China Falls Out Of Fashion For U.S. Brands

President Trump's Tariffs Push More US Manufacturers To Look Outside China
By SCOTT HORSLEY

Designer Isaac Mizrahi (left) embraces Robert D'Loren, CEO of Xcel Brands, which once manufactured 70% of its clothes in China. Today that's down to about 20%. The company now manufacturers in a variety of countries, including Indonesia, India and Sri Lanka.

A lot of American companies that make or buy products in China are starting to rethink that, as a new round of tariffs takes effect this weekend. 

But Robert D'Loren doesn't have to worry. 

As CEO of the Xcel Brands clothing company, he began moving production out of China some time ago.
"You never want to have all your eggs in one basket," D'Loren said. 

"China was easy. In retrospect, probably if you had 90% of your production in China, that wasn't good risk-management planning."
D'Loren, who sells clothing under the Isaac Mizrahi and Halston labels, among others, once manufactured 70% of his company's clothes in China. 

Today that's down to about 20% — a byproduct of D'Loren's effort to find faster, more flexible suppliers that can jump on fashion trends and turn out clothes in as little as six weeks.
"Sometimes there are things that by design and by luck ... you do that serve you well," D'Loren said.
Xcel now manufacturers in a variety of countries, including Indonesia, India and Sri Lanka, and it's exploring production in Central and South America. 

But building that flexible network wasn't easy. 

Clothes from the new factories didn't fit right at first, or the fabric wasn't what D'Loren expected.

"It took us five deliveries to get it right," he said. 

"Everything that could go wrong did go wrong."
Many companies are now going through a similar process of trial and error, as they look for ways to avoid the president's tariffs.
"The truth is that the trade war is a little bit of a wake-up call for many companies," said Gerry Mattios, a Singapore-based vice president with Bain & Company consultants.
He says rising labor costs in China were already causing some companies to look elsewhere for suppliers, and the Trump tariffs have accelerated that. 

But other countries will need a lot of investment to match the expert manufacturing base and robust shipping network that China has built over the past two decades.
A survey by the American Chamber of Commerce in China says most companies that do relocate look to Southeast Asia. 

Vietnam's exports to the U.S. jumped 33% in the first six months of this year, compared with the same period last year.
Mexico is another popular destination for companies shifting away from China. 

Roberto Durazo works for a company called Ivemsa that helps manufacturers set up shop in Mexico. 

He held three conference calls with potential clients in a single day this week. 

But for now, he says, most companies are keeping their options open.
"Not many of them are pulling the trigger," Durazo said. 

"My feeling is that many of them are gathering information and, if the trade war continues for a long time, just making the decision of coming into Mexico."
Mexico offers the advantage of much shorter delivery times to the United States. 

But it was only three months ago that President Trump was threatening tariffs on goods made there. Trump ultimately dropped that threat.
Trump has urged companies worried about tariffs to move production back to the United States. 

But only about 6% of the companies operating in China are considering that, according to the American Chamber survey.
Harry Moser, who runs the Reshoring Initiative, estimates that about 25% of those companies would find manufacturing in the U.S. competitive if they took tariffs, transportation and all other costs into account.
"Probably they made the right decision going to China when the wages [there] were so low," Moser said. 

"Probably they should have reevaluated it five years ago. But now that they feel they have to bring a lot of work out of China, now is the perfect time to reevaluate the U.S. as an alternative."
As the trade war drags on, more companies may rethink their presence in China. 

But for now, most are staying put. 

That includes Crown Crafts, a Louisiana-based company that makes baby blankets and other products in China. 

CEO Randall Chestnut told investors this summer that he looked into shifting production to a half-dozen different countries. 

But ultimately he decided it was cheaper to stay in China and simply pay Trump's tariffs.
"So we think that we're going to have to bite the bullet and, you know, pass it on," Chestnut said during a quarterly earnings call.
According to the American Chamber survey, 60% of the U.S. companies now operating in China have no plans to relocate.

Chinese Trap

Countries should not be duped into borrowing from China

“We are being duped, and we have to negotiate better for our own interests,” said Karim Raslan, the founder of ASEAN-focused political risk consultancy firm KRA Group about China’s Belt and Road Initiative.
By Shirley Tay

Countries should not be “duped” into borrowing from China through the Belt and Road Initiative, and should be looking for opportunities in India instead, says one firm critic of Beijing’s flagship infrastructure project.
”The BRI is all about Chinese strategic objectives; it’s not about the host countries,” said Karim Raslan, founder of political risk consultancy, KRA Group.
“We are being duped, and we have to negotiate better for our own interests,” he told CNBC’s Nancy Hungerford at the Credit Suisse Asian Investment Conference in Hong Kong on Tuesday.
Sometimes referred to as “One Belt, One Road,” the mega-project is a Chinese investment scheme which aims to create a vast global infrastructure network connecting China to more than 60 countries across Asia, Europe and Africa.
Controversy surrounding the strategy was highlighted in 2017 when Sri Lanka handed over its Hambantota port to Beijing for 99 years after the South Asian nation failed to pay back the money it owed Chinese firms.
The BRI is a “debt trap,” said Raslan. 

China is “not investing — they’re lending us money, for projects which have very little economic value to the host countries,” he added.
Borrowing nations need to “look more to India,” Raslan said. 

“We have got to focus there.”
He explained that “India, at the end of the day, (has)1.3 billion people. It’s growing very fast — they will be sucking in imports.”
India’s economy is poised to grow at 7 percent in 2019, expanding more than China’s projected growth of 6 to 6.5 percent the same year.

China's State Terrorism

Masood Azhar Is China’s Favorite Terrorist
BY MICHAEL KUGELMAN

Indian Muslims hold a scratched photo of Masood Azhar as they shout slogans against Pakistan during a protest in Mumbai on Feb. 15. 

On March 13, China placed a “technical hold” on a resolution calling on the United Nations Security Council to designate Masood Azhar, the leader of the Pakistani militant group Jaish-e-Mohammed (JeM), as a terrorist. 

Beijing’s intervention effectively torpedoed the measure. 

This marked the fourth time that China has prevented Azhar, who enjoys long-standing ties to the Pakistani security establishment, from being officially designated a terrorist by the United Nations.
There had been good reason to believe that this time might be different, and that Beijing would step back and let the resolution get approved. 

The fact that the fourth time wasn’t the charm speaks volumes about how deep the partnership between China and Pakistan still runs, and how far Beijing is willing to go to defend its “iron brother.”
So important is the China-Pakistan partnership that Beijing was willing to stick its neck out in support of a key terrorist asset of the Pakistani state who garners little sympathy outside Pakistan. 

At home, Beijing has sent hundreds of thousands of innocent Chinese Muslims to detention centers under the guise of counterterrorism, but it has bent over backwards to protect an actual Islamist terrorist abroad.
The move came even though global pressure has intensified on Pakistan to crack down harder on India-focused terrorists on its soil. 

The trigger was a February 14 attack on Indian security forces, claimed by JeM, in the Indian-administered part of Kashmir. 

The assault, which killed more than 40 paramilitary troops, was the deadliest attack on Indian security forces, and in Kashmir on the whole, in years. 

Nearly 50 countries, including all five permanent members of the U.N. Security Council (even China), issued statements condemning the tragedy, and many called on Pakistan to crack down on JeM. 

Soon after the attack, the United States, with support from fellow Security Council members France and the United Kingdom, proposed the resolution. 

The Trump administration, according to Indian press accounts, tried to convince Beijing to support it.
And yet China defied all the pressure and refused.
That’s especially strange given that the Belt and Road Initiative (BRI) gives Beijing a major incentive to take a stronger stand on terror in South Asia. 

Despite mounting financing concerns, Beijing continues to build the mammoth transport corridor that the BRI, now a much more expansive project, was originally conceived as, and South Asia figures prominently in its plans. 

