Akerib, Vice-Rector SWISS
agree that the cumulative economies of China and India will be
larger than that of the G7 by 2030. At present, China's GCP stands
at $9.2 trillion, or nearly 5 times that India.
The two countries
have taken very different economic paths. China has chosen to
become an exporter of labor-intensive products while India still
relies on agriculture and services, particularly in IT.
Russia's GDP at $2
trillion in 2013, and expected to shrink by 3 to 5% in 2015, less
than a quarter of China's. Russia is a raw material powerhouse
and a manufacturing dwarf. As such it should be a natural supplier
of oil and gas to China - it is a closer supplier than the Middle
East. However, the pipeline that will be built across Siberia
will deliver its goods to Nakhodka, a port facing Japan. Russia
seems to fear that it will become dependent on China for its gas
exports and that China will consider Russia as a vassal state
and sideline it on the international scene as the disparities
between the two countries grow. China has also to date not given
a definite reply to the role Russian gas will play in its energy
policy. Price is also an issue since China tends to compare the
price of gas with that of domestic coal.
forecast that China's GDP will overtake that of the US, it still
has some way to go as US GDP stands at $15 trillion.
By building its extremely
large dollar reserves, $4 trillion, the Chinese Central Bank has
allowed the US to borrow at very low interest rtes and has created
a situation in which banks have searched for higher yields through
lending massively to the housing market. The risk on the currency
and on the value of US Treasury paper is extremely large. It is
estimated that China holds over 6% of the US debt.
China could, if it
so wished, put pressure on the US economic system by buying less
US debt, or even selling it, thus precipitating a fall in the
dollar and an increase in interest rates. Reprisals from the US
could come in the form of new barriers to trade for products made
Should there be a
major economic recession in the US, with a consequent loss of
jobs, the country may well turn to protectionism. The idea that
the globalization process has been essentially beneficial to China
will be a driver to reduce imports from that country.
China is also worried
that US government borrowing to cover its enormous deficit will
lead to high inflation and that therefore the bonds held by the
Central bank will lose value.
The US has been putting
considerable pressure for China to revalue its currency, the RMB,
and thus reduce its competitive advantage based on cheap labor.
Some economists, however, believe that a revaluation of the currency
may well lead to precisely the opposite effect as funds may then
float out of the RMB and into other currencies, thus leading to
a de facto devaluation.
The fall of the dollar
has revaluated the RMB and thus made Chinese exports more expensive,
hurting mostly privately-owned SMEs and halting the modernization
process of the economy. The US could allow its currency to depreciate
further, to the point where its goods would be significantly more
competitive than they are today.
China could take
advantage of a weaker dollar to acquire assets denominated in
dollars, whether in the US or in other countries. It has thus
become a major lender and investor in South America - particularly
in Ecuador, Nicaragua and Venezuela where it has committed to
invest $250 billion over the next 10 years. This might well be
the reason for the US to have softened its stance towards Cuba.
China could also
use its reserves to acquire major European corporations in the
hope that they will out-compete US companies thus creating an
economic war between the US and the EU. It could also use its
vast financial reserves to hoard oil and uranium forcing prices
of these products to reach new highs.
China feels that
the US administration under President Obama has not delivered
on its pledge of including China, and other emerging countries,
into major economic decisions. Thus, the Obama administration
has put pressure on its allies in the Asia-Pacific area to stay
away from the Asia Infrastructure Investment Bank, one of China's
As of Japan's GDP
at $5 trillion stands also at four times that of South Korea.
Trade and investment
Asia is in a unique
tradition with several world powers sitting on a nuclear arsenal
and harboring resentments and old, deep rooted hatreds and territorial
disputes. Military budgets are on the rise and economic growth
has slowed considerably. Competition exists between the countries
we have been considering in this series of articles - it exists
in the industrial world, in cyberspace and in outer space.
Asia's history is
one of constant conflicts and long-seated hatred and there are
too many potential conflicts that threaten to erupt into wars.
There is also a seeming disdain of leaders towards their own people,
the most flagrant case being North Korea.
