Is China the real Pakistan?

19 MARCH 2019

Every government has a set of known geographical, human, and financial resources which it needs to build out a future for its citizens. Norway, sheltered by the support from US and NATO defence forces during the Cold War, was anointed with oil reserves that it has used expeditiously to build a super-rich country. Many European nations, using "stolen" assets from their colonies added to their own wealth and enhanced the living standards of their citizens - overcoming two horrific world wars that took a toll on their finances and people. In this scorecard of ability to focus on developing an economy, India has been hindered by the existence of a failing state at its doorstep: Pakistan.

The BJP and Prime Minister Modi keep reminding us how much damage Jawaharlal Nehru has done to India. As a sarcastic video doing the rounds of social media suggests, the BJP wants us to blame Nehru for everything: from traffic light that don't work, to potholes, to schools that don't have teachers - you get the point.

Yet, has Modi multiplied the error that Nehru made in trusting China? Nehru had little historical experience to go on when dealing with China. On the face of it, there was some commonality in the early days of engaging with China: India had gained independence from the Imperial British in 1947 and Mao had led a popular uprising against a foreign-backed regime that was oppressing the Chinese. So, maybe Nehru's comforting words towards China may be excused. But, with decades of Indo-China relationship since the 1950's has the BJP miscalculated the threat that China poses to India's sovereign interests?

Modi's frequent hugs, handshakes and meetings with the Chinese leadership have led to India being pincered into a weak position between two nations who actively support Pakistan. After travels to nearly 50 countries, India's best friends seem to be Saudi Arabia (we need the Made in Islam oil) and China (we need to keep an aspiring superpower happy). This despite the fact that the Indian Army had a tense 2-month stand-off against the Chinese army in 2017 in Doklam as India came to the defence of its ally, Bhutan.

Nehru misreads China.

The meeting between Mao and Nehru in Beijing in 1954 reportedly gave hopes to a new era of two old civilisations spearheading the future of a post-Colonial world after liberating their countries from the shackles of the imperialists. The phrase Hindu-Chini bhai bhai conjured up images of two large countries, walking hand in hand, influencing the course of the world. But by the end of 1959, India and China were engaged in border skirmishes seemingly triggered after the fact that India decided to give refuge to the Dalai Lama and his followers who were escaping the brutality of the Chinese army in Tibet. The unsettled border dispute with Arunachal Pradesh - long claimed by the Chinese as their territory which has been wrongly occupied by India - did not help. The Indo-China war broke out in October 1962 which China was winning and abruptly withdrew having taught a humiliated nation and Nehru "a lesson".

That vast superiority of a Chinese army in 1962 (despite the fact that millions were dying in China from famine after Mao's Great Leap Forward) can only have multiplied over the decades. China's economic power and foreign currency reserves dwarf that of India. On every count, barring number of times an Indian citizen can cast a vote, China overwhelms India. And China, unlike India, is deliberately and methodically working towards replacing the United States as the most powerful nation in the world.

While, China still has border problems with India and is particularly troubled by the presence of the Dalai Lama in India, it knows that fighting a direct war with India is not in China's immediate interest. It has battles over territory in the South China Sea and needs to win land mass in the Middle East and Africa through soft and financial diplomacy. Is it possible that China knows that fighting a proxy war using Pakistan and its legions of terrorists is a far cheaper way to hold India back and ensure that India can never stake a claim to be a global superpower? The fact that India and USA jointly conduct Malabar Naval exercises to patrol the contested South China Sea angers China - and they show this anger by blocking India's various resolutions including attempts by India to join the 48-member Nuclear Supply Group which monitors trading in nuclear materials.

But China must also be gaining comfort that India has bred its own enemies and probably celebrates the fact that successive incompetent governments in democratic India, led by the Congress and the BJP, have ensured that India remains a poor country and is unable to claim any sort of real global superpower status - barring the images that circulate on social media. Still, the Chinese probably don't want to take the chance that a million gods will, via a democratic election, finally reward India with governance and government machinery that actually begins to work for the betterment of its people! Sending a few winks to Pakistan to keep the jihadist fire alive and remain a constant threat to India may be far cheaper and effective way to tie India down to its past and prevent the electorate from aspiring for a better future.

Undeterred by the Chinese diplomatic threat, India's trade with China nears USD 100 billion. India runs a trade deficit of over USD 40 billion with China - so India helps the factories of a nation that may actually be troubling India by supporting Pakistan! A bit like the US sending arms to Pakistan only to find that Pakistan houses the Taliban and others who target US troops!

