Transcript EDITED India China Net Assessment DSSC

And so these men of Hindustan
Disputed loud and long,
Each in his own opinion
Exceeding stiff and strong,
Though each was partly in the right
And all were in the wrong.
- John Godfrey Saxe (1816-1887)
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Predicting the future.
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China: A Net Assessment
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MOHAN GURUSWAMY
WITH MILITARY AND SECURITY INPUTS FROM
BRIG. ARUN SAHGAL (RETD.)
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How the world stacks up in 2015.
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IMF Projections for China & India PPP GDP’s
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Year
China
India
2020
$29 trillion
$13 trillion
2030
$46 trillion
$22 trillion
2040
$71 trillion
$35 trillion
2050
$103 trillion
$55 trillion
2060
$145 trillion
$82 trillion
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China’s GDP growth 1980-2011
& growth forecasts for 2012-2030.
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The coming economic transition.(GDP PPP)
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The coming economic order.
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China’s population projections.
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2010:
1,330,141,000
2020:
1,384,545,000
2030:
1,391,491,000
2040:
1,358,519,000
2050:
1,303,723,000
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What happened to Japan.
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Age & Population structure 2000-35
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Losing workers to education.
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Sustained low fertility means that the number of young workers will
decline more sharply than projected. In 2010, there were 116m people
aged 20 to 24; by 2020 the number will fall by 20% to 94m.
But the actual number of workers will be considerably lower than
94m, thanks to rising participation in higher education.
Annual higher-education enrollments tripled from 2.2m to 6.6m in
2001-10, while the number of college students (mostly aged 18 to 21)
rose from 5.6m to 22.3m.
The size of the young population aged 20-24 will only be 67m by
2030, less than 60% of the figure in 2010.
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An aging country.
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As the share of young people falls and the share of elderly people rises,
Chinese society will age - rapidly.
China already has 180m people aged over 60, and this is set to reach
around 240m by 2020 and 360m by 2030. These are minimum
numbers, which will only increase with rising life expectancy. Less
certain are how fertility rates will affect the population age structure.
Should China’s currently low fertility of 1.4 children per couple be
sustained, the population share of people aged over 60 could reach
20% by 2020 and 27% by 2030.
Using the more conservative international definition of elderly—
people aged 65 plus—one in five Chinese citizens will be elderly by
2030.
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Workforce projections.
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Ratio of working to non-working age population,
China & India
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India’s late surge!
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No more business as usual.
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Fiscal imperatives brought about by demographic changes are also set
to change the political landscape.
Over the next 20 years, the ratio of workers to retirees will
drop precipitously from roughly 5:1 today to just 2:1. Such a
drastic change implies that the tax burden for each workingage person must rise by more than 150%, assuming that the
government maintains its current level of tax income.
In addition, mounting expenditure on social entitlements—especially
pensions and health care—will put the CPC in a difficult position. If
the government demands that taxpayers pay more, the public will
demand better scrutiny of how their dollars are collected and spent.
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Is China now following in Japan’s footsteps?
Japan, South Korea and Taiwan all grew close to 9%
annually for about two decades and then started to
slow.
Many think that China’s fate will be like that of Japan,
which crashed and slowed down in the 1990s and has
yet to boom again.
But the more realistic scenario is Japan in the 1970s,
when the original Asian tiger’s growth slowed from
9% to about 6%.
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The importance of being China.
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The importance of exports to China’s growth.
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Why the USA is so important to Asia?
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The smallest bite of the Apple!
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Each iPad sold in America adds
$275, the total production cost, to
America's trade deficit with China,
yet the value of the actual work
performed in China accounts for
only $10.
• Using
these
numbers,
The
Economist estimates that iPads
accounted for around $4 billion of
America's reported trade deficit with
China in 2011; but if China's exports
were measured on a value-added
basis, the deficit was only $150m.
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The present realities of India vs. China till 2035.
Growing economic asymmetries.
Growing military asymmetries.
