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“Incisive...lively and accessible...Manuel shows us that an optimistic path is possible: we can bring China and India along as partners.” —San Francisco Chronicle
In the next decade and a half, China and India will become two of the world’s indispensable powers—whether they rise peacefully or not. During that time, Asia will surpass the combined strength of North America and Europe in economic might, population size, and military spending.
Both India and China will have vetoes over many international decisions, from climate change to global trade, human rights, and business standards.
From her front row view of this colossal shift, first at the State Department and now as an advisor to American business leaders, Anja Manuel escorts the reader on an intimate tour of the corridors of power in Delhi and Beijing. Her encounters with political and business leaders reveal how each country’s history and politics influences their conduct today. Through vibrant stories, she reveals how each country is working to surmount enormous challenges—from the crushing poverty of Indian slum dwellers and Chinese factory workers, to outrageous corruption scandals, rotting rivers, unbreathable air, and managing their citizens’ discontent.
We wring our hands about China, Manuel writes, while we underestimate India, which will be the most important country outside the West to shape China’s rise. Manuel shows us that a different path is possible—we can bring China and India along as partners rather than alienating one or both, and thus extend our own leadership in the world.
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Anja Manuel is cofounder and partner with former Secretary of State Condoleezza Rice, National Security Advisor Stephen Hadley, and Secretary of Defense Robert Gates, in RiceHadleyGates LLC, a strategic consulting firm. She served as an official at the US Department of State from 2005-2007, responsible for South Asia policy. She has traveled extensively across China and India, and with her business clients, regularly experiences tough government negotiators and managing unruly subsidiaries in cities from Beijing to Bangalore. A graduate of Harvard Law School and Stanford University, Manuel now lectures at Stanford. When she is not on a plane, she lives in San Francisco with her husband and two young children.Excerpt. © Reprinted by permission. All rights reserved.:
FROM THE INTRODUCTION
China Flexes Its Military Muscle—Bloomberg
China Fears Sink Markets Again—Wall Street Journal
It’s Time to Get Tough on China—Washington Post
China, a Wounded Tiger, Could Lash Out—Los Angeles Times
The headlines leading up to Chinese President Xi Jinping’s visit to the United States in September 2015 were scathing. Washington threatened to impose sanctions for Chinese computer hacking. Some presidential candidates called for President Obama to cancel the state visit. I was among the hundreds who stood politely to applaud Xi’s speech to the American business community in Seattle during that visit. It was an impressive affair. Entrepreneurs sipped wine and made polite conversation with Chinese officials. Xi is a statesman and looked it, in a crisp dark suit and tie. He struck all the right notes: assuring us that China will create a level playing field for U.S. companies, crack down on commercial cyber-theft, and cooperate with us on issues ranging from Iran to global financial stability. He encouraged the United States and China to “work together” on our future. Yet underneath the ceremony, there was an air of formality, and even discomfort. We had waited in line for more than an hour to go through a security screening. Most of the Chinese and Americans sat at separate tables, scarcely interacting with each other. Some American CEOs fretted about the negative news coverage they would receive for being seen hobnobbing with the Chinese president.
The atmosphere at a Silicon Valley dinner for Indian Prime Minister Narendra Modi a few days later was entirely different. The prime minister was an hour late. Indians, Americans, and Indian-Americans mingled happily in the banquet room and, in many cases, no one quite knew who belonged to which country. There was such loud, happy chatter that the organizers repeatedly had to ask us to sit down. Most of the Americans onstage, including the CEOs of Google, Microsoft, and Adobe Systems, were born in India. Prime Minister Modi, in a beige traditional Indian Nehru jacket, gave a less formal speech than Xi. He spoke in English, told jokes, shared stories of technology connecting Indian grandmothers to their grandchildren working in San Francisco, sketched his vision for a digitally empowered India, and called the India-U.S. relationship the “defining partnership of this century.” In contrast to that of President Xi, Modi’s visit received very little news coverage.
The dinners are a snapshot of the state of our relations with Asia’s rising giants. We respect China, our commercial ties bind us, but difficult geopolitics and a slew of bilateral disagreements lurk beneath the surface. As we listen politely to Xi Jinping, we don’t always trust his words. We are “working hard” to get along with the Chinese, but it is not easy. Some would describe us as “frenemies.” Relations with India are much more affable and comfortable. It is far behind China by most economic and development metrics, but has long-term strengths such as real rule of law and democracy. India doesn’t get much attention in our press. We assume that we share values and already have a strong “partnership” in most areas. Yet we tend to underestimate India’s size and future power.