China's game: A weak India?

The refusal of China to support a resolution of the Security Council of the United Nations banning the JeM is a slap on the face of India. To be fair, nothing really happens from any such resolutions - other terrorist organisations banned by the UN still continue to flourish in Pakistan.

So, why did China not support this mostly useless and symbolic resolution? To show India that Hindu-Chini are not bhai, bhai. To remind India that, even if the US withdraws from being the largest funder of Pakistan, China is willing to support Pakistan economically and militarily. Pakistan's ports will not only provide China access to the Persian Gulf via the build out of the China-Pakistan Economic Cooperation Pact and the One Road One Belt project, but that a well-funded Pakistan means that India will be forced to spend 10% of its annual budget (about 2% of GDP) on defence and military equipment. Every rupee spent on guns by a poor country (and, please don't fool yourself, India is a poor country) is one less rupee spent on education and development. China has amassed a stash of reserves and has money to spend on guns and on food - and has ambitions towards being a global superpower. To be sure, China has many challenges but money is not one of them.

India is, meanwhile, surrounded by an Axis of Evil: the Middle East led by the Saudi form of Wahabbi Islam, Pakistan, and China.

Table 1: Chutney sandwich: The reality of being in this part of the world

  Saudi Arabia Pakistan India China
Type of Government Monarchy Migraine# Democratic One party system
Foreign ex reserve US$ bn 487 10 402 3,053
GDP US$ billions, est 690 180 2,556 12,000
Money spent on defence, % to GDP 10.0% 4.9%** 2.5% 1.9%
Money spent on defence, US$ bn 69.0 8.8* 63.9 228.0
% of total trade of Pakistan 9.0%  NA 3.0% 16.9%
% of total trade of India 2.7% 0.5% NA 8.4%
Sources: Defence data from Stockholm International Peace Research Institute, 2017/8;
*The Diplomat; **World Bank; trade data from Wikipedia;
#Former Secretary of State, Madeleine Albright on December 2008 called Pakistan an "international migraine"

The recent Asian tour of the Crown Prince of Saudi Arabia, Mohammed bin Salman (MBS), is interesting. MBS landed in Pakistan on February 16, which was 2 days after the JeM inspired attacked that killed 40 CRPF personnel in Pulwama. While in Pakistan MBS promised them money. Then he landed in India on February 18 and promised India money. From India, MBS flew to China on February 21 where he promised China oil and more trade. And, he did not criticize China for locking up millions of Muslims (the minority Ughur have been detained in concentration camps) and re-educating them. Ironically, MBS is trying to break the link between the Saudi state and the preaching of Wahabbism, which is credited with inspired the creation of Al Qaeda. MBS is known to support a more liberal role for women in Saudi Arabia - but is suspected of having a role in the murder of journalist, Jamal Khashoggi on October 2nd at the Saudi consulate in Istanbul. According to Al Jazeera: "China has the right to take anti-terrorism and de-extremism measures to safeguard national security," MBS was quoted as saying by the state-owned CCTV.

And as NDTV notes on the ongoing visit of Foreign Minister of Pakistan to China: Mr Qureshi who reached Beijing on Monday is visiting China, days after Beijing for the fourth time blocked a bid in the United Nations Security Council on Wednesday to designate Pakistan-based chief of Jaish-e-Mohammed (JeM) terror group Masood Azhar as a "global terrorist" by putting a technical hold on the proposal, a move India termed as disappointing. The JeM has claimed responsibility for the February 14 Pulwama attack that left 40 CRPF personnel dead and escalated tensions between India and Pakistan.

The proposal to designate Azhar under the 1267 al Qaeda Sanctions Committee of the UN Security Council was moved by France, the UK and the US on February 27.

"As neighbour, China would like to see easing of tensions between the two. We would like to see the two countries continue to engage in dialogue for the peace and stability of the region," Chinese Foreign Ministry spokesman Geng Shuang told a media briefing.

"I believe the issues causing regional tensions will be discussed," Geng said.

To another question whether the issue of listing of Azhar would figure in the talks specially in the backdrop of Chinese Ambassador to India Luo Zhaohui expressing confidence that it would be resolved, Geng said, "well I can't prejudge the topics" that are going figure in the talks.

"But they will discuss issues of bilateral, regional and international issues of mutual concern," he said.

Regarding the listing of Azhar, "China will continue to deal with the issue with a responsible and constructive manner and will maintain close communication with all parties, including India and Pakistan," he said.

Lu on Sunday exuded confidence of resolving the sticky issue of designating Azhar as a global terrorist through consultations.