Gaps expected to start closing only around 2035-40
Is this a period of vulnerability?
Will China be tempted to “teach a lesson?”
Is it in India’s interest to get too cozy with the USA?
China, Japan, ASEAN & USA great trading partners.
Economically integrated.
 India is least integrated with any region.
 India is the only country with a long un-demarcated land
border with China, and major territorial disputes.
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Satellite view of Aksai Chin.
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Arunachal Pradesh or Lower Tibet?
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PLAAF airbases in Tibet, Xinjiang & Yunnan
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Some distances from PLA AFB’s to IAF AFB’s
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 Tezpur 325 kms
 Gauhati 355 kms
 Bagdogra 381 kms
 Jorhat 430 kms
 Chabua 455 kms
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Major ethnic groups in Xinjiang.
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Ethnically divided Xinjiang.
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Post Dalai Lama Tibetan scenarios.
 New spiritual head -Karmapa. A minor Dalai Lama
incarnate.
 The role of Lobsang Sangay. Increasing militancy
among youth.
 A Chinese Dalai Lama. Two of them. Legitimacy battle.
 Tibetan protests in Western capitals. Unrest in Tibet.
 Tibetan community in India becomes militant.
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The geo-strategic importance of the Indian Ocean.
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The sea lanes in the Indian Ocean are considered among
the most strategically important in the world.
According to the Journal of the Indian Ocean Region,
more than 80 percent of the world’s seaborne trade in oil
transits through Indian Ocean choke points.
With 40 percent passing through the Strait of Hormuz,
35 percent through the Strait of Malacca
and 8 percent through the Bab el-Mandab Strait.
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China’s crude oil imports in 2015 by source.
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Oil is now the basis of about half the
World GDP of over $85 trillion.
Oil is now the single most important driver of world economics,
politics and technology.
The rise in importance was due to the invention of the internal
combustion engine, huge expansion of private and public
transportation and the rise in commercial aviation.
And the importance of petroleum to industrial organic
chemistry, particularly the synthesis of plastics, fertilizers,
solvents, adhesives and pesticides.
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march 20, 2015
A vivid graphic of oil shipping volumes.
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Why the odd man out needs the status quo?
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WHAT DO THE CHINESE THINK OF INDIA? - 1
Apart from a palpable awe of the USA, it is near impossible to know
what the Chinese are thinking about anything. Even Chinese
commentators are unable to do so or commit themselves to any
sense of it. The only way to probably understand what they are
thinking is analyze their questions. These conclusions emerge out of
an analysis of questions and comments recorded by groups of
scholars over a period of time.
1.Indians are noisy and disorganized. CWG, Infrastructure, dirty
surroundings etc.etc.
2.Highly excitable. Post 26/11 reactions. Depsang la and LOC
incidents.
3.Indians lack community values. Lack strong nationalist values.
4.India’s economy will never be able to reach Chinese growth levels,
nor will it be able to compete with Chinese industry.
5.Indians are neither innovative or industrious.
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WHAT THE CHINESE THINK OF INDIA?- 2
6. India will not become a US ally. It has a certain notion
about itself. It also believes that the Indian
bureaucratic/military elite is inherently hostile to it.
7. China does not believe that India’s interest in Afghanistan
is benign. It subscribes to the Pakistani notion.
8. China does not believe that India will support the Tibetans
beyond a point.
9. China does not believe that India will have a leader or
arrive at a consensus in the foreseeable future, who/which
can accept a border compromise, even on a standstill basis.
10. China does not believe that India will ever repudiate the
McMahon Line and settle for a new alignment even if it is the
same as where the LAC is now.
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Five Economic scenarios: PPP GDP’s China & India in 2025.
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Some Future Drivers and Outcomes
Demographic Comparison
Chinese population peaks in 2016.
Begins to decline. Aged cohort
increases . GDP growth slows.
Or one child policy reversed. Growth
continues, but at a slower pace. Ageing
delayed .
