Viswanathan K's Thoughts

The Zerodha article points out that slowly but steadily, Chinese manufacturing moved up the value chain. Patience and strategy matter. Uniquely, the Chinese government identified some sectors as critical (e.g. telecom) and poured money and helped arm-twist Western companies into sharing technological knowhow with Chinese partners. To help domestic companies grow in those sectors, when they were new and inferior initially, China would prevent Western (superior) tech from being sold, thereby creating a “protected home market to develop in”. “This model played out in multiple sectors — solar panels, electric vehicles, high-speed rail equipment. The value chain expanded.” Of course, this can be risky –local companies may stay at low quality only with no fear of competition from superior products. Remember the License Raj? ~~   China adopted a spray-and-pray approach. “They just threw money at everything and hoped something worked… even if the waste along the way was colossal… China go...

This Zerodha article analyzed how China became the manufacturing hub of the world. And whether India could replicate those steps. When Mao died, Deng Xiaoping took over. A major decision at this point was to learn from Singapore “a once backwater little fishing island had begun to cement its place in world conversations”. It was a good place to start because Singapore had started poor with a lot of Chinese origin citizens with little or no qualifications, a situation similar to China in ’79. ~~   A major outcome of the Singapore visit was the creation of the SEZ (Special Economic Zone): “These special enclaves didn’t have the same rules as the rest of China. Different rules applied — freer movement of capital, flexible labour laws, easy land acquisition, consistent, uninterrupted electricity. And quick customs clearances.” (India followed the same SEZ technique for the IT sector).   Crucially, one of the most famous SEZ’s was created in (now famous) Shenzhen bec...

How is China positioning itself to become the new reserve/international currency? China, writes Way Yuhl, has learned from and copied America.   Remember the New Silk Road project (aka Belt and Road), whereby China “financed roads, railways, ports, power plants, and telecommunications networks” across Asia, Africa and Latin America? Well, that’s not entirely about profits from interest on the loans. It is also how China has built financial leverage with much of the developing world. If their infrastructure projects all rely on China, well, they are likely to align/agree with China on economic and financial matters. On a side note, Yuhl mentions the Sri Lanka port that was handed over to China for 99 years when Sri Lanka couldn’t repay. While India’s concern was Chinese presence so close to our borders/waters, the West cited it as an example of Chinese predatory lending ( zamindar style). Guess what? “America used the same mechanism after WWI, converting Britain’s debt depe...

Is AI over-hyped? Or is it going to transform the landscape so drastically that it would be unrecognizable? Like how electricity did a century back?   If it will/does shake up the job market drastically, how quickly/slowly would that happen? At the pace of electricity (quite fast, but nowhere close to overnight)? Or much slower? Or way, way faster?   It was in the context of these questions that (right or wrong) China’s approach being so different from the US is worth checking out.   AI, if it were to be as transformative as some say (fear?), would cause massive job losses and social upheaval, the backdrop to every revolution. Which is why the Chinese government (single-party rule system) is wary. On the other hand, China can’t ignore AI, given how much potential it has, plus the risk of its arch-rival running too far ahead. Therein lies China’s AI dilemma. What then is China’s AI approach?   Since 2023, all public facing AI models must be filed with...

America’s erratic actions and constant policy shifts make a lot more sense when viewed from the lens of what Noah Millman calls the “Thucydides trap”. “(It refers to) a situation where a rising power and an established power facing a possible power transition each make moves that, while individually rational, ultimately lead to a catastrophic war that proves ruinous to both powers’ fortunes.”   With Obama, America tried a “pivot to Asia” approach to counter China, i.e., increase the focus on China and its neighbouring countries, reduce the focus elsewhere (The pivot to Asia is why the US didn’t do much/anything when Russia invaded Crimea in 2016; why Obama signed the nuclear deal with Iran). Obama was being pragmatic – it was clear that the assumption that the only road to economic prosperity went hand in hand with democracy and other Western systems was not true. China was prospering without democracy; and showing signs of not wanting to be part of a system dominated by the...

A couple of years back, China banned all coaching centers. The reason was exactly what many in India complain about – the competition to get into the best colleges is fierce, thus the rise of those coaching centers. But those centers are hard to afford to many plus they are only in the bigger cities. That means the kids of the already well off, urban folks are the only ones with a real shot of making it to the best colleges and then to better economic prospects.   While that reasoning makes sense, China (like India) has another problem, as this article explains . The quality of education in schools is not good. And their education too is exam oriented, not concept oriented. Teachers are gauged based on exam results, so they are incentivized to teach to the test (and in poorer areas, to cheat). The quality of education isn’t the same everywhere – the richer provinces do much better . Kids in the poorer provinces drop out of education much earlier. The per capita teacher count is...