* * *
The axial shift of power from the United States and Europe to China and India is unrelenting. By 2030, just fourteen short years from now, Asia will surpass the combined power of North America and Europe in economic might, population size, and military spending. The United States will still be the most powerful international player, but China and India will increasingly dictate the terms of global governance. Along with the United States and Europe, they will become the new indispensable powers—whether they rise peacefully or not.
The lion’s share of public attention is focused on China. We are obsessed with the Asian goliath and fear that it will replace America’s preeminent power. This insecurity misses the larger picture. Due to their size and economic might, both India and China will have veto power over most international decisions, from climate change, to the openness of global trade, to nuclear policy, to human rights and business norms. India will be the most important country outside the West to shape the rise of China. We must stop our hand-wringing about China and seek instead to forge harmonious relationships with both giants, and thus bravely create the new world.
More attention has been paid to China’s ascent because its boom started earlier and many predict it will be the world’s largest economy by 2030 (if measured by purchasing power, it already is). Our news coverage of China is filled with breathless statistics: it already has more megacities than anywhere else on earth; it has promised pensions to more retirees than the total U.S. population; its cars and smokestacks gush almost twice as much CO2 into the atmosphere as the United States; it has more Internet users than the United States and Europe combined, and 2 million censors monitoring them. The list goes on. Sometimes we describe China as an unstoppable juggernaut, ready to dominate the world. A few days later the papers are filled with stories of its impending economic doom and potential political collapse. The truth, of course, lies somewhere in between. China’s economy, might, and influence are trending up, but they will not follow a straight-line trajectory.
Many still doubt the relevance of India as a global power. They should not. India will likely be the world’s most populous country before 2030, with at least 100 million more citizens than China. India will be adding more people than China to the world’s middle class, so our companies will strive to please both Indian and Chinese consumers. By 2030, India will lead the world in energy demand. It will be the world’s second-largest emitter of carbon, third-largest source of investment in the world, and third-largest economy after China and the United States. It is true that in many areas, especially economic development, India will lag behind the United States and China. Some question whether India’s economy will grow enough for it to become a great power, and discount its international role. This misses the point. India is so large that it will impact us whether or not it lifts millions more out of poverty. If it does not grow, international concerns like climate change will only become worse. We need India’s help to solve global problems and to shape China’s rise, so we want it to succeed.
The interaction between these two Asian giants will impact the United States. Disputes between China and India could force us to take sides, possibly even militarily, since our interests will more likely align with India’s. China and India increasingly compete for oil, coal, and other natural resources around the world, and their decades-old dispute over where their Himalayan border lies could turn ugly. India’s nuclear program is primarily a hedge against China’s larger military. As China extends its sphere of influence south and India east, the two are more likely to come into conflict, and may draw us into their disagreements.
Conversely, the two countries sometimes cooperate in ways we do not like—by setting up a New Development Bank with Brazil, Russia, and South Africa to compete with the World Bank, by refusing to join American-led free trade negotiations, or by India joining China’s new Asian Infrastructure Investment Bank. For years China and India argued in concert that they had less responsibility than the West to lower carbon emissions because their economies were less developed, and thus demonstrated that they have absolute veto power on this critical issue. Fortunately, both have recently begun to cooperate with the West. As Chinese and Indian companies become some of the world’s largest investors, they will influence global business practices from bribery to environmental stewardship and labor standards.
I have been lucky to have a front-row view of this colossal shift in power, and a small role in shaping it. At the U.S. State Department from 2005 to 2007, I was part of our internal deliberations to create a new strategic partnership with India, and I watched as we struggled to encourage China to become a “responsible stakeholder” in the world system. In the faded splendor of India’s foreign ministry, I helped negotiate a civil nuclear accord with Indian officials, which fostered mutual trust that unlocked cooperation in other areas. In a glorious gilded French palace I observed the “new China”—in the form of then foreign minister Li Zhaoxing—flexing its diplomatic muscle by refusing to agree to additional sanctions on Iran. For the past six years, the consultancy I cofounded and manage with former cabinet-level government officials has helped American companies expand into emerging markets. While we focus on the whole world, the two countries that matter most to our clients are China and India. With my clients, on a daily basis I live through the trials of selling to tough Indian and Chinese negotiators or managing unruly subsidiaries in cities from Beijing to Bangalore.