Economic Growth Differential
Growth reduces to 7 % . Domestic
consumption increased. Reforms
passed.
Or growth reduces to 5% or less.
Reforms not passed. Exports decline,
as wages increase.
Political Internal Dynamics
Reformists regain strength.
Resumption of decentralization trend;
rebalancing strategy prioritizing nonstate and foreign capital. Nonantagonistic approach to West/Japan.
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Or leftist faction entrenches itself.
Reforms pursued to strengthen state
sector. Provinces emasculated.
Centralized/great power foreign policy.
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Post Dalai Lama Tibet
Differences on Post-Dalai
Lama Tibet is escalated by
China owing to internal
disturbances in Tibet. Forces
inducted into Tibet. Border
becomes active.
Or differences exist on Dalai
Lama’s successor.
Situation does not escalate.
Tibet restive but peaceful.
US China Power
Differential
US industrial strength spurts Or US industrial strength
owing to energy exports. GDP does not increase. Chinese
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Geographical Expansion South
China establishes corridors through Laos
to Thailand and through Pakistan and
Iran to Arabian sea. Builds pipelines to
Myanmar. Nepal and Sri Lanka come
under Chinese influence.
Or establishes limited corridors
southwards. Relies on SLOCs.
Political Reform and Civil Society
Civil Society agitates for political reform
and multi party candidates during
elections. Communist Party challenged.
Or civil society agitates only for
economic reform. Is satisfied with
Communist Party primacy. No
internal instability.
Sino–Indian industrial detente
Indian leadership post 2019 elections
Or China not invited to participate in
invites China to participate in Indian
Indian growth. Relations remain
infrastructure such as high speed rail
frosty.
network.
Huge investments flow & political
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relationship thaws.
India - China Military Balance
China increases military expenditure.
R&D projects deliver results. 5th
generation aircraft. Chinese military and
air superiority of China in Tibet becomes
overwhelming. Three carrier battle
groups in operation
Or China ’ s military expenditure
continues at present rate. Fewer
R&D projects are successful.
Continues import from Russia.
Carrier aircraft not successful. Only
two carrier battle groups with
doubtful air capability.
Sino Indian Maritime Balance in
the Indian Ocean
Deployable Chinese forces in Indian
Ocean, taken as 20% Chinese naval
strength, amounts to 3 destroyers 8
frigates, 2 nuclear attack submarines.
Indian forces remains superior on the
surface owing to carrier and land based
aviation. Vulnerable to nuclear attack
submarines.
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Or Chinese Navy increases due to
massive building program. 20%
deployable forces amount to one
carrier battle group, 6 destroyers
and 14 frigates with 4 nuclear attack
submarines. Still balance decidedly
in Chinese favor.
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Aerospace Technology
Breakthrough
China achieves breakthrough
in both military aircraft and
space technology. Deploys
full range of military aircraft
and satellites including ASAT,
low earth crisis and ELINT
satellites.
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Or China just successfully
manufactures a civil aircraft
for passenger and military
use. No other technological
breakthrough. ELINT satellite
and ASAT capability.
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The three possible futures.
 Scenarios outline three possible futures emerging from
driver outcomes;
 Strong and assertive China.
 China mired in internal contradictions on account of
politico – economic transition gone awry.
 Steadily growing China vs. growing India.
 Scenarios define outline of possible futures that impact
Indian security.
 Ostensibly there are no manifest reasons for conflict.
Chinese great power ambitions could be a catalyst - if it
believes geo-strategic balance shifting against it.
 Similarly Peripheral Security an important issue–
attempts to undermine could result in strong Chinese
reaction.
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Scenario 1: Fragile China
 This scenario outlines Chinese future marked by
declining economic growth; political – economic
transition gone awry.
 Leads to large scale economic, social and ethnic
consequences.
 Scenario marked by declining growth of exports,
internal demand slowing leading to weak
consumption, declining household incomes.
 Internal party rumblings emerge between liberal
economic and pro-social reform lobbies.
