China and The North East: Future lies in the model

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By Amar Yumnam
During the last fortnight or so two interesting documents confirming the rise of China and her important role in the collective future of the world have come out. First is the World Bank’s study report titled China 2030: Building a Modern, Harmonious, and Creative Society followed by the just published Asian Development Outlook 2013 of the Asian Development Bank.  The World Bank report writes: “Over the past three decades, China’s two historic transformations, from a rural, agricultural society to an urban, industrial one, and from a command economy to a market-based one, have combined to yield spectacular results. Not only did economic growth soar, but the poverty rate fell from more than 65 percent to less than 10 percent as some 500 million people were lifted out of poverty, and all the Millennium Development Goals have been reached or are within reach. Although growth rates differed across China, growth was rapid everywhere. Indeed, if mainland China’s 31 provinces were regarded as independent economies, they would be among the 32 fastest-growing economies in the world. Such rapid growth has been accompanied by many other achievements: for example, 2 of the world’s top 10 banks are now Chinese; 61 Chinese companies are on the Global Fortune 500 list; and China is home to the world’s second-largest highway network, the world’s 3 longest sea bridges, and 6 of the world’s 10 largest container ports. The country has also made large strides in health, education, science, and technology, and is quickly closing the gap on all these fronts with global leaders.” The ADB report emphasises that the growth “resilience” in Asia in the face of global economic “doldrums” is supported mainly by the Chinese economic strength and the accompanying growth in the countries of ASEAN.

The whole world has already taken advantage of the growing strength of China by attracting Chinese investments; this covers from Africa to Latin America. Besides, the developed countries are already applying their mind on making policy changes to maintain their economic and social competitiveness with China’s sure rise to global dominance; even if growth slows down the country’s economy would be the largest in the world before 2030. The American response in this regard is sharp and clear. With innovations increasingly emerging from the Chinese institutes of higher learning, the United States of America is now thinking of evolving a policy for retaining international students studying in their universities, particularly in the subjects of science, technology, engineering and mathematics (STEM). Here it must be noted that Chinese students constitute the largest proportion among international students undergoing doctoral programmes in the American universities. The response of the American corporate world to the Chinese rise is even more wonderful and tries to merge in with the rise. Stephen Allen Schwarzman – Chairman and CEO of the Blackstone Group, and generally considered as one the most powerful private equity tycoons in America and the world – has just announced this Sunday a $300 million endowment for scholarships for studying at the Tsinghua University in Beijing. This would match the prestigious Rhodes Scholarship programme in reputation over time and enable 200 international students annually to undergo Master’s programme in the university.  

This is exactly where we need to have a North East take on the perspective to be adopted in so far Chinese policy is concerned. We understand that India is guided more by hatred and distrust when it comes to China. These are coupled by absolute suspicion whenever the North East comes into the picture. Here two points need to be emphasised. First, the rise of China, and in a way more robust way than India’s, cannot be stopped and matched by India in the foreseeable future. Second, given the imperative to have deeper and meaningful economic ties with China, India can do it best through her North East Region.

Now the question is: how do we do it?  This requires digesting the Chinese development model in recent years. India’s, for that matter any developed country’s development experience, has been marked by the inability to be inclusive. It is exactly here that the Chinese approach comes out glaringly unique as something sustainable, inclusive and having trans-boundary positive implications. China has so wonderfully developed a production network with the neighbouring countries which have been a win-win situation for all. While the country increasingly engages in high end technological innovations, she has definitely helped in building the manufacturing capabilities in the neighbouring countries at least in the initial phases of a product. This has got three important positive economic impacts. First, it allows the neighbouring countries to expand income without dependence on the far off countries. This is exactly the reason why the ASEAN countries and China have not been adversely affected in a huge way by the recent global meltdown (now called the Great Recession). Second, it develops an inter-country production and technological network among the neighbouring countries such that the inclusiveness of the development as manifested in shared income growth among neighbouring countries spontaneously creates an atmosphere of sustainability. This is very different from any model experienced so far anywhere in the world where every country has endeavoured to beat any other country in both price and quality of a product. In the Chinese industrialisation paradigm the atmosphere generated among the neighbouring countries is one of shared production framework and rising income atmosphere rather than cut-throat competition. Third, the shared rise in income across neighbouring countries ensures a perennial market for products even if the rest of the world experiences a negative shock. This is how China and her networked countries escaped the troubles of the Great Recession.

The opportunity of the North East lies in dovetailing her development efforts to the Chinese production networks. The region has both capability and opportunity to harness this scope. Besides, China is also looking for additional investment opportunities. If the North East joins the production network of China, it would be a case of killing two birds with one stone. First, the relationships between India and China would get a positive push. Second, the so far intractable development issues of the North East would be greatly addressed. 

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