Over the past few months, the Chinese stock market, rather than its real economy, has been making headlines. The index rose almost 50% between March and mid-June before coming back to the March level over the next four weeks, when the authorities took several steps to halt the slump. These moves—like reducing interest rates, restricting margin trading, getting some state-controlled organizations to buy equities or provide margin money, suspension of trading in a number of shares, etc—are standard measures which all policymakers, including those in Anglo-Saxon economies, take when a bubble in asset prices bursts.
Market euphoria and gloom are recurring features of all financial, or asset, markets, and exaggerated when leveraged, or margin, trading is preponderant. To recall a few examples from the supposedly deep and “mature” US financial markets: the October 1987 crash of the stock market; the “rescue” of Long-Term Capital Management, a hedge fund, by the Fed “persuading” several banks to take it over; the bursting of the dotcom bubble in 2000; and the 2007-08 crisis in the mortgage securities market. The US Federal Reserve is famous for writing a “Greenspan put” option in favour of markets.
More important in the long term is the way China has been fostering the internationalization of the yuan. A few years ago, Arvind Subramanian, now India’s chief economic adviser, wrote a book titled Eclipse: Living in the Shadow of China’s Economic Dominance. His argument is that, given the size of China’s economy (the world’s largest in purchasing power parity terms) and trade, and the fact that China is the world’s largest creditor nation while the US is a very large debtor, China is likely to become the dominant financial/economic power in the near future.
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As the Dalai Lama exiled in India turned 80, the situation regarding the Tibet issue has reached a crucial stage. There seems to be no chance of resumption of talks between Beijing and the representatives of the spiritual leader as deep differences between the two sides persist; the last contact was five years ago. China’s economic and security policies have led to an overall stability in Tibet; its international economic clout has grown leading to a weakening of foreign support to the Dalai Lama’s movement. With these as basis, China may feel confident about its ability to control events in Tibet and despite some internal viewpoints in favor of a soft line towards the Dalai Lama, China may not be in a hurry to reach a rapprochement with the latter. It is quite possible that China would choose to wait for the passing away of 14th Dalai Lama and appoint his successor on its own within the country in which case it can hope for a close to the Tibet issue once for all. Till such time, there may not be an end to the prevailing stalemate with respect to the Tibet issue. The stalemate has negative implications for relations between India and China though the Tibet issue is not a bilateral political problem among them. Any settlement of the issue between Beijing and the Dalai Lama can contribute to creating a right atmosphere for solving the vexed India- China border problem which was once non-existent and arose only after China liberated ’Tibet.
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For much of the two decades since the 1990s, when China moved into a high orbit of economic growth, it propounded the theory that its “rise” would be “peaceful” in nature. It was perhaps intended to reassure a wary world, which was watching a notionally Communist country of a billion-plus people move at top speed, that China would not disturb the global order overmuch even if it became the world’s largest economy (which it is on course to be, perhaps as early as the end of this decade).
That reassurance was critical to China’s securing access to international capital, becoming a magnet for Big Business, and more generally ensuring a benign geopolitical and regional climate in the early stages of its development. And particularly after the bloody crackdown on the Tiananmen Square student protests of June 1989 rattled global faith in China’s motives, “peaceful rise” became something of a mantra.
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In 1991, Chinese Premier Li Peng, who was on a visit to India, handed over Rs 500 to an Intelligence Bureau official who had been assigned as the liaison officer with the Chinese delegation. Although it is customary for visiting delegations to give gifts of mementos, the cash ‘gift’ was considered a breach of protocol, and according to media accounts, was promptly returned to the Chinese embassy.
It appears that Chinese visitors have, at the very least, been sensitised to the impact of inflation in India in recent years. For yesterday, visiting Chinese Defence Minister Liang Guanglie committed another such breach of protocol, when he handed over a cash ‘gift’ to two IAF officers – but this time the ‘gift’ was for a total of Rs 1 lakh.
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Pankaj Mishra’s From the Ruins of Empire ambitiously attempts to unite Asia intellectually, and such an enterprise is bound to face insurmountable odds.
Mishra might argue that it’s merely about how the de-colonisation of Asian countries was preceded, in the 19th century, with the stirrings of intellectual de-colonisation. Specifically, he says that the Islamic Jamal al-Din al-Afghani, the Chinese Liang Qichao and the Indian Rabindranath Tagore were first to intellectually reject the West; that this happened even before the 1905 defeat by Japan of Russia, a historical watershed demonstrating that the white man was not invulnerable; and that their ideas, rooted in “going back to one’s roots” influenced one another and subsequent Asian thinkers till de-colonisation became inevitable after World War II.
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In a February 2003 edition of Newsweek, Professor of History at Yale University, Paul Kennedy, said, “the US military budget will soon be equal to that of all countries in the world combined.”
Yet even now, hawkish policy makers in Washington are concerned that the US defence forces are dangerously thin and overstretched. So how can both facts be true?
And, a book by Martin Jacques, When China Rules the World provides adequate and, precise answers to economic rise in Asia.
Even before Lehman Brothers filed for bankruptcy protection in September 2008, war, scandal, economics and politics had plunged Americans into sullen self-deprecation. Commentaries in newspapers and books announced the Post-American World. China was riding high on the success of the Beijing Olympics, its grand coming-out party. It came out relatively unscathed in the first phase of the global financial crisis that followed Lehman Brothers’ collapse. Sustained economic growth and rising prosperity in Asia were shifting the global balance of power eastwards.
It was around this time that Martin Jacques’ When China Rules the World first hit the bookstores, the certainty of its title confirming Americans’ fears. Four years on, an updated edition is out. The US is not fully out of the latest of its periodic bouts of declinist thinking, but, as I have argued in these pages, China finds itself in its most vulnerable moment in two decades (see “Dealing with a vulnerable China”, November 21, 2011).
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Martin Jacques, author of the well-received “When China Rules The World”, tells Sangeeta Barooah Pisharoty why that country will outpace India and why it will not become more Western in the process
Reviews worldwide have called it “by far the best book on China”, “a forcefully written lively book that is full of provocations and predictions”, “offering deep knowledge and understanding” about “the end of the Western world and the birth of a new world order.”
Martin Jacques, the author of this celebrated book When China Rules the Worldis currently promoting it in India, China’s largest neighbour which is also viewed as its challenger in the region. Sitting at the New Delhi office of his publisher, Penguin, Jacques dishes out a genial smile, almost sage like, or is it that of a conqueror who knows what today holds and what tomorrow shall bring? With hands clasped together behind his head, he is all keen to reason out with you why he thinks China is the crown prince of the world economy, how it is inching closer to the throne. After all, he chased the subject for almost a decade to fill up a tome of a book at 800 pages.
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Martin Jacques isn’t just convinced about something that a lot of people believe but would rather not voice — that China will soon be the most powerful nation in the world — but he is also courageous enough to have written a book on the subject.
On Friday, The Bengal Club in association with The Telegraph and the Aspen Institute presented, as part of Bengal Club Library Talk, a discussion with Jacques on his book,When China Rules the World: The End of the Western World and the Birth of a New Global Order. The talk and the ensuing interactive session was moderated by the retired major general Arun Roy.
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Most authors have written bestsellers while on a trip to a different country or an exotic holiday destination. Whatever it takes to get inspired. For popular columnist and author Martin Jacques, a trip to East Asian countries did the trick. It gave the author a push to write a book.
“In 1993, I went on a big holiday and life changed thereafter. I met my wife, Hari, during this two-and-a-half week trip and was charmed by East Asia,” says Martin Jacques, who was here in the city to address a gathering on China and world politics at IIT Madras.
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