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Scenario 1: Fragile China (contd.)
 Inner party factionalism intensifies.
 By 2020 these tensions begin to sharpen –
growing frustration and disenchantment within
CPC.
 Draw down in economy, declining incomes and
hinterland vs coastal divide sharpen societal
tensions.
 Large scale unemployment & floating population
creates a new underclass, angry and frustrated.
 Large scale unrest. Flows on to streets as state
tries to curb violence with repression. Clamp down
on social media exacerbates societal tensions.
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Scenario 1: Fragile China (contd.)
 Unrest spreads to ethnically sensitive Tibet and
Xinjiang exacerbated by induction of radicalized Af–
Pak elements. Number of underground movements
spurt.
 Post 2020 period is marked by large scale attacks on
Chinese garrisons, fiber optic networks, and blowing
up of gas pipelines, railways etc. Incensed state
apparatus ruthlessly cracks down.
 Loud protests erupt in India. PLA leadership accuses
India of inciting Tibetans, decides to escalate border
tensions. Result is heightened stand.
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Scenario 1: Fragile China (contd.)
 Simultaneous tensions erupt along the Myanmar border
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with Kachin and Wa groups attacking Chinese pipelines &
highway projects.
Major standoff between Vietnam and China in South China
Sea. US wars China not to exacerbate tensions. Japan sets
up installations on Senkaku and intimidates China on EEZ.
Beleaguered leadership see these as an attempt by inimical
interests to restrain and contain China.
Internal party acrimony allows ruling faction to whip up
anti-India hysteria, leads to border clashes and tensions.
India responds by resolute posturing.
Chinese leadership concerned about internal troubles,
happy to externalize tensions, secure in belief of ability to
manage escalation.
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Scenario 2: Steady China
& Meandering India
Eclectic scenario, set in post 2020, whose pathways signify situation of
drift with profound impact on external geo-political environment.
Defining parameters:
 Sino–American competition continues for primacy in Asia–Pacific.
Both attempting to exert influence in Asian core zone of power play.
 US tightens up on trade deficits with China, pushing mfg. to Vietnam,
Indonesia and India.
 In terms of military balance China is catching up; US military and
technological power remains at least two generations ahead.
 Japan is beginning to assert itself; radical departure from existing
pacifist security mindset. More tensions with N Korea & China.
 Competition for energy is becoming intensified, with China cornering
majority oil and gas resources in Asia and Africa. America is indifferent
toward Middle East oil.
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Scenario 2: Steady China
& Meandering India (contd.)
 Af–Pak region continues to smolder. Pakistan grapples
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prospects of incremental state failure, no change in military
mindset about Kashmir, anti India stance or strategic depth.
Radical Islamic shadows shifting to Central Asia - emerging
as new center of Al Qaeda activities.
Russia becoming more assertive player seeking to partner
China to balance US dominance in Asia–Pacific.
China perceives Indian economic interests and growing
military relations with US inimical to its interests.
A heady mix of Sino-Pak collusion supported by Indian
insurgent groups creating tough situations in J&K & NE.
Chinese make major gains in Nepal, Sri Lanka, Myanmar
and IOR littorals.
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Scenario 2: Steady China
& Meandering India (contd.)
 India too economically sturdy but indecisive, unable to
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assertively configure strategic power, to meet Chinese
challenge.
Increasing internal security contradictions and challenges.
Leadership remains internally focused.
In prevailing mood, defence reforms losing steam, minimal
restructuring to drive new technologies and doctrines. Little
modernization and transformation.
Lopsided strategic planning and acquisition process not
conducive to addressing obsolesce. All major projects are
behind schedule
By 2018 single SSBN & SSN is in service. MRCA project is
delayed. FGFA not yet on horizon.
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Scenario 2: Steady China
& Meandering India (contd.)
 Indian Army remains heavily committed in counter
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insurgency operations, its modernization too is behind
schedule.
Strategic road development program along Eastern and
Western borders makes little progress. Mountain strike
corps is mired in controversy over structures &
organization.