* * *
To sharpen our perspective on what’s at stake for the United States as this power shift progresses, and how critical India will be in shaping China’s rise, one can paint two dramatically different portraits of the world in 2030.
First, picture the worst case, a world divided by a twenty-first-century cold war:
China’s insatiable demand for resources has caused it to ally with resource-rich countries throughout the world, corrupting their governments, propping up dictators, and exploiting the local population. China’s economic power and lavish infrastructure spending has made its Asian neighbors heavily dependent on Chinese trade and investment and effectively “purchased” their acquiescence to China’s regional hegemony. Russia has become a junior partner in a China/Russia axis that confronts American policy at every turn. In part to divert attention from their slowing economies, together they work to undermine “western” principles and to dismantle the post–World War II international order established and maintained by the United States. The Mainland has coerced Taiwan into accepting its domination and future control. The South China Sea and its oil are now Chinese territory. China launches constant, low-level cyberattacks against the United States. India and China have had several military skirmishes in the Himalayas and over control of Tibetan rivers, which China wants to divert to water its increasingly parched northern territory.
In this scenario, India’s fear of China has brought it into a close military alignment with the United States, Japan, and Australia, and into closer cooperation with Europe. As these opposing coalitions form, an arms race increases military spending. That escalation diverts much-needed funds from social services, improvements in education, and vital infrastructure projects in the United States, China, and India. While China still trades with the West, it does not open its economy further and it increasingly uses its market clout to favor allies and punish adversaries, all weakening western influence. India, despite its alignment with the West, resists open trade. These new divisions bring the influence of institutions such as World Bank and the United Nations to an all-time low.
To prevent unrest over stagnating wages, the Chinese government becomes more authoritarian and represses dissent. India fails to reform its political system, is still plagued by a byzantine bureaucracy and corruption, and economic growth stalls. Its education system remains third-rate, and millions who might have risen out of poverty are still mired in it. India’s and China’s immense carbon emissions have led to irreversible climate change.*
* One can imagine several variants of this worst-case scenario: An actual short, hot war between the United States and China could ensue if China forcibly seeks to take the Diaoyu islands from Japan, a U.S. treaty ally. Or suppose that Chinese growth stalls, and President Xi Jinping is overthrown in an internal coup, led by Communist Party leaders unhappy with the vast scale of his anticorruption crackdown. This leads to chaos in China, stagnation in the Chinese economy, and, because many countries like Australia, Korea, the United States, and India are dependent on exports to China, a world economic recession.
Alternatively, imagine an optimistic, best-case scenario:
Goods, services, and people flow fairly openly between China, India, the United States, and Europe, making all of these regions more prosperous. India and China agree to share water resources from Tibet and settle their Himalayan border dispute. China accepts the status quo with Taiwan, leaving its ultimate status for future generations. While India, China, and the United States maintain some of the largest militaries in the world, increased cooperation among them, including sharing responsibility for securing the key sea-lanes in the South China Sea and Indian Ocean, allows them to restrain military spending.
As a result, each can devote more funds to shoring up pension systems and improving health care, especially pressing needs in rapidly aging China and in the United States. India invests to improve its education system, vital to equipping its fast-growing young population with job skills. Many millions are lifted out of poverty in both India and China. This new cooperation creates space to reform the UN, World Bank, and World Trade Organization (WTO) to make each more inclusive and effective.
The Chinese government introduces some public accountability and creates institutions that uphold the rule of law. Chinese citizens win cases against the government to fight land grabs, for example, and feel generally more empowered. In India, sweeping reforms clean up graft and make government processes more efficient, leading to strong growth. The United States, India, and China—the world’s largest “carbon sinners”— sign substantive agreements to combat global warming and together keep greenhouse gas levels below the tipping point.
FROM CHAPTER TWO:
THE NATIONS THEY BUI LT
When current Chinese President Xi Jinping was fourteen years old, Red Guards accosted his father. They dragged the old man before a crowd and forced him to declare that he was a horrible person. Then they threw him into prison. The crime: Xi’s father, one of the original communist leaders who had followed Mao since the Long March, was now suddenly considered not revolutionary enough.
It was a stunning reversal. Just a few years earlier, the elder Xi had been vice premier and a confidant of Mao. Xi Jinping attended a prestigious school for the children of the elite. Suddenly he was without parents and sent ...
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