Saturday, February 12, 2011

'China ready to go to war to safeguard national interests'

Terming US attempts to woo India and other neighbours of China as "unbearable," an article in a Communist party magazine has said that Beijing must send a "clear signal" to these countries that it is ready to go to war to safeguard its national interests.

The article published in the Qiushi Journal, the official publication of the ruling Communist Party of China (CPC) said China must adhere to a basic strategic principle of not initiating war but being ready to counter-attack.

"We must send a clear signal to our neighbouring countries that we don't fear war, and we are prepared at any time to go to war to safeguard our national interests," the article said, suggesting an aggressive strategy to counter emerging US alliances in the region.

"Throughout the history of the new China (since 1949), peace in China has never been gained by giving in, only through war. Safeguarding national interests is never achieved by mere negotiations, but by war," it said.The piece said countries like Japan, India, Vietnam,

Australia, the Philippines, Indonesia, and Korea are trying to join the anti-China group because they either had a war or a conflict of interest with China.

"What is especially unbearable is how the US blatantly encourages China's neighbouring countries to go against China. We cannot completely blame the US, as flies do not stare at seamless eggs.

"They are attempting to gain benefits by using US," it said.

It suggested that China should use its economic clout and trade as a weapon to rein in neighbours. "China's neighbouring countries need China's international trade more than China needs them, with the vast majority of China's trade deficit caused by these countries," it said.

"Therefore, they, but not China, will suffer greater damage by antagonising China. China should make good use of these economic advantages and strategic power. This is also the most effective means to avoid a war," it said.

The article said the US has adopted a series of strategies to contain China like through an exchange rate war, through a public opinion war, besides launching military exercises and simulated warfare, and the development of an anti-China alliance.

China on its part, it said, can consider the idea of launching economic warfare through strategies to contain the US dollar and making effective use of forums like the IMF and initiating a space war by developing strong space weapons.It also suggested as a counter-strategy the idea of pursuing a strong policy against neighbours joining the US alliance, even attacking a nearby enemy and forming anti-US alliances in Latin America and Africa.

It also said the China should also launch a public opinion war by making an effective use of the free media in the US and other democracies.

Though suggesting a hard-line policy towards neighbours, the article, however, proposes to rope in countries with good foreign reserves like India to neutralise the influence of US dollar.

"Of course, to fight the US, we have to come up with key weapons. What is the most powerful weapon China has today? It is our economic power, especially our foreign exchange reserves (USD 2.8 trillion). The key is to use it well. If we use it well, it is a weapon; otherwise it may become a burden," it said.So in view of this China should "pick up courage" and go for aggressive buying of other currencies, including the Indian Rupee hence taking the lead in affecting the market for US dollars.

This approach, it said, is market-driven and it will not be able to easily blame China.

"Of course, the most important condition is still that China must have enough courage to challenge the US currency. China can act in one of two ways. One is to sell US dollar reserves, and the second is not to buy US dollars for a certain period of time," which will weaken the currency and cause deep economic crisis for Washington. Given the fact that China is the biggest buyer of US debt, its actions will have a demonstrable effect on the market.

"If China stops buying, other countries will pay close attention and are very likely to follow. Once the printed excess dollars cannot be sold, the depreciation of the dollar will accelerate and the impact on Americans wealth will be enormous.

"The US will not be able to withstand this pressure and will curtail the printing of US currency," it said.

Wednesday, February 9, 2011

'Islamic banking surges post-global recession'

Islamic banking has been gaining momentum after the recent global meltdown and many countries, including India, are opening their doors for it, an international Islamic banking expert said here.

Islamic banking is based on the principle of profit-sharing, rather than charging interest.

"The current volume of Islamic banking is USD 1.2 trillion. It is very small and less than 1 per cent when compared to conventional banking, which is nearly USD 243 trillion. But this USD 1 trillion was achieved within 40 years. This is growing 15-20 per cent much faster than conventional banking," expert Madzlan Husain said on the sidelines of 17th Commonwealth Law Conference being held here.

According to him, as many as 75 countries all over the world have recognised the need for Islamic banking and opened doors for it.

The segment constitutes nearly 22 pc of the total banking in Malaysia, which is considered as hub of Islamic banking. It has been growing at nearly 20 pc in countries like Kuwait, Bahrain and Saudi Arabia."The number is definitely growing. Recently, India also allowed Islamic banking in Kerala. The global financial crisis contributed to the growth. They feel that there is something structurally wrong with conventional banking system. Even countries like China, Korea are also implementing Islamic banking," Husain explained.

Recently, the Kerala High Court paved the way for setting up an Islamic bank by dismissing Janata Party leader Subramaniyam Swamy's plea challenging the state government's decision to start an Islamic bank.

