China ensnares vulnerable states in a debt trap

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Easy loans are used to secure influence and grab control of strategic assets

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A ship departs a port in Zhanjiang, China, in July 2017 for Djibouti to dispatch members of the People’s Liberation Army to man a military base there. © Xinhua

Brahma Chellaney, Nikkei Asian Review

“There are two ways to conquer and enslave a country,” American statesman John Adams (U.S. president from 1797 to 1801) famously said. “One is by the sword. The other is by debt.”

China has chosen the second path. Aggressively employing economic tools to advance its strategic interests, Beijing has extended huge loans to financially-weak states and ensnared some in debt traps that greatly strengthen its leverage.

After establishing a growing presence in the South China Sea, Beijing seems increasingly determined to extend its influence in the Indian Ocean, not least in countries surrounding India, its regional strategic rival.

From Djibouti in Africa to the Indian Ocean island of Sri Lanka, China has converted big credits into political influence and even a military presence.

Now a political crisis in the Maldives has highlighted the fact that China has quietly acquired several islets in the heavily-indebted Indian Ocean archipelago.

Mohamed Nasheed, the nation’s first and only democratically elected president who was ousted at gunpoint, says the country cannot repay the $1.5bn-$2bn it owes China, equivalent to 80% of the total foreign debt. “Without firing a single shot, China has grabbed more land” in the Maldives than what Britain’s “East India Company did at the height of the 19th century.”

Among the unpopulated Maldivian islands China has acquired on lease are Feydhoo Finolhu, lying close to the capital Male and previously used for police training, and the seven-kilometer-long Kalhufahalufushi, with a magnificent reef. For Feydhoo Finolhu, it paid $4 million, which is what a luxury apartment in Hong Kong sells for; Kalhufahalufushi was even cheaper.

China is the only country to come out in support of Maldives’ embattled authoritarian president, Abdulla Yameen, who came to power in 2013. Beijing has also issued an open threat against India, which has traditionally been the dominant foreign influence in the Maldives since the islands were granted independence from Britain. Chinese state-controlled media has warned that if India militarily intervenes in the Maldives, Beijing won’t “sit idly by” but will “take action to stop” it.

To be sure, China claims sound commercial grounds for acquiring its Maldivian islands. But across the Indian Ocean, port projects that China insisted were purely commercial have acquired military dimensions.

After lending billions of dollars to Djibouti, China last year established its first overseas military base in that tiny but strategically important state, located on the northwestern edge of the Indian Ocean. In Pakistan, Beijing has deployed its warships for the security of the Chinese-built Gwadar port, whilst seeking to establish a military base nearby.

Beijing’s creditor diplomacy scored a major success in December when Sri Lanka formally handed over its strategically located Hambantota port to China under a 99-year lease valued at $1.12 billion. Earlier, after Sri Lanka’s $500-million, largely Chinese-owned Colombo Port container terminal opened in 2014, Chinese submarines arrived quietly and docked there.

Further east in Myanmar, there are concerns in India and the West that Kyauk Pyu, a deep-water port to be developed and financed largely by China, could eventually also serve military purposes.

In the Maldives, Beijing has shown interest in turning an uninhabited island into a naval base by cutting through the surrounding coral reefs to create passageways for its warships. Or it could create an artificial island and militarize it, as it has done in the South China Sea.

Underscoring Beijing’s strategic calculations, three Chinese frigates visited the Maldives about six months ago, docking in Male and at Girifushi Island and imparting special training to Maldivian troops.

Meanwhile, China’s stepped-up naval presence in the Indian Ocean in recent weeks might be intended to send a message to India, including seeking to deter it from militarily intervening in the Maldives, as New Delhi did with Western backing in 1988, when Indian paratroopers foiled a coup attempt. The action reinforced India’s claim to be the region’s peacekeeper.

The current ruler, Yameen, has facilitated China’s island acquisitions in his country by amending the constitution in 2015 to legalize foreign ownership of land. The amendment appeared tailored for China; the new rules for foreign ownership require a minimum $1 billion construction project that involves reclaiming at least 70% of the desired land from the ocean.

By also awarding Beijing major Chinese-financed infrastructure contracts, Yameen is saddling the Maldives with mounting debt that is likely to prove unserviceable.

Several countries that have fallen into, or risk slipping into, debt servitude to China are India’s immediate neighbors, including Bangladesh, the Maldives, Myanmar, Nepal, Pakistan and Sri Lanka. This holds major foreign-policy implications for India, which is seeing its influence erode in its backyard. By establishing a Djibouti-type naval base in the Maldives, China could open an Indian Ocean front against India in the same quiet way that it opened the trans-Himalayan threat under Mao Zedong by gobbling up Tibet, the historical buffer.

