CHINA’S TRANSITION UNDER XI JINPING CHINA’S TRANSITION UNDER XI JINPING Editor Jagannath P. Panda Foreword by Jayant Prasad Director General Institute for Defence Studies and Analyses INSTITUTE FOR DEFENCE STUDIES & ANALYSES NEW DELHI PENTAGON PRESS China’s Transition under Xi Jinping Editor: Jagannath P. Panda First Published in 2016 Copyright © Institute for Defence Studies and Analyses, New Delhi ISBN 978-81-8274-907-8 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without first obtaining written permission of the copyright owner. Disclaimer: The views expressed in this book are those of the authors and do not necessarily reflect those of the Institute for Defence Studies and Analyses, or the Government of India. Published by PENTAGON PRESS 206, Peacock Lane, Shahpur Jat, New Delhi-110049 Phones: 011-64706243, 26491568 Telefax: 011-26490600 email: [email protected] website: www.pentagonpress.in In association with Institute for Defence Studies and Analyses No. 1, Development Enclave, New Delhi-110010 Phone: +91-11-26717983 Website: www.idsa.in Printed at Avantika Printers Private Limited. Contents Foreword by Shri Jayant Prasad, Director General, IDSA ix Acknowledgement xi List of Contributors xiii 1. China in 2015: A Primer 1 Jagannath P. Panda I. POLITICS AND SECURITY 2. China’s Domestic Politics: Promises and Pitfalls 9 Avinash Godbole 3. Chinese Society: The ‘Story’ Continues 21 Gunjan Singh 4. China’s Approach to Terrorism, Separatism and Extremism 35 Neha Kohli 5. Reform and Restructuring: Chinese Military in Transition 51 M.S. Prathibha 6. China’s Space Footprint: Tracking the Progress 65 Ajey Lele 7. Tibet: Perplexing Paradoxes and Shifting Paradigms 88 Antara Ghosal Singh 8. China and the Infrastructure of the Tibetan Plateau 105 Claude Arpi vi China’s Transition under Xi Jinping II. ECONOMY AND REFORMS 9. Chinese Economy: Measuring the Progress 121 Sumita Dawra 10. China’s Exports: Declining Foreign Trade in the New Normal? 130 Sriparna Pathak 11. Labour and Industrial Slowdown in Pearl River Delta 143 Suresh T. Gopalan 12. Towards ‘Rule of Law’: Tracing the Legal Reforms 154 Ritu Agarwal III. FOREIGN POLICY AND STRATEGY 13. Chinese Foreign Policy: New Developments under Xi Jinping 165 Panu Pazo 14. China’s One Belt One Road (OBOR) Initiative: Tracking the Progress 175 Teshu Singh 15. China in Global Economic Governance: Cautious Debut, Confident Journey 188 Arpita Anant IV. ENGAGING THE MAJOR PLAYER 16. China-U.S. Relations: Sharing Power is Not an Option 207 Namrata Goswami 17. China-India Relations: Calibrated Bonhomie or Real Harmony? 223 Netajee Abhinandan 18. China-Russia Relations: Convergence and Divergence in Partnership 237 Amit Kumar Contents vii 19. China-Japan Relations: Deciphering the 70th Anniversary Course 254 Titli Basu V. REGIONAL OUTREACH 20. China and South Asia: Deepening of Engagement 277 Prashant Kumar Singh 21. Beijing: Kabul’s ‘Reliable’ Strategic Partner 314 Vishal Chandra 22. China and Southeast Asia: Tracking the Developments 337 Sampa Kundu 23. China’s Silk Road Economic Belt Strategy in Central Asia 352 Rajorshi Roy 24. China and Korean Peninsula: Evolving Dynamics 376 Sandip Kumar Mishra 25. China and Iran Nuclear Deal: Primed to Benefit 388 S. Samuel C. Rajiv 26. China-EU Relations: Marco Polo Arrives from the East? 403 Nachiket Khadkiwala Index 419 Foreword The Institute for Defence Studies and Analyses has been publishing a comprehensive annual compendium consisting of a systematic survey of different aspects of China’s internal evolution, its relations with the great powers, its stand on issues concerning global governance, and its regional and South Asian relationships. The Institute has invested in tracking developments in China since these are likely to shape the future of Asia and the world. For India, China is, arguably, its most important bilateral relationship. From this year, the Institute has decided to take the yearbook beyond a descriptive chronology of events, towards an analytical presentation on chosen themes related to China. The first such theme for the new-look publication is China’s transition under President Xi Jinping. The short studies commence with a primer by the editor, Dr. Jagannath Panda. This is followed by showcasing and evaluating developments concerning Chinese domestic politics and security, and restructuring of its military, as also the state of its trade, industry, and legal reforms. On China’s foreign and security policy, the focus is on new developments, including China’s ‘Belt and Road’ initiative, its quest to alter the rules of global economic governance, its relations with India, Japan, Russia, and the United States, and its regional interactions with South, Southeast, and Central Asia, the Korean Peninsula, Afghanistan, Iran, and the European Union. Going by projections as recent as five years ago, when Arvind Subramanian wrote Eclipse: Living in the Shadow of China’s Economic Dominance, by 2049, a hundred years after the Chinese Revolution, we