There is also a major
gender imbalance in favor of men and this situation has led to
fears of a rise in militarism. There is contradictory evidence
that unmarried men tend to be more violence-prone than married
Almost all the countries
covered have strong economic interconnections.
India runs a major
trade deficit with China which in 2013 was of over $ 30 billion,
with India complaining that Chinese goods take advantage of a
whole series of measures put in place by the Chinese government
while Indian companies have problems entering the market.
companies have had problems entering the Japanese market, but
due to quality issues.
With the opening
of the Indian economy to foreign investments, Japanese corporations,
catching up to a late start, are expected to invest $35 billion
over the next 5 years in public-private partnerships. Japan is
also expected to become a partner in a major public-private infrastructure
partnership project, so large many knowledgeable observers of
Indian politics doubt it can be realized, estimated at $100 billion,
to create a high technology corridor - the Delhi Metro Industrial
Corridor - linking Mumbai to New Delhi. Terrorist attacks have
so far frightened would-be investors, however.
China has also been
an important investor in India. A sustained economic cooperation
between the two countries would make them less dependent on exports
to the European Union and to the US.
China has regularly
complained about the long delays for India to approve investments
by Chinese firms and of a total ban in investments in infrastructure.
Chinese workers also have difficulties in obtaining working visas.
Bilateral trade between
India and Russia is much lower at $12 billion but after President
Putin's visit, ambitious targets have been set for 2030, essentially
in infrastructure projects. Thus, Russia will supply four nuclear
India's largest market
is the US with bilateral trade between the two countries being
of the order of $100 billion with plans to reach $500 billion.
The US has thus displaced China as India's largest trading partner
in spite of India's complaint that US subsidies to cotton farmers
undermine Indian exports and that steel exports are unjustly submitted
to high tariffs. In turn, the US complains at the difficulties
companies face in attempting to enter the Indian market and at
the limitations imposed on them when investing.
China and Japan are
each other's largest trade partners, China having replaced the
US in that role. Japanese tourists are the main visitors to China.
Japan is the major foreign investor in China, taking advantage
of low labor costs. However, the tense situation between the two
countries, and the increased cost of manpower, has led Japanese
companies to sharply reduce their investments.
China is also South
Korea's main trading partner with two-way trade of $230 billion
and the signing of a bilateral trade agreement that took effect
in February of this year. Koreans are also large investors in
China and Russia,
in spite of the fact that they are both export-oriented economies,
are complementary in that the first is a big consumer of raw materials,
primarily energy, while Russia is a major exporter of oil and
gas. This has led China to increasingly see Russia as a petro-state
with little technological capabilities and unable to pose any
type of threat.
Hence, while in the
years following the Second World War Russia saw itself dwarfed
by the Western economies, the country is, today, overtaken economically
by both the West and the East, the latter being represented by
China, Japan and South Korea.
In the Chinese-Russian
partnership, China appears to be the senior partner and it is
safe to say that Russia needs China more than China needs Russia.
Russia sees China
as a hedge of its European energy markets. This hedge, however,
can only be fully operational in the future as building the right
infrastructure that would allow Russia to move its energy exports
eastwards is a long-term venture, particularly since Russia's
most productive wells are in the European part of the country
while the bulk of China's population is in the eastern part of
their own country.
Two-way trade in
2014 was over $100 billion and while China is Russia's second
largest trading partner, trade with the EU is 4 times that amount.
The value of trade is very dependent on the price of oil and gas.
It is nevertheless expected to reach $200 billion by 2020.
On completion of
the Eastern Siberian Pacific Ocean Oil Pipeline (ESPO), Russia
could supply 20% of China's imports and 33% of Japan's on condition
these two countries choose this dependency.
The two countries
have launched the world's largest joint gas project - the Sila
Sibiri pipeline - which will deliver gas to the Russian Far East
and to China. There are other joint projects, including in the
Arctic, which have received President Putin's blessing.
