China’s GDP & Asian strategic matrix

The dramatic revision of China’s GDP (Dec 20) by the National Bureau of Statistics in Beijing reveals that the dragon’s economic vitality is far more robust than earlier estimated.

Many of the anxieties about China bucking macro-econometric tenets and structural fiscal prudence seem to be misplaced and the current quip is that it is not the patient who is ill but the tools used for the diagnosis of the Chinese economy!
Estimates about any quantitative indicator pertaining to China have been famously skewed for decades and this ranges from the claims made in the early decades during the Great Leap Forward about food and steel production to famine deaths and defence expenditure and evidently Beijing is now keen to restore credibility in its official statistics.

The Chinese GDP for 2004 has been revised to $1.97 trillion and this takes it to the fourth position in the global hierarchy – just behind the US, Japan and Germany. The GDP growth rate for 2005 is estimated to be 9.4 % and may slow down fractionally in 2006 but will still be above the enticing 9% mark.

If this scorching pace is sustained, one may infer that China will overtake the US as the world’s largest economy around 2035 – that is 30 years from now – telescoping the earlier estimate by about a decade.

The GDP for the last year was estimated to be $12.6 trillion and clearly there is lots of catching up to do in the next three decades but the Chinese determination to attain this perch is not in doubt and the dragon is on a canter.

It is precisely for this reason that the Asian strategic matrix is in a state of slow turbulence and the ripples were discernible at the first East-Asia Summit (EAS) held in Kuala Lumpur in mid-December. But it is not China alone that is the focus of global strategic attention and India – despite its relatively more modest showing at the hustings – is also on the radarscope.

The current buzz is that 2005 will be remembered as the year when gold, China and India were on the rise and while this is heady company, the long-term implications of the current shift in the Eurasian politico-economic tectonic plates merit careful scrutiny to identify the opportunities and challenges for the elephant.

India’s GDP in 2004 was closer to $700 billion, a little over a third of China and the GDP growth rate is estimated to be about 7%, creditable given the many disparities that characterise the two political, economic and socio-cultural domains.

Due to their inherent demographic advantages and relative position in the macro-economic ‘catch-up’ curve, it is estimated that all indicators being equal – the world will become tripolar by about 2050-55 with China, the US and India at the high table.

In other words, China and India that once contributed to half the global wealth will return to this position after a quarter of a millennium and the global strategic centre of gravity will be back in Asia.

However, there are many caveats to this scenario and much of this was on display at the EAS where the simmering historical animosity between China and Japan on one hand and the anxiety of the smaller Asean states and South Korea on the other were on display.

The fact that the US was excluded from the summit while Russia was invited as a guest added to the chess game and the many complementarities within Eurasia including the energy potential of Moscow and a relatively fragile Central Asia were highlighted.

The most abiding fault-line is that between China and Japan and it is instructive that within a day of the Chinese GDP revision, Tokyo voiced its concern about China’s defence expenditure and the military build-up. Beijing on the other hand was keen to assure its interlocutors that China’s rise was “peaceful” and that a benign dragon was not an oxymoron!

This entire spectrum of strategic animation and Delhi’s own politico-economic trajectory in the last decade (including the nuclear tests of May 1998) have made India a ‘swing state’ of critical import and this is borne out by some seminal developments of 2005 that reverberated at the EAS.

The single most important development is the re-casting of the US-India relationship by the Bush administration that was formalised in the July 18 agreement and the impact this has had on the Eurasian strategic systemic.

One may cautiously aver that if the letter and spirit of the Bush-Manmohan agreement is taken to its maximum potential, the strategic architecture of the 21st century which is poised to be one of a knowledge-based economy, committed to normative, plural democratic values will be radically different from that of the last century.

However, India would have to read the current turbulence and the tea leaves very astutely and evolve a range of pro-active measures across the board.

The primary goal is to ensure that the national discourse moves from the mind-set of an inflexible and arid interpretation of non-alignment and prickly insularity bordering on xenophobia to a more self-assured posture based on credible empirical indicators such as a vibrant democracy, rule of law, equitable economic vitality and a conviction that the Elephant is on the move.

By current projections, India will cross the $1 trillion GDP mark by 2009 and this is happy augury. The year 2005 has been an encouraging one for India from the strategic perspective and evolving meaningful partnerships with the nodes of relevance has been the leit-motif of Dr Manmohan Singh’s macro- policy initiatives.

Thus, India may be seen to be moving from the inheritance of non-alignment, which had its validity in the earlier systemic of bi-polarity and the state-regulated command economy, to a more flexible and pragmatic posture of being meaningfully ‘unaligned’ vis-à-vis the major powers.

This was the refrain at the summit meetings with the US, China, Russia, EU and Japan at the political level and in the interactions with the global business community.

However this potential for meaningful Asian vibrancy that maximises India’s interests can be realised only if Delhi deals with its complex domestic and regional challenges both expeditiously and prudently. Strategic acumen in synergising state capability with the aspirations of civil society is imperative.