Monday, October 13, 2014

my firstpost piece on how modi outsmarted xi last month

my firstpost piece on how china's #xi came, saw, and was outsmarted by #modi. @narendramodi wins one over the hans. 

Now that the dust has settled on Prime Minister Narendra Modi's whirlwind foreign policy activities in September, and the protests in Hong Kong have petered out, this is a good time to sit back and analyze what Xi Jinping's visit to India has left behind as a legacy. There have been a number of quasi-imperial visits by Chinese strongmen in the last few years, and it is my contention that this one was qualitatively different, mostly because of the shadow-boxing and symbolism in the background.

I am reminded of an old fable: a king had a favorite vidushaka, whom he sent to the court of the emperor, whom he owed fealty to. At the emperor's court, the vidushakacurtseyed, and said: "The new moon, my king, sends his salutations to you, dear emperor, the full moon". The emperor was pleased, but the king wasn't. Until the jester reminded him that the full moon would be waning, while the new moon would be waxing. Something along those lines applies to Xi and Modi.

To take an inventory of how things stand today, Modi has returned from a fairly good visit to the US, which enhanced his credentials as a global statesman. He has, at least for the moment, demonstrated to the Pakistanis firing across the border that if they do not behave, there will be consequences, and that their all-weather sugar daddies China and the US will not lift a little finger to help them. He is enjoying his honeymoon period, and the economy is looking up a wee bit.

Xi, on the other hand, has had a rough few weeks. The Hong Kong uprising, while ultimately infructuous, suggests that there are many young people who resent the heavy-handed police state he runs. Yes, even in the prosperous mainland cities, there must be underground activists. Besides, the economy is slowing, and people are once again talking about the probabilities of a soft landing (medium), a bursting of the real estate bubble (high) and a banking crisis (high).

It is true that time and again, the Cassandras have been proven wrong, and the Chinese have pulled rabbits out of the hat. But there are a few indicators that, this time around, suggest strongly that things may be souring in China. One is the precipitous fall in the price of oil (despite war clouds in the Middle East): it is down to around $92/barrel for Brent crude as I write, which is a four-year low. The other is the fall in the price of iron ore, at a five-year low of around $90/metric ton.

Xi and Modi in Ahmedabad. AP

Xi and Modi in Ahmedabad. AP

Since commodity prices have been pushed up by Chinese demand, these are indirect signals suggesting a slowdown in the Chinese economy. According to Bret Stephens in The Wall Street Journal the 'China dream' is a hoax, as he cites the elites trying to get out, including by buying EB-5 US green cards that cost a cool $1 million each. The Financial Times is running a series showing the dramatic growth of Chinese investment, and migration (using expensive 'golden visas') into Europe. Do these people know something the rest of us don't?

So, in some sense, Xi stands slightly diminished compared to the time of the Modi-Xi meeting, and Modi stands slightly elevated. So far, so good, but what about their actual encounter itself? I think it was full of jousting and probing, as each man tried to figure out how far the other could be pushed, and they used tried and tested methods of insulting each other diplomatically.

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sent from samsung galaxy note, so please excuse brevity

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