among the very few that would still have a positive growth rate in the near future (1% in the case of China and 1.8% in the case of India, according to the International Monetary Fund) — given the size of China’s economy, it does not translate into a massive shift in India’s favour.

India would welcome some of the Companies exiting China, but there are no “green shoots” to suggest that such a shift has, or is, about to take place. Many alternatives are available to these companies and it would be excessively optimistic on our part to hold on to the belief that India is the only alternative choice for most of them.