China’s strategy in southern Asia and beyond is aimed at fashioning a Sinosphere of trade, communication, transportation and security links. By financially shackling smaller states through projects it funds and builds, it is crimping their decision-making autonomy in a way that helps bring them within its strategic orbit. It is even replicating some of the practices that were used against it during the European-colonial period when, in the words of the Chinese nationalist revolutionary leader Sun Yat-sen, “India was the favored wife of Britain while China was the common prostitute of all powers.” One such practice is the long-term lease, an echo of the 99-year-lease through which 19th-century Britain secured control of the New Territories, expanding Hong Kong’s landmass by 90%.

The International Monetary Fund has warned that Chinese loans, offered at rates as high as 7 percent, are promoting unsustainable debt burdens. The price that such loans exact can extend to national sovereignty and self-respect. The handover of Hambantota was seen in Sri Lanka as the equivalent of a heavily indebted farmer giving away his daughter to the cruel money lender.

In Pakistan, Chinese state companies have secured energy contracts on terms that include ownership of the plants and 16% guaranteed yearly returns, very high by global standards. The “economic corridor” that China seems intent on building across Pakistan has become a vehicle for a deep Chinese penetration of the Pakistani state, with most of the investment going into energy, agricultural and security projects often unrelated to a corridor.

Against this background, the word “predatory” is increasingly being used internationally about China’s practices. U.S. Secretary of State Rex Tillerson has called China a “new imperialist power” whose practices are “reminiscent of European colonialism.”

Mao said, “Political power grows out of the barrel of a gun.” But with China emerging as the first major power in modern history without real allies, an additional principle is guiding its policy: buying friendship by opening a fat wallet. China is co-opting states into its sphere of influence by burying them in debt.

Brahma Chellaney is a geostrategist and the author of nine books, including the award-winning “Water, Peace, and War.”

© Nikkei Asian Review, 2018.

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The Maldives: The moment of truth

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Brahma Chellaney, The Hindustan Times

China, the sole defender of the Maldives’ embattled autocrat, Abdulla Yameen, has issued an open threat through a state mouthpiece: If India militarily intervenes in the Maldives, Beijing won’t “sit idly by” but will “take action to stop” it. This essentially is an empty threat because China has no credible capability to sustain a military operation far from its shores. Despite China’s rising naval power, taking on India in its own maritime backyard will be a fool’s errand.

India could call China’s bluff through quick military action that deposes Yameen and installs the jailed Supreme Court chief justice as the interim president to oversee fair elections under UN supervision. In truth, an Indian intervention is not on the cards, in part because such action would trample on the principles India has long championed.

India has carefully weighed all the factors and resolved not to intervene at present in the vicious politics of the increasingly radicalized Maldives. If the crisis there were to escalate to civil war-like conditions, with street clashes erupting in the capital Malé, where two-fifths of the nation’s total population lives, India could, of course, intervene in the name of “responsibility to protect”, the moral principle NATO invoked to counterproductively overthrow Libya’s Muammar Gaddafi.

India had a narrow window of opportunity to intervene immediately after Yameen declared a state of emergency and jailed many, including his elderly half-brother, Maumoon Abdul Gayoom, whose dictatorship lasted three decades largely because Indian paratroopers in 1988 salvaged his presidency from coup plotters who seized control of much of Malé. Before Yameen fell out with Gayoom, he actually ran a family dictatorship, with Gayoom’s daughter his foreign minister.

Beijing’s threat at this stage is not only Doklam-style psychological warfare against India but, more importantly, also an effort to curry favour with the internationally isolated Yameen. By claiming to shield him from India’s potential action, China wants to expand its strategic footprint in the Maldives, where it has already acquired several of the country’s 1,190 atolls for projects. The Maldives’ first and only democratically elected president, Mohamed Nasheed, who was ousted at gunpoint by Gayoom’s pro-Islamist cronies, claims China’s “land grab” has netted 17 islets.

While India has wisely refrained from any precipitous action in response to Yameen’s unbridled lurch toward authoritarianism, it faces a pressing foreign-policy challenge extending beyond the Maldivian crisis. Make no mistake: India’s rapidly eroding influence in its strategic backyard holds far-reaching implications for its security, underscoring the imperative for a more dynamic, forward-looking strategy. India’s inaction and missteps have aided China’s aggressive diplomacy, with Chinese clout increasingly on display even in countries symbiotically tied to India, such as Nepal, Sri Lanka and the Maldives. With Beijing seeking to establish a Djibouti-type naval base in the Maldives, China is opening an oceanic threat against India in the same quiet way that it opened the trans-Himalayan threat under Mao Zedong.