Since 2014 commercial
contracts between the two countries intensified as Russia was
looking for credit and investors in the face of the sanctions
imposed by the EU and the US as well as the serious dip in the
price of oil. The oil and gas contracts signed between the two
countries are, respectively, of $270 and $400 billion over a thirty-year
period with Gazprom deliveries due to start in 2019.
in Russia are of the order of $10 billion and new investments
have been earmarked for a large variety of projects. The largest
investment is a partnership with Rosneft, valued at several billion
dollars meant essentially for the Sakhalin-3 block. Rosneft has
also secured a $35 billion loan from China in exchange for oil
supplies. This envelope is to be used to purchase several smaller
China will also invest
in a high-speed train between Kazan and Moscow - a $25 billion
investment, and other major infrastructure projects are being
Russia has, in turn,
agreed to supply China with the know-how to produce uranium-enrichment
facilities and to supply enriched uranium.
Economic ties between
China and the US are also important and the interdependence between
them appears to be growing rather than slowing in spite of constant
mutual accusations of retreating from free trade. The US ran in
2013 a deficit of $318 billion for merchandise trade, one third
of the total trade deficit. China is the US' biggest supplier.
Imports by the US
of cheap Chinese products - essentially manufactured goods, machinery,
chemicals and transport products - has been of great assistance
in controlling inflation and the US has thus transferred to China
increasingly large amounts of dollars. Since China is a major
supplier of goods to other Asian countries, in particular in South-East
Asia, that assemble products for export to the US, the US' importance
to the Chinese economy is even greater than what the above figures
show. The US has started a large number of cases against China
at the WTO claiming the country is practicing illegally high import
tariffs on US goods while simultaneously subsidizing exports.
By limiting or banning exports of raw materials, such as bauxite,
and allowing prices to climb, China has been accused of developing
one more strategy of subsidizing its industry.
in the US are of the order of $50 billion but are dwarfed by the
over $400 billion invested by US corporations in China, even though
the investment flow has slowed. Statistics in this respect are
not meaningful, as often these investments are not reported in
US statistics as the flow of funds is channeled through favorable
A large number of
American firms have established manufacturing facilities in China,
and this allowed the US economy to grow with minimal inflation.
There is a generally shared belief that China has entered a period
of uncertainty, that local competition is adopting a more aggressive
stance that in some areas there is over-capacity, that intellectual
property is not respected and that the country is increasingly
adopting a protectionist stance. Nevertheless, an increasing number
of US corporations are dependent on the Chinese economy for their
profits and sometimes on products, such as tobacco, whose sales
are dwindling in traditional markets.
Also, the US is attempting
to sell, in China, alternative energy sources such as solar or
wind power technology. This is a major market considering that
the Chinese government has announced its intention of investing
$200 billion in renewable energies by 2020. US companies, however,
are loath to export their latest technology in a country known
for closing an eye to the trespassing of intellectual property.
in the US could be even bigger if they were not met by obstacles
- the most glaring example being that of Huawei, the telecommunications
company, which was blocked from entering the US market.
The Chinese have
also become very large buyers of real estate in the US, amassing
a portfolio of $22 billion.
between Japan and Russia is more complex since the two countries
have never signed a final peace agreement and Japan still lays
claim on the Kurile Islands. Russia is ill at ease with Japan's
future involvement in a missile defense system and has proposed
to join the initiative which is led by the US.
Bilateral trade is
of the order of $33 billion with oil and LNG taken an important
part of this volume, in particular from the Sakhalin deposits.
After the Fukushima incident Japan has felt the need to diversity
its sources of energy and Russia is a natural supplier. In Russia's
eyes, supplying Japan would counterbalance the increasing dependence
on China. Several cooperation agreements to develop new gas and
oil fields have also been signed between the two countries.
Total Japanese investments
are small, with car makers have plants in Russia, but the most
likely investments will target Russia's Far East, particularly
for infrastructures. Several joint ventures have been started
in agriculture, energy and infrastructure.
