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INTERVIEW | Geopolitics Expert MD Nalapat on Why India is at the Core of Japan’s Security

Published

4 years ago

April 23, 2020

Cleo Paskal

: Prime Minister Narendra Modi and Prime Minister Shinzo Abe

: Professor Madhav Das Nalapat, April 11, 2020 interview

: Xi Jinping's Currency Ambitions

As COVID-19 grabs headlines around the world, China quietly continues its push for global influence in a range of spheres. A priority for the Chinese Communist Party seems to be to weaken the United States dollar as the global reserve currency, and then fill some of that economic space with a replacement controlled by China. This long-term strategic desire of the CCP has only accelerated as the world’s economy has gone into a COVID tailspin, potentially opening up new weak points.

The implications are global, and have been closely watched by experts in capitals across the world. Effectively understanding ― and countering ― these CCP plans will require more exchange of information between concerned countries in order to piece together the strategies and design coordinated options for response.

To that end, JAPAN Forward reached out to another corner of Prime Minister Shinzo Abe’s Democratic Security Diamond, India, to influential Indian commentator, Professor Madhav Das Nalapat (MD Nalapat, UNESCO peace chair and director of the Department of Geopolitics and International Relations at Manipal University, India). In an exclusive interview on April 11, we asked his thoughts on what the CCP might be planning, and what the implications might be for Japan-India relations.

Following are excerpts from the interview:

What have been some of the driving economic and political goals of previous Chinese leaders?

Mao Zedong sought to consolidate China into a unified country bigger than that ruled by past dynasties. Deng Xiaoping worked to make China a global economic force, aiming eventually to be the biggest. Jiang Zemin focused on growth, and did not much care that technology and plants were imported. Hu Jintao aimed for self-sufficiency, and ramped up domestic production of higher-end items, such as automobiles and even aircraft. Hu also opened the door towards ancient culture and traditions, both of which had been shunned by Mao and ignored by Jiang.

What are some of the markers of the era of Xi Jinping?

Xi Jinping is looking to China to establish dominance in the “Knowledge Economy” by going digital and spending vast sums on innovation and hi-tech products. Xi’s China Dream is in reality to establish his country as the world’s dominant force, the way the U.S. has been since the decline and fall of the USSR.

What are some of the ways Xi is attempting to establish that dominance?

While working to co-opt some U.S. allies in Europe, such as Italy or Greece, Xi is looking to replicate Lin Biao’s strategy of the “villages” surrounding and overpowering the “cities.”

South America, Africa, and Asia are the “villages,” while the U.S. and its trans-Atlantic partners are the “cities.” China is systematically replacing the U.S. as the first preference of several of the countries within this arc.

Additionally, given the way the U.S. has been perceived to be a fickle partner, several of its allies are backing away from earlier full scope reliance on the U.S. for their security.

It is in such a context that efforts to work towards a strengthening of the India-Japan-US-Australia Quadrilateral Alliance become important. Japan is the northern prong of the alliance in the Indo-Pacific, India the southern prong. Both countries need to work closely together in the face of global challenges.

What are some of the economic strategies being used by China?

Because Xi Jinping is looking to displace the U.S. at the apex of the global pyramid, he is also working to end the role of the dollar as the global reserve currency. Having the accepted reserve currency of the globe is both a cause and an effect of U.S. pre-dominance in the global order. Xi would like to have that advantage for China.

At the same time, to make the U.S. once again a manufacturing giant, President [Donald] Trump needs a weaker dollar, and the flood of currency flowing out of the Federal Reserve during these past three years can help ensure that.

China has been quietly buying up gold, including from the U.S. and the United Kingdom, in anticipation of an expected [by Chinese analysts] reset of the U.S. dollar. If this happens, China plans to showcase its [by then] digital currency, that it will say will be substantially backed by gold. The premise is its gold-backed digital currency creates trust, especially if it uses the transparent method of blockchain for monitoring and transactions.

Should China move into a perceived form of the pre-1971 Gold Standard combined with a reset of the U.S. dollar, China could get “first mover” advantage in the new financial system, and would emerge from the close of the U.S. dollar as the global reserve currency.

What are some of the other tactics used by China to try to weaken or replace the dollar as the global reserve currency?

(A) Getting oil exporters [including Saudi Arabia and Russia] to price oil sales to China in currencies other than the dollar. Now that the U.S. is no longer the biggest consumer, but the biggest competitor to Middle Eastern crude, with China replacing it in the first role, Xi’s task has been made easier.

The fact that the U.S. is a competitor rather than a consumer is why Saudi Arabia, for instance, has in effect teamed up with Russia against the U.S. to drive U.S. shale companies out of business through a dip in oil prices. Both the Saudis and the Russians believe that in 15 years at the most, oil will become obsolete as a feedstock due to increasingly affordable alternatives, including nuclear. Hence, the need to pump out and sell as much as they can before that happens.

(B) Exchanging China’s reserve of dollars for physical assets across Europe and Asia through the Belt and Road Initiative. Projects are denominated in dollars, and when countries fall back in repayments, assets are taken over, several of which have long-term strategic value.

(C) Taking advantage of the doubts created about the safety of the dollar as a store of value, now that successive U.S. administrations have weaponized the currency against target countries, rather than left it alone. Xi Jinping is playing the long game.

U.S. policymakers are known for setting aside long-term considerations in their obsessive search for quick fixes to short-term problems. Even in Saudi Arabia, there are those worried that a future U.S. administration may levy sanctions on the country because of disputes with its leaders. Hence, the refusal to oblige Trump by cutting oil output sharply.

What does this mean for Japan and India?

Given such a scenario, it is essential for the U.S.-Japan alliance to move closer to India, not least because of my country’s youthful population — 60% of citizens are below 30.

Only India has the manpower needed to back up U.S. and Japanese technology and equipment in ensuring stability in the countries of the Middle East. Prime Minister Abe has correctly understood that the era of peaceful co-existence may be coming to a close, and that not only the U.S., but India as well, is core to Japan’s security.