On the Maldives, India’s moment of truth came not with the latest emergency proclamation but in February 2012 when Nasheed made desperate phone calls to Prime Minister Manmohan Singh pleading for an Indian intervention against the Islamists besieging his office. Nasheed, however, had roiled New Delhi with his overtures to Beijing, including personally inaugurating the newly established Chinese Embassy on the day Singh arrived in Malé for a SAARC summit. India’s refusal to take a long-term strategic view and prevent Nasheed’s overthrow has had important consequences, including empowering the Islamists and ceding more space to China. Just months after Nasheed’s ouster, the Maldives expropriated its main international airport from India’s GMR Infrastructure.

In recent years, an emboldened Maldives has increasingly acted against India’s strategic interests with impunity. Six months ago, it sent New Delhi a chilling message by welcoming three Chinese frigates, which docked in Malé and Girifushi Island and imparted special training to Maldivian troops. Yameen amended the Constitution in 2015 to legalize foreign ownership of land in a way tailored for China, requiring a minimal $1-billion construction project that reclaims at least 70% of the desired land from the ocean. New Delhi’s carrots-only approach also encouraged Yameen more recently to sign a free-trade agreement with China that seems designed to use the Maldives as a conduit for the flow of Chinese goods to the Indian market.

India must now start wielding the stick. With other democratic powers, it should impose punishing sanctions. However, the right powers to militarily intervene in the Maldives are the U.S. and Britain because, unlike India, they have little to lose and democracy promotion is a legitimate foreign-policy plank for them. China’s growing presence in the Indian Ocean threatens not just India’s security but also the Diego Garcia-centred Anglo-American naval pre-eminence in the region.

Brahma Chellaney is a geostrategist and author.

© The Hindustan Times, 2018.

India has forgotten its own realist strategic thought

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India’s tradition of realist strategic thought is probably the oldest in the world. Yet India has forgotten its own realist strategic thought, as propounded before Christ by the strategist Kautilya (also known as Chanakya). So, despite growing realism in foreign policy, quixotic traditions from the Nehruvian era still persist to this day. 

Chanakya

Brahma Chellaney, DNA, January 26, 2018

Madeleine Albright famously said that, “The purpose of foreign policy is to persuade other countries to do what you want or, better yet, to want what we want.” How has Indian foreign policy done when measured against such a standard of success?

In this century, India’s growing geopolitical weight, impressive economic-growth rate, rising military capabilities, increasing maritime role, abundant market opportunities, and favourable long-term demographics have helped increase its international profile. India is widely perceived to be a key “swing state” in the emerging international order. Yet Indian foreign policy offers little clue as to whether India is a world power in the making or just a sub-regional power with global-power pretensions.

India has yet to resolve an underlying tension in policy between realism and idealism. The struggle between idealism and pragmatism has bedevilled its diplomacy since independence, imposing serious costs. For example, Jawaharlal Nehru, the idealist, rejected a U.S. suggestion in the 1950s that India take China’s vacant seat in the United Nations Security Council. The officially blessed selected works of Nehru quote him as saying that India could not accept the American proposal because it meant “falling out with China and it would be very unfair for a great country like China not to be in the [Security] Council.” The selected works also quote Nehru as telling Soviet Premier Marshal Nikolai A. Bulganin in 1955 on the same U.S. offer that “we should first concentrate on getting China admitted.”

Such have been the national-security costs for future Indian generations that just in the first seven years after independence, India allowed Pakistan to seize and retain one-third of Jammu and Kashmir; looked the other way when the newly established People’s Republic of China gobbled up the large historical buffer, the Tibetan Plateau; and tamely surrendered its British-inherited extra-territorial rights in Tibet without any quid pro quo, not even Beijing’s acceptance of the then-prevailing Indo-Tibetan border. The 1954 surrender of extra-territorial rights in Tibet included India shutting its military outposts at Yatung and Gyantse in Tibet and handing over Tibet’s postal, telegraph and public telephone services that it had been running to the Chinese government.

India thought that if it sought peace, it would get peace. In reality, a nation gets peace only if it can defend peace. This reality did not sink in until China humiliated India in 1962.

The 1962 invasion, however, did not change another characteristic of Indian diplomacy — it has been driven not by integrated, institutionalized policymaking but by largely an ad hoc, personality-driven approach. This remains the bane of Indian foreign policy, precluding the establishment of a strategic framework for pursuit of goals. The reliance by successive prime ministers on ad hoc, personal initiatives and decisions has helped marginalize the national security establishment and compounded India’s challenges.

This needs to be corrected. The ministry of external affairs, for example, must play its assigned role in the formulation and execution of key aspects of foreign policy — a role that has increasingly been usurped by the Prime Minister’s Office.

