Commentary

Pravin Sawhney

The overarching belief in India is that under Prime Minister Narendra Modi, India has emerged as the global balancer amidst the "great changes unseen in a century" as Chinese President Xi Jinping calls the reshaping of the twin global geopolitical and economic orders. The reality, however, is that India is headed towards strategic isolation and irrelevance in its own neighbourhood by 2030.

This is because of two critical decisions taken at the recent Quadrilateral Security Dialogue (Quad) leaders’ (US, India, Japan and Australia) summit held on the margins of G-7 summit in Japan. One, to collaborate in telecommunications including 5G and 6G, and in developing ‘standards’ for critical and emerging technologies, especially in Artificial Intelligence (AI) and cybersecurity. ‘Standards’ in technology relate to commonality in hardware, software and platforms for interoperability to work together. Different tech standards will disrupt global supply chain and force global companies to develop two sets of technologies, one with the US and developed nations standards for the global north, and another with Chinese standards supported by Russia for developing and underdeveloped nations (global south) and those which have joined the Belt and Road Initiative (BRI), Shanghai Cooperation Organisation (SCO) and Brazil, Russia, India, China, South Africa (BRICS). Ironically, India as part of the Quad and BRICS will be caught riding two horses.

Consequently, development of technology will become extremely expensive and consumer nations including the US and European Union (EU) will face problems of compatibility. It will become increasingly difficult for the US and EU to continue with its present policy of ‘de-risk’ instead of ‘de-couple’ with China. ‘De-risk’ refers to exclusion of China from select technologies like advanced chips while ‘de-couple’ means end of trade and commerce. Moreover, as China is the primary trading partner with 138 nations, digital logistics systems build on Chinese tech will make traditional trade and commerce with nations following US digital trade standards difficult.

And two, as part of the "partnership for cable connectivity and resilience" the Quad will leverage its expertise in design, manufacturing, laying and maintenance of subsea cables to secure and diversify critical networks. This will result in splinternet: separation of the global internet into two sets of subsea cables developed and maintained by the US and China techs. Together the two Quad decisions (tacitly endorsed by G-7 nations) will fragment globalisation by 2030 with no free flow of data, trade, capital and human resources. This will impact adversely on third and fourth industrial revolutions concerned with mobile internet economy (hardware digital connectivity in cyberspace) and industrial internet economy (software digital connectivity in cyberspace).

At the core of the Quad decisions is cross-border cyberspace governance debate on two issues: cybersecurity and cyberspace governance: rules regarding who will control data, which properly handled, will enhance a nation's innovation power.

Meanwhile, China's Digital Silk Road (DSR), which was announced by Xi in 2017, is the second phase of the BRI which was launched by Xi in 2013 as the Silk Road Economic Corridor (land component) and the Maritime Silk Road (Ocean component). Since the DSR is about hardware and software cyberspace connectivity, it encapsulates both third and fourth industrial revolutions or the robotics age, and hence can shift the global geopolitical balance of power. Hardware cyberspace connectivity comprises subsea cables, fibre optic cables, and Baidu Global Navigation Satellite System (GNSS), which, with a total of 35 satellites (more than the US's Global Positioning System) was completed in 2020. Commonly referred to as Space Silk Road, the GNSS will help in monitoring the BRI. The software cyberspace connectivity while building upon the third industrial revolution is distinctly different since connectivity is replaced by autonomy undergirded by AI, 5G, big data, cloud computing and blockchain technology. The US does not have any dynamic structure comparable to the DSR, which offers prosperity to nations by advanced information technology such as broadband networks, e-commerce hubs, smart cities, efficient ways of doing business and so on.

Before discussing India in South Asia, let's understand the genesis of the tech war between the two tech giants. Conscious of China's rise, which had shifted global geopolitics and geoeconomic from Europe to the Asia Pacific region, the Obama administration in 2011, announced "rebalancing" to the Asia Pacific region. This had two components: the Trans-Pacific Partnership (TPP), a huge trade and investment agreement with 12 Pacific rim nations, and the military ‘pivot’ meant to shift 60 per cent of US naval assets under its Pacific Command (PACOM) in Hawaii to meet the People's Liberation Army (PLA) growing challenge. To China's delight, the Trump administration withdrew from the TPP upon entering office in 2017. It instead focused only on deterrence (military power) and re-named Asia Pacific as Indo-Pacific, and PACOM as Indo Pacific Command (INDOPACOM) to give centrality to India's role in its deterrence. This left the field open for China to further economic cooperation with the Asia-Pacific nations.