Japan and South Korea
are each other's fourth largest trading partners. Russia has proposed
building a railway that would link North and South Korea to the
European markets via Russian territory - i.e. connecting to the
Trans-Siberian Railway. Such an undertaking would allow South
Korea to increase trade with Europe and reduce its dependency
on the American and Asian markets.
Bilateral trade between
South Korea and the US amounted to $115 billion in 2014 and represented
a US deficit of $25 billion. In June 2007, the two countries signed
a trade agreement that phases out all tariffs, on consumer and
industrial products over a period of three years. Total investments
from South Korea to the US is estimated to be $25 billion while
US investments in South Korea are of $35 billion.
Bilateral trade between
the US and Russia was, in 2014, of $34 billion with a US deficit
of $13 billion. Russians are big investors in New York - particularly
Manhattan - real estate particularly since the sanctions and the
decrease in the price of oil led to a collapse of the ruble. US
investments in Russia stand at around $15 billion and are rather
diminishing, again in view of the sanctions.
Economic growth has
not eradicated poverty in East Asia and estimates of the extremely
poor are of the order of 250 million persons. Although continuing
economic growth should lead to a reduction in poverty, this should
still touch 15 to 17% of the population. The imbalance stems in
part by the fact that there is an imbalance between skilled and
unskilled labor as well as regional imbalances due to the rapid
industrialization of certain areas.
East Asia is today's
the world's fastest aging. Projections show 20% of the population
over 60 by 2050, or two-thirds of the world's seniors. Already
by 2040, the number of people over 60 will be higher than the
people under 15.
Just as China is
the world's most populated country, India is the world's largest
democracy. They are the only two countries with a population larger
than 1 billion. It is forecast that sometime between 2015 and
2025, India's population will have overtaken China's as the former's
population is growing at twice the rate of China's population.
Furthermore, India's population has a low average age while China's
is aging. Therefore while India may be considered to have an infinite
supply of cheap labor, this will not be the case of China in the
mid-term future. Thus, while India's dependency ratio will improve,
China's will worsen.
is aging rapidly, partly because of a vastly improved health system.
This expanding health care system will require substantial additional
funding. So will the pension system even though traditionally,
children support their elderly parents.
Both China and India
suffer from a growing ratio of males to females. The devotion
of the children to their parents, when these age, will be difficult
to maintain if single men, due to absence of the brides, migrate
in search of employment of opportunities.
As the economies
of both countries expand at a similar rate, they will need trained
engineers and scientists. China graduates 600 000 engineers per
year and India 350 000. However, China has a qualitative advantage
due to a better educational system.
Japan's economy is
to a large extent driven by demographic change. Birthrates have
collapsed with a total fertility rate dangerously approaching
1. With a life expectancy of 88 years, it has today the world's
oldest population, with the largest number of centenarians, but
may well cede this place to China by 2050. By 2025 its population
over 80 years of age will be equal to that under 15. Thus, two
persons of working age will have to support one retiree. On the
other hand, they will be a reduction in supporting children.
Older persons invest
very conservatively, and therefore the economy might lack the
dynamic financial markets required to fuel growth and entrepreneurship.
To a large extent,
the same analysis applies to South Korea. North Korea is faring
slightly better with a total fertility rate of nearly 2.
Russia has a population
of 142 million for a country representing 19% of immerged land.
There has been a small rebound in birth rates, but it may not
be sustainable. The percentage of the population over 60 is low
compared to China, Japan and South Korea, and is of only 20%.
The imbalance between women and men - 1 160 women for 1 000 men
- and the fact that women in rural areas are unable to find husbands
who are not addicted to alcohol, contribute to a low level of
marriages, and consequently low fertility. With life expectancy
expected to rise in the coming years, while fertility is expected
to remain at its present level, the old-age dependency ratio is
expected to double by 2050. This would mean that spending on allowances
and pensions would rise from the present figure of 9% to 12% by
2030 and 16% by 2050.