Today, India confronts a “tyranny of geography” — that is, serious external threats from virtually all directions. To some extent, it is a self-inflicted tyranny. India’s concerns over China, Nepal, Bangladesh, Sri Lanka, the Maldives and even Pakistan stem from the failures of its past policies. An increasingly unstable neighbourhood also makes it more difficult to promote regional cooperation and integration.

With its tyranny of geography putting greater pressure on its external and internal security, India needs to develop more innovative approaches to diplomacy. The erosion of its influence in its own backyard should serve as a wake-up call. Only through forward thinking and a dynamic foreign policy can India hope to ameliorate its regional-security situation, freeing it to play a larger global role. Otherwise, it will continue to be weighed down by its region.

While India undoubtedly is imbibing greater realism in its foreign policy, it remains intrinsically cautious and reactive, rather than forward-looking and proactive. And as illustrated by Narendra Modi’s unannounced Lahore visit or by his government’s reluctance to impose any sanctions on a country it has called “Terroristan,” India hasn’t fully abandoned its quixotic traditions from the Nehruvian era.

India’s tradition of realist strategic thought is probably the oldest in the world. The realist doctrine was propounded by the strategist Kautilya, also known as Chanakya, who wrote the Arthashastra before Christ. This ancient manual on great-power diplomacy and international statecraft remains a must-read classic. Yet India, ironically, has forgotten Arthashastra.

© DNA, 2018.

China’s Creditor Imperialism

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Just as European imperial powers employed gunboat diplomacy, China is using sovereign debt to bend other states to its will. As Sri Lanka’s handover of the strategic Hambantota port shows, states caught in debt bondage to the new imperial giant risk losing both natural assets and their very sovereignty.

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, Project Syndicate
BERLIN – This month, Sri Lanka, unable to pay the onerous debt to China it has accumulated, formally handed over its strategically located Hambantota port to the Asian giant. It was a major acquisition for China’s Belt and Road Initiative (BRI) – which President Xi Jinping calls the “project of the century” – and proof of just how effective China’s debt-trap diplomacy can be.

Unlike International Monetary Fund and World Bank lending, Chinese loans are collateralized by strategically important natural assets with high long-term value (even if they lack short-term commercial viability). Hambantota, for example, straddles Indian Ocean trade routes linking Europe, Africa, and the Middle East to Asia. In exchange for financing and building the infrastructure that poorer countries need, China demands favorable access to their natural assets, from mineral resources to ports.

Moreover, as Sri Lanka’s experience starkly illustrates, Chinese financing can shackle its “partner” countries. Rather than offering grants or concessionary loans, China provides huge project-related loans at market-based rates, without transparency, much less environmental- or social-impact assessments. As US Secretary of State Rex Tillerson put it recently, with the BRI, China is aiming to define “its own rules and norms.”

To strengthen its position further, China has encouraged its companies to bid for outright purchase of strategic ports, where possible. The Mediterranean port of Piraeus, which a Chinese firm acquired for $436 million from cash-strapped Greece last year, will serve as the BRI’s “dragon head” in Europe.

By wielding its financial clout in this manner, China seeks to kill two birds with one stone. First, it wants to address overcapacity at home by boosting exports. And, second, it hopes to advance its strategic interests, including expanding its diplomatic influence, securing natural resources, promoting the international use of its currency, and gaining a relative advantage over other powers.

China’s predatory approach – and its gloating over securing Hambantota – is ironic, to say the least. In its relationships with smaller countries like Sri Lanka, China is replicating the practices used against it in the European-colonial period, which began with the 1839-1860 Opium Wars and ended with the 1949 communist takeover – a period that China bitterly refers to as its “century of humiliation.”

China portrayed the 1997 restoration of its sovereignty over Hong Kong, following more than a century of British administration, as righting a historic injustice. Yet, as Hambantota shows, China is now establishing its own Hong Kong-style neocolonial arrangements. Apparently Xi’s promise of the “great rejuvenation of the Chinese nation” is inextricable from the erosion of smaller states’ sovereignty.4

Just as European imperial powers employed gunboat diplomacy to open new markets and colonial outposts, China uses sovereign debt to bend other states to its will, without having to fire a single shot. Like the opium the British exported to China, the easy loans China offers are addictive. And, because China chooses its projects according to their long-term strategic value, they may yield short-term returns that are insufficient for countries to repay their debts. This gives China added leverage, which it can use, say, to force borrowers to swap debt for equity, thereby expanding China’s global footprint by trapping a growing number of countries in debt servitude.