The Yellow Line of the Bangalore Metro started operations in August. Why did it take 2 years after the completion of all construction for operations to start? Tannmay Kumar Baid and Pranay Kotasthane look into the causes.   The short answer? India-China geopolitics. Now for the longer version.   In 2019, bids were accepted for the trains. A Chinese state-owned company, CRRC, won. It was cheaper than the nearest Indian manufacturer by 2 crores per coach. The contract included a clause that 75% of the coaches be manufactured in India. CRRC was to build a new plant in Andhra Pradesh.   Then, in 2020, Galwan happened. India tightened its scrutiny of all Chinese investments. Cabinet clearance was made mandatory. The visa regime tightened and CRRC engineers were denied visas to come and set up the factory.   That apart, the usual Indian obstacles played their part. Land clearance took forever. Customs could and did hold up imports. BMRCL tried cancelling ...

In The Mongol Empire , John May says: “Two of the strangest (things) are that today’s China owes its shape and size… to a barbarian non-Chinese who was its greatest enemy; and that the same barbarian is now honoured as an insider, the founder of a Chinese dynasty.” It also explains why China considers Tibet a part of itself.   No, this tale is not about Genghis Khan.   Genghis’ descendants split the empire. Some ruled the Middle East, others towards Hungary, and the last group a little into China. “Little” is the right word, China was huge and had different rulers in different places. It was on the Chinese side that Kublai was the frontman for his brother, Mönkhe.   After hard fought wins in China, Kublai followed Genghis’s approach. Mass slaughter was perpetrated on the losers only if it would serve as a signal to the next kingdom in their path – surrender and you live, fight and be slaughtered. But if there was no kingdom nearby waiting to be conquered...

China is the world’s factory. Everything is made in China. Every country buys from China. And therefore, pretty much every country has a trade deficit (total value of exports minus total value of imports) with China. While more and more countries rightly worry that China can lock them out of more and more critical items (rare earths being the most recent example), the US under Trump in particular is also worried about the trade deficit with China.   It was in this context that I was struck by Tomas Pueyo’s post . “What happens when the West owes China so much they can’t repay the debt? How should we understand the current trade war between the US and China? What we don’t realize is that this isn’t the first time this has happened. ” Huh? Pueyo elaborates.   Go back around 2,000 years, when Rome ruled Europe. Pliny the Elder lamented even back then: “India, China and the Arabian peninsula take one hundred million sesterces from our empire per annum at a conse...

Rare earth minerals . No, they don’t refer to gold or silver. They are the lanthanides (lanthanum, neodymium, cerium, europium etc), scandium, and yttrium. Never heard of them? Well, they are critical for a whole host of industries, which is why they have been in the news for a while.   Importantly, China is the world’s largest producer of these vital minerals. A key point here is that the rare earth minerals aren’t really rare. Rather, they are found in low concentrations, which makes their extraction economically unviable. So did China just get lucky in having higher concentration ores in its territory? Like how the Middle East lucked out by having oil under its feet?   Nope, that’s not the case here. Rather, China got to this point via its deliberate economic policies. First, China heavily subsidized the rare earth mining/extraction industry. These subsidies made it cheaper to extract in China.   Second , China doesn’t allow its exchange rate to be decide...

Many people, include Indians, often compare how our country is doing with China. But China is five times richer, so not all comparisons are fair. However, as Pranay Kotasthane writes , there are also many areas where a comparison between the two is fair, and sadly, India does much worse than China.   One , agricultural output: “Although India has a third more land under cultivation than  China , it harvests only a third as much produce by value.” Two , medical colleges: “India has the highest number of medical colleges globally, yet China produces 3.5 times the doctors India produces yearly .” (I had gone into the reasons behind this in an earlier blog ). Three , vaccines: “India is the world’s largest vaccine maker. Yet China exported five times the number of COVID-19 vaccines India could export. ” Four , school teacher salaries: “Indian teachers in government schools are much better paid than in China, yet China beats India in student learning outcomes.” ...

We know of the Internet of Things (IoT) – it refers to interconnected devices that “talk” to each other. Like the wearable fitness sensors that report back to your smartphone. A decade or so back, there was also talk of the industrial variant of it, the so called Industrial Internet of Things (IIoT), writes Nicholas Welch: “The belief was that the falling cost of cloud computing, sensor costs, and machine learning — coupled with new connectivity technologies such as 5G or IPv6 — would lead to a revolution.” Revolution in what? In manufacturing efficiency, in predicting when an equipment would have problems (say your washing machine or a wind turbine) and then proactively sending the service guy to fix it, in reducing system downtime and thus productivity increases. Add data analytics on top of that, and we should have had massive productivity increases. So why didn’t that happen?   Simply put, there are too many different players whose systems needed to be integrated. (1) ...

