Opinion

India’s unfounded fears: For China, One Belt One Road is about economics – not world domination

Beijing simply wants to invest its forex reserves where they will fetch higher returns, and make up for industrial losses at home.

On Sunday, May 14, China hosted a well-attended and hugely touted conference to promote its One Belt, One Road initiative – which aims to create the world’s largest platform for economic, social and cultural cooperation through a network of road and sea links and infrastructure projects connecting China with South and Central Asia, West Asia and Europe. Also known sometimes as the New Silk Road and Maritime Silk Route initiatives, the project has been hailed or condemned by commentators all over the world as a “game changer” and China’s big play to seek world domination. Both the fears and the optimism are unfounded. One Belt One Road is a project meant to very simply get out Chinese reserves invested in western banks into investments where it will fetch a higher rate of return, and to take up the slack from the huge overcapacity problem that plagues the Chinese economy. Speaking at the conference, President Xi Jinping announced that Beijing would advance 380 billion Yuan or $55 billion to support One Belt One Road. This is a far cry from the huge figures, sometimes as high as $750 billion or $1 trillion, bandied about.

While economists are generally skeptical about China’s goals and intentions, strategists – mostly the garden-variety Indian military types – have endowed this project with sinister overtones. I was on a television show a couple of days ago where both the prominent anchor and a prominent commentator of the unempirical stuff that passes off as strategic thought raised the issue of the so-called String of Pearls – a theory that China is cultivating commercial or military ties at strategic ports in the Indian Ocean region. To them, it seemed that every port or airport where a Chinese company is the contractor had a military purpose.

The String of Pearls is a bogus idea. It was cooked up by consultants working for a Central Intelligence Agency and United States Department of Defence-tied company called Booz Allen Hamilton and was given much traction by some well-known Indian “strategic thinkers”. I was once in a conference where Admiral Dennis Blair, former chief of the United States Navy and later director of national intelligence to President Barack Obama, was asked about it. He called it a stupid notion and said that no one who has run a navy or held a responsible position in a navy will ever say an oceanside blockade is possible. He explicitly and loudly said to Indian strategists who harped on the String of Pearls that no navy could encircle a country with a few ports.

The question we need to ponder over a bit is how long will these ports survive after the outbreak of general hostilities? The Indian Air Force and the Indian Navy have enough airpower at hand to sort them out, and our Navy can effectively blockade hostile ports in the neighbourhood. It may be noted that the Indian Air Force has operationalised an airbase in Thanjavur in Tamil Nadu and will fly Sukhoi Su-30MKIs from there. The Navy deploys MiG-29K fighters as well as P-8 Poseidon maritime surveillance and attack aircraft and a formidable fleet of combat vessels. We have not exactly been sleeping, nor do we need to be overly worried. The same Sri Lanka that once hosted a Chinese Jin-class nuclear submarine ostensibly on a goodwill mission last week turned away a PLAN conventional submarine wanting to pick up supplies.

Economics of One Belt One Road

Now, to the economics of One Belt One Road. China claims it is “based on principles of mutual benefit and that it is not interested in interfering in the participating countries’ internal affairs”. But there is a reality most of our commentators do not see or understand. China has accumulated foreign exchange reserves of $3.5 trillion. The capital it claims it is prepared to subscribe for the New Development Bank (previously BRICS Development Bank), the Asian Infrastructure Investment Bank and the Silk Road Fund would amount to only around 7% of its total foreign exchange reserves invested in western banks. Since these China-promoted institutions will be providing infrastructure lending rather than grants, the return on capital from these investments could be significantly higher than the returns China is getting from its foreign exchange reserves currently invested in low-yielding US government bonds. It is very simple. China needs to get value for its money and also help its demand-starved industries. And they have found a typically Chinese solution to it and are making a virtue of a necessity.

Look at it from another angle. The US dollar is also steadily depreciating in the long term against other major currencies. With no interest and with depreciation factored in, China’s huge reserves, accumulated by extracting surpluses in its sweat shops, are steadily shrinking in value. The question that Beijing seeks to grapple with is this. One way is to put these funds to work in investment-starved countries in Africa and Asia and assure them of returns for a long time to come. In some, the birds have come home to roost quite early. The grandiose Hambantota port project in Sri Lanka, which once had the same bunch of Indian “strategic thinkers” in a tizzy, hosts no ships and does not earn very much. China is now putting pressure on the Sri Lankans to service the debt and is seeking to extract some more in lieu of that. Much of the Hambantota investment has already been recouped by China by way of material and labour supplied to complete the project. That is why one prominent European commentator calls the One Belt One Road project “One Belt, One Road and One Trap”.

The Pakistani newspaper Dawn recently questioned the benefits from the China-Pakistan Economic Corridor, a mega project linking Gwadar port with Xinjiang in China. (Credit: Caren Firouz / Reuters)
The Pakistani newspaper Dawn recently questioned the benefits from the China-Pakistan Economic Corridor, a mega project linking Gwadar port with Xinjiang in China. (Credit: Caren Firouz / Reuters)

Utility and intentions

Like Sri Lanka, other intended beneficiaries have also now begun to ask questions about the utility and intentions of One Belt One Road. The Pakistani newspaper Dawn has said,

“But the main thrust of the plan actually lies in agriculture, contrary to the image of CPEC [China-Pakistan Economic Corridor] as a massive industrial and transport undertaking, involving power plants and highways. The plan acquires its greatest specificity, and lays out the largest number of projects and plans for their facilitation, in agriculture.” 

This top Pakistani newspaper then questions the benefits that will arise from linking mostly dry and barren Xinjiang, and in particular the predominantly Turkestani Muslim Kashgar prefecture, with its restive four million people, to an increasingly water-starved and already much troubled Pakistan.