The situation in
the US, while not as bad, is worrying. Its population of 316 million
is growing at the rate of 0.7% and is expected to reach 400 million
by 2050. 22% of the population will be over 65. The life expectancy
is slightly higher than 78 years but the total fertility rate
at 1.9% is below replacement. The reduction in birth rate applies
also to immigrants, usually an important component in US demographics.
are quite different. Its population is only slightly below that
of China, at nearly 1.3 billion, and it has the world's largest
number of young people since two thirds of its population is under
35, and the average age of the population is 27. But in India
too the population is aging and is expected to reach 37 by 2050.
At that time 300 million people with be over 60. The total fertility
rate is 2.5. It should therefore still enjoy a demographic dividend
compared to the ageing societies we have reviewed.
There is a large
Tibetan diaspora in India where the Dalai Lama has established
his headquarters and this has been an irritant to the Chinese
government while achieving little for the Tibetans. The Dalai
Lama relinquished his political responsibilities in March 2014
and has been replaced by a Harvard scholar who has never visited
The presence of a
Chinese diaspora in Russia is a more complex issue as there is
an important labor movement, of legal and illegal immigrants,
along the border and is becoming an important issue in the relations
between the two countries. Migrant labor is essentially employed
in agriculture and construction. The total number of Chinese in
Russia is estimated to be 400 000 including nearly 20 000 Chinese
students in Russian universities. The vast majority of the migrants
come to make money and have no plans to settle permanently.
The Chinese diaspora
in the United States is much larger with 1.6 million immigrants
and just as many US citizens of Chinese origin, heavily concentrated
in the states of California and New York. Several incidents have
questioned the loyalty of some of the immigrants to the host country.
There is a small
but concentrated Korean diaspora in China numbering approximately
There has been a
considerable flow of highly qualified and entrepreneurial migrants
from India to the US and the Indian diaspora amounts to 2.5 million
people and this number is expected to double in the next ten years.
Indians are thus the most important group of Asian immigrants
in the US. The 75 000 Indian students in the US are the largest
foreign group registered in colleges and universities. Indian
immigrants have been, on the whole, an extremely educated and
successful group with total assets estimated to total $76 billion.
There are in the
US over 3 million Americans of Russian descent.
There is a contentious
issue between China and India regarding the latter's water diversion
plan which will shift 50 billion cubic meters of water from the
Yarlung-Tsangpo, an affluent of the Brahmaputra originating on
the Tibetan plateau, to the Yellow River so as to harness hydroelectric
energy. This would severely restrict the flow of water to India.
As mentioned in the
first part of this article, China and India, but also China and
Japan, are competing to secure energy sources.
While the competition
between China and India lies in securing energy sources in other
countries, that with Japan is not only centred around Russian
supplies, but also on the presumed hydrocarbon deposits around
two rocky uninhabited islands in the East China Sea that the Japanese
government purchased from a private owner and which China claims
as its own.
China is uncomfortable
with the long shipping route oil takes from the Middle East to
its ports. The area is populated by pirates and other revolutionary
or semi-revolutionary movements that could be allowed, if not
encouraged, to target Chinese vessels. Ensuring the safety of
the shipping routes is the official reason for China's investments
in naval power.
Russia fears the
political influence that China may exert on the Central Asian
republics, in particular through the SCO - the Shanghai Cooperation
Organization - set up by China but pf which Russia is also a member.
India is, incidentally, an observer, and Russia would like to
invite the country to full membership status. Intriguingly, however,
while Russia sees to remain the determining factor in influencing
policy in Central Asia, China's position is that these states
are free to develop relations with countries not members of the
SCO and that the organization is not, and should not, become an
Russia opposes China's
wish of extending the SCO agreement to cover trade in the form
of a free trade agreement, as Russian corporations would be unable
to compete on price. It would also open the area to Chinese investments,
including in energy projects. China is successful in the region
due to the aid it brings, diplomatic pressure and large investments.
Russia's policy has been to prevent Central Asian countries to
supply European markets by bypassing the Russian pipeline system
and ensuring it has a monopsony. However, in view of the decreased
quantities purchased by Russia affected by the reduced demand
in Europe, these countries have looked for alternative markets,
and China is the obvious one.
Russia would like
to see a coordination of pricing policy on energy exports between
the member countries that are energy exporters.