"I am quite sure this matter (listing of Azhar by the UN) will be resolved. This is only a technical hold and the matter can be resolved through continued consultation," Luo said on the side-lines of an event at the Chinese embassy.

According to reports in the Pakistani media, Mr Qureshi, which is on a three-day visit to China, will hold comprehensive discussions on the entire range of bilateral relations, including the China-Pakistan Economic Corridor (CPEC).

In summary, India is stuck in a bad geographical space. The reality of dealing with an active Pakistan, supported by China, will ensure that India will always be short of money to spend on guns, food and development - fiscal deficits and weak government financials are here to stay. Inflation will be higher than global averages and the Indian Rupee will remain a fundamentally weak currency, depreciating by 2.5% per annum on average, as it has over the past few decades. Just as children cannot determine the parents and the households they are born into, India was unable to determine the geo-political map in which it was created.

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Disclaimer: The Honest Truth is authored by Ajit Dayal. Ajit is Founder of Quantum Advisors Pvt. Ltd which is the Sponsor of Quantum Asset Management Company Pvt. Ltd - the fund manager of the Quantum Mutual Funds. Ajit is also the Founder of Quantum Information Services which owns Equitymaster and PersonalFN. The views mentioned above are of the author only and should not be acted upon unless the reader has sought detailed financial advice from a qualified individual. Data and charts, if used, in the article have been sourced from available information and has not been authenticated by any statutory authority. The author, Equitymaster, Quantum AMC and Quantum Advisors do not claim it to be accurate nor accept any responsibility for the same. Please read the detailed Terms of Use of the web site.

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13 Responses to "Is China the real Pakistan?"


Apr 29, 2019

There are many points the author missed. Real politics are influenced by economic considerations. China basically established overseas military bases through BRI projects with debt traps. Can it succeed in the long term? Quite unlikely. China controls its people with iron hand but the same is not possible in other countries, say, Pakistan. Public uprising, abetted by India, will see ousting of the China supporting governments and even its military hold. Plus, Chinese economy and its banking sector is pretty weak and risks cascading default risk that may weaken China a lot, say, by 2025-26. India is much is safer position. The war risks are not so high if Indian Govt. is firm in response like Israel. China cannot afford war for sure. It will be end of its dream of becoming Superpower. Such games will continue. No end result is expected even by China or India. Pakistan is just a pawn.

Like (2)


Apr 1, 2019

Dear Sir,

As usual, your articles are very well thought out and have deep insights. I think that China is already in a state of war with the world. But the rules of war are not along conventional and well established rules and procedures. China leverages the absence of the rule of reciprocity vis-a-vis democracies & the free world e.g. whilst Chinese enjoy freedom of movement globally, foreigners do not have the same liberties in China.

Another example is ChiPak control news in their countries, whilst India & other democracies do not. Neither Chi nor Pak has free & independent reporting, whilst in India, even a rape incident can get global coverage. It is essential to institute reciprocity principle with these countries - your diplomatic staff will have the same freedom / access as provided to India in their countries. E.g. Pak diplomatic staff can meet Kashmiri separatists, can Indian diplomatic staff meet Baloch separatists? As Chinese security monitors and does not permit free travel across the country to foreigners & foreign diplomatic staff, we should also impose reciprocal restrictions on Chinese citizens & diplomatic staff.

China has started a war along unconventional lines - it is redefining war. Salami slicing strategy is the tip of the iceberg. And human shields in the form of maritime militia is another strategy. These initiatives make even Russia holy.

Some unconventional initiatives, duly co-ordinated, are required to take on the unconventional war by China. Some possibilities are:

– Rename SCS with a name minus China. South Asian Sea sounds fine.
– Move against China at the UN by passing a resolution censuring the SCS activities by China
– Create a NATO type military alliance. The affected countries, along with US, UK & France should create a joint maritime militia titled South Asian Sea Protection Force. This entity is not country specific and can destroy Chinese assets without any one country being exclusively responsible for the act. China will definitely not nuke all the countries because one missile brings down its aircraft carrier or its oil rig. And this force can be provided enough missiles and torpedoes at subsidized prices. Whether a Patriot, Exocet or Bhramos decimated its military / commercial asset also can be camouflaged.
– Create a legal alliance to initiate legal proceedings against China in all forums and under all anti-civil acts by China – be it the ICJ or the various organs of the UN. The Permanent Court of Arbitration ruling was by efforts of a single country, and China promptly pointed guns at the Philippines. With a bunch of countries, China will not take on the bunch.

