Thursday 9 June 2016

The situation in South Asia

The most dangerous place in the world today is not the Middle East, but South Asia.

Here, the established super power of the world, USA, and the rising super power, China, are on a collision course, as is evident from their disputes over the South China Sea, etc. The question is : who will control South Asia, with its markets, raw materials and cheap labour ?

Politics is concentrated economics, and so to understand politics, we must go behind it and see the real economic forces at work.

For quite some time, a global economic recession has been going on. Europe, in particular, has been badly hit. What is the condition of the economies of USA and China ?.

U.S. industrial production shrank by 1.6% in the first quarter of 2016. Sales of durable goods, e.g. cars, and retail sales, etc are declining. Corporate profits were flat in 2016. The Michigan Consumer Sentiment Index fell 9% in March, 2016.

 As regards China, it has gone down from being the world's chief growth engine to becoming its biggest risk factor. While the Chinese still claim a growth rate of 6% in their GDP, more reliable sources say that the real growth rate is about 3%---a far cry from the double digit figures of growth of the Chinese economy for over a decade.

 So to relieve their distress, both USA and China desparately need more markets for their goods, and cheap raw materials to lower their cost of production.

 Of these two super powers, China is more dangerous to world peace. A rising super power is always more aggressive and expansionist, than an established one. For example, Hitler Germany, being a rising super power in the 1930s and 1940s, was more dangerous than the Western powers.

 Today, China has a huge foreign exchange reserve, estimated at 3.23 trillion dollars in January 2016. This is a huge amount of hot money, hungrily looking for investment opportunities, markets to infiltrate and capture, and cheap raw materials, and indeed it has grabbed many in Asia and Africa, including some in India. So the victim of imperialism upto 1949 has itself become an imperialist now.
 The dispute between USA, which is facing a recession, and China, whose economy has slowed down considerably, for control over South Asia is now spilling over into India and Pakistan.

Modi has taken India firmly into the American camp. His present visit to USA is only a culmination of the process started earlier.

So China is making its own counter moves. It is dominating Nepal, has come closer to Pakistan, and is arming the anti-Indian insurgency in Kashmir and the North East, in an attempt to carve out of India an area of its own influence and control.

 Earlier, Pakistan was under the grip of Americans. But now that Modi has taken India firmly into the American camp, the Chinese have decided to take a grip over Pakistan.

 The Chinese-Pakistani trade, which was only of a few hundred million dollars a year upto the year 2000, has gone upto 16 billion dollars last year ( though heavily tilted in China's favour ).This was no doubt facilitated by the Free Trade Agreement between China and Pakistan which came into effect in January 2007.  Also, today 47% of all Chinese international arms sales are to Pakistan.

In April 20, 2015, China’s President Xi Jinping visited Pakistan in what the government of Prime Minister Nawaz Sharif self-flatteringly called a “historic occasion”. During this visit, Xi announced the Chinese plans to invest 46 billion US dollars in Pakistan’s transport and energy infrastructure, including the construction of the China-Pakistan Economic Corridor (CPEC) that will connect Kashgar in China’s Xinjiang region with Gwadar Port in Balochistan over the next 15 years. Since that announcement, several high-level Chinese government officials and top executives of several Chinese companies, have visited Pakistan, and have shown keen interest in setting up Chinese industries in Pakistan.

The militants who keep committing terrorist acts in Kashmir, are obviously getting arms from some power. The only logical inference is that they are getting them from China, via Pakistan. Similarly, the militants in the North East appear to be getting arms from China. It is evident that China is on an expansionist path, as Japan was in the 1930s and 40s. But America too has its economic interests in South Asia to safeguard. So a collision is inevitable.

 Of course,the Americans and Chinese will not fight each other themselves. They are both nuclear powers, and have too much invested in each other's economies for that. But there is nothing to stop them fighting proxy wars, which they will. And India ( and Pakistan ) are directly in the frontline.
It seems we are sitting on a gunpowder keg which may explode anytime.

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