November 11, 2012

US-China-India: A critical strategic triangle

 By C Uday  Bhaskar

Two major national elections – that in the USA  and China - have been  the focus of considerable attention in recent weeks and their outcome  have a very abiding relevance for India and the region.

For India, both the US and China remain critical interlocutors and as per macro economic projections, these three countries will form a  distinctive strategic triangle of  the largest single state economies  by about 2030– which is the equivalent of the near future. Currently the  GDP of these three nations is as follows;  US –under US $17 trillion; China – below $7 trn; and India below $2 trn.  A Goldman Sachs estimate projects that by 2030, the line-up would be as follows: China –  $25.6 trn; USA –  $22.8 trn; and India –  $6.68 trn.

However in end 2012,  the domestic mood in these three countries is one of  considerable apprehension about the future.  Grave economic, fiscal and governance challenges  confront the leadership  in Washington DC, Beijing and Delhi  with the attendant socio-political discontent that augurs ill for the next election.
Equitable and inclusive  socio-economic growth  has eluded all these three societies and this has been aggravated by the global economic slowdown which is still taking it toll in the relatively insulated  European Union. For the USA, the immediate priority  is to deal with a looming 'fiscal-cliff' which will come into effect on January 1, 2013.  Unless some radical legislative consensus is arrived at, current US law mandates that  hefty tax  increases and certain  spending cuts  will become mandatory  to  progressively reduce the huge budget deficit.

President Barack Obama and the US  Congress will be tested for their political perspicacity and the integrity of the decisions taken will have a bearing on the credibility and  vitality of the USA as the world's  leading power. Experts aver that the scale of the public debt  the USA has now accumulated -  US$ 11. 4 trillion (October 2012 )  which is almost 72 percent of total US GDP - is just too colossal to handle. The oppressive strait-jacket situation that now obtains is that the event  - the inevitability of the 'fiscal-cliff' cannot be allowed to happen for the consequences would  push the USA into a disastrous tail-spin with no macro-tools for redress ; and  on the other hand – the problem is so big that it cannot be tackled with the current orientation of the US political establishment, the vested corporate interests and the life-style choices of the American citizen.

The picture in Beijing  is differently bleak.  Currently the top Chinese leadership represented by the new team – Xi Jinping and Li Kaoqing  - have to address growing disenchantment  among their billion plus citizens,  of whom half as many have become vocal netizens who give vent to their frustration through cyberspace and social media. In the wake  of a series of high-profile corruption scandals,  the disparity between the  rich and the poor has visibly come into the open in a society that  prizes opaque compliance from its people.

The 1989 Tiananmen experience is the socio-political  'fiscal-cliff' equivalent  that Beijing has to avoid – at any cost. That the amber lights are flashing in the Chinese Communist Party  (CCP)  apex is evident in the fine-print of the  Hu Jintao speech  at the November 8th transition.  President Hu in a very uncharacteristic manner cautioned his colleagues : ""We cannot take the old road of seclusion and stagnation, nor can we take the 'wicked way' of changing our banner."

The Hu Jintao speech has elicited enormous comment within China and among China watchers outside the country. Will Xi Jinping – who represents the fifth generation  CCP leadership adapt to a more progressive path to deal with China's complex  socio-economic  challenges? The global economic slowdown and the  consumption depression in the USA and EU  has adversely impacted China's hyper-export profile. A large component of China's phenomenal  10 percent plus GDP growth rate of the last 15 years has been  enabled by its export profile. This in turn led to China's  GDP quadrupling during the Hu Jintao  decade.

The improvement of socio-economic indicators for a billion Chinese and hence their societal stability was pegged to the 10 percent plus  GDP growth and this is now shrinking. The first half of 2012  registered below 8 percent and while this an impressive figure when compared globally (or for that matter India ) , Beijing is  worried. What are the policy  paths available to the Xi-Li combine ?

A return to the conservative Maoist ideology – which has many supporters in the CCP will lead to one kid of  Chinese orientation in relation to its principal interlocutors – USA, Japan and India. The Hu Jintao reference to  the strategic imperative for  China  to become a credible  maritime power has already led to a flurry of interpretations in the USA and Japan.

UPA 2 which has an effective political life of about a year from now will have to deal with an Obama team and a Xi-Li combine that  has these complex  challenges to address in their respective domestic context. In the interim the intractable strategic and security basket that includes Af-Pak 2014,  Iran, Syria and the  East Asian island disputes  amongst others will continue to simmer.

Obama, Xi (or Li) and Manmohan Singh will have their first meeting as part of the East Asia  Summit in Cambodia in mid November. Can they agree that  a major global  structural   review is called for to ensure that their triangular relationship is harmonized with the opportunities of this century?

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