CHINA YEAR BOOK 2011 Edited by BRIGADIER MANDIP SINGH, VSM 1 CHINA YEAR BOOK Cover map not to scale. Institute for Defence Studies and Analyses, New Delhi. All rights reserved. No part of this publication may be reproduced, sorted in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photo-copying, recording or otherwise, without the prior permission of the Institute for Defence Studies and Analyses (IDSA). ISBN: 978-93-82169-04-8 Disclaimer: The views expressed in this Report are of the Task Force Members and do not necessarily reflect those of the Institute for Defence Studies and Analyses or the Government of India. First Published: May 2012 Price: Rs. 299/- Published by: Institute for Defence Studies and Analyses No.1, Development Enclave, Rao Tula Ram Marg, Delhi Cantt., New Delhi - 110 010 Tel. (91-11) 2671-7983 Fax.(91-11) 2615 4191 E-mail: [email protected] Website: http://www.idsa.in Layout & Cover by: Vaijayanti Patankar Printed at: M/s Printline H-10, IInd Floor, NDSE-I New Delhi - 110049 Tel: (91-11) 24651060, 24643119 Mob: 9716335119 Email: [email protected] 2 CONTENTS Foreword ............................................................................. 5 Introduction ......................................................................... 7 Section I: External Relations 1. Sino-Indian Relations in 2011: Two Steps Forward, One Step Backward ................ 13 Rup Narayan Das 2. China's Current Central Asia Policy: Revisiting Priorities ................................................... 24 Jagannath P Panda 3. China and South Asia: Dragon Displacing the Elephant? ............................ 35 South Asia Centre 4. China-US Relations in 2011: Stymied by Strategic Mistrust ................................. 55 Rukmani Gupta 5. China and ASEAN in 2011: Redefining a Relationship ......................................... 60 Udai Bhanu Singh 6. China's Relations with Japan, Koreas: Measured Caution .................................................... 74 Shamshad A Khan 7. China-Australia Relations in 2011: Glass Half Empty or Half Full? ................................. 83 Rahul Mishra 8. China and West Asia in 2011: Threat or Opportunity? ............................................ 91 M Mahtab Alam Rizvi 3 CHINA YEAR BOOK Section II: Internal Issues 9. China's Political Landscape: Preparing for Transistion .......................................... 101 Avinash Godbole 10. The Chinese Economy in 2011: Retrospect and Prospects ......................................... 111 Joe Thomas Karackattu 11. The China's Military in 2011: Modernisation on Track ........................................... 121 Brigadier Mandip Singh, VSM 12. Chinese Society in 2011- Some Observations .................................................. 133 Gunjan Singh About the Authors .......................................................... 143 4 FOREWORD The China story is an important part of any the burning issues in the same year. During discussion in geopolitics and international 2011, China emerged as a major player in relations today. International attention has Africa, Latin America, South Asia, and the been for some time now on China’s rapid Indian Ocean region, even as the Iran and growth, the military modernisation and its Eurozone crises loom large over the fate of somewhat assertive foreign policy. China’s world energy and economy. In its quest to sustained 9-10 per cent growth, $ 7 trillion change from a brown water navy to a blue economy, aspirations of a blue water navy, water navy, China launched its first aircraft huge investments in energy and carrier to sea for trials. Also important were infrastructure worldwide, soft power and landmark achievements in space and growing clout in the comity of nations, on stealth technologies, presence of a flotilla the one side, and its internal contradictions, conducting anti-piracy missions in the Gulf inequalities and vulnerabilities, on the of Aden, and quests for bases in the Indian other, make it an exciting and challenging Ocean. subject of study. What happens in China It goes to the credit of both India and China impacts the world. that the process on engagement and The year 2011 commemorated the 90th year cooperation continued, despite occasional of the Communist Party of China (CPC). hitches. The stated policy on both sides is The CPC has come a long way from its that cooperation must prevail over hardened communist ideology to a unique confrontation. However, it would be communist-capitalist form of economy. As counter-productive to ignore security China undergoes a once-in-a-decade issues. They must be addressed taking care political transition in 2012, there is an active that no single issue overshadows the entire debate on power equations in