Even the terms of the 99-year Hambantota port lease echo those used to force China to lease its own ports to Western colonial powers. Britain leased the New Territories from China for 99 years in 1898, causing Hong Kong’s landmass to expand by 90%. Yet the 99-year term was fixed merely to help China’s ethnic-Manchu Qing Dynasty save face; the reality was that all acquisitions were believed to be permanent.

Now, China is applying the imperial 99-year lease concept in distant lands. China’s lease agreement over Hambantota, concluded this summer, included a promise that China would shave $1.1 billion off Sri Lanka’s debt. In 2015, a Chinese firm took out a 99-year lease on Australia’s deep-water port of Darwin – home to more than 1,000 US Marines – for $388 million.

Similarly, after lending billions of dollars to heavily indebted Djibouti, China established its first overseas military base this year in that tiny but strategic state, just a few miles from a US naval base – the only permanent American military facility in Africa. Trapped in a debt crisis, Djibouti had no choice but to lease land to China for $20 million per year. China has also used its leverage over Turkmenistan to secure natural gas by pipeline largely on Chinese terms.

Several other countries, from Argentina to Namibia to Laos, have been ensnared in a Chinese debt trap, forcing them to confront agonizing choices in order to stave off default. Kenya’s crushing debt to China now threatens to turn its busy port of Mombasa – the gateway to East Africa – into another Hambantota.

These experiences should serve as a warning that the BRI is essentially an imperial project that aims to bring to fruition the mythical Middle Kingdom. States caught in debt bondage to China risk losing both their most valuable natural assets and their very sovereignty. The new imperial giant’s velvet glove cloaks an iron fist – one with the strength to squeeze the vitality out of smaller countries.

A New Front in Asia’s Water War

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For decades, China has been dragging its neighbors into high-stakes games of geopolitical poker over water-related issues. But the country’s politically motivated decision to withhold hydrological data from India amounts to an escalation of China’s efforts to exploit its status as the world’s hydro-hegemon to gain strategic leverage over its neighbors.

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BRAHMA CHELLANEYProject Syndicate

China has long regarded freshwater as a strategic weapon — one that the country’s leaders have no compunction about wielding to advance their foreign-policy goals. After years of using its chokehold on almost every major transnational river system in Asia to manipulate water flows themselves, China is now withholding data on upstream flows to put pressure on downstream countries, particularly India.

For decades, China has been dragging its neighbors into high-stakes games of geopolitical poker over water-related issues. Thanks to its forcible annexation of Tibet and other non-Han Chinese ethnic homelands — territories that comprise some 60% of its landmass — China is the world’s unrivaled hydro-hegemon. It is the source of cross-border riparian flows to more countries than any other state.

In recent years, China has worked hard to exploit that status to increase its leverage over its neighbors, relentlessly building upstream dams on international rivers. China is now home to more dams than the rest of the world combined, and the construction continues, leaving downstream neighbors — especially the vulnerable lower Mekong basin states, Nepal, and Kazakhstan — essentially at China’s mercy.

So far, China has refused to enter into a water-sharing treaty with a single country. It does, however, share some hydrological and meteorological data — essential to enable downstream countries to foresee and plan for floods, thereby protecting lives and reducing material losses.

Yet, this year, China decided to withhold such data from India, undermining the efficacy of India’s flood early-warning systems — during Asia’s summer monsoon season, no less. As a result, despite below-normal monsoon rains this year in India’s northeast, through which the Brahmaputra River flows after leaving Tibet and before entering Bangladesh, the region faced unprecedented flooding, with devastating consequences, especially in Assam state.

China’s decision to withhold crucial data is not only cruel; it also breaches the country’s international obligations. China is one of just three countries that voted against the 1997 United Nations Watercourse Convention, which called for the regular exchange of hydrological and other data between co-basin states. But China did enter into a five-year bilateral accord, which expires next year, requiring it to transfer to India hydrological and meteorological data daily from three Brahmaputra-monitoring stations in Tibet during the risky flood season, from May 15 to October 15. A similar agreement, reached in 2015, covers the Sutlej, another flood-prone river. Both accords arose after flash floods linked to suspected discharges from Chinese projects in Tibet repeatedly ravaged India’s Arunachal and Himachal states.

Unlike some other countries, which offer hydrological data to their downstream counterparts for free, China does so only for a price. (The Watercourse Convention would have required that no charges be levied, unless the data or information was “not readily available” — a rule that may also have contributed to China’s “no” vote.)

But it was a price India was willing to pay. And this year, as always, India sent the agreed amount. Yet it received no data, with the Chinese foreign ministry claiming after almost four months that upstream stations were being “upgraded” or “renovated.” That claim was spurious: China did supply data on the Brahmaputra to Bangladesh.