Much is being made about the overland link between China and Europe by rail and road links. Most commentators seem to miss that the Trans-Siberian Railway line from Vladivostok to Moscow is almost a hundred years old. Its capacity can be beefed up. Yet, overland freight costs will always be much more expensive than sea freight costs. Business is about cuttings costs and taking the least expensive options. No one with common sense would prefer to shift by land what can be shipped. Others make much of the so-called Malacca dilemma – a phrase coined by former Chinese President Hu Jintao reflecting Beijing’s worry about a potential US blockade of the Malacca Strait, though which 80% of its oil shipments pass. Well, the Arctic route is opening up and the real Malacca dilemma will soon be the rapid decrease in freighters through it.

We welcome your comments at letters@scroll.in.
Sponsored Content BY 

How sustainable farming practices can secure India's food for the future

India is home to 15% of the world’s undernourished population.

Food security is a pressing problem in India and in the world. According to the Food and Agriculture Organization of the UN (FAO), it is estimated that over 190 million people go hungry every day in the country.

Evidence for India’s food challenge can be found in the fact that the yield per hectare of rice, one of India’s principal crops, is 2177 kgs per hectare, lagging behind countries such as China and Brazil that have yield rates of 4263 kgs/hectare and 3265 kgs/hectare respectively. The cereal yield per hectare in the country is also 2,981 kgs per hectare, lagging far behind countries such as China, Japan and the US.

The slow growth of agricultural production in India can be attributed to an inefficient rural transport system, lack of awareness about the treatment of crops, limited access to modern farming technology and the shrinking agricultural land due to urbanization. Add to that, an irregular monsoon and the fact that 63% of agricultural land is dependent on rainfall further increase the difficulties we face.

Despite these odds, there is huge potential for India to increase its agricultural productivity to meet the food requirements of its growing population.

The good news is that experience in India and other countries shows that the adoption of sustainable farming practices can increase both productivity and reduce ecological harm.

Sustainable agriculture techniques enable higher resource efficiency – they help produce greater agricultural output while using lesser land, water and energy, ensuring profitability for the farmer. These essentially include methods that, among other things, protect and enhance the crops and the soil, improve water absorption and use efficient seed treatments. While Indian farmers have traditionally followed these principles, new technology now makes them more effective.

For example, for soil enhancement, certified biodegradable mulch films are now available. A mulch film is a layer of protective material applied to soil to conserve moisture and fertility. Most mulch films used in agriculture today are made of polyethylene (PE), which has the unwanted overhead of disposal. It is a labour intensive and time-consuming process to remove the PE mulch film after usage. If not done, it affects soil quality and hence, crop yield. An independently certified biodegradable mulch film, on the other hand, is directly absorbed by the microorganisms in the soil. It conserves the soil properties, eliminates soil contamination, and saves the labor cost that comes with PE mulch films.

The other perpetual challenge for India’s farms is the availability of water. Many food crops like rice and sugarcane have a high-water requirement. In a country like India, where majority of the agricultural land is rain-fed, low rainfall years can wreak havoc for crops and cause a slew of other problems - a surge in crop prices and a reduction in access to essential food items. Again, Indian farmers have long experience in water conservation that can now be enhanced through technology.

Seeds can now be treated with enhancements that help them improve their root systems. This leads to more efficient water absorption.

In addition to soil and water management, the third big factor, better seed treatment, can also significantly improve crop health and boost productivity. These solutions include application of fungicides and insecticides that protect the seed from unwanted fungi and parasites that can damage crops or hinder growth, and increase productivity.

While sustainable agriculture through soil, water and seed management can increase crop yields, an efficient warehousing and distribution system is also necessary to ensure that the output reaches the consumers. According to a study by CIPHET, Indian government’s harvest-research body, up to 67 million tons of food get wasted every year — a quantity equivalent to that consumed by the entire state of Bihar in a year. Perishables, such as fruits and vegetables, end up rotting in store houses or during transportation due to pests, erratic weather and the lack of modern storage facilities. In fact, simply bringing down food wastage and increasing the efficiency in distribution alone can significantly help improve food security. Innovations such as special tarpaulins, that keep perishables cool during transit, and more efficient insulation solutions can reduce rotting and reduce energy usage in cold storage.

Thus, all three aspects — production, storage, and distribution — need to be optimized if India is to feed its ever-growing population.

One company working to drive increased sustainability down the entire agriculture value chain is BASF. For example, the company offers cutting edge seed treatments that protect crops from disease and provide plant health benefits such as enhanced vitality and better tolerance for stress and cold. In addition, BASF has developed a biodegradable mulch film from its ecovio® bioplastic that is certified compostable – meaning farmers can reap the benefits of better soil without risk of contamination or increased labor costs. These and more of the company’s innovations are helping farmers in India achieve higher and more sustainable yields.

Of course, products are only one part of the solution. The company also recognizes the importance of training farmers in sustainable farming practices and in the safe use of its products. To this end, BASF engaged in a widespread farmer outreach program called Samruddhi from 2007 to 2014. Their ‘Suraksha Hamesha’ (safety always) program reached over 23,000 farmers and 4,000 spray men across India in 2016 alone. In addition to training, the company also offers a ‘Sanrakshan® Kit’ to farmers that includes personal protection tools and equipment. All these efforts serve to spread awareness about the sustainable and responsible use of crop protection products – ensuring that farmers stay safe while producing good quality food.

Interested in learning more about BASF’s work in sustainable agriculture? See here.

This article was produced by the Scroll marketing team on behalf of BASF and not by the Scroll editorial team.