In terms of attributes of military capability, only
marginal at best 20% improvement. Services remain
fragmented by continuing turf battles.
An uncertain India with steadily declining strategic
configuration of power. Competition with China
becoming increasingly asymmetric.
A period of grave strategic vulnerability prevails.
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Scenario 3: Sino-centric Asia
 This scenario is built around China continuing to
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grow at a sustained 7 – 8 %. By 2025 Chinese real
GDP crosses $15 trillion.
Commensurate increase in its defence budget around $450-500 billion backed by robust
indigenous defence industrial base.
China has completed Phase II of its modernization
and is in position to field RMA based net centric
force over critical theatres.
Upgraded its strategic forces by induction of JL-2
SLBM and DF-41 ICBM both with MIRV capability.
Large asymmetry has developed between China and
India in both conventional and strategic capability.
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Scenario 3: Sino-centric Asia (contd.)
 These developments come in the backdrop of
relative decline of American economic power.
Still a dominant military power but with
reduced propensity to use force.
 US remains engaged in Asia coalescing regional
allies to put up united front.
 Aware that US had lost stomach to contain
China, they balance relations with China
carefully hedging economic and security
policies.
 Its sphere of influence encompass SE, East and
Central Asia. Inducing ASEAN and Korea to
bandwagon rather than balance Chinese power.
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Scenario 3: Sino-centric Asia (contd.)
 India too grows at robust 7-9 %. Real GDP grows to $ 8
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trillion. Share of global trade increasing.
Military capability grows as defence budget touches $ 150
billion.
Number of current programs in pipeline have fructified
including induction of five squadrons of MRCA, two SSBN’s
, two SSN’s and indigenous carrier. FGFA induction.
Mountain strike corps is operational. Infrastructure in
Ladakh is finally upgraded. An armored brigade located in
Ladakh.
India had made substantial upgradation of its C4ISR,
providing near real time “look and lock” capability both
over TAR and IOR. It also fields a rudimentary GPS.
Successfully tested ASAT and ASBM weapons.
Indigenous defence industrial base begins to develop.
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Scenario 3: Sino-centric Asia (contd.)
 With both countries growing, availability of energy
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resources becomes decisive.
By 2024, China energy import dependency increases.
Perceived vulnerability of SLOC’s rising. Availability
issues too becoming critical. Forces PLAN to step out
into IOR.
China acquires repair and refueling facilities in Gwadar
and Hambantota (?), and establishes earth stations.
Facilities on East African coast. Kisimayu or Socotra or
Comoros?
China clearly upgrading its presence and deployments in
IOR, even as Indian Navy remained dominant force.
In late 2024 Myanmar, Bangladesh, Sri Lankan, Pakistan
and Chinese navies carried out joint exercises in Bay of
Bengal.
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Scenario 3: Sino-centric Asia (contd.)
 Period marked by major Chinese inroads in Nepal
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where it is involved in upgrading both
communications & defence infrastructure. Military
training team also located. Friendship treaty?
Similar influence was noticeable in Bangladesh and
Myanmar, where China has developed an energy
hub at Sitwe.
Sino – Pak relations marked by greater bonhomie.
China providing HN9 AD systems, J–10’s and
access to Beidou navigation system.
These were in addition to infrastructural projects
being undertaken in Northern areas including
economic corridor from Xinjiang to Makran.
Rumblings had once again started in Tibet and
Xinjiang. PLA and Central Leadership is worried?
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Consequences : Fragile China
Unrest increases in China. Visible on social
media.
China actively censors internet.
Reasserts dominance over ASEAN over South
China Sea dispute.
Raises stakes against Japan over territorial
dispute. Increases patrols in South China Sea.
Enhances force strengths in Xinjiang & Tibet.
Task group visits Karachi.
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Consequences of Fragile China
Chinese President makes provocative speech against
foreign interference in Chinese core interests in Tibet.