Three weeks earlier, the state-controlled newspaper Global Times offered a more plausible explanation for China’s failure to deliver the promised data to India: the data transfer had been intentionally halted, owing to India’s supposed infringement on Chinese territorial sovereignty in a dispute over the remote Himalayan region of Doklam. For much of the summer, that dispute took the form of a border standoff where Bhutan, Tibet, and the Indian state of Sikkim meet.

But even before the dispute flared in mid-June, China was seething over India’s boycott of its May 14-15 summit promoting the much-vaunted “Belt and Road” initiative. The denial of data apparently began as an attempt to punish India for condemning China’s massive, cross-border infrastructure agenda as an opaque, neocolonial enterprise. China’s desire to punish India was then reinforced by the Doklam standoff.

For China, it seems, international agreements stop being binding when they are no longer politically convenient. This reading is reinforced by China’s violations of its 1984 pact with the United Kingdom, under which China gained sovereignty over Hong Kong in 1997. China claims that the agreement, based on the formula “one country, two systems,” had lost “practical significance” over the last 20 years.

Were the roles reversed, a downstream China would have stridently accused an upstream India of exacerbating flood-related death and destruction by breaching its international obligations. But just as China has unilaterally and aggressively asserted its territorial and maritime claims in Asia, it is using the reengineering of cross-border riparian flows and denial of hydrological data to deepen its regional power.

In fact, China’s cutoff of water data, despite the likely impact on vulnerable civilian communities, sets a dangerous precedent of indifference to humanitarian considerations. It also highlights how China is fashioning unconventional tools of coercive diplomacy, whose instruments already range from informally boycotting goods from a targeted country to halting strategic exports (such as of rare-earth minerals) and suspending Chinese tourist travel.

Now, by seizing control over water — a resource vital to millions of lives and livelihoods — China can hold another country hostage without firing a single shot. In a water-stressed Asia, taming China’s hegemonic ambition is now the biggest strategic challenge.

© Project Syndicate, 2017.

China’s Weaponization of Trade

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The largest container ship in world, CSCL Globe, docks during its maiden voyage, at the port of Felixstowe in southeast England, January 7, 2015. Photo: Reuters.

A column internationally syndicated by Project Syndicate.

China denies mixing business with politics, yet it has long used trade to punish countries that refuse to toe its line. China’s recent heavy-handed economic sanctioning of South Korea, in response to that country’s decision to deploy the Terminal High Altitude Area Defense (THAAD) anti-missile system, was just the latest example of the Chinese authorities’ use of trade as a political weapon.

China’s government has encouraged and then exploited states’ economic reliance on it to compel their support for its foreign-policy objectives. Its economic punishments range from restricting imports or informally boycotting goods from a targeted country to halting strategic exports (such as rare-earth minerals) and encouraging domestic protests against specific foreign businesses. Other tools include suspending tourist travel and blocking fishing access. All are used carefully to avoid disruption that could harm China’s own business interests.

Mongolia became a classic case of such geo-economic coercion, after it hosted the Dalai Lama last November. With China accounting for 90% of Mongolian exports, the Chinese authorities set out to teach Mongolia a lesson. After imposing punitive fees on its commodity exports, Chinese Foreign Minister Wang Yi voiced “hope that Mongolia has taken this lesson to heart” and that it would “scrupulously abide by its promise” not to invite the Tibetan spiritual leader again.

A more famous case was China’s trade reprisals against Norway, after the 2010 Nobel Peace Prize was awarded to the jailed Chinese dissident Liu Xiaobo. As a result, Norwegian salmon exports to China collapsed.

In 2010, China exploited its monopoly on the global production of vital rare-earth minerals to inflict commercial pain on Japan and the West through an unannounced export embargo. In 2012, after China’s sovereignty dispute with Japan over the Senkaku Islands (which the Japanese first controlled in 1895) flared anew, China once again used trade as a strategic weapon, costing Japan billions of dollars.

Likewise, in April 2012, following an incident near the disputed Scarborough Shoal in the South China Sea, China bullied the Philippines not only by dispatching surveillance vessels, but also by issuing an advisory against travel there and imposing sudden curbs on banana imports (which bankrupted many Philippine growers). With international attention focused on its trade actions, China then quietly seized the shoal.

China’s recent trade reprisals against South Korea for deploying the THAAD system should be viewed against this background. China’s reprisals were not launched against the US, which deployed the system to defend against North Korea’s emerging missile threat and has the heft to hit back hard. Nor was this the first time: in 2000, when South Korea increased tariffs on garlic to protect its farmers from a flood of imports, China responded by banning imports of South Korean cellphones and polyethylene. The sweeping retaliation against unrelated products was intended not only to promote domestic industries, but also to ensure that South Korea lost far more than China did.