"Why should our country lose the benefit of foreign direct investment in this sector by saying that we will not allow Islamic banking? When our Prime Minister visited Malaysia, he said that India will send a team of RBI officials to Malaysia to study Islamic banking aspects. I am sure that there will be a necessary regulation in place," L Nageswara Rao, the counsel for the Kerala Government in the Islamic banking case, said. According to experts, no financial institution that practices Islamic banking looked for bailout packages during the global recession.

"After the recession banks like Scotland Bank were to be bailed out. But not a single Islamic bank needed help or looked for bailout. It was completely unfazed by the recession. That is the reason France is competing with Britain to become a hub for Islamic banking due to ethical banking," said M J Husain, an Independent Director at South Africa-based ASBA Bank (a subsidiary of Barclays Bank).

Thursday, February 3, 2011

India has high stakes in a stable Egypt

In some respects, India has the same close entanglement and investment with Egypt and Mubarak as the United States does, although it comes from a different direction, both geographically and strategically.

Washington views Egypt as a military and diplomatic partner, which it got to sue for peace with ally Israel in the teeth of Arab opposition and paved way for decades of relative concord in that part of the world.

India-Egypt ties pre-date this and are rooted in the exceptionally close relationship between Nehru and Nasser, founding members and buddies of the Non-Aligned Movement. It survived the US ingress into the region and even New Delhi's dalliance with Israel, although with noticeable less ardor.

Since the 1980s, there have been four Prime Ministerial visits from India to Egypt: Rajiv Gandhi (1985); P V Narasimha Rao (1995); I K Gujral (1997); and Manmohan Singh (2009). Mubarak visited India thrice, in 1982 (bilateral), 1983 (for NAM), and most recently in 2008, when New Delhi finally handed over the Jawaharlal Nehru Award for International
Understanding that had been conferred on him as far back as 1995.

Mubarak's 2008 visit was mainly driven by massive Indian investments in Egypt, which overcame the mushy sentimentality that hitherto characterized the ties. As with rest of the world, Indian movies are popular in Egypt.

In the past decade though, it's India Inc that has stepped up to the crease: Indian companies have made a mark in Egypt, raising India's profile that was otherwise largely cultural. Egypt is the beachhead for Indian push into North Africa and Maghreb, with Oberoi, which owns two hotels and runs cruises, leading the way in the hospitality sector.

Wipro and Satyam Computers set up global delivery centers in Cairo; Kirloskar assembled diesel engines and irrigation pumpsets in the country; Ranbaxy found an Egyptian subsidiary for manufacturing pharmaceuticals; Dabur, Marico and Asian Paints have operations here; Bajaj Auto dominated the three-wheeler market; Tata Motors, M&M, Ashok Leyland and Maruti have all motored in.

More recently, Essar, Reliance, and the Tata group are among those planning investments in Egypt worth an estimated $20 billion. Add to this, nearly 1,00,000 Indians vacation in Egypt every year.

Clearly, India has much to wish for in Egypt's stability.

Checking inflation focus of 12th plan, says Plan panel official

Identifying inflation as a major challenge, the UPA government will come up with a new set of reforms to check it in the 12-five year plan starting from 2012-13. Inflation crossed 18% mark in January 2011 making the government feel that keeping it under control will not be possible without systematic reforms in the food distribution and storage sector. Since April 2009, the inflation has increased by about 25%."Unless there is not a huge difference between the price farmer gets and at what the consumer buys checking inflation would be a difficult task," said Pranob Sen, principal advisor with Planning Commission, who has been given the task to formulate approach paper for the 12th plan.While food to all through a re-structured Public Distribution System aimed at plugging leakages will be a reality in the 12th plan, the government will also target at taking agriculture infrastructure to the doorsteps for farmers. It includes cold storage chains and market access.The commission has identified sectors where "well regulated markets are non-existent" and will come up with a strategy to create or improve markets in all sectors."The key would be providing access to farmers to markets all over the country," Sen said.Another key area identified for improvement is enhancing skills and faster generation of employment."It is believed that India's economic growth is not generating jobs or livelihood opportunities," said a plan panel internal note on approach for 12th plan. "At the same time, many sectors face manpower shortages".The panel also believes that there is a need to improve skills for both job market and for self-employment."We have to come up with modules to providing training to people who want to set up their own small business enterprises such a shops," Sen said.Although attaining economic growth of more than 10% through mobilization of resources and efficient capital markets will remain a key objective, the 12th plan is expected to have serious of reforms to make the growth inclusive for poverty eradication, for providing quality health and education facilities.The commission has identified inefficient transport sector as a major bottleneck for attaining higher economic growth and insufficient access to large national markets.In the 12th plan will be a renewed focus on development of rural and urban multi-modal transport.Sen said while the 12th plan will take ahead the work of the 11th plan the emphasis will be on having bigger impact on people of the Central government schemes