Two key pathways—the China-Central Asia-West Asia Economic Corridor and the China-Pakistan Economic Corridor (CPEC)—pass directly through the region.
The BRI needs stability to succeed, and terror groups like JeM are inherently destabilizing. 

While most JeM attacks have been carried out in the Indian-administered portion of Kashmir, where the BRI doesn’t have a footprint, the group has previously been implicated in at least one attack in Pakistan. 

According to the U.S. government and independent analysts, it has also maintained a presence in Afghanistan. 

Additionally, JeM has ties to al Qaeda.
But Beijing refused to sanction the leader of one of South Asia’s most destabilizing entities. 

This is striking, given that Beijing frequently uses the rhetoric of terror to demonize and delegitimize lesser threats, especially the Uighurs. 

Some years back, as Richard Bernstein recently described in The Atlantic, Beijing went so far as to convince the United States to detain 22 Uighurs—none of whom had any apparent links to terror—in Guantánamo Bay. 

And yet when it comes to Masood Azhar, who heads a potent terror group linked to al Qaeda with regional reach, China all but legitimized a terrorist by refusing to have him officially designated as such.
Perhaps the biggest reason to have believed China would let Azhar be designated a terrorist is that it would have been a low-risk move for Beijing. 

Pakistan’s close friendship with and deep dependence on China—which increased after the United States suspended its security assistance to Pakistan last year—means Islamabad would have been in no position to express displeasure, much less retaliate. 

So there would have been no deleterious consequences for bilateral relations. 

In fact, allowing the resolution to pass would have benefited Beijing: It would have brought China some international goodwill at a moment when its global image has been marred by its cruel and repressive policies toward the Uighur community.
In effect, Beijing declined to make a relatively cost-free move that could have helped advance its interests in South Asia and given a much-needed boost to its reputation. 

It’s a decision that can largely be attributed to the strength of the China-Pakistan relationship.
This partnership, motivated by shared rivalry with India, isn’t as ironclad as the heady official rhetoric (“sweeter than honey,” “higher than the Himalayas”) might suggest. 

But it’s still warmer, deeper, and more strategically vital than just about any other bilateral relationship in Asia.
And yet Beijing’s decision to block Azhar’s designation should be read not only as a show of support for Pakistan, but also as an effort to reaffirm China’s continued commitment to the country—at a moment when Islamabad may fear Beijing is wobbling.
Over the last year, as the U.S.-India defense partnership continued to gain speed, Beijing sought a rapprochement of sorts with New Delhi. 

In March 2018, amid efforts to move beyond their tense standoff on the Doklam Plateau in the summer of 2017, Chinese Foreign Minister Wang Yi made a strong pitch to end confrontation and initiate conciliation. 

“The Chinese dragon and Indian elephant must not fight each other but dance with each other,” Wang declared in a press conference.
Then, in April 2018, Indian Prime Minister Narendra Modi and Chinese dictator Xi Jinping held an informal summit in Wuhan, China, that led to a commitment to cooperate on joint training programs for Afghan diplomats. 

Later that year, there was talk, mainly from the Chinese side, of potential India-China cooperation on connectivity projects in Afghanistan—and even in Pakistan.
Perhaps not coincidentally, Beijing has declined to defend Pakistan in global forums on several occasions over the past year.
In February 2018, it refused to oppose a measure at the Financial Action Task Force to put Pakistan on its so-called gray list for failing to curb terrorist financing.
In July, Beijing signed on to a public statement issued by the Heart of Asia initiative (a 14-nation collective focused on promoting stability in Afghanistan) that condemned JeM and Lashkar-e-Taiba (LeT)—another major Pakistan-based, India-focused terror group—by name.
This came less than a year after China did the same with a statement issued at a BRICS summit.
And then came the recent India-Pakistan crisis, when India and Pakistan launched air strikes on each other’s soil and brought the subcontinent to the brink of war.
Beijing was quiet throughout the crisis and never expressed public support for Islamabad.
Instead, it called for restraint.
In reality, Pakistan shouldn’t need reminding that China is still on its side.
The India-China rivalry remains strong and fraught, and it’s destined to deepen in the coming years as the two Asian giants ramp up competition for markets, mineral resources, and influence.
And a bitter territorial dispute—the cause of a 1962 war—remains unresolved.
Still, signaling is important in international relations, and Beijing’s obstructionism at the U.N. sent a strong message.
To be sure, other factors may have prompted China’s move as well.
With Pakistan facing mounting debt to Beijing from CPEC, and with several Belt and Road countries having backed out of projects over the past year due to financing concerns, Beijing may have wanted to make a gesture of goodwill to get Islamabad to shake off any emerging discontent over CPEC. Additionally, Beijing may have wanted to offer a sop to Pakistan to preclude any chance of Islamabad calling China out for its Uighur policy.
While Pakistan, like every other government of a Muslim-majority country (except Turkey), has maintained a deafening silence on the matter, one can’t rule out the possibility, however remote, of Prime Minister Imran Khan—a bold leader with a populist streak—speaking out at some point.
If Khan doesn’t take it up, the opposition may.
All this said, one gets the impression that Beijing didn’t block Azhar’s listing with glee, and that it did so somewhat grudgingly.
The official Chinese justification for its technical hold—it needed more time to think the matter through—suggests a level of indecision.
Also, on March 17, Luo Zhaohui, China’s ambassador to India, struck a conciliatory tone, saying, “We understand India’s concerns and are optimistic this matter will be resolved.”
At the very least, Beijing appears to be trying to soften the blow of the move for Indian audiences, indicating a desire not to antagonize New Delhi.
As for New Delhi, it has handled this whole episode quite well.
Even amid shrill calls from some hawkish quarters for retaliation—including a social media campaign to boycott Chinese goods—India has reacted quite calmly.
The government released a fairly anodyne statement that spoke of being “disappointed by this outcome” and vowed to “continue to pursue all available avenues to ensure that terrorist leaders who are involved in heinous attacks on our citizens are brought to justice.”
This was the right move.
At the end of the day, China’s move doesn’t amount to much.
It’s symbolic at best.
Had Azhar been sanctioned, he would have faced an assets freeze, an arms embargo, and a travel ban. However, according to multiple Indian media reports as well as Pakistan’s own foreign minister, Azhar is very ill and hardly likely to move about.
However, based on past precedent, even if we assume Azhar is still actively driving JeM’s operations and strategy, listing him would have had a minimal impact—especially in the context of Pakistan. Hafiz Saeed, the leader of LeT, was listed in December 2008 (a move China did not prevent) just days after his group carried out the Mumbai terror attacks.
Over the past decade, Saeed has largely lived unencumbered and led the life of a law-abiding thought leader: He has moved about freely, delivered fiery public lectures, and given media interviews.
This year, he even filed (unsuccessfully) a formal request for his U.N. terror designation to be repealed.
Ultimately, India wants to be seen as a responsible rising power.
Rather than fixating on the symbolic pass China gave to an infirm militant, New Delhi is better off tapping into the growing resolve within the international community to combat Pakistan-based terrorism, and working multilaterally in other forums to curb a threat that is of great global concern.

China’s Muslim Concentration Camps Spark Protests in Islamic World

Backlash grows over mass internment of Uighurs as Pakistani traders press for action

By Jeremy Page and Eva Dou in Beijing and Saeed Shah in Islamabad

When Bacha Khan, a Pakistani trader, returned from a trip abroad to his home in China’s northwest this spring, his Chinese wife and three of his children had disappeared and their house had been demolished.

Police told him his family had been taken into custody, he said, adding to the up to 1 million people, most of them Muslim ethnic Uighurs, that the United Nations estimates have been detained by China in camps in its East Turkestan colony.
Mr. Khan and dozens of other Pakistanis whose Uighur wives are in the camps have lobbied Pakistani authorities for help for months.

Last week, they got a boost when a minister in Pakistan’s new government spoke out for the first time about China’s policies in East Turkestan.
It was a rare indication of official concern about the issue within the Islamic world, and added to a growing backlash among Muslims world-wide that presents a thornier challenge for Beijing than Western government censure.