China will not use the trade cudgel when it has more to lose, as illustrated by the current Sino-Indian troop standoff at the border where Tibet, Bhutan, and the Indian state of Sikkim meet. Chinese leaders value the lopsided trade relationship with India – exports are more than five times higher than imports – as a strategic weapon to undercut its rival’s manufacturing base while reaping handsome profits. So, instead of halting border trade, which could invite Indian economic reprisals, China has cut offIndian pilgrims’ historical access to sacred sites in Tibet.

Where it has trade leverage, China is not shy about exercising it. A 2010 study found that countries whose leaders met the Dalai Lama suffered a rapid decline of 8.1-16.9% in exports to China, with the result that now almost all countries, with the conspicuous exception of India and the US, shun official contact with the Tibetan leader.

The harsh reality is that China is turning into a trade tyrant that rides roughshod over international rules. Its violations include maintaining nontariff barriers to keep out foreign competition; subsidizing exports; tilting the domestic market in favor of Chinese companies; pirating intellectual property; using antitrust laws to extort concessions; and underwriting acquisitions of foreign firms to bring home their technologies.

China regards even bilateral pacts as no more than tools to enable it to achieve its objectives. From China’s perspective, no treaty has binding force once it has served its immediate purpose, as officials recently demonstrated by trashing the 1984 Sino-British Joint Declaration that paved the way for Hong Kong’s handover in 1997.

Ironically, China has developed its trade muscle with help from the US, which played a key role in China’s economic rise by shunning sanctions and integrating it into global institutions. President Donald Trump’s election was supposed to end China’s free ride on trade. Yet, far from taking any action against a country that he has long assailed as a trade cheater, Trump is helping make China great again, including by withdrawing the US from the Trans-Pacific Partnership and shrinking US influence in the Asia-Pacific region.

The TPP, which Japanese Prime Minister Shinzo Abe is seeking to revive, but without US participation, can help rein in China’s unremitting mercantilist behavior by creating a market-friendly, rule-based economic community. But if the TPP is to be truly effective in offsetting the trade sword wielded by a powerful, highly centralized authoritarian regime, it needs to be expanded to include India and South Korea.

China’s weaponization of trade has gone unchallenged so far. Only a concerted international strategy, with a revived TPP an essential component, stands a chance of compelling China’s leaders to play by the rules.

Brahma Chellaney, Professor of Strategic Studies at the New Delhi-based Center for Policy Research and Fellow at the Robert Bosch Academy in Berlin, is the author of nine books, including Asian JuggernautWater: Asia’s New Battleground, and Water, Peace, and War: Confronting the Global Water Crisis.

China Reveals How it Wages Psychological Warfare

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The Sino-Indian troop standoff has underscored the centrality of propaganda in China’s foreign policy.

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A Chinese government handout photo of a live-fire military exercise in Tibet. The photo was released amid rising border tensions with India. It later came to light that the military exercise was conducted before the crisis began.

By , The Japan Times

Since a Sino-Indian troop standoff began at the border where Tibet, Bhutan and the Indian state of Sikkim meet, China’s warmongering has become so raucous and coarse that, to the casual observer, a Himalayan military conflict may seem imminent. In reality, Beijing is waging — in Chinese strategic tradition — full-throttle psychological warfare to compel India to back down without a shot being fired.

The current crisis, more significantly, has underscored the centrality of propaganda in China’s foreign policy — from the aggressor playing the victim to unremitting efforts to camouflage its intrusion into tiny Bhutan that precipitated the standoff. China’s vitriolic war rhetoric and unrealistic preconditions for holding talks stand out in stark contrast to India’s measured response and emphasis on diplomacy and dialogue to peacefully resolve the standoff. The U.S. has implicitly supported India’s stance by similarly calling for a dialogue to peacefully end the crisis.

The crisis, in fact, has highlighted how China blends psychological warfare (“psywar”), media warfare and the manipulation of legal arguments (“lawfare”) to undermine the opponent’s information-control capabilities and to buttress its strategic game plan. Disinformation and deceit are among the tools China is employing in its psywar to tame India without military combat, in Sun Tzu style.

Its psychological operations (psy-ops) have included mounting almost daily threats to teach India a lesson, unless it gives in. Indeed, the authoritarian regime in Beijing has shown itself adept at exploiting the political divisions in the world’s largest democracy, including reaching out to Indian Prime Minister Narendra Modi’s opponents and attacking his “Hindu nationalism” in order to help sow dissensions in India on its current China approach.