China will be rendered impotent if the enemy is indeterminate. It can bully if it can point a gun, but not a non-entity or an invisible enemy.

China has undermined the traditional rules of military engagement – to the extent of undermining the rules of civil engagement – beyond its borders. Civil and traditional engagement protocols / procedures / norms have been undermined by China. One cannot shape iron by using butter.

China is using the proverb war is the art of deception by Sun Tzu. With unconventional warfare being initiated by China, the same can be applied to China. Chose unconventional approaches – flagless warfare, news of Chinese insulting and desecrating Islam / Muslims (IS will train their guns on China), publicizing details of scandals of the Chinese leadership etc.

A dictatorship fears information and democracy more than its own destruction.

Do not match strength to strength in conventional military approaches. Use strengths that the enemy cannot counter. If even one fishing boat without bearing a flag unleashes a torpedo and brings down a Chinese oil rig, it will be enough to make China know that the bigger you are, the harder you fall.

Like (3)


Mar 22, 2019

Loads of good stuff - but at times you are comparing Aloo with Ghobhi....

If India were to follow the dictorship style of rulling the country - we would be ahead of China

A Chinese friend of mine - born and raised in HK; presently working in Canada pointed out so many things that your compare fails in comparision. Unfortunately dont have the time for nitty gritty...

Be very thankful for what you have in India, be very thankful for Modi and his govt - dont ever compare them with Congress or their rule. Future will prove my words

Not sure if its the lack of vision / clarity that prompted you to say what you say or it is the financial benefits over the years by the previous Govt that lies at its root....

Like (3)


Mar 21, 2019

God Help India !

Israel here we come !!

Like (3)


Mar 21, 2019

Do not worry. Pakistan has taught a lesson to America. Also will do the same to China.America is now understanding it. Chaina will also understand it.

Like (3)

Sanjeev Dange

Mar 21, 2019

No doubt sir that China is real Pakistan.For last 30 yrs India had no clear action plan even against proxy war of Pakistan.We have never thuoght of China's role in this issue.Your article is a initiative in this path.You are having vast experience of markets,economics yours 3 point action plan suggestion to govt will be useful ,though govt might be doing it presently

Like (3)

Sanjeev Kumar Singh

Mar 21, 2019

Dear Mr Dayal,
It is heartening to note a Financial expert making such a detailed analysis of geo political to arrive at the conclusions for a investment decisions. While I may not fully agree with your point of view, but I can't avoid appreciating the fact you have made such a comprehensive analysis. I fully agree that in last five year our foreign policy position has weakened significantly both politically and morally. Now we don't take morally and ethically correct position. We are rushing to be a part of a power block.


Like (3)


Mar 20, 2019

No matter all the protestations, the fact is that we are now diplomatically at the worst point in our history barring the 1962 defeat at the hands of China. All our so called friends and neighbours have gone into the arms of China in just about the past 4-5 years. Nepal, Sri lanka, Bangladesh, Pakistan, Bhutan, Maldives etc are all now doing China's bidding. We have even lost the support of Russia. In the bid to butter up US, we have lost our oldest supporter. So much for the muscular diplomacy of modi who has been nothing short of an absolute disaster politically, economically, diplomatically and in almost all other fields. We elected an incompetent disaster in 2014 and we are paying for that.

Like (3)

Gurudas Aras

Mar 20, 2019

Dear Mr Dayal... you have hit the nail at right place. We Indians should clearly understand and realize the fact that its China that is no.1 enemy and not Pakistan. Pakistan without China is absolutely non-entity and we can manage it easily. China always had been a Hawkish and most untrustworthy country. It is high time that India devises a long term strategy to deal with China and there is no opportune time than this when US and leading European countries are backing India. I totally am convinced about Pt. Nehru's role in destroying India's position globally on several occasions, allowing China to take disadvantage of it. History will not pardon him for all those grave mistakes for which country has to pay for over many decades.All the past Congress governments had a much weaker stance in dealing with China. Congress's position had always been suspicious while dealing with China. The best example is secret meeting of Mr Rahul Gandhi with Chinese ambassador keeping our government in dark while the Doklam issue was at peak. Instead of standing firmly behind our PM he went on a secret mission weakening India's position. If some one who can take real bold step in handling China's might, it would only be our present PM Mr Narendra Modi, with his Chanakyaniti.

Like (3)

R Tayal

Mar 20, 2019

A mindless article, with very little of substance and mostly with wrong data, and opinion masquerading as facts. A good economist or financial expert is not necessarily a good political or strategic analyst. Disappointing.

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