Pakistani trader Mirza Imran Baig shows a picture of himself with his wife, who is Uighur, outside the Pakistan Embassy in Beijing on Wednesday. He said he had met the ambassador the previous day to seek help in getting her a Chinese passport. 

Muslim groups in India and Bangladesh held protests over the Chinese camps for the first time this month after former inmates began to talk publicly about their treatment, including being bound to chairs for hours on end and forced to renounce Islamic beliefs.
In Kazakhstan, many people were also outraged, and local lawyers and activists say hundreds of people have lobbied their government for help, following the detention of several Kazakh citizens and many more ethnic Kazakh Chinese nationals in the camps.
Hizb ut-Tahrir, an Islamist group that claims a million members in 40 countries, called on Muslims this month to be wary of Chinese investment and to oppose Chinese rule in East Turkestan.
On Saturday, the group accused Pakistan’s government of betraying the Uighurs for the sake of China’s infrastructure program in the country, known as the China-Pakistan Economic Corridor, or CPEC.
“Should the Muslims of Pakistan quietly observe the persecution of Uighur Muslims for the sake of CPEC and China?” it asked.
China began the mass detentions about two years ago as part of a drive to snuff out an occasionally violent Uighur separatist movement that Beijing says has links to foreign jihadists. 

However, rights groups and Uighur activists abroad say unrest in East Turkestan is driven mainly by heavy-handed policing, tight restrictions on religious activities and one of the world’s most intensive electronic surveillance systems.

Policemen patrol on Aug. 31 in China’s East Turkestan colony, where the government has established tight security and pervasive electronic surveillance.

The U.S. has strongly criticized the detention camps and some European countries are reviewing immigration and asylum policies. 

Sweden this month joined Germany in suspending deportations of Uighurs to China.
The backlash in the Islamic world is more troubling for China as it could rally international support for the Uighurs and foment opposition to its “Belt and Road” infrastructure building initiative.
Concerns about the restrictions on Muslims in East Turkestan were raised by Pakistan’s religious affairs minister, Noorul Haq Qadri, in a meeting with China’s ambassador to Islamabad on Sept. 19, according to a person familiar with the matter.
After Pakistani media reported Mr. Qadri’s message, the Chinese Embassy issued a statement to assert that the reports were incorrect, and that the two men had reached consensus on promoting religious harmony. 

A Wall Street Journal investigation reveals what goes on inside China's growing network of internment camps, where hundreds of thousands of ethnic Uighurs are detained.

Chinese officials say the camps are "vocational training centers" for minor criminals and deny that a million people have been detained, without providing their own estimate of the numbers.
Governments in the Islamic world have been reluctant to criticize China, fearing they could lose out on “Belt and Road” funding.

Those governments have also often put pressure on local clerics and media not to discuss the camps.
“They’re scared. Nobody wants to say anything,” Anwar Ibrahim, who is in line to become Malaysia’s next premier, said in an interview with Bloomberg Television this month when asked why Muslim countries had been largely silent on the Uighur issue.
Pakistan has been the biggest recipient of Chinese infrastructure loans; its last government, whose term ended in May, made no public statement about China’s policies in East Turkestan, which borders Pakistan, India and several other countries.

Indian Muslims protest China’s detention of Muslim minorities in East Turkestan, in Mumbai on Sept. 14.

The new government in Islamabad, under Prime Minister Imran Khan, is pressing China to revise the goals of its $62 billion infrastructure program in Pakistan and working with Beijing to shrink Pakistan’s trade deficit, goals that could be complicated by complaints about one of China’s most sensitive national-security issues.
“Before Pakistan government and China government, they no care about this. But this government now Imran Khan, they start help,” said Shahid Ilyas Hussain, a Pakistani man whose wife has been detained.
Mr. Hussain said he hasn’t been able to contact her since she was taken from their home in East Turkestan’s capital, Urumqi, while he was away in Beijing in April 2017.
He and others involved in lobbying Pakistan’s government said there were more than 300 Pakistani men whose Chinese wives had been detained in the camps, many of whom were now seeking Chinese or Pakistani passports for their spouses so they could leave China.
Mr. Khan, the trader, said local police wouldn’t allow him to see his family and demanded 100,000 yuan ($14,500) per child to have them released.
“If my wife has broken the law, then go through the legal process for her,” he said, speaking from Urumqi. 

“But what crime have my children committed? They are so young and innocent.”
Two Pakistani traders, Mirza Imran Baig and Asif Mohammad, said they met Pakistan’s ambassador in Beijing on Tuesday to seek help obtaining Chinese passports for their Uighur wives.
A Pakistan Embassy official in Beijing said several Pakistani citizens had filed applications for assistance for their detained wives, which he said had been forwarded to Islamabad. 

He declined to provide further details and Pakistan’s foreign ministry didn’t respond to requests for comment.

Pakistani trader Mirza Imran Baig and a compatriot sit outside the Pakistan Embassy in Beijing as they campaign for assistance for their Chinese Uighur wives. 

A Chinese foreign ministry spokesman didn’t respond directly to a question at a news briefing Tuesday about Pakistani nationals whose Chinese wives have been detained.
Pakistan’s Islamic clerics and organizations, which often protest over rights abuses against Muslims in other countries, have mostly remained silent on East Turkestan.
But in Bangladesh, which has the world’s fourth biggest Muslim population, an Islamist group held a demonstration against China’s Muslim camps in front of the national mosque in the capital, Dhaka, on Sept. 7.
The group, Islami Andolan Bangladesh, threatened a Muslim boycott of Chinese products if Beijing didn’t release those detained.
In India, a Muslim organization called Raza Academy, which claims hundreds of thousands of followers, held a protest over China’s camps in Mumbai on Sept. 14.
About 150-200 Muslim scholars and community leaders took part, shouting “Stop using Chinese products” and carrying placards with messages such as “Chinese government must stop atrocities on Muslims.”
“The Communist government is forcing the Muslims to give up their faith,” said Mohammed Saeed Noori, Raza Academy’s general secretary. 

“It must stop.”

The protest march by activists from Islamist group Islami Andolan Bangladesh in Dhaka on Sept. 7. The group has threatened to boycott Chinese goods. 

Chinese Peril

U.S. and India, Wary of China, Agree to Strengthen Military Ties

By Maria Abi-Habib

From left, Defense Secretary Jim Mattis and Secretary of State Mike Pompeo, with India’s foreign and defense ministers, Sushma Swaraj and Nirmala Sitharaman, in New Delhi on Thursday.

NEW DELHI — The United States and India signed an agreement Thursday to pave the way for New Delhi to buy advanced American weaponry and to share sensitive military technology, strengthening their military partnership as both powers warily eye the rise of China.
“Today’s fruitful discussion illustrated the value of continued cooperation between the world’s two largest democracies,” said Jim Mattis, the United States defense secretary, at a news conference on Thursday after the agreement was signed. 

“We will work together for a free and prosperous Indo-Pacific.”
The countries also promised to hold joint land, sea and air military exercises in India next year. 

In the past, they have held joint exercises outside the country.
But despite the friendly handshakes and flattering remarks exchanged as Mr. Mattis and Mike Pompeo, the secretary of state, met with their counterparts in New Delhi on Wednesday and Thursday, the two counties remain deeply skeptical of each other.
The United States is worried about how willing India will be to openly counter China as the Chinese expand their influence in the waters between the Indian and Pacific Oceans. 

It is also unhappy about India’s reluctance to cut trade relations with Iran.
India views the Trump administration as erratic, and it is troubled by the United States’ recent barriers to trade, which threaten to impose tariffs on Indian goods and force New Delhi to import more American products.
Still, the agreement won praise.
“This is a huge deal,” said Rudra Chaudhuri, a senior lecturer at King’s College, London. 