Another Chinese advantage
is that it is perceived by Central Asian governments as a trading
partner and a door to Europe and the Middle East, and not as a
competitor as Russia is for gas supplies to Europe. Russia's role
as a supplier of finished goods disappeared with the downfall
China sees the pipelines
for hydrocarbons from Central Asia as a hedge against possible
disruptions of shipping lanes from the Middle East. However, just
as it is beefing up its Navy to protect those lanes, and to rely
less on US maritime power, it will have to beef up its security
along the pipelines to protect them from possible attacks.
Russia sees China
as a good partner in its policy of containing the US in Central
Asia and elsewhere. In fact one can say that Russia sees China
as a partner only when its relations with the West are less than
perfect - which is the situation at present.
China has been able,
so far, to restrain any influence the US could have on Central
Asia thus enabling China to secure energy resources for itself
and to prevent the infiltration of democratic ideas.
The US has key interests
in the region: to support its military adventure in Afghanistan,
to have access to energy - without relying on the Russian logistical
infrastructure - and to wield political influence in the entire
Central Asian area. The US also sees an opportunity to lessen
Russia's position as a gas supplier - should the Central Asian
republics find alternative routes for their gas shipments, Gazprom
will no longer be in a position to export as domestic demand is
rising from an already important base.
has been, and will continue to be in the foreseeable future, to
encircle India both through its own forces and through those of
its allies who neighbour India, Pakistan in in particular. China,
nevertheless, contrary to the US, is not part of any defence organization
and thus does not have the burden of having to defend the territories
of other nations.
budget for 2015 has been increased by 10%, reaching $145 billion,
a rather steep figure in regard to the slowing of the country's
economy. China has installed missile systems pointing to India's
major cities while China's industrial heartland is very far removed
from their common border.
China's nuclear strategy
is to use their missiles only for a second strike and not to use
them for a first strike on any state. It may, however, rapidly
change this policy if it so decided.
India is also worried
with the building of a port, by China, on the coast of Myanmar,
that would give China direct access to the Bay of Bengal. It is
also worried by the increasing presence of Chinese submarines
in the Indian Ocean. The submarines use Colombo as a refuelling
port, leading India to fear that China was building alliances
with countries surrounding India - the so-called 'string of pearls.'
China has called this project the 21st Century Maritime Silk Road,
a project financed by China to the tune of $40 billion.
Indian military hardware
purchases, the world's largest with a budget of $250 billion over
10 years, are an important source of cash for the ailing Russian
The two countries
will be jointly developing a fighter plane of the fifth generation.
India has also served Russia as a basis to enter the South East
Asian markets for military hardware by servicing and training
users of Russian equipment sold to those countries.
Russia has been very
supportive of India in its conflict with Pakistan over Kashmir,
among other things committing not to supply weapons to Pakistan,
an embargo it lifted in 2014.
The US has also been
a major provider of mostly defensive weapons to the Indian army
and this may lead to a licensing agreement for India to manufacture
India and Japan have
reached an agreement regarding military cooperation. Japan is
about to review its constitution to enable it to expand its military
which is already considered as one of the world's best and China
would have problems measuring themselves to Japanese firing power
in case of a conflict. It is also backed up by the US military
that have bases in Japan.
The main discussions
between the two countries centred on the supply of nuclear technology
and fuel to India by the US. This is an important step considering
the fear of nuclear proliferation pervasive in the world today
and particularly considering the fact that India will be adding
to an already existing nuclear capability while it has never signed
the Nuclear Non Proliferation Treaty (NPT). This allows the US
to put pressure on New Delhi to reduce its energy purchases from
Tehran. Further, India's rivalry with Pakistan might lead the
latter to accelerate its own weapons programs should India proceed
with its own purchases.
For India this is
an important development as its supplies of uranium are drying
out. The treaty also allows it to remain a nuclear player without
signing the NPT, although the country has entered negotiations
with the International Atomic Energy Agency to negotiate an agreement
that would have clauses specific to its situation.
