By Kumar David –

Prof. Kumar David

China’s turn to its domestic market may yield mixed results; Letter from the land of the Great Khan

Why are there two Mongolias, the country Mongolia often called Outer Mongolia (OM) and the Chinese province Inner Mongolia (IM)? The answer lies in 600-year-old history. First a few dates: Genghis Khan (1162-1227) the Great Khan, ruled for 37 years (1190-1227); his grandson Kublai Khan (1215-1294) ruled for 34 years (1260-1294) and extended Mongol rule to China.  In between, Genghis’s sons Ogedei, Jochi, Chagatai and other grandsons extended the empire in southern Russia, central Asia, Turkey, Mesopotamia and northern Persia. The Mongol Empire, the second largest ever, was 24 million sq. km at its peak; the British Empire at peak was 35 million sq. km. For comparison, SL is 66 thousand sq. km, population 21.5 million; OM is 1.6 million sq. km, population 3 million, 96% Mongol; IM is 1.2 million sq. km, population 25 million, 17% Mongol and 80% Han Chinese.

Kublai annexed China and founded the Yuan (Mongol) Dynasty which held sway from 1271 to 1368. After his death the logistics of empire were too much for the unsophisticated Mongols and the conquests in Central Asia, Russia, and the East splintered into smaller khanates. Inner squabbles were the harbinger of disintegration; self-immolation lessons that the USA and a fractured EU are learning the hard way now. The Mongol invasions led to millions of deaths and man-made climate change; the lives lost in Genghis’ battles helped clear 700 million tons of carbon from the atmosphere and cooled the planet.

This guy actually cooled the planet

There is one huge misunderstanding about Genghis that I need to clear up for those who, like this ignoramus, did not know. Genghis was not merely a conqueror, destroyer and ruthless slayer; he was more than that. He was a nation builder, unifier of Mongol tribes, promoter of education and meritocracy, patron of the Mongolian script, creator of laws and tolerated religious diversity. He was a great-grassland version of Napoleon, 600 years before the Corsican-Frenchman. 

How could I resist the temptation to visit the land of the Great Khan when my political guide was Comrade Bikyimchui of the Mongol CP’s central committee who encouraged me with my Essays on the Global Economic Crisis (Ecumenical Institute – 2010)? I was unsurprised that a Mongolian was a devotee of Genghis, but taken aback that my comrade was an avid fan of Genghis videos! In IM I found not a statue or museum piece of Mao; it was Genghis here, there, everywhere. The three things that impressed me most were the Mongolian Museum in Ho Hot, which laid out how nomads emerged, millennia ago, as humans divided into settled agricultural peoples, and nomads like the Aryans who exploded out of Central Asia into North India and Westward; secondly the Genghis Mausoleum (a museum since the burial site of no great khan has ever been found); and thirdly the vast grasslands. Pastoral nomads rely on their animals for survival and move habitat several times a year in search of water and grass for their herds. Their lifestyle is precarious, constant migration discourages transport of reserves of food and goods. They leave no graveyards as they may never return to the same place. This explains why the khans have no burial sites.

Infrastructure excess in the hinterland

It is amazing, literally incredible how much expenditure has been sunk into some of China’s hinterland. In Inner Mongolia (IM) it’s on an Ozymandian scale. The most stunning, if you want to call it that, is the city of Ordos known as “China’s ghost city”. Six-lane beautifully laid out roads but hardly a human in sight, vast verdant parks sans frolicking kids or leisure seekers (this is late spring mind you), imposing concert halls, rows of vacant apartment blocks which in appearance would do Dubai proud, and mighty government buildings to administer an urban population less than half of Colombo’s. One new area “intended to have 300,000 residents, government figures stated, had only 28,000”. Over investment on wasteful infrastructure has attracted criticism and rebuke. 

Three subway projects in IM’s provincial capital Ho Hot have been put on hold; trains are under patronised! An expressway linking Ho Hot to Ordos has been suspended. The provincial government has admitted to doctoring 2016 growth upward by 40% and fiscal revenue upward by 26%. The north-eastern rust-belt province of Liaoning made a similar confession when the authorities said its cities and counties fabricated fiscal data between 2011 and 2014. The fear is that if China turns sharply to its domestic market to sustain a high growth in the wake of a trade-war with the US, wasteful infrastructure expenditure will balloon. Provincial governments, driven by their own ambitions, promote profligacy, borrow recklessly and mire themselves in debt. 

My view is that there are two brakes on this. The trade-war is fizzling out; Trump is all piss and wind, no substance. Negotiations have put tariffs and counter-tariffs threatening $100 billon of bilateral trade on hold. China verbally promised to reduce its $300-$400 billion trade surplus, import $50 billion of US natural gas and increase agricultural imports by 30 to 40 percent, but did not accept the demand it cut the trade surplus by US$200 billion. China also used the talks to get the US to lift the ban on ZTE – one of its largest telecom companies – from purchasing crucial US components. The company which employs 80,000 people was accused of illegal shipments to Iran and North Korea. 

The most significant US demands went by default. US insistence that China curb its “Made-in-China-2025” programme designed to push it into global co-leadership in technology – AI, robotics, digital electronics, aviation and space and military products – was rejected. The trade crisis is not over and the two sides will bristle at each other from time to time, but urgency for China to switch to the domestic market to sustain growth has been ameliorated.

The second reason is to do with the way the North Korean calculus is panning out. Three weeks ago I mapped out Kim Jong Un’s Game-Plan (Sunday Island 13 May); things are going pretty much as predicted. The US is being marginalised, the North and South seem to have an unambiguous strategy of their own; Donald is tumbling like a jack-in-the-box. The South will keep the US pacified but that’s only a sideshow. The Kim-Trump summit is still uncertain and in any case result only in anodyne pronouncements. The pace and manner of denuclearisation, easing sanctions, investment and economic development in the North, will be pretty much set by the two Koreas themselves. 

China is waiting in the wings as the big hitter to move in and replace the US, not strategically but as lead economic partner. If these developments are smooth, Japan too has capital to export. I can see a new foursome strong economic-gathering emerging within five years. The US under its mad hatter is isolating itself – in Europe and the Middle East as well – and fading away sooner than the changing face of global conditions make it necessary. The relevance of all this to this piece is that if China finds new economic fields in which to play ball, infrastructure profligacy can be curbed.