“In one sense, it makes clear that the wind in the U.S.-India sail is strong, whatever differences there might be.”
The Indian and American defense secretaries, he said, have pulled off a big accomplishment “at a time the Trump White House remains committed to undermining the United States’ global partnerships.”
India is critical to the United States’ new “Indo-Pacific” strategy — formerly known as “Asia-Pacific” — which aims to curb the growing influence of China’s navy in the region by elevating New Delhi as a cornerstone of future military cooperation.

Although India is worried about China’s growing influence in the region — the two militaries engaged in a tense standoff over a disputed border region last year — New Delhi prefers to avert confrontation with Beijing when it can. 

That reluctance may stymie Washington’s plans for India to be a linchpin of its efforts to counter China, American officials worry.
India’s military budget this year is $45 billion, while China’s is $175 billion. 

India has 18 submarines in service; China has 78.
New Delhi has been alarmed by the growing presence of Chinese submarines in its traditional sphere of influence, and as Beijing strikes seaport deals with countries encircling India. 

Western and Indian diplomats worry China may turn these seaports, currently used for commercial purposes, into calling docks for Beijing’s navy by leveraging the enormous debt of countries it has lent money to across the region.
The goal of the trip by the American delegation this week was to smooth over the ability of the United States and India to cooperate militarily. 

Under the pact signed by the two countries, the Communication Compatibility and Security Agreement, the United States will transfer high-tech communications platforms to India. 

Until now, the countries have communicated over open radio channels.
“The defense cooperation has emerged as the most significant dimension of our strategic partnership and as a key driver of our overall bilateral relationship,” India’s defense minister, Nirmala Sitharaman, said at the news conference Thursday, sitting with Mr. Mattis and Mike Pompeo.
American sanctions on Russia and Iran also loomed over the meetings, as both countries have major deals and economic ties with India.
Earlier this year, President Trump scrapped the Iran nuclear deal and reinstated sanctions on the country, which currently supplies roughly 20 percent of India’s oil needs. 

Indian businesses also have deep ties in Iran.
Mr. Trump has given allies a November deadline to stop trading with Iran or also face sanctions, but Indian officials have said they would ignore the threats and continue buying Iranian oil. 

Earlier this week, Mr. Pompeo acknowledged that Iran would feature in the negotiations in New Delhi, but said they would be a minor part of discussions.
India is also set to buy a Russian antiaircraft missile system, the S-400 Triumf, a $6 billion deal that violates sanctions that Congress imposed earlier this year on Russia.
American officials have indicated they may overlook the purchase, but they remain irked by New Delhi’s reliance on Russian defense equipment, which makes up the bulk of India’s military hardware.
Washington has tried to increase its military sales to New Delhi over the years. 

Sales have gone from nearly zero a decade ago to an estimated $18 billion next year.

How China Skirts America’s Antidumping Tariffs on Steel

Government-backed manufacturers have avoided steep U.S. and EU levies by shutting production at home and expanding overseas

By Matthew Dalton in Smederevo, Serbia, and Lingling Wei in Beijing

A steel mill outside Smederevo, Serbia, that was bought and revived by Hesteel Group, a Chinese state-owned steelmaker. 

Three years ago, the steel mill outside the small city of Smederevo, Serbia, appeared headed for the scrap heap.
The Serbian government, which owned the mill, had stopped subsidizing it after six straight years of losses. 

Hemorrhaging cash, it struggled to buy spare parts and raw materials such as iron ore.
“It was like trying to drive a car without tires,” says Siniša Prelić, a union leader at the factory.
Now production is hitting all-time highs under its new owner, Hesteel Group, a Chinese state-owned steel producer. 

Exports from the plant, which is backed by tens of millions of dollars from Chinese state banks and investment funds, are surging. 

And it has started shipping steel to the U.S.
As the Trump administration ramps up its fight against Chinese steel and Commerce Secretary Wilbur Ross ended trade talks with Beijing over the weekend without a settlement, U.S. officials are confronting a strategic shift from China’s state-backed manufacturers. 

For the past several years, they have been shutting production at home and expanding overseas, fueled by tens of billions of dollars from Chinese state-owned lenders and funds.

Global Expansion
Chinese steelmakers have been buying and building plants overseas, fueled by tens of billions of dollars from Chinese state-owned lenders and funds.
By owning production abroad, Chinese steelmakers aim to gain largely unfettered access to global markets. 

Their factories back in China are constrained by steep tariffs imposed by the U.S. and numerous other countries—largely before President Donald Trump took office—to stop Chinese steelmakers from dumping excess production onto world markets. 

But their factories outside China face few so-called antidumping tariffs.
The Trump administration in March jolted the global trading system by imposing additional tariffs of 25% on all imported steel and 10% on aluminum, a move aimed at ratcheting up pressure on China to shut domestic steel and aluminum plants. (Last week, those tariffs were extended to Canada, Mexico and the European Union.) 

The EU is considering its own tariffs to stop metals exports blocked by the U.S. tariffs from flooding into Europe.
Even though the new U.S. tariffs apply to Chinese steelmakers that moved production abroad, the moves are still paying off. 

The Trump tariff rate is much lower than existing U.S. antidumping tariffs on steel produced inside China, which often exceeded 200%.
A spokesman for Hesteel declined to comment. 

China’s Ministry of Industry and Information Technology, which oversees the steel and aluminum industries, didn’t respond to inquiries.
Chinese overcapacity has depressed global steel prices and wreaked havoc on China’s competitors. After cajoling Beijing to cut domestic capacity, Western officials have watched with exasperation as Chinese companies boost production around the world. 

And Western industry executives worry the overseas investments are helping Chinese steelmakers avoid the antidumping tariffs that governments have imposed to protect their companies against unfair Chinese trade practices.

Chinese steel production rose sevenfold between 2000 and 2013. A worker helps load steel rods at a plant in Hebei province. 

China’s steel-production boom took off around the turn of the century as Beijing threw its support behind a sector seen as vital to the nation’s emergence as a global economic power. 

The 2008 financial crisis prompted Beijing to undertake an economic stimulus program that included the construction of hundreds of new steel plants. 

Chinese steel production rose sevenfold between 2000 and 2013, when it accounted for half of all global capacity.
By 2013, China’s domestic economy was slowing, leading Chinese steel and aluminum producers to flood global markets and drive down prices. 

The average price of Chinese steel exports fell by about 50% between 2011 and 2016.
Governments around the world responded by imposing more than 130 antidumping tariffs against Chinese metals manufacturers, mostly on steel, depriving the domestic market of an important outlet.
Beijing responded by ordering capacity cuts: a net of 150 million tons of annual steel capacity is slated to be shut between 2016 and 2020, as are aluminum plants that were built without government approval. 

At the same time, in 2014, the government launched a plan, called International Capacity Cooperation, that enlisted Chinese state financial institutions to help manufacturers add production overseas.
Analysts and Western government and industry officials say Chinese manufacturers are receiving hundreds of billions of dollars of state support to build and purchase plants on foreign soil, through money provided by institutions such as China Development Bank, Bank of China and funds like China Investment Corp. 

The overseas plants are likely to be tapped as exclusive suppliers for the “One Belt, One Road” initiative, Beijing’s trillion-dollar infrastructure plan to project economic influence across Eurasia and Africa.
“China is just moving whole industrial clusters to external geographies and then continuing to overproduce steel, aluminum, cement, plate glass, textiles, etc.,” says Tristan Kenderdine, research director at Future Risk, a consulting firm that tracks China’s overseas investments. 

“None of this is economically viable under a supply-demand regime without state subsidies.”
Chinese steel companies have signed agreements to build plants in Malaysia, Pakistan, India and elsewhere.
In northern Brazil, a Chinese consortium is expected to break ground later this year on an $8 billion project to build one of the world’s biggest steel plants, expanding Brazil’s potential steel output even though the industry there operates at less than 70% of capacity.
“This is total nonsense, with all the idle capacity that we have,” says Alexandre Lyra, chairman of the Brazilian Steel Institute, which represents Brazilian producers.
Chinese companies also are building new steel mills in Indonesia. 

