http://www.asianage.com/columnists/china-can-we-reset-ties-150
May 26, 2014
Mohan Guruswamy
In the 52 years that have followed the debacle of 1962, little has changed. We do not seem to have as yet grasped the real and futile nature of the border dispute. It seems that to us country no longer means people, but land.
Many challenges face the Modi government. On the international arena the most urgent and the most doable is a settlement with China. The new government’s plans to vastly expand infrastructure with a hundred new and modern cities, a high-speed rail network, the clean-up of our rivers, and to make India an industrial nation instead of the services-oriented economy, it is going to entail an investment of the scale we have never imagined.
India has a propitious demographic window from now till about 2060 when it must transform itself into a modern and prosperous nation. After that the demographic situation will start turning adverse with an ageing population and an increasing dependency ratio. So not only is time money, but money is also time. The time is now and ours. But we need to look for credit to build our nation. Right now the only countries with the cash reserves to be bankers to India’s plans are China and Japan. China has reserves amounting to over $3.5 trillion and Japan has a little more than $1 trillion. India has to turn to both or either. Only they can lead to the fruition of our plans.
China is in a semi-adversarial relationship with the US, and even more so with Japan. Japan is its biggest trading partner. And the US is its biggest export market and gives it a trade surplus of about $200 billion each year. It is this trade surplus that has made China wealthy as King Croesus. But it has a problem too. Most of this cash horde sits in US banks or in US treasury bonds earning it between zero to one per cent a year. With the US dollar depreciating at about four per cent a year, this Chinese reserve will turn into dust in about 30 years.
The US also has a worrying habit of freezing reserves when the going gets hot. Iran has several hundred billions in frozen assets. With so many flashpoints, particularly the South China Sea and the Senkaku Islands disputes with Vietnam and Japan, the chances of the US raising the ante should not be rated low. The Chinese need to invest this money elsewhere to get them a rate of return and also benefit Chinese industries. Right now their options are few and poor. China cannot pull back this hoard into its domestic economy, as that will cause hyperinflation. It cannot let this hard-earned money, earned by severely exploiting its own working classes, languish either. It has to put it to work. It is no secret that China is interested in investing some of the hoard in India. India has always been a good place to invest and India has never defaulted on a loan ever.
May 26, 2014
Mohan Guruswamy
In the 52 years that have followed the debacle of 1962, little has changed. We do not seem to have as yet grasped the real and futile nature of the border dispute. It seems that to us country no longer means people, but land.
Many challenges face the Modi government. On the international arena the most urgent and the most doable is a settlement with China. The new government’s plans to vastly expand infrastructure with a hundred new and modern cities, a high-speed rail network, the clean-up of our rivers, and to make India an industrial nation instead of the services-oriented economy, it is going to entail an investment of the scale we have never imagined.
India has a propitious demographic window from now till about 2060 when it must transform itself into a modern and prosperous nation. After that the demographic situation will start turning adverse with an ageing population and an increasing dependency ratio. So not only is time money, but money is also time. The time is now and ours. But we need to look for credit to build our nation. Right now the only countries with the cash reserves to be bankers to India’s plans are China and Japan. China has reserves amounting to over $3.5 trillion and Japan has a little more than $1 trillion. India has to turn to both or either. Only they can lead to the fruition of our plans.
China is in a semi-adversarial relationship with the US, and even more so with Japan. Japan is its biggest trading partner. And the US is its biggest export market and gives it a trade surplus of about $200 billion each year. It is this trade surplus that has made China wealthy as King Croesus. But it has a problem too. Most of this cash horde sits in US banks or in US treasury bonds earning it between zero to one per cent a year. With the US dollar depreciating at about four per cent a year, this Chinese reserve will turn into dust in about 30 years.
The US also has a worrying habit of freezing reserves when the going gets hot. Iran has several hundred billions in frozen assets. With so many flashpoints, particularly the South China Sea and the Senkaku Islands disputes with Vietnam and Japan, the chances of the US raising the ante should not be rated low. The Chinese need to invest this money elsewhere to get them a rate of return and also benefit Chinese industries. Right now their options are few and poor. China cannot pull back this hoard into its domestic economy, as that will cause hyperinflation. It cannot let this hard-earned money, earned by severely exploiting its own working classes, languish either. It has to put it to work. It is no secret that China is interested in investing some of the hoard in India. India has always been a good place to invest and India has never defaulted on a loan ever.