The US has insisted
on certain clauses in the treaty such as India accepting not to
undertake further nuclear testing, not reprocessing the spent
fuel and accepting that the President of the United States certifies,
annually, that the country is respecting these clauses.
For the US this is
a major step in containing China and relations between China and
India took a turn for the worse, with China supplying nuclear
power plants to Pakistan, after this agreement was signed.
Another main motivation
of the US has been to prevent India making up for its energy shortcomings
by purchasing Iranian gas that would be routed through an Indian-Pakistani
pipeline. Financial motives are not left too hard behind, considering
the deal would generate close to $100 billion in sales for US
corporations to which must be added large sales of defence equipment
which presently India purchases from France and Russia.
India is also the
country with which the US has conducted the largest number of
military exercises in recent years.
Obama's visit to India in 2015, a Joint Strategic Vision for the
region was agreed upon. Its objective is to support sustainable
development and address poverty. However, the main objective is
to ensure India's Navy plays a dominant role in the Indian Ocean.
Japan is now allowing
its military to have an activity outside the country's territory.
militarization worries Japan, particularly the installation of
missile launching ramps, China's declaration of an exclusive maritime
and air space, and the highly vocal Chinese media constantly threatening
of war with Japan.
China, in turn, fears
a reunified Korea with nuclear weapons.
to be China's main weapons supplier as it wants the money from
these exports which are of the order of $2 billion per year. Since
2006, the two countries have conducted joint manoeuvres, and intensified
their military cooperation.
China, however, no
longer represents an overwhelming share of Russia's weapons exports
- a mere 20% today from a high of 70% ten years ago, while the
value of total exports has risen considerably, thus decreasing
even more the importance of Chinese purchases. Further, with the
new cold war, Russia itself is becoming its own major customer.
Russia is eager to
maintain this monopoly on Chinese weapons purchases, and the EU
and US embargo assist them in achieving this objective. However,
inevitably, China will want to be involved in weapons development
and testing rather than simply acquiring technology entirely developed
in Russia. It has already indicated it does not want to buy finished
weapons or assembly kits but want to build the planes in China.
On a longer term
basis, it is obvious that China will develop its own military
platforms and it is already successfully copying several weapons
systems thus severely reducing its imports from Russia. This worries
Russia as on a conventional army basis, China would have the upper
hand in case of conflict, and Russia would have to rely on tactical
nuclear weapons where it has the upper hand. While the INF treaty
constrains Russia's capability of deploying intermediate range
nuclear missiles, Russia would probably opt out of the treaty
should it feel threatened by China.
North Korea is actively
developing its nuclear program and at least one estimate is that
it may possess 100 nuclear heads by 2020.
On the other side
of the demilitarized zone, there are US forces on the ground.
The US keeps 40 000 troops in South Korea.
China and India have
fought several border wars and in November 2006 China declared
one of the Indian provinces, Arunachal Pradesh, to be part of
China, calling it South Tibet. India also claims China is occupying
illegally an Indian province in the Himalaya.
In fact, China and
India are in a constant military confrontation along their mountainous
China is also in
a confrontation with several countries regarding their maritime
borders, and particularly Japan.
The Diaoyu / Senkaku
(Chinese and Japanese names, respectively) islands have been a
bone of contention for 120 years but China has lately become assertive
on their claims particularly as it is believed that the waters
surrounding them are rich in hydrocarbons and fishing grounds.
is also fed by the fact that it is using Japan as a useful scapegoat
that helps it maintain strong nationalist feelings of its population,
an important cement in a country in which social pressures between
different groups, such as rural and urban, are increasing and
threatening the country's stability. China also believes that
Japan is on a long-term decline and will not be able to adequately
respond to China' bullying presence.
China's claim that
the entire South China Sea belongs to it has opened the door for
the US to pose as the protector of the South East Asian countries.
The South China Sea
is an important point of convergence between the interests of
the two countries as well as the countries of Southeast Asia.
The rise of Chinese naval power - which could become larger than
that of the US in the next 5 years - could threaten the US' dominance
in the area.
