 Today's topic is the recent changes in China. This is not a complete or final assessment of what is happening in China because it's a process that has been taking place in the last one year or so. We can only look at the various developments as we hear about them and see a pattern in it to see whether there is going to be a big change in China. We know for the last 40 years also China has been making rapid progress after the visit of President Nixon to China and the adoption of capitalism with Chinese characteristics which meant basically shifting from communism to capitalism. Communism in politics but capitalism in economics and this has enabled them to come to the forefront of the world and it became the second most powerful economy and in many ways next only to the United States and certainly the most powerful country in Asia and this region. This has been a growth which costs wonders. Everyone was looking at China as a kind of model but at the same time not something which could be copied because it had its own strengths and weaknesses. So when China made all these low huge progress people were just admiring China on the one hand and on the other hand wondering whether China will ever fail and observers used to say experts used to say that the Chinese growth can stop or its course will change only under two circumstances for two reasons. If these two reasons do not happen or if these two things do not happen nobody can stop China's growth and it will overtake United States in the next few years and during the height of the pandemic it appeared as though the United States was weakening and there was going to be a cap which can be filled by China. So China made very many efforts to try to accelerate its growth and to take over the leadership of the world but somehow it did not work to change your president in the United States and the US returned to the international arena in order to retain its own its position but in the last one year and the two conditions two reasons why China could fail or slow down its growth one is the contradiction between regulated political system that is the communist system and a liberated economic system that is capitalism. So whether capitalism can succeed in a communist structure was a question to be answered and people used to say that one day this contradiction between the two will appear and China will change. The second reason why people said that could be a change was if the environmental problems of China because their uncontrolled growth industrial growth and production supply chains and global domination and all that they had forgotten to take care of the environment and therefore there is considerable deterioration of the environment over China. So these could be the only challenges that China would face and in the last one year or so if you look at China's growth and Chinese policies you will find that both these problems have come up on the one hand the contradiction between communism, communist state and capitalist economy on the other hand the very grave environmental problems which China is facing. Of course in the discussion on global environment China had always taken the plea that their greenhouse gas emissions per capita is low like we argued also at that time but now they are facing a situation where they feel that by the time the Winter Olympics comes they will have to come out somehow do things which would make the country better environmentally and on the capitalist side they had seen some problems and difficulties and after 40 years the Chinese leadership seems to be thinking that they had forgotten that they were communists and this uncontrolled growth of capitalism is not doing much good for them and therefore they need to return to some of the communist principles. So the challenges are many at the moment because in the last one year we have seen a falling growth rate in the Chinese economy and the economy is overburdened by various debt issues. The export driven economy to a consumer driven economy and manufacturing and banking had some serious problem and non-performing assets of the government also posed a challenge. So what we have seen today is just a considered conclusions but certain observations now many experts are pointing out and the most important thing is that what the reformer of China, the NCOP said earlier that creation of wealth is essential whether it is in the private sector or in the public sector because only if there is growth the economy grows exponentially and the people and the world benefit from it. So there was no control at all on the private sector and as a result a large number of huge companies under private ownership began to grow and so the new President Xi Jinping started thinking about it and to find a solution he started bringing in some reforms. This is a background because it was Mr. Xi Jinping who really brought the country to this state and he has declared himself virtually as the as president for life and his third term is starting unprecedented third term as president is starting next year. So at this critical stage he appears to be changing the economic system in different ways. So he tackled some of these private giants in various ways to create difficulties for them. For example it started with a conversation he had with some school children and their parents somewhere in the provinces where the children and the parents complained about the growth of private tuition system which had overwhelmed the education system in China because students started depending on private tuition rather than the teaching that they get in school. Because this is a problem that we are also seeing in here today we are also seeing growth of these private agencies you know publicizing advertising that the only way our children can do well is not by studying in the classes but by hiring those people their facilities online offline etc to gain good education and become exceptional students and this has grown at a higher level in China which meant that parents were spending more money on private tuition of