could be living in a China-led world. China could then be the world’s pre-eminent power, much like the United States is today. It is too early to assess the impact of President Xi Jinping’s charismatic leadership and his contribution to China’s economic transition and diplomacy. His personal standing appears to be inversely proportional to the declining esteem for the Chinese Communist Party. He has taken good judgement calls in his campaign against corruption and steps to reorient China’s economy from export- led manufacturing growth to services, consumption, and development of the x China’s Transition under Xi Jinping hinterland. Notwithstanding his vision, energy, and pragmatic statesmanship, the desirable outcomes might not materialise due to structural factors beyond his control. China’s extraordinary economic growth is beginning to falter. It had the slowest growth last year than in the preceding quarter century. While China’s leadership is confident about the success of the economic transition, the global sentiment is uncertain. A continued downturn in China could cause as much damage to the global economic environment as the unravelling of the Euro or a serious setback to recovery of other leading economies, including that of the United States. It could increase pressure on the Renminbi, leading to competitive devaluations to ward off cheaper Chinese imports. The entire world, India included, therefore, has a stake in China’s continued stability and growth. China’s success in implementing its ‘Belt and Road’ initiative, especially the 21st Century Maritime Silk Road, will be predicated on an India-China entente, a cooperative framework built on culture and commerce, and their mutual understanding about a cooperative management of the Indo-Pacific region, in partnership with the States that straddle it. I compliment all the contributors, particularly members of the East Asia Centre of the Institute, for their dedication in producing this volume. Jayant Prasad Director General Institute for Defence Studies and Analyses Acknowledgement This volume is an outcome of the annual exercise of the Institute for Defence Studies and Analyses, New Delhi (IDSA) to understand and track China and its developmental course. As a flagship publication of the East Asia Centre in IDSA, the China Year Book (CYB) 2015 is an undertaking to comprehensively analyse China’s state transformation internally and externally. I had the privilege to edit this volume. Most of its chapters were presented in a seminar on 5 February 2016 and reviewed in IDSA forum. I owe much appreciation to a number of people who have supported me immensely in bringing out this volume. First and foremost, I owe a special gratitude to Shri Jayant Prasad, Director General, IDSA, for his continuous interest and support for this exercise. Shri Prasad was candid in reading through most of the chapters and offering useful comments. I thank Brig. (Retd.) Rumel Dahiya, Deputy Director General of IDSA for his encouragement and support for this annual exercise. I thank all my colleagues in the East Asia Centre for their support in reviewing some of the chapters in this volume. Their comments and suggestions have been beneficial. I specially thank Dr. Titli Basu for going through the entire manuscript and highlighting errors. I thank all the contributors of this volume, some of whom are stationed outside Delhi. Their enthusiasm to present their papers was commendable. Most importantly, I thank them for meeting the deadlines and for promptly responding to my queries. Last but not least, I thank Mr. Vivek Kaushik of IDSA and Ms. Kiran Sahani for their support in the editing process. I also thank Mr. Rajan Arya of Pentagon Press for bringing out the volume in time. My sincere appreciation to Mr. Virender Negi of Pentagon Press, who assisted in the production process. Dr. Jagannath P. Panda List of Contributors Dr. Jagannath P. Panda is Research Fellow at Institute for Defence Studies and Analyses (IDSA), New Delhi, where he is currently heading the East Asia Centre as coordinator. He has published in leading peer-reviewed journals like Journal of Asian Public Policy, Georgetown Journal of Asian Affairs, Asian Perspective, Journal of Contemporary China, Strategic Analyses, China Report, Journal of Asian and African Studies, Indian Foreign Affairs Journal and Portuguese Journal of International Affairs. Dr. Panda has received several international fellowships in Asia, Europe and the USA and he has been a member of the IDSA delegation for TRACK-II dialogues with various Chinese, Japanese and Korean think-tanks/ institutes. He is a recipient of the V.K. Krishna Menon medal for his academic excellence in international law and diplomacy from Indian Society of International Law (ISIL), New Delhi. Dr. Avinash Godbole is a Research Fellow at the Indian Council of World Affairs (ICWA), New Delhi. Prior to this, he was Research Assistant at the Institute for Defence Studies and Analyses (IDSA), New Delhi.