The Trump administration's Sputnik Moment came when China, in July 2017, released its super ambitious ‘New Generation Artificial Intelligence Development Plan’ to become a global leader in AI by 2030. AI, which is a technology of technologies since all emerging technologies converge into it, has dual use for ushering in prosperity by fourth industrial revolution and changing the character of war. Thus, progress in and management of the AI ecosystem will be the main issue in determining global polarity—whether the world remains multipolar or not since it is no longer unipolar. Or, by the end of the decade when progress in the AI ecosystem by major powers becomes clear, will it move towards bipolarity—vastly different from the Cold War years since it would be a fragmented globalisation, led by the US and China (not an Iron Curtain as it was between the West and the Soviet Union). And contours of unipolarity may emerge in the second half of this century.

Interestingly, the Trump administration failed to comprehend that the Sputnik Moment in China had come at the turn of the century itself when Chinese started using smartphones. Unlike the rest of the world, China moved directly from cash payment to mobile payment without a developed credit card system. By 2013, some 900 million Chinese were using mobile internet (smartphones connected to 4G wireless internet), which is more than the population of the US and Europe combined. Thus, in 2017, when China announced its AI plan, its mobile internet companies had unrivalled consumer data pool which made it easy for them to convert from mobile internet for consumers (third industrial revolution) to industrial internet for enterprises (fourth industrial revolution).

Alongside, China's forays into international cyberspace connectivity started in 2009 as a junior partner in the joint venture for subsea cables with the UK-based Global Marines. By 2019, Chinese Huawei Marine had completed over 100 projects involving shorter and longer trans-Atlantic distances using indigenous advanced subsea cables where Chinese acquired expertise in laying them. China became the fourth largest supplier of subsea cables in the world and required no further assistance from foreign partners.

Around the time Xi Jinping announced the DSR, the worldwide demand for subsea cables with greater bandwidth had increased. China was among the nations making advances in material sciences, optics and data processing to enable higher capability in submarine-grade fibre. It was conscious about investing heavily in advanced subsea cables, terrestrial fibre optic cables and other standalone infrastructure for the Huawei 5G wireless network that would allow data flow at greater speed, higher volumes, and minimal latency when compared to existing 4G networks. Unlike the US where subsea cables are in the private sector, the Chinese government is backing its strategic cyber connectivity plans with policies, timelines, resources, subsidies and loans. Since subsea cables carry over 95 per cent of all international data, and with demand for data having increased exponentially, high-speed internet is expected to spur innovation, increase employment opportunities, exploit 5G potential and prepare the world for 6G connectivity, which is expected to be commercialised by 2030.

Thus, starting 2017, China took four important steps which has left the US wondering if it has been left behind in the fourth industrial revolution. One, it ushered in the industrial internet by converting internet companies into technology companies which have also helped launch start-ups. To optimise digital technologies, Alibaba, Baidu and Tencent among others started cloud services for users to rent and remotely access a range of computing services including servers, data storage, network, analytics and data bases. Realising that data was a strategic resource, the Chinese built industrial data centres for manufacturing and producing data to help further the capabilities of traditional industries.

Two, Xi, in October 2019, attested that blockchain technology was an important breakthrough for the next round of technological innovation and industrial transformation. Blockchain is a distributed digital ledger which is open for anyone to join. As the name suggests, it has number of connected blocks, with each block having three items: data, hash (like a fingerprint, it is unique to a block), and hash of the previous block. When any data is added or deleted in a block of this digital ledger, changes get automatically made in all blocks of the chain and the hash also registers it. With many checks in the system, tampering with data becomes impossible. This makes transactions quick, convenient, controlled, traceable, secure and stable since all the people in the chain get to know the changes made in a block. In 2020, China launched the Blockchain Services Network (BSN), which is an overarching framework wherein various block chains for different services are brought under one framework for each of digital monitoring.

Three, China launched the world's first Central Bank Digital Currency (CBDC), e-Yuan or e-Renminbi in April 2020. Digital renminbi is the world's first digital currency issued by any country's central bank, which is not the case with cryptocurrency. Unlike the digital wallet system of Alipay and WeChat, digital renminbi is a representation of an actual amount in a bank and not in some digital wallet. China, thus, has created a new monetary transfer pathway which is independent of the existing ones dominated by the US like the Swift system. So, on the face of it, the reserve currency (usually in US dollars) will not be affected by an alternate Chinese money transfer system. But once the BRI nations find out that the Chinese payment system is faster, cheaper and more efficient, the importance of systems like Swift will diminish.