the political relationship. The entire gamut of security arena with the new dispensation. China’s issues was addressed during the 15th round global engagement to safeguard her energy of talks between the Special needs, management of stresses with the Representatives, which though due in West, especially the US, and a mature and December, were held in January 2012. responsible global image has been the hallmarks of its foreign policy in 2011. The China Centre at the IDSA felt the need However, a looming economic slowdown, for a compact overview of the wide burgeoning internal unrest, and tensions spectrum of political, economic, and in the South China Sea have, equally, been military dimensions of the China story as 5 CHINA YEAR BOOK it unfolded in 2011. The present volume It gives me immense pleasure to present brings together information and analysis of the first edition of the China Year Book 2011. developments in China in the year 2011. We hope it will be received well by the We hope that this publication will be a wider strategic community. useful source of information to China I compliment the China Centre of the watchers. IDSA for this initiative. New Delhi Arvind Gupta May, 2012 Director General IDSA 6 INTRODUCTION Defeating the invasion of Iraq by 400 per there are signs of impatience, belligerence, cent, and leaving other catastrophic events and aggression. Its strategic orientation is such as 9/11, Hurricane Katrina, the war undergoing change. in Afghanistan, and the global economic What makes the world turn and look at crisis way behind, the story of China’s rise China? An economy booming at a steady is the world’s most read news story in the 9–10 per cent over two decades; a gross past decade, according to The Global domestic product (GDP) of $7 trillion, Language Monitor, which tracks the top second only to the US, having overtaken 50,000 media sources throughout the Japan in 2009; forex reserves at $3.2 trillion; world. And rightly so. India’s China $90 billion defence budget; and an even watchers have been assiduously studying greater internal security budget, just to China’s growth story and could not but name a few indicators of the China story. agree more with the findings of The Global With these come the aspirations for Language Monitor. The China story covers superpower status and a change in the the entire spectrum of relations—political, world order that China hopes to achieve— economic, diplomatic, and military. China a new world order with ‘Chinese figures in all major debates in international characteristics’! China is now a key player relations simply because it impacts every in most multilateral forums worldwide, a part of the globe and every aspect of responsible member of the United Nations international relations. The ‘peaceful rise’ ‘big five’ club, and a major contributor to theory, attributed to Zheng Bijian in 2003, the cause of peace and prosperity in the was a hurried and somewhat reassuring comity of nations. All this is not without a slogan for the world which was convinced dark side: the huge issues of inequalities that China could do no better than deviate that are internal to the capitalist– from history. After all, Germany, Great communist model; the disparities in social Britain, and the United states (US) issues; the fear of failure of the Party; the embarked on an aggressive and restrictions and control of basic freedoms; expansionist policy to feed its domestic absence of institutions of democracy; and industrial hunger on the way to becoming the quest for the assimilation of the ‘lost superpowers: Britain in the industrial territories’. When put together, China is a revolution; Germany in the early twentieth scholar’s delight. century; and the US post the Cold war. Could China be any different? China, till China is at a critical juncture of its growth recently, has been true to its word, but now curve. The Hu–Wen team will be bowing 7 CHINA YEAR BOOK out of office in end 2012 amidst Association of Southeast Asian Nations speculations about the succession. Battle (ASEAN) partnership, and a key member lines are drawn between the elitist of the East Asia Summit (EAS) amongst the princelings led by Xi Jinping, against the major regional initiatives. Globally, China populists led by Chinese President Hu is a responsible member of the ‘big five’ at Jintao’s protégé, Li Keqiang. The Eighteenth the United Nations, but has not been Party Congress will meet this year end to particularly assertive, having used its veto elect the new General Secretary of the power only eight times in the past four Communist Party, an event that will decades as compared to, say, Russia, which ultimately decide the future President and has exercised it 120 times. China’s Premier