Given China’s rise as a praetorian state, its foreign ministry is probably the weakest government branch; yet that ministry has taken the lead to intimidate India in unbecoming and undiplomatic language. Beijing is also using its state media to threaten an “all out confrontation” along the entire, more than 4,000-kilometer-long Sino-Indian border and to warn India that it would suffer a humiliating rout greater than it did in the 1962 war. One Chinese state mouthpiece even called the Indian foreign minister a liar.

In the current crisis, the Chinese state and its media have worked in tandem to feed disinformation as part of the psy-ops. After all, media organizations, backed by an annual $10 billion budget from the state, have become integral to China’s global propaganda offensive. Chinese propaganda is getting smarter and more targeted, with some in the Indian media lapping up the disinformation, yet Beijing’s mendacity is becoming conspicuous.

Consider two examples. In mid-July, the Chinese state broadcaster CCTV telecast a video of live-fire military exercises in Tibet by a mountain brigade deployed against India. It later came to light that this was a routine annual drill conducted in early June before the crisis began. Shortly after the CCTV report, the Chinese military’s official newspaper, PLA Daily, said tens of thousands of tons of military hardware had been moved to Tibet in response to the troop standoff. This report too turned out to be part of China’s psywar, with Indian intelligence still finding no evidence of a Chinese military buildup in Tibet.

In this light, what can China hope to achieve through its psy-ops? India has a lot at stake: If it were to wilt under the Chinese pressure, it would impair its national security and potentially open the path to its long-term strategic subordination to China. In addition, China would be able to mount a stronger military threat against India’s hold on its far northeast.

India is a raucous democracy with poor public relations and media outreach. Yet China’s psywar has failed to obscure even the key facts, let alone achieve any political objective.

The crisis, which offers important insights to other countries on China’s psychological-warfare practices, was triggered in mid-June after days of growing local military tensions when People’s Liberation Army troops sought to unilaterally change the territorial status quo by beginning work on a strategic highway through Bhutan’s Doklam Plateau, which is located very close to the Tibet-Bhutan-Sikkim trijunction. (China contends that Doklam is its own territory in the way it claims the Japanese-controlled Senkaku Islands or the sprawling northeastern Indian state of Arunachal Pradesh.) The Chinese encroachment prompted the Indian army to swiftly intervene and halt the road construction, triggering the standoff.

The PLA has for years been quietly chipping away at strategic areas in Bhutan’s north and west. It has also waged an aggression by stealth to assert its claim over the Doklam Plateau, including by increasingly sending Tibetan herdsmen and armed patrols there and by turning some natural paths into small paved roads. Bhutan has long complained of Chinese encroachments. For example, it told its Parliament in 2009 that it had “protested many times to the Chinese regarding the road-construction activities.”

Bhutan, with just 8,000 men in its military, police and militia, has no means to resist Chinese encroachments. Its security partner, India, was previously loath to go beyond training and advising Bhutanese forces. But with China’s latest land grab also threatening Indian security, New Delhi decided that Bhutan’s fight was India’s fight. In a strategic miscalculation that has fueled its current fury, China anticipated Bhutan’s diplomatic protest over its latest road construction but not India’s rapid military intervention.

New Delhi cannot allow Beijing to gain control of Doklam because it will result in China fortifying its military positions around the border trijunction and bringing India’s territorial link with its northeastern states within Chinese artillery range. This link — the Siliguri Corridor — is just 27 kilometers wide at its narrowest point and is aptly known as the “Chicken Neck.” If China built the highway through Doklam, it would be able to transport heavy tanks to the trijunction and, in the event of a war, seek to implement its military plan to cut off mainland India from northeast India.

The risk that a frustrated China could escalate its current psy-ops to a military conflict cannot be discounted. Indeed, Beijing is signaling that it will brook no Indian “interference” in Bhutan’s external relations or national security, although Indo-Bhutanese relations are governed by a friendship treaty and defense arrangements. It wants India to leave Bhutan to its fate.

More fundamentally, China’s intrusion into Bhutan and its war rhetoric against India raise important larger issues. One issue is China’s disregard of international law, including the bilateral accords it has signed with Bhutan and India pledging not to alter the status quo unilaterally. As the South and East China seas also illustrate, Beijing signs agreements and treaties but does not comply with them.

Another issue is China’s abiding faith in propaganda, extending from fake history claims to other countries’ territories to disinformation operations intended to deceive and outmaneuver opponents. The reliance on propaganda blurs the line between fact and fiction to such an extent that, gradually, the Chinese state begins to believe its own propaganda and act upon it. This factor, along with its associated risks, is apparent in the Doklam standoff.

Brahma Chellaney is a geostrategist and the author of nine books, including “Water, Peace, and War” (Rowman & Littlefield).

© The Japan Times, 2017.