The brilliance of China?s often underrated soft power diplomacy was in full display in Athens last week. On the very day that Standard and Poor?s downgraded Greece?s sovereign debt rating to junk, a clear vote of no confidence, China?s Vice-Premier Zhang Dejiang signed at least 14 different agreements across sectors like shipping, telecommunications and tourism, committing billions of dollars of Chinese investment in Europe?s most stricken economy. For good measure, the Chinese Vice-Premier added an explicit vote of confidence from the world?s fastest growing major economy when he said, ?I am convinced that Greece can overcome its current economic difficulties.?
Will China?s intervention help solve Greece?s debt crisis? Only to the limited extent that this investment will eventually boost growth. In the short term, however, Greece?s fate remains dependent on EU and IMF aid and its own ability to cut government spending. But what
China?s commitment to invest billions of euros does is to earn it a lot of goodwill in Greece. Compared with the many tough conditionalities that accompany IMF and EU aid, China?s investment has no-strings attached. It puts China firmly into the ?good guys? category, while the EU and IMF?the real saviours?are seen as the villains.
Needless to say, China is not doing this as charity for Greece. Getting a foothold for Chinese firms in Greece opens up for them a vast market across Eastern Europe. The timing is what is important; in the midst of a crisis, Chinese firms will get a bargain price. The more intangible goodwill factor is not unimportant either?when the Chinese company Cosco took over the management of cargo at Greece?s largest port of Piraeus last year, the local unions opposed it strongly. Now, they are welcoming the additional investment committed by Cosco at a time of dire crisis. The goodwill thus garnered by China?s commitments now both in the government and with public opinion, will smoothen out the path for future Chinese investment as well. Incidentally, as icing on the goodwill cake, China announced that it would import significant amounts of Greek olive oil.
China?s intervention in Greece fits into the broader pattern of the way it is expanding its footprint globally. The government is very conscious of the fact that China?s rise is viewed with suspicion in large parts of the world. The top leadership of the Chinese government doesn?t usually miss an opportunity to downplay China?s global ambitions. At an Asian security summit in Istanbul earlier this month, state councillor Dai Bingguo had clearly stated that China will never seek to be a superpower or hegemon. A realistic interpretation of such statements is that China does not intend to use its military prowess to expand influence in the world. It doesn?t even want to be seen as aggressively expanding its economic interests at a significant cost to other countries. Rather, as its intervention in Greece shows, and indeed its continued foray into Africa indicates, China will be ruthless in accessing new markets, but it would like to project itself as a ?benefactor? rather than a ?predator?.
In Africa, China has committed to building infrastructure?roads and schools?while exploiting natural resources. That wins goodwill with public opinion. Also, unlike Western powers, Chinese investment usually comes with few strings attached for governments?China never bothers about whether a country is democratic and whether it respects human rights or whether its rulers are corrupt. That gets it goodwill with Africa?s most powerful politicians.
And if soft power, backed by China?s vast surpluses and foreign exchange reserves, can bring so much access and goodwill, there is little need to project hard power ambitions for the moment.
Ironically enough, India, the world?s second fastest growing major economy, whose comparative advantage vis-?-vis China ought to be in soft power hasn?t been quite as successful in acquiring similar influence across the globe. To be fair, India has two constraints that China does not.
For one, India?s foreign exchange reserves, solid as they are, are made up largely of foreign portfolio flows that can reverse easily. China?s reserves are earned through exports and foreign direct investment. That makes a difference in terms of ability to spend those reserves.
Second, Indian firms are not as closely aligned to government interests as their Chinese counterparts are. Indian firms have made their forays abroad but independent of what the government may or may not have wanted. Unfortunately, many Indian firms went overseas in boomtime rather than waiting for the bust to buy out companies cheap like their Chinese counterparts are now doing.
Despite these constraints, there is certainly a case for Indian diplomacy?with cooperation from Indian industry?to leverage India?s relative economic strength to garner influence and goodwill in different parts of the world. India?s foreign policy establishment in the ministry of external affairs, though, tends to be singularly focused on a more traditional view of power and influence, obsessing about security and border issues most of the time. The Africa and Eastern Europe desks, for example, would not command the same prestige as the Americas, West Europe, Pakistan and China desks. That needs to change if India wants to catch up with China in extending its influence to those corners of the world that are looking for powerful ?benefactors?.
dhiraj.nayyar@expressindia.com