China tests anti-carrier ballistic missile at sea.
Increases offensive patrolling on Tibet border.
Begins a major Air-Land exercise in Southern China.
Leadership visits Pakistan to reiterate military and
economic aid.
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Consequences of Steady China
& Meandering India
•China commences series production of military aircraft
and heavy lift helicopters
• Retrofits long range cruise missiles in naval vessels.
• Lays keel for 3rd aircraft carrier (2020).
• Increases investments in Africa for minerals and oil.
• Deploys one Brigade of 2nd Arty corps with conventional
missiles in Tibet.
• Conducts naval exercise with Pakistan Navy in Arabian
sea, including nuclear submarines.
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Consequences of Sino-centric Asia
China overtakes US in GDP by 2025. Has defence
budget of $ 450 billion.
Is primary trade partner of all SE Asian and Central
Asian countries.
Operates 3 carrier battle groups and 10 SSN’s. Has
finished testing JL–2 from Jin Class submarines.
Has 3 air cavalry divisions and 4 para divisions.
Cumulative lift of one corps by air assets . One air
cavalry division with Chengdu Theatre Command.
Dominates South China Sea with CVBGs.
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Consequences of Sino-centric Asia
Is primary user of Indian ocean SLOCs.
Operates one CVBG in Indian Ocean part of the year.
Conducts naval exercises in Indian ocean with South
Africa, Kenya, Saudi Arabia, Pakistan, Bangladesh &
Indonesia.
Matches Indian Navy in Indian Ocean.
Entire Pakistan, Bangladesh & Myanmar naval
hardware is Chinese. Leases one SSN to Pakistan.
Tibet living standards superior to India. Very little
unrest.
Chinese Taikonaut does moon walk. Has strong
anti-satellite capability. Launches foreign satellites.
Holds debt of all declining European nations.
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PRC: Three Principles for the management of
political-military crises.
• Do not attack unless attacked. Never attack others without
provocation, but once attacked, do not fail to return the blow. It also
implies a stress on reciprocity and symmetry in evaluating when and
how to escalate.
• Do not fight decisive actions unless sure of victory. Never fight without
certainty of success, unless failing to fight would likely present a worse
outcome. This conveys the selective and political approach to the use of
force and other forms of escalation.
• Be pragmatic and aware of the limited nature of objectives and
strength. With a strong power, set appropriate objectives; do not exceed
capabilities. Know when to stop, when to counter, and when to bring the
crisis to a close. Stop once the goals are attained; rethink if you cannot
obtain your objectives.
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Deductions
A prolonged and sustained Sino-Indian war with a political
decision enforced by the military is unlikely in next 20 years.
However a short sharp conflict with limited aims and duration
is quite possible following escalation of border incidents leading to a ‘teaching a lesson’conflict.
1.Tensions arising out of Tibetan turmoil post Dalai Lama and a
messy succession.
2. A general ‘teaching lesson’ conflict by a rising China against
an aspiring India, to underscore its world power status.
3.To reassert Chinese maritime power in the Indian Ocean to
protect its SLOCs.
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Policy Recommendations
1.Make a strategic national decision to maintain an
indigenous asymmetric capability against China on the
border and the Indian ocean. Build capacity for swift,
decisive and even disproportionate escalation.
2. In pursuit of that decision create national industrial
capacity, with or without foreign collaboration, for following
urgently –
• medium lift aircraft
• heavy lift helicopters
• nuclear attack submarines
• precision attack long range cruise missiles
• fighter aircraft
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Policy Recommendations.
Acquire military hardware to preserve military asymmetric
edge on Tibetan-Xinjiang border and the Indian Ocean.
Assure asymmetric response.
Strategic decision to escalate to an offensive trade war
against Chinese SLOCs in case attacked on the Tibetan
border. Obtain US acquiescence for trade war in IOR if
forced to escalate.
Preserve air superiority edge on Tibetan border by further
acquisitions.
Develop credible nuclear deterrence.
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Jai Hind!
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