Eventually, all the BRI countries that do business with China will realise that e-Renminbi is not just China's central bank issued currency but also a ticket to China's new digital payment system, which would be supported by secure and transparent BSN. For example, if a customer in a BRI nation buys physical containers from China, all he needs to do is make the payment in digital renminbi. Everything else, from customs clearance to shipment to exact delivery date, will happen automatically and he will be able to trace and monitor the progress.

And four, China announced the dual circulation policy in September 2020. This had two aspects. The first was to strengthen the domestic economy by supply chain structural reforms and distribution of wealth with the aim to bring more Chinese people into the middle class. This involved more medium companies working on digital industrial economy rather than a few big corporates like Alibaba, Weibo and Didi Chuxing technologies.

The second aspect of dual circulation policy was that foreign investments, free trade agreements and free trade ports for engagement with the outside world were encouraged but not actively sought. The dual circulation policy came in for global criticism—that the Communist party did not want more power centres in the shape of huge Chinese corporations. This may not be entirely untrue, but the point was that this policy was to sharpen Chinese fourth industrial revolution at home before it was sold to the BRI nations.

Against this backdrop, let's consider India and its neighbourhood by 2030. India has rejected the "China fix," as foreign minister S. Jaishankar recently said at a book launch. According to him, "Indian growth cannot be built on Chinese efficiency (technology)." This was evident in 2021 when China's Huawei 5G was denied participation in India's 5G telecom trials not for technical reasons (it passed the technical tests in India), but on political grounds. While India declared it will have indigenous 5G, the reality is that 100 percent of 5G electronics have been imported. There is a truism in telecom: first class companies set standards, second class companies provide services, while third class companies make products; Indian companies fall in the last category. To be sure, 5G is the backbone of the industrial internet.

Moreover, the reality of India's poor manufacturing was conceded by Jaishankar when he said India's "focus on services was actually an excuse for being incompetent in manufacturing." Since India invests a pittance in research and development, its manufacturing growth will be built and supported by the US and developed nations.

Thus, India (Bhutan by then would have resolved its border dispute with China and would have likely joined the BRI) which has signed for its emerging technology needs with the US-led tech ecosystem will have difficulty in trade and commerce in South Asian nations which have joined the BRI and consequently China-led tech logistics system. India will likely face similar problem with Brics and SCO nations. Russia is, at present, already having payment problem with India. Under US sanctions, it wants India to pay for its military hardware and energy either in roubles or yuan which India is unable to do. Since China is the first nation with CBDC e-renminbi which will likely go global by end-2023, BRI, Brics and SCO nations will be comfortable with transactions in it.

This will impact geopolitics in South Asia, which India had traditionally considered its backyard or an area of influence. To India's horror, it found at the 2014 South Asian Association for Regional Cooperation (Saarc) summit in Kathmandu that three member states, namely Pakistan, Sri Lanka and Nepal had proposed that China's observer status in the group be elevated to full member. India managed to sidestep the proposal saying nations with disputes would complicate functioning of the Saarc, which works on consensus. The Uri attack of 2016 gave India the perfect reason to boycott the Saarc summit in Pakistan the same year, leading to its eventual demise.

The challenge for India was how to regain influence in South Asia which had come under the BRI spell. For example, land-locked Nepal, with access to the world through India, said that while India was a brotherly nation with a shared religion, it needed Chinese money for progress. China had no problem with the pendulum diplomacy of South Asian nations since it could always outcompete India.

This happy state of co-existence was disrupted when the Trump administration decided to back India to build closer ties with littoral nations that were on China's MSR in the Indian Ocean Region. Since the MSR was physically close to the traditional sea lanes of communications, the US was concerned about its ‘free and open’ Indo-Pacific strategy. Meanwhile, the high-profile visit of US secretary of state, Mike Pompeo to Sri Lanka and the Maldives in October 2020, where the US accused China of exercising "debt trap" diplomacy, got a sharp rebuttal from China. The US believes that China could seek ports along the MSR that could be converted into naval bases once small nations get into China's debt trap.

All this will change by 2030 when South Asian nations, on the DSR bandwagon, would realise that prosperity and security are indivisible for their peaceful rise. Thus, the PLA will not require additional military bases for power projection, as the US believes. It would instead seek cooperative security with BRI nations to protect its assets, infrastructure, and people in their nation using the MSR for PLA Navy's (PLAN) friendly visit to BRI nations.

By indulging in geopolitics against its geography, India would end up being economically (by following US-led tech logistics system) and geopolitically (by piggybacking on the US power to regain influence) isolated in its neighbourhood. From isolation to irrelevance is a short distance.