The South China Sea
sees the flow of half of the world's trade and the conflictual
situation could disturb the globalization process which explains
why China is becoming interested in continental routes and goods
are shipped by train through a new train link which is the worlds
longest and reaches all the way to Madrid.
The interest in the
area, however, does not stop there. China believes that it contains
massive quantities of oil - approximately the same as those in
the Arab Gulf.
and purchase of high-powered microwave weapons, 1500 missiles,
submarines and amphibious ships seem targeted at resisting, or
keeping at bay, the US Navy in case of a conflict with Taiwan.
As a response, the US moved 20 vessels from the Atlantic to the
Pacific fleet in 2007 and more such moves are forecasted. The
South China Sea is considered by the US as a natural border China
should not cross. It is a strategic passage point between the
Indian Ocean and Japan and Korea.
China also has a
border issue with Russia. The two countries share a 4300 km border
and an important historical confrontational past.
Inside those two
borders the major issues about the autonomy of certain regions
and peoples - Taiwan, Tibet and Xinjiang for China and a considerably
large number of areas in Russia and the adjoining countries in
Central Asia that were once part of the Soviet Union. If China
has a clear position on this issue - i.e. a total aversion to
any such move including with the use of force and population movements
- Russia has a more opportunistic stance. It has fought an internal
war to prevent the Chechen aspirations to an independent state
but intervened military outside its borders in Georgia and is
the only country to recognize Abkhazia and South Ossetia as independent
Russia fears that
its under-populated and vast expanse of territory rich in natural
resources, Siberia and the Far East, yields in the face of China's
demography while Russia is in a state of demographic collapse.
These two areas have large deposits of hydrocarbons, diamonds,
gold and other metals as well as large tracts of forests that
provide raw materials to the Chinese paper industry.
Some of the lands
forming the region of the Russian Pacific were Chinese until the
eighteenth century, and while China has not made any recent claims
for their return, Russians fear they may do so.
Russia and China
are intent in developing their relations but simultaneously competing
for domination of Central Asia and attracting Japanese and South
Korean capital to develop the Far East so as not to be exclusively
bound to China.
will redevelop China's and North Korea's moribund industry in
the adjoining North Eastern parts of the country so as to economically
integrate these areas.
Russia also has a
contentious issue with Japan that has prevented the signing of
a peace agreement between the two countries since the end of the
Second World War. It concerns what the Russians call the Southern
Kuril Islands, and the Japanese the Northern Territories.
Russia carried out
military drills on the islands and announced it would spend over
$1 billion between 2016 and 2025 to develop these islands. Japan
would like to invest in these islands, particularly in energy
While for many years
neither country appeared to think, in spite of speeches to the
contrary, that dealing with the other was a priority, Primer Minister
Abe's visit to Moscow in August 2013 seems to have started a different
process. One thing Japan needs to avoid at all costs is a coalition
between China and Russia.
A dialogue process
was started between the defence and foreign ministers of the two
countries to discuss measures to combat piracy and terrorism.
of its military presence in the Arctic should also be considered
as part of its Asian play, the Arctic being a possible base for
ventures in Europe, the American continent and Asia.
Japan also has a
territorial issue with South Korea centred around the Takeshima
or Tokdo islands, as called respectively by the Japanese and Koreans,
that each country claims to be a part of their territory.
These are very small
volcanic islands. They are, however, of interest economically
as their waters are good fishing grounds and the surrounding waters
are believed to contain gas, although none has so far been found.
Further, if an international arbiter would rule in favour of Korea,
Japan's case for the Kurile Islands and the Senkaku Islands would
be severely affected as the country's claims in all three cases
stems from the San Francisco Peace Treaty that remained vague
on this issue.
Asian Square Dance - Part 1
Asian Square Dance - Part 2: China
Asian Square Dance - Part 3: India
Asian Square Dance - Part 4: Japan
Asian Square Dance - Part 5: The Koreas
Asian Square Dance - Part 6: Russia
Asian Square Dance - Part 7: The Role of the USA