Last year, Tsingshan Group Holdings, a state-backed steel producer based in Wenzhou on China’s southeastern coast, opened a two-million-ton stainless-steel plant on the Indonesian island of Sulawesi that accounts for 4% of the world’s stainless-steel production. 

The mill, built using a $570 million loan from the China Development Bank, is now pushing down prices from Asia to the U.S., industry executives and analysts say.
“We are seeing tenders in the area from Tsingshan at very, very, competitive prices,” Miguel Ferrandis Torres, financial director at stainless-steel companyAcerinox , told analysts in April. Tsingshan is likely losing money on those shipments from its Indonesian plant, Mr. Torres said.
Tsingshan declined to comment.
Tsingshan’s product is entering the U.S. through a joint venture with Pittsburgh-based stainless-steel producer Allegheny Technologies Inc. 

The joint venture is restarting a stainless-steel rolling plant in western Pennsylvania that Allegheny had shut in 2016 partly because of pressure from inexpensive Chinese imports. 

The new company is importing 300,000 metric tons of semifinished stainless-steel slabs from Tsingshan’s Indonesian plant—replacing slab Allegheny made in a now-closed production line—and processing them into sheets for products ranging from household appliances to medical equipment.
That put downward pressure on U.S. stainless-steel prices last year, industry executives say. 

“We’re moving from being a high-cost producer, which we’ve been for a while, to being the low-cost producer in the market,” Robert Wetherbee, an Allegheny executive, told analysts in November.
The Trump tariffs that came into force in March hit the stainless steel Tsingshan was importing from Indonesia to its joint-venture plant in Pennsylvania. 

Allegheny has asked the Trump administration for an exemption from the tariffs on those imports.
Tsingshan is expanding its Indonesian plant, and Jiangsu Delong, a Chinese producer based in Jiangsu province, is building another plant nearby. 

Those projects alone will increase global stainless-steel capacity by 9% from 2017 levels, according to Michael Finch, a steel analyst at  CRU Group in London, even though the stainless-steel industry has significant spare capacity.

Hebei province, a pollution-choked region near Beijing, is home to steelmaking operations like this one in Qian'an. 

In 2014, officials from Hebei province, a pollution-choked steelmaking region near Beijing, began hunting for overseas investments for the province’s most important company: Hebei Iron & Steel Group, renamed Hesteel Group in 2016.
When Hebei officials approached the Serbian government in 2014 about investment opportunities in the country, Belgrade immediately thought of the Železara Smederevo steel company, which had a mill on the Danube River, say people familiar with the deal.
The Serbian government had purchased the plant in 2012 for $1 from United States Steel Corp. 

After shutting the plant for several months, Belgrade restarted it to make it attractive for potential buyers, pumping tens of millions of dollars into it to keep it alive.
But with its public finances deteriorating, Serbia in 2014 sought a standby loan facility from the International Monetary Fund, which along with the European Commission, ordered it to stop subsidizing the steel company.
In early 2015, the Serbian government pulled the plug on subsidies for Železara, says Bojan Bojkovic, who was in charge of efforts to sell the mill for the Serbian government. 

“A lot of people, especially so-called economists, wanted to shut it down immediately,” he says.
Meanwhile, in March 2015, Hesteel signed an agreement with China Investment Corp., which has more than $200 billion in foreign assets, to fund Hesteel’s overseas expansion.

Beijing touted the $54 million acquisition of the steel plant in Serbia as one of China’s flagship overseas investments. 

During the talks with the Serbians, Hesteel pledged to invest at least $300 million in the plant over the next three years. 

Beijing touted the €46 million ($54 million) acquisition as one of China’s flagship overseas investments. 

Chinese dictator Xi Jinping visited the mill for the June 2016 signing ceremony.
Hesteel executives have said that they quickly turned around the money-losing plant after taking control in June 2016. 

Serbian corporate records show an operating loss of $34 million over the next six months. 

Records for 2017 aren’t yet available.
“This is all part of a huge political initiative,” says Markus Taube, professor of East Asian economic studies at the Mercator School of Management in Duisburg, Germany. 

“They are extremely insensitive to losses.”
The EU for years has applied tariffs to low-price Chinese steel exports. 

Now, Hesteel’s Serbian plant can export tariff-free into the 28-nation bloc.
“We feel like the Serbian plant is a Trojan horse,” says Sonia Nalpantidou, a trade-policy expert with Eurofer, a trade association representing EU steel producers.
At a steel expo in Beijing last month, a “Hesteel of the World” banner hung near the company’s booth. 

Pins in a map marked countries where Hesteel had invested—Serbia, Macedonia, Switzerland, South Africa, Australia and the U.S. 

A company representative said overseas expansion is now a core strategy. 

The company is planning to build more plants in regions such as North America, she said, and plans to derive 20% of revenue from non-Chinese markets by 2020.
“Products made in Europe shouldn’t be subject to European tariffs,” the representative said.
Late last year, Hesteel offered $1.5 billion for a large steel mill in Slovakia owned by United States Steel, according to a person familiar with the talks. 

The Slovak prime minister said last month that U.S. Steel wouldn’t sell the plant to Hesteel. 

A U.S. Steel spokeswoman declined to comment.

After purchasing the plant in Serbia, Hesteel began selling its output onto the U.S. market. 

After purchasing the plant in Serbia, Hesteel began selling its output, including a sheet-steel product called wide hot-rolled coil, onto the U.S. market through Duferco, a Swiss trading company in which it owns a 51% stake.
Since 2001, China’s domestic producers of that product have faced antidumping tariffs of more than 64% at U.S. borders, effectively shutting them out of the market. 

Hesteel’s Serbian plant could export to the U.S. with minimal tariffs—until the additional Trump tariffs took effect earlier this year.
In March, one of the Serbian plant’s U.S. customers, Priefert Ranch Equipment of Mount Pleasant, Texas, asked the Trump administration for an exemption from the tariff to import 24,000 metric tons of steel sheet annually made at the plant. 

Priefert argued that it has long relied on overseas steel mills to supply product that domestic mills don’t produce. 

Priefert executives didn’t respond to a request for comment. 

The Trump administration hasn’t yet decided on the request.
“We want to be the world’s Hesteel,” Yu Yong, the company’s chairman, said when he signed the deal to buy the Serbian plant. 

He pledged to make the Serbia plant “the most competitive steelmaker in Europe.”

Chinese Peril

India and Indonesia push back against China with a military alliance

By David Lipson

As China's growing influence dominates headlines, India and Indonesia have joined Australia in pushing back.
The two countries signed an agreement for closer military ties, and while it was not mentioned specifically in the official communique, concerns over China's military expansion in the South China Sea are clearly at the heart of the deal.
Australia has welcomed the agreement, suggesting it will work closely with India and Indonesia to ensure international law is maintained in the region.

India's Prime Minister Narendra Modi's visit to Jakarta was a clear display of friendship between the two countries.
That friendship extends beyond trade and tourism, with their military ties elevated to a "comprehensive strategic partnership".
Indonesian President Joko Widodo said the visit was timely in the midst of many uncertainties in the world.
"I hope the partnership will contribute to stability, peace and prosperity," he said.
President Joko Widodo said Narendra Modi's visit was timely in the midst of many uncertainties in the world.

A communique released by India's Government spoke of the importance of a rules-based Indo Pacific region — where international law, freedom of navigation and overflight are respected.
In other words, India and Indonesia are pushing back against China's growing dominance in the region.
Professor Rory Medcalf, head of the National Security College at ANU, said it was a "very serious development in regional security".
"We're seeing two key middle powers joining forces to offer an alternative to Chinese hegemony, or indeed to an uncertain American leadership," he said.
China has been taking an increasingly assertive role in the South China Sea.
Two weeks ago it landed several H-6K long range bombers on an airstrip in the disputed region — placing all of South-East Asia within range.
India's Prime Minister Narendra Modi's visit to Jakarta was a clear display of friendship between the two countries. 