their children than they could afford and this came to the attention of the president and he appeared to say it casually to them that he said that yes I think the private sector is taking over the education of our children and not the teachers in the schools and now we are going to change that but that very simple declaration by the president was turned into a major initiative to cut out these educational institutions which had invested very heavy amounts of money, billions of dollars and excluded them or made them made it difficult for them to function as they used to do many of these companies had stocks and shares outside China and they were flourishing and they were making money and the money was also going out of China and so this particular aspect made the president think in terms of reducing this dependence which immediately meant that billions of dollars or of overseas investment went out and the only people who are happy about it are the parents who now do not feel compelled to spend their money on education of their children and this issue was so severe that many people did not want more than one child because in China there was a one-child formula but that was relaxed but still people said this is too expensive to bring up sort of and many of them found that this is a very expensive affair so the this action by the president by the government made a dramatic change and one of the growth industries of China suffered severely but the people were happy they developed a concept of common prosperity the idea of common prosperity that it is not enough that technological companies, private companies, health companies, education companies, property companies etc make billions of dollars and of course in the forms of tax the government also gains across the system so by turning back on capitalism in a sense several measures were introduced which would get the benefit of the business to the common people so the word common prosperity has become a kind of slogan which is not different from the slogan of socialism or communism and what the government did was to attack not only the educational companies but highly technology, highly developed technology companies we have heard about Alibaba owned by the richest man in China Jack Ma they created a lot of difficulties for him he actually disappeared from the scene for a long time and his company virtually collapsed another big giant in property called Evergrande and it's also perceived no support and it has gone into dark debt and become bankrupt these are just some of the instances but generally there was a reversal of the policy of growing capitalism in the country and trying to take over some of these for the people by the government itself so we find in the last year also this new trend and it appears that there is a sweeping new vision for China that is removing the interest of the investors or the policies will be in favor of the social stability and national security of the country rather than on investment and growth so investment and growth has taken the third priority and the first will be social stability so that the poorer people will overruns of the society and develop even if it means a reduction in the growth of the big companies so the idea is to use the state's power to save the middle class which is being squeezed by the big industries and technology companies who had according to the present leadership they had hijacked the capital and therefore the education companies if they were to operate they had to be no profit so the old rules of Chinese business favoring the private companies changed and these were targeted in order to reduce their significance in the economy the government earlier had only strict control on banking and oil such fundamental businesses and private companies were free to adopt technologies but now the priority is on as I said earlier natural security and this I think marks a change a watershed in Chinese policy priorities and so the government has been talking about three big mountains that the ordinary people are facing in China so what are these three mountains or burdens one is the burden of payments for education that has already been handled so now education companies have to be non-profit healthcare again the healthcare giants were put to size cut to size and the government took over many of those responsibilities and then property as I mentioned earlier the Evergrande which had become a global company on of the biggest now running through huge debts then generally the technology companies were the main target of the government apparently the technology companies were called by the government authorities and they were given a lecture on data security because there was suspicion that these companies were not properly taking care of data which was being used and sent abroad because of their collusion with companies in the United States so the steps that they have taken is they have told them that this stifling competition among the companies should be avoided their policies should be directed towards the welfare of the people and the three priorities for national security they said control of data and greater self-reliance like we are also now talking about atmanar par India so the first principle is that data should be controlled and these should not go out for the sake of investment and therefore there should be greater self-reliance that is develop your technology develop your chips and thus retain the control of the growth of the technological companies within China itself then the idea I mentioned earlier of common prosperity to curb iniquities in the government then stability reducing the discontent in the middle class and therefore this new vision is being executed of course it's not very sure how far it will go over the crunch will come with the failure of these companies and their commitments are brought but it appears at the moment that policies of the government are becoming more and more middle class oriented and the earlier belief that creation of wealth by anybody is useful to other