If a region has a well-established and ancient belief and value system, whether one calls it a religion or not, it is hard to replace it. Since China had Confucianism, how was Buddhism able to replace it? The starting point for the transformation, as per William Dalrymple in The Golden Road : “It was war and devastation.” Not external war or devastation by external forces. Instead it was triggered by the fall of the Han dynasty in 220 CE. This power vacuum was soon followed by natural disaster like floods, famines and plague. The power of the Confucian elite eroded, and the general belief in Chinese cultural superiority too got chipped away. A vacuum now existed for new ideas…   Buddhist missionary work exposed the population to Buddhist practices, art and imagery. The emperor Wen soon became the most “enthusiastic champion” of Buddhism in Chinese history (he had been born in a Buddhist temple and raised by a Buddhist nun). He ordered the construction of many monasteries ac...

All roads lead to Rome. All supply chains lead to China. As the global mood changed and such heavy dependence on China began to be perceived as a risk, it was also clear that total decoupling from Chinese manufacturing was impossible. Hence the West has started aiming for what is called “China + 1” policy (China + one other major manufacturing country).   This was considered an opportunity for many countries to get manufacturing jobs, including India. But while India has benefited only a little, Vietnam has benefited a lot. Why? The biggest reason turns out to be that Vietnam has a much better work force relevant to manufacturing . India does not, and its poor primary education system is a major cause for that. Which raises the question as to why India’s primary education system is so much worse?   While looking into that question, I found Apurva Kumar’s post comparing China and India’s education systems. In 1950, both countries had a literacy level of around 20%. Chi...

The Russia-Ukraine war has probably created a “major shift in the world order”, writes Amit Kumar. On the one hand, the US and Europe have moved closer to each other.   On the other side, how close have Russia and China moved to each other? This is a particularly worrying question for India, he writes, because “one of India’s historically most trusted partners now possibly shares an indispensable friendship with India’s primary adversary”.   Russia and China have several points of convergence: “The first point of convergence between China and Russia emanates from their shared antipathy for the US-dominated economic order and financial system. Both countries have been subject to a range of Western economic sanctions and export restrictions.”   Russia as the oil source addresses another critical fear of China. Oil from the Middle East has to go through the Indian Ocean, a route which can be blocked (in times of war). Conversely, China as the new consumer of Russian oil hel...

We think of the Internet as one large network. Technically, that is true since the Internet literally means the connected network of computer systems. The software that runs on it (websites, apps etc) is called the web. In reality, most people mean websites and apps when they use the term “Internet”.   In his book on the Chinese app named WeChat, The First Superapp , Kevin Shimota says it might be more accurate to define the Internet as the consolidation of services and information that are made accessible through a digital device (PC, phone, tablet). This, in fact, is how most of think of it today.   Initially, the Internet was almost entirely in English, he says. But as it began to spread, its diversity increased. Which brings us to the term, “splinternet” – a part of the Internet formed by splintering from the global Internet.   In China’s case, he says most of the content is in Chinese. Most Chinese don’t know English, and so don’t bother to access the res...

Ex-India NSA and Foreign Secretary (among a host of other roles), Shivshankar Menon’s book, Choices , is about some of the major foreign policy decisions made since the 90’s, and the why’s behind those, er, choices: “The examination of choices suggests there is no single correct or right answer to the questions foreign policy throws up, no answers that are valid in all circumstances… Choice involves uncertainty, risk, and immediacy.”   A major foreign policy decision, esp. a 180˚ change in course, he says wryly, requires a crisis. A situation that forces you to think and act differently. When “more of the same” is not an option. He cites the 1993 border agreement with China during Narasimha Rao’s tenure as one such example.   Given the bitter history and the “emotional baggage” of 1962 that India carries, why were the 2 countries even willing to start talking? It was a pragmatic choice on both sides, given the internal challenges they faced at that time. China felt s...

Biden continues to escalate the American trade war with China by increasing the tariffs on goods made in China, from steel and aluminium to EV’s (electric vehicles) to solar panels apart from, of course, denial of high-end semiconductor chips. Trump promises such and even more stringent measures if he comes to power.   Raghu S Jaitley correctly says that in an election year, American politicians will only try and out-do each other in what they say and do. In a polarized country like America, the reactions are also totally predictable – the right says Biden is too soft on China; while the left says that Trump’s measures would be taking things too far and would hurt America. Only their own side knows the right course of action on China.   Jaitley evaluates the consequences of such American tariff policies, on both America itself and on China.   He looks at America. First , if they try and de-couple themselves from China, they need to build up alternate manufact...