Column : Are we really paranoid about China?

It is just as well that the minister of environment and forests,Jairam Ramesh,personally called on the home minister...

It is just as well that the minister of environment and forests,Jairam Ramesh,personally called on the home minister,P Chidambaram,to explain why he had described the home ministry as unduly paranoid about Chinese businesses wanting to enter India. The place and occasion Jairam Ramesh chose to vent his frustrations were certainly wrong. But P Chidambaram would be the first to admit that in recent years the bureaucracies at the ministries of external affairs,industry and home have never treated China on par with the western countries,as far as inward investment is concerned.

When Chidambaram was the finance minister,the Chinese had complained to him about the Indian bureaucracys discriminatory attitude towards Chinese businesses wanting to enter India. I recall the Chinese ambassador told Chidambaram that of all the business visas given by China and India to each other,nearly 80% were extended by the Chinese until a few years ago. So,Chidambaram agreed that if visas were a proxy for the openness of an economy,the Chinese were more open than us.

Again,as finance minister,Chidambaram,and several other Cabinet ministers,had the good sense to oppose a draft proposal mooted by the then national security advisor (NSA),MK Narayanan,that China must be clubbed with Pakistan and Bangladesh in a negative list nations from where no investment proposal should get automatic clearance. In his first draft proposal,which went for comments to various economic ministries,the NSA had actually sought to put this negative list of countries as part of a national security legislation Act to safeguard Indias national interests.

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Better sense prevailed as most Cabinet ministers then opposed the draconian idea of placing China on a negative list of inbound investors. Of course,later the NSA himself piped down and diluted the idea,after the Prime Minister firmly voted against any draconian legislation that treated China as pariah. It would be totally self-defeating to treat a global economic power in our immediate neighbourhood as pariah,it was argued.

Significantly,looking at Chinese investments with suspicion is a mindset that exists across the government. This is not just a home ministry problem. For instance,most investment proposals,even for innocuous consumer goods,are referred by the industry ministry for security clearance to the home ministry. I remember the investment proposal from the Chinese global white goods major,Haier,was held up for nearly two years before getting security clearance! Would Samsung from South Korea and Electrolux from Sweden be treated like this?

Two years ago,Jairam Ramesh himself led a campaign urging Indian power generation companies to buy equipment from Bharat Heavy Electricals Ltd (BHEL) and not from Chinese companies,which were selling at 30% to 40% less price. There was a whisper campaign that the Chinese power equipments were inferior. However,power producers like Reliance Power and GMR had no complaints. In fact,after Jairam Ramesh persuaded BHEL to offer a better price to Reliance Power,it was found that Chinese equipment was still cheaper by 30%. As the minister of state for power then,Jairam Ramesh proposed that the Chinese must be forced to set up operations in India and value-add up to 30-40% here before selling power plants to domestic power producers.

I asked the head of General Electric in India whether Chinese equipment was indeed inferior. He told me that General Electric had fully transferred technology to the Chinese and they were adding more than half of Indias total capacity every year! So what is wrong with Chinese equipment?

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Let us face it. We are suspicious and even paranoid about China. There is no point blaming the home ministry alone for it. This suspicion has permeated the entire government. It is fuelled by strategic experts who are encouraged by the establishment,that is the ministry of external affairs,to constantly generate more suspicion about China. Clubbing China with Pakistan is the biggest disservice strategic experts do to this nation.

Actually,we are still totally unsure how to deal with the Chinese. Here is a classic example. Recently FE published a report based on the minutes of a meeting held by the Foreign Investment Promotion Board under the ministry of industry. There was a foreign investment proposal from the Chinese telecom equipment company,Huawei,which has presence across 40 countries in the world. Huawei also powers the telecom networks of half of 14-odd telecom operators in India. However,the government has observed in the minutes that Huawei is a company promoted by an officer of Peoples Liberation Army and has the capability to remotely manipulate the equipment it supplies to operators. Mind you,in the past this company has supplied equipment even to public sector companies such as BSNL and MTNL. This would certainly qualify as paranoia,for Huawei has a huge research centre at Bangalore powered by Indian minds. It has registered a large number of patents in telecom hardware earned by these very Indian minds. So why would Indian IT professionals work for a company run by the Peoples Liberation Army? Am I being paranoid?

Indeed,paranoia can also be part of conscious policy. British Historian Paul Kennedy describes the USs foreign policy approach to China brilliantly. He says American foreign policy towards China is marked by schizophrenia. One half consciously wants to convert China after Americas own image. The other half is paranoid that a morphed China will become a huge threat. So at least there seems to be a method in their madness. Is there one in ours?

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