countries is being weakened or even abandoned so who are the people who have lost out in this process technological billionaires because Jack Ma has come back and he has been talking about revival but certainly he is not the same person that he was before then highly leverage property companies like Evergrande not just one including China's Evergrande group then foreign venture capital firms waited to take Chinese companies the public system in the United States so many companies Chinese private companies were going abroad to the western market to raise resources and funds in order to raise more wealth and much of it was going out of the country all this is being seen in the context of the decision for President Xi to continue for a third time we do not know what is happening in the communist party of China because these are I mean there are always China watchers writing about stories but sometimes it can be totally off the mark but there were some dangerous signals which Mr. Xi had noticed in the system and there were strikes there were problems of power failure and production of exports so he probably felt that when he takes on the next term as president these problems should not be there if there are problems possibly within China within the communist party itself there could be some challenge because nobody sees any sign of challenge at this moment is the unchallenged leader and that does not seem to be any problem in his continuing but he feels more secure if the controlling aspects of the economy are in the hands of the government rather than the private sector this of course has a disadvantage that is China's integration with the global economy will be weakened and therefore naturally the size of the economy could be affected so the bigger companies like Alibaba many others who were supposed to even surpass the biggest American companies and therefore this cracking down on what's called disorderly expansion of the capital and especially foreign capital will naturally come down and the emphasis is on cybersecurity and data security as I mentioned earlier and even companies like DD Global which is the Chinese version of Uber were all restricted and they were even taken off the app stores so the identification that the middle class is being squeezed by the growth of the private sector the billionaires and millionaires of China has now affected the meteoric rise of China in the past and there's also a lot of pushing back against the monopoly power of certain individuals therefore like President Biden recently said that capitalism without competition is not capitalism it is exploitation and so that's what President Biden said seems to have made an impact on China also and therefore they have come down heavily on monopolies companies who are just doing one thing which were not prepared by us and education was one of them so on the whole China believed that it can thrive through state planning which is what they started originally even in our case we know that for 50 years we believed in state planning and our economy was very constrained and we changed that in the 90s in that time of course Chinese were at the top of the industrial world so there is a reversal in the economic policies of China and also there are signs that there are there are movements inside China against human rights abuses in Xinyan where there is a sizable muslim population and the west has been critical of what is happening in Hong Kong and the west wants to reduce the links with China and China being considered irresponsible for the for the pandemic and there has been talk in the west and even in India about decoupling China from its economic links in the west and in even in India we know that we tried to close down some apps we discouraged Chinese investment in India during the pandemic because of the Ladakh crisis but in actual fact what has happened is during this period of recession and economic difficulties around the world China has actually grown more and because it came to be known because of Chinese involvement abroad in so many areas and particularly supply chains most countries in spite of their effort to restrain Chinese activities actually Chinese activities increased so this is another factor which may have gone into the thinking of the Chinese that if this policy of decoupling that is dissociating themselves from Chinese supply chain and industry manufacturing etc then all the most more necessary it will become for the state to take control so anticipating that that may be another fact that suppose one day the policy of the the western countries or even countries like it like China make it difficult for the Chinese economy to operate in other countries then the blow would be too strong so maybe the Chinese authorities are trying to prepare for it so there is a boost to self-sufficiency that is try and because as you know most of the technology most of the patents are all from the west and China is only our crop and both sides agreed and therefore there was complementarity but expecting that there could be a change in that they're talking about like we started talking about make in India when the new government took over they have started a boost for self-sufficiency made in China in 2025 to cutting reliance on the technology that they have imported like artificial intelligence and electric vehicles and robotics and moving away from the US to major centers in China itself Hong Kong is a possibility Shanghai is a possibility Shenzhen is a possibility to develop centers of industry self-reliant industries in modern technologies in these areas and therefore there was a structural shift also in the planning they are making for the economy so in other words all these factors being witnessed in different areas without any particular announcement of a policy as such except common prosperity and security China is moving into a new norm so but they expect that this new normal all of us are in a new normal situation we are not in the same situation as we were in 2019 so the idea is that even if there is