This year the US pushed back by dispatching warships to conduct freedom of navigation exercises through disputed sea lanes.
And in an indication America plans to continue its pressure, new language has been officially adopted by the US military.
"US Pacific command has this week changed its name, it will be called Indo Pacific command," Professor Medcalf said.
This, he said, reflected the fact that the US remained "strategically engaged with the wider Indo Pacific region".

So where does this leave Australia?
In a statement to the ABC, Foreign Minister Julie Bishop said the Government welcomed the India-Indonesia partnership.
"Our three countries share a commitment to a free, open, rules-based, peaceful and prosperous region," she said.
"This includes respect for international law.
"Australia is working closely with India and Indonesia to advance these objectives."
Professor Medcalf said it showed that the idea of the Indo Pacific was "not simply some American plot as some pro-China voices have claimed."
"This development shows that Indonesia and India are beginning creatively to use their geography to position themselves at the core of new regional structures that Australia can link with, that Australia can play into," he said.
"That I think in many ways will moderate and balance Chinese power — this game is far from over."

US rebrands Pacific command amid tensions with China

By Ryan Browne

The US announced Wednesday that it would rebrand the command responsible for overseeing US military operations in Asia, a move that comes amid heightened tensions with China over the militarization of the South China Sea.
US Pacific Command will now be called US Indo-Pacific Command, Secretary of Defense James Mattis said while speaking at a change of command ceremony in Hawaii, where the command's headquarters is located.
"In recognition of the increasing connectivity of the Indian and Pacific Oceans today we rename the US Pacific Command to US Indo-Pacific Command," Mattis said.
"It is our primary combatant command, it's standing watch and intimately engaged with over half of the earth's surface and its diverse populations, from Hollywood, to Bollywood, from polar bears to penguins," Mattis said of the command.
Adm. Harry Harris, who oversaw US military operations in the region until Wednesday, has been tapped by President Donald Trump to serve as the US ambassador to South Korea. 

Adm. Phillip Davidson will now lead the Indo-Pacific Command, which oversees some 375,000 US military and civilian personnel.
US officials say the name change is meant to better reflect the command's areas of responsibility, which includes 36 nations as well as both the Pacific and Indian Oceans.
The US has increased cooperation with India in a range of areas, including defense cooperation, and both Washington and New Delhi have voiced concerns about what they see as an increased assertiveness by China's military.
The rebranding comes in the wake of a series of actions by both the Chinese and US militaries that have raised tensions in the South China Sea. 

The US and the majority of the international community reject Beijing's claims of ownership of the area.
In recent months US officials have said that the Chinese military has deployed anti-ship missiles, surface-to-air missile systems, and electronic jammers to contested features in the Spratly Islands region of the South China Sea.
China also recently landed a nuclear-capable H-6K bomber aircraft on Woody Island for the first time.
Those actions led the US to disinvite China from participating in the Rim of the Pacific (RIMPAC) Exercise, which the US Navy calls "the world's largest international maritime exercise," and involves some 26 nations including India and countries like Vietnam and the Philippines which actively contest China's claims to the South China Sea.
"China's continued militarization of disputed features in the South China Sea only serve to raise tensions and destabilize the region. As an initial response to China's continued militarization of the South China Sea we have disinvited the PLA Navy from the 2018 Rim of the Pacific (RIMPAC) Exercise," Pentagon spokesman Lt. Col. Chris Logan told CNN last week.
"We have called on China to remove the military systems immediately and to reverse course on the militarization of disputed South China Sea features," he added.
The US Navy also sailed two warships Sunday past a handful of disputed islands in the South China Sea, including Woody Island where the Chinese bomber landed, a move that drew the immediate ire of Beijing.
Two US defense officials told CNN that the guided-missile destroyer USS Higgins and the cruiser USS Antietam sailed within 12 miles of four of the Paracel Islands in what the US Navy calls a "freedom of navigation operation," which are meant to enforce the right of free passage in international waters.
Two US officials said that during the freedom of navigation exercise a Chinese naval vessel shadowed the US warships, coming close enough to the US ships that the encounter was considered unprofessional but safe.
"It's international waters, and a lot of nations want to see freedom of navigation," Mattis told reporters Tuesday while en route to the change of command ceremony.

The Coming Clash Between China And India

By Panos Mourdoukoutas

China wants to expand its influence in South Asia -- in all of it, the land, the sea, and the air. 

That’s why Beijing is spending billions of dollars to build long-stretch highways like CPEC and taking over Sri Lanka’s and Pakistan’s ports.
The trouble is that Beijing’s plan has misjudged India—A miscalculation that could revive old animosities, create new ones, and lead to a clash between the two Asian powers.
That’s something foreign investors should watch closely, as a clash between India and China would have devastating effects on the economic integration of South Asia and the performance of the financial markets of the region.
Officially, China and India are moving closer to addressing old and new issues that divide them, with high profile meetings like the one at the end of this week, when Prime Minister Narendra Modi will meet with Chinese dictator Xi Jinping.
The two leaders are expected to bridge the “gap of trust” between the two countries, as some media sources in both countries interpret the high-level summit. 

But unofficially, India and China are moving further apart, due to Beijing’s miscalculation of India’s capability to spoil its plans.
“Beijing’s miscalculations regarding India have created conflict with a regional power that has the capability and desire to disrupt China’s outward push,” explains Raffaello Pantucci in “China’s South Asian Miscalculation,” published recently in CURRENT HISTORY (April 24, 2018). 

It is a calculation that could cause serious complications for China’s broader South Asian vision, and ultimately provoke a clash between the two Asian giants.”
What makes this confrontation more likely is the rise of hawkish voices in both countries, especially In India where there’s a growing sense that China is trying to encircle and strangle it.
“The story is one of growing confrontation, as hawkish national security establishments on both sides increasingly outflank economic pragmatists who want to take advantage of the potential benefits of a more cooperative relationship between the two Asian giants,” adds Pantucci.
Then there’s a shift in fortunes of the economies of the two countries. 

India’s economy is gaining momentum, as China’s economy loses steam.
That could certainly provide India the resources to push back against China with its own checkbook (ie, South Asia diplomacy), further intensifying the antagonism between the two countries.
The Indian economy is expected to grow at an annual rate of 7.4% in 2018 and 7.8% in 2019, according to a recently released IMF Economic Outlook. 

India’s projected 2018-19 growth rates are well above China’s 6.6% and 6.4% over the same period. And things could get even worse for Chinese economic growth over the long-term, due to the continued rise of the country’s nonfinancial debt.
A strong Indian economy will further help India strengthen its naval capabilities and up its participation in joint naval exercises with America, Japan and Australia in the South China Sea and the Indian Ocean, irking China.

India Spurns the Dalai Lama’s Celebration, Worried About China

India’s growing reluctance to engage with the Tibetans in exile is due to its growing economic weakness

By MARIA ABI-HABIB

The Dalai Lama at a Tibetan Buddhist temple in McLeod Ganj, India, in August. India has sheltered the Dalai Lama and his followers since a Chinese crackdown on Tibetans 60 years ago. 

McLEOD GANJ, India — An original song of thanks to India had been rehearsed, and a stadium in New Delhi had been reserved for a celebratory rally — all a gesture of gratitude from the Dalai Lama and his followers for India’s role in sheltering them after a Chinese crackdown on rebellious Tibetans 60 years ago.
Instead, the planned “Thank You India” celebrations, set for this coming weekend, set off apprehension in New Delhi and embarrassment among Tibetans.
A directive from India’s foreign secretary urged officials to discard their invitations, and it was blunt in saying the timing of the events coincided with a “sensitive time” for New Delhi’s relations with Beijing. 

A series of high-level meetings between Indian and Chinese officials are being billed in India as an attempt to smooth over an increasingly tense relationship.
Invitations to top officials were withdrawn, and the event was moved from a stadium in the capital to the secluded northern town of McLeod Ganj, home to the Dalai Lama’s temple and the seat of the Tibetan government in exile. 

A scheduled interfaith prayer in New Delhi was flatly canceled rather than moved, given the lack of other religious representatives in McLeod Ganj.
“In Delhi, we approached many dignitaries and invited them,” said Sonam Dagpo, a spokesman for Tibet’s government in exile and the chief organizer for the planned events. 

“But the foreign secretary’s notice says very clearly that Indian officials shouldn’t attend. So why continue? It’s futile.”
The canceled events underline India’s struggle to both court and counterbalance China, an increasingly difficult feat given China’s recent willingness to flex its military growth.
India has continued to host the Dalai Lama and his fellow Tibetan Buddhist exiles even though China condemns them as dangerous separatists. 

But the Indian government has also sought at times to rein in the religious leader at crucial moments in the relationship with China, and this is certainly one of them.

A march in McLeod Ganj last year commemorating the Tibetan uprising against China. India is trying to smooth its increasingly tense relationship with China. 

India is trying to encourage trade ties and Chinese investments while playing catch-up to modernize its military, worried about China’s rapidly expanding forces and its growing influence all around India in South Asia.
China has made deep inroads with New Delhi’s traditional allies and neighbors, building seaports in Sri Lanka and Pakistan, increasing trade and political ties with Nepal, and sending warships to the East Indian Ocean during a state of emergency in the Maldives.
“Giving in to China on the Tibetan community in exile is largely symbolic,” said Jonathan Holslag, professor of international politics at the Free University of Brussels. 

`“But it does mark India’s weakening compared to China. China is rapidly modernizing its military presence, and India cannot follow.”
When Beijing increased its annual defense budget in March to $175 billion, it dwarfed the $45 billion New Delhi had announced just weeks before. 

India’s army chief complained that the disparity “dashed our hopes” of modernization.
The coming talks with China cited by the Indian foreign secretary’s directive will be the highest-level meetings since the two countries engaged in a military standoff last year, after China expanded an unpaved road in a contested sliver of territory in the Himalayas.
The dispute was resolved in August, but Indian and Chinese troops threw rocks and chest bumped each other in a clash that some fear could flare up again. 

India’s leader, Prime Minister Narendra Modi, may be particularly concerned about that possibility given that he faces an election next year.
Over the next few months, India’s defense and foreign ministers will meet with their Chinese counterparts ahead of a meeting between Mr. Modi and Xi Jinping in June. 

The main topics on the agenda are trade and border disputes, according to Western diplomats in New Delhi.

McLeod Ganj, a suburb of Dharamsala, has been home to the Dalai Lama’s temple and the seat of the Tibetan government in exile. 
Tibet’s government in exile found out about New Delhi’s anxiety over its planned celebrations only when a local newspaper reported that government officials had been ordered to stay away.
A spokesman for India’s Ministry of External Affairs, Raveesh Kumar, said his government had not changed its stance on the Dalai Lama, saying, “His Holiness is accorded all freedom to carry out his religious activities in India.”
That came to be an issue last year, after the Dalai Lama visited a province in northern India, another territory disputed by China, which had demanded that India prevent the Buddhist leader from visiting.
But generally, India has been more cautious with China about the Dalai Lama and other issues.
“This is not appeasement. China’s relative bargaining positions have improved across the board,” said C. Raja Mohan, the director of Carnegie India, a branch of the Carnegie Endowment for International Peace. 

“The main objective is to manage the relationship while avoiding a confrontation but leaving space for India to progress, catch up and increase its bargaining position.”
On the economic front, India’s efforts to keep meeting ambitious growth targets has kept it relying on trade with China. 

But the country also faces a $51 billion trade deficit with Beijing, leaving New Delhi with less bargaining power.
“India’s growing reluctance to engage with the Tibetans in exile is due to its growing economic weakness,” said Mr. Holslag, of the Free University of Brussels.
“Modi assumes that Chinese investment will be critical to realize his plans to develop India’s infrastructure and industry, and thus to increase his chance to win the next elections,” he said. 

“This is really key: Indians want jobs, not a confrontation with China.”

Chinese Peril: Coalition of the Willing

The US and its Asia Pacific allies are boosting security ties
By Nyshka Chandran

The US Navy guided-missile destroyer USS Lassen, which sailed within 12 nautical miles of Chinese artificial islands in the South China Sea, on October 27, 2015.

The U.S., Japan, Australia and India are working to preserve the balance of power in the Asia Pacific. Officials from the four democracies held discussions on upholding freedom of navigation, terrorism, connectivity and maritime security in Asia on the sidelines of a November ASEAN Summit.
The meeting, dubbed the "Australia-India-Japan-United States consultations on the Indo-Pacific," was widely viewed as a resurgence of the Quadrilateral Security Dialogue — or "Quad" — an
informal security forum consisting of the same four countries that launched in 2007 but eventually fell apart.
The revived Quad comes as President Donald Trump's administration centers its Asia strategy around a "free and open Indo-Pacific," a term used as a replacement for the more widely used "Asia Pacific" label.

A strong anti-China alliance
The consultations focused on "issues of mutual concern, whether they be security, economic or political," Alex Wong, deputy assistant secretary at the U.S. State Department's East Asian and Pacific Affairs bureau, said last week in response to a question from CNBC.
Beijing is the biggest shared worry among the four powers, strategists said.

"Though China is not named in any of the statements, the revival of the group is undoubtedly motivated by increasing nervousness at China's assertiveness and ambitions in the region," researchers at Singapore-based Nanyang Technological University said in a note.
From building man-made islands in the contested South China Sea to increasing economic leverage over developing countries with the Belt and Road program, China's behavior has worried America's Asia Pacific allies. 

Beijing has also been criticized for using education, spying, and political donations to influence local decision-making in countries such as Australia and New Zealand.
When asked whether the four-country dialogue was a means to hedge against China, Wong said unfounded fears were being appended to a single, working-level meeting: "The strange types of intentions being ascribed to [this meeting], I think, may not be grounded in truth."
He said dialogue among the four nations would continue, but warned that he "can't predict where it's going to go."
For now, the Quad is widely expected to remain a loose and flexible partnership based on solidarity rather than an institutionalized military alliance.
Maritime security is seen as the group's core issue, but infrastructure could play a major role too.
"Australia is likely to back proposals to insert an infrastructure investment component into the Quad so it can provide an alternative — or supplement — to China's sprawling 65-nation Belt and Road Initiative," intelligence firm Stratfor said in a February note.
"The four countries discussed the proposal at the November 2017 meeting, and Australia and Japan subsequently have downplayed any potential military aspects to the Quad, perhaps out of worries over Beijing," it continued.

China's response
So far, Xi Jinping's government has expressed reservations about the Quad, with a foreign ministry spokesman saying that regional cooperation should neither be "politicized" nor "exclusionary."
"Despite frequent disavowals, the Quad redux is primarily about China," according to Chengxin Pan, associate professor at Deakin University. 

"Chinese are likely to interpret the Quad efforts and U.S. freedom of navigation operations in terms of new gunboat diplomacy," he said in a recent report.
"Gunboat diplomacy" is when military actions or threats are used to support a country's foreign policy.

Kowtowing to China’s despots

India is willing to snub the Dalai Lama to please China

By Devjyot Ghoshal

On March 17, 1959, a 23-year-old Buddhist monk disguised as a soldier fled Tibet, travelling for three weeks across the Himalayas before reaching the border with India. Since then, the Dalai Lama, Tibet’s spiritual leader, has run a government-in-exile from India, which is also home to some 95,000 Tibetan refugees.
So, to mark the 60th year of his arrival, the Dalai Lama and his Central Tibetan Administration (CTA) had planned a series of events this year, starting March 31. 

“Tibetans will thank India for promoting its rich ancient culture and unique identity, assuring the viability and sustainability of Tibetan leadership and Tibetan communities..,” the CTA said in an invitation sent out in January.
But the Narendra Modi government, it appears, would have none of this fanfare and festivity, lest it displeases China. 

Beijing, of course, considers Tibet an integral part of its territory and views the senior monk with barely concealed disdain.
On Feb. 22, India’s foreign secretary Vijay Gokhale wrote to cabinet secretary PK Sinha asking “senior leaders” and “government functionaries” to stay away from the CTA’s events, the Indian Express newspaper reported.
“The proposed period will be a very sensitive time in the context of India’s relations with China. Participation by senior leaders or government functionaries, either from the central government or state governments, is not desirable, and should be discouraged,” Gokhale, who previously served as the Indian ambassador to Beijing, wrote, according to the Indian Express.
Sinha then sent out a directive in a similar vein to central and state government bureaucrats, the newspaper reported.
The Dalai Lama and the CTA seem to have received the message.
Two major events they planned to hold in New Delhi have now been either shifted out or scrapped. 

A large rally that was to be organised at Delhi’s Thyagaraja Stadium on April 01 will now be held in Dharamsala, Himachal Pradesh, where the CTA is based. 

This rally, which was to be attended by the Dalai Lama, was specifically mentioned in Gokhale’s note to Sinha. 

An inter-faith meeting at Mahatma Gandhi’s memorial at Rajghat scheduled for March 31, too, has been cancelled.
“There was no direct message from the government to call off the commemorations, but it was conveyed to our leadership that perhaps these events should not be held in Delhi,” Tsering Dhondup, spokesperson of the Dalai Lama’s Bureau, told The Hindu newspaper.
Diplomatic relations between New Delhi and Beijing have been rocky in recent months, particularly following last year’s military standoff in Doklam, bordering Bhutan. 

The border face-off in the Himalayas lasted nearly two months before the two countries agreed to pull back their troops from the disputed area.
The neighbours may now be looking to mend fences, with a number of upcoming high-level meetings scheduled, including those during prime minister Modi’s trip to China in June for the Shanghai Cooperation Organisation (SCO) summit. 

Foreign secretary Gokhale was himself in Beijing last month, holding talks with Chinese vice-foreign minister Kong Xuanyou. 

Already, there are murmurs of discontent and hurt within the Tibetan community, but the official position remains pragmatic. 

“Some people may be disappointed,” Ngodup Dhongchung, representative of the Dalai Lama in Delhi, told the Hindustan Times newspaper. 

“But we are guests of India. Indian people have been very generous to us. We understand the compulsions.”

China Encroaches on India’s Sphere of Influence

An autocrat in the Maldives tests New Delhi’s resolve.
By Sadanand Dhume

Maldivian police stand guard near the opposition party’s headquarters in Male after President Abdulla Yameen declared a state of emergency, Feb. 6. 

Is India still top dog in its neighborhood? 

This is the question raised by a political crisis in the Maldives, an Indian Ocean island chain known for its luxury beach resorts. 

Unless New Delhi swiftly restores democracy, it risks looking ineffectual in the face of Chinese inroads into India’s traditional zone of influence.
The crisis began earlier this month, when President Abdulla Yameen’s government declared a state of emergency and arrested two Supreme Court judges as well as a long-serving former president who is Mr. Yameen’s half-brother. 

The arrests followed a Supreme Court ruling that declared the terrorism conviction of exiled former President Mohamed Nasheed unconstitutional and ordered the release of eight other jailed opposition lawmakers.
Major democracies reacted to Mr. Yameen’s actions with dismay. 

The State Department said the U.S. was “troubled and disappointed” by the declaration of emergency. India’s Foreign Ministry announced that New Delhi was “disturbed.” 

The United Kingdom, from which the Maldives gained independence in 1965, said it was “gravely concerned.”
By contrast, China urged the international community to “play a constructive role on the basis of respecting the sovereignty of the Maldives.” 

Translation: Mr. Yameen should be allowed to snuff out constitutional checks without fear of foreign intervention. 

The People’s Liberation Army reinforced this message last week by posting on social media photos of training exercises in the Indian Ocean.
The Maldives has a population of 400,000 people, about as many as Staten Island, N.Y., or the south Mumbai neighborhood of Byculla. 

The country has come to symbolize a broader tussle between the world’s two most populous nations, China and India. 

For India it represents a stark challenge: Beijing’s growing influence in countries where New Delhi has traditionally loomed large.
In Nepal, K.P. Oli, a veteran communist leader with links to China, took over as prime minister last week. 

In Bangladesh, China has rolled out $24 billion in loans, mostly for infrastructure projects, dwarfing India’s more modest forays into checkbook diplomacy.
In the tiny Himalayan kingdom of Bhutan, arguably India’s closest ally, Beijing is lobbying to establish full diplomatic relations. 

Last year Indian and Chinese troops were involved in a 10-week standoff on territory claimed by both Bhutan and China, and regarded by India as strategically vital. 

It ended when the Chinese agreed to halt construction of a road to which India objected, and both countries pulled back troops.
Nowhere in the region is China’s dramatically enlarged presence more visible than in Sri Lanka, the teardrop-shaped island that dangles off the southern tip of India. 

In Colombo, hulking cranes rise above a $1.4 billion port expansion and new commercial and residential development built by a Chinese firm on reclaimed land. 

Company officials say the development could turn Colombo into a commercial hub midway between the thriving entrepôts of Singapore and Dubai.
A 45-minute helicopter ride south of Colombo—over dense forests, manicured tea plantations, herds of wild elephants, and $2,000-a-night resorts—is China’s most controversial project in the region. 

In the sleepy town of Hambantota, China has built an airport with an 11,500-foot runway capable of landing an Airbus A380, as well as a modern seaport able to dock oil tankers. 

Both are largely unused.
Unable to pay back the money it borrowed to build the port, last year Sri Lanka handed it to China on a 99-year-lease. 

Both the Colombo Port project and Hambantota are part of China’s ambitious One Belt, One Road initiative.
In an interview in Colombo earlier this month, Sri Lankan Prime Minister Ranil Wickremesinghe flatly stated that his country will not allow the Chinese to use the port for military purposes. 

But U.S. and Indian officials say that is a possibility.
This regional backdrop raises the stakes for India in the Maldives. 

Should Mr. Yameen continue to flout the Supreme Court order, it will send a signal across the region and beyond that even the smallest nations can, with China’s backing, thumb their noses at New Delhi without consequence.
In a phone interview from Colombo, former Maldivian President Nasheed says he’s concerned that expensive Chinese infrastructure projects amount to a potential “land grab” that is “hollowing out” his country’s sovereignty. 

He also worries that under Mr. Yameen the Maldives has allowed Islamic State to make inroads into the Muslim-majority country.
Mr. Nasheed stops short of explicitly calling for an Indian military intervention to restore democracy. (Thirty years ago, India sent troops to ward off mercenaries who attempted to depose the then-president.) 

Nonetheless, when asked what New Delhi should do to ensure Mr. Yameen respects the Supreme Court decision that sparked the current crisis, he leaves ajar the door to intervention: “How they impress this upon him, I’m sure countries have the imagination and the tools to do that.”

The former president may have to pick his words carefully, but for India the choice is clear. 

If it wants to retain credibility as South Asia’s leading power, it cannot allow the Maldives to turn into an authoritarian Chinese vassal. 

This means keeping all options on the table, including using military force if necessary.

Sina Delenda Est

CHINA SHOWS OFF AIR FORCE IN DIRECT CHALLENGE TO INDIA MILITARY POWER IN ASIA
BY TOM O'CONNO 

The Chinese military has published photos of recent air force drills that at least one expert quoted in ruling party media identified Tuesday as a direct message to neighboring India.
Tensions between the two Asian powers have once again risen after they threatened to come to blows over a border dispute last summer. 

Officials have swapped provocative words in recent months, reigniting a potential crisis as rhetoric turned into military preparations. 