a reduction in the growths double digit growth was there in China till now but these changes may lead to a growth rate going down to 7.5% to 7.5% and how do you deal with that because on the one hand you satisfy the people by giving them the source of wealth controlling the money making companies and give the benefit to the people but if the growth rate itself comes down that will cause a strain on the the same people that China is wanting to help so that is the dilemma that they are facing now and some measures are being taken about that and observers are watching and seeing that the lifestyle of the Chinese people is changing gradually to suit the new policy like people have noticed that there is less street food available in the cities of China you know earlier there was growth when there was a huge growth taking place and tourists coming and business and so on the number of eating places on every street was so huge and a lot of money was being spent there by everyone and apparently there has been a big reduction this now many of them have been closed and there are other businesses there then reliance on cashless economy so that everything is recorded people know who has spent money on what so they in a way they are you know making the economy smaller at the same time that they are making taking control of the economy and one last point is the environmental awareness because they have been like India we have been arguing that developing countries must have the capability to use more resources in order to develop and also they should get support from the developed countries for growth China is now looking at reduction of greenhouse gases voluntarily under the Paris agreement and therefore they are getting more serious about environmental protection so both these things are being addressed the one hand the growth of public sector or a private sector being curtailed on the other hand also make sure that the environmental deterioration is arrested and that is why China has already declared that by 2050 China will be a net zero carbon emission country Americans have declared 2030 some other West European countries have 2050 India has not declared we have more said so because we say that if we have to declare that we need to have funding and technology in order to have alternate manufacturing capacities but this meeting of the summit or climate change is going to take place in a month's time in Gloucester in UK and all the world leaders are supposed to be there is the 26th conference of parties of the United Nations framework convention on climate change so from the Paris agreement formula of everyone voluntarily declaring voluntary cuts of emissions in Glasgow the countries are moving towards or at least the Americans are pushing all the countries to declare net emission targets for those countries and China has already said that they will do it in 2050 so their hard position against the west that we will not reduce emissions is being changed and the same pressure is coming on us also so they are become more serious about environment but there has been a development that which happened today is that Xi Jinping has announced that he will not be attending the Glasgow conference no people are wondering what is this about why is it that if he has all these reforms in mind and he needs international cooperation and understanding his new policies and so on why is it that he is not going to this very important conference there are doubts about it before but he has now announced that he will not go which means that he has not gone out of China for the last two years so does it mean trouble does it mean that he doesn't feel secure enough to leave China at this time even for such an important conference in Glasgow and this is the last evidence that people are analyzing as to what is happening in China and what is going to follow so briefly in the context of the new term that the new the president is going to assume he is preparing the people to be preparing to be popular among the people and meet their requirements and in the process he may do some damage to the growth of the economy but at the same time he feels that he will be performing or doing his responsibility towards the original communist system or the socialist system this is how experts are reading it but I brought this up for you this time is for you to be cognizant of the fact that these changes are taking place and the future as you prepare for your civil service examination all these factors will come into play China's role and so it is important for you even at this stage to note these changes and continue to follow them as you move towards your examination thank you very much today we're discussing actually changes inside the inside China we already discussed occurs and bought and sold several times but there is a linkage I understand what you are asking because of the all these changes and how is it going to affect Chinese effort to dominate the world because there is no doubt that their final objective externally what we talked about today were all about internal changes but externally they want to dominate the world and they know that they would in the next 10 or 15 years but what they were doing they were flexing their muscles to show that because of the pandemic and the changes in the world they might be able to accelerate that growth okay so the indications from inside now get the we get the impression that this may change in the sense that they may focus more on internal reform and may not be so aggressive against Taiwan or Hong Kong or South China Sea that is mere gesture but as far as their position today is concerned they are very determined to be present in the Indo-Pacific and try to control the passage through the South China Sea and everything is all intact there is no change at all but the trust that they made during the height of the pandemic that has been reduced because China's prestige or China's influence has not grown over the last 20 years and the Quad and the and more than the Quad AUKUS is threatening Chinese presence in the Indo-Pacific so I don't think their policy has changed so at least there is no indication they are getting softer on that but there is all the indication that with the with the formation of AUKUS rather than Quad because Quad is now becoming a more you know common good ideas like climate change and supply chains and and so many you know pandemic itself so by separating Quad and AUKUS now Quad is more of a civilian organization that's what we like also and the military aspects have been taken over by AUKUS so China must be in the process of adjusting itself to this situation and they also know that Quad can suddenly become a military grouping if it becomes necessary the potential there in the labor exercises are there you have studied the situation so you know so it is not very clear that there has been any change in the Chinese aggressive attitude but from what they are doing inside the country people are thinking that there could be a change in external policies also but there is no sign of it myself okay well belt and road initiative as you know was the most important initiative taken by Xi Jinping and the objective of it was to dominate the world by taking making every road should lead to Rome like old days every road should lead to Beijing that is the purpose of the Dalton Road in China and it sounded very good for the other countries because here was going to be a lot of projects money etc etc coming to them and therefore virtually everybody joined except for India many people have joined but there has been a certain disillusionment among these countries who went in for it like some of the central Asian countries Sri Lanka for example because we realize what we have been saying at that time was that these projects that they are going to give these countries were designed not for the requirement of those countries but for the requirements of China like haven't thought about why is it being built why does Sri Lanka want a boat like that and so the idea was that all this money would be spent for the sake of Chinese interest and at the same time shown is as debts to those countries concerned so one we have been saying earlier that there could be a debt trap involved in the BRI initiative is now coming through and so several countries are expressing hesitation but countries like Pakistan etc are going full force so there could be one other reasons why these changes which are taking place inside China would also be because of the lacking or deteriorating attractions for the BRI so the BRI does not seem to be going as well as they had expected and that could also be a reason why they are making these adjustments within the economy in China but we don't know well it is not directly linked to India India will continue its policy of middle path which you have always been following both private sector and the public sector and it may have an impact in the sense that the kind of goods that we get from China may change so some changes will be there but that we cannot say as yet because we don't yet know what these changes in policy are adding up to and then naturally there will be some changes but our idea was to be self-sufficient ourselves rather than depend on China and that is why the foreign minister has been talking about de-risking not de-complete but de-risking at least we should not be dependent on China to such an extent that if Chinese system changes it will it should not affect us and deal Quad is now dealing very seriously with supply chains and alternate supply chains which United States is working on but as of now as you know many countries are dependent on Americans Chinese supply chains and but if these gigantic manufacturing companies suffer and that also will change and alternative supply chains have to be developed I don't think there is any any option in that but here again we have to see what the impact of these internal changes will be on their exports on their dependence on outside markets and so well nobody knows when you set a date like that there's always uncertainty but the idea is to set a date is to have a benchmark are we moving towards that and that'll be watched by the UN system by the climate change convention etc so instead of merely reducing greenhouse gas emissions to reduce the temperature rise you know that is the principle of the Paris Agreement so we are moving to Glasgow with a new idea that everybody must declare and pressure is being put on put on countries after the United States having said 2030 they tried China to say it but China has said 2050 they are asking us to so you know declare a date we have not done that so so far I do not know whether we will make any commitment in Glasgow I do not know whether the Prime Minister is going there or it's going to be only on online participation we don't know but it is going to make a change the Glasgow decisions will make a change to the approach to climate change because it is proved that Paris Agreement is not helpful because even if all the commitments made of the Paris Agreement are implemented the average growth or global warming will still be more than 2 degrees Celsius it will be more it will be about 3 so we have to restrict it to 1 or 1.5 maximum and that the Paris Agreement commitments will not lead to that is more or less clear so a new path will be sought whether it will be realistic and these years will be really observed and honoured it is yet to be seen because they want a market and with political prices people buy Chinese goods even India don't receive Chinese shops all around the place and that is because they sell these goods at a cheap rate that is what is called dumping so we are all victims of dumping but it is very difficult to stop people from buying things when they find it cheap and so that also has to be we have to have our own regulations to control it but the market forces are such that when another country is willing to dump these things of us people will be attracted so we have to see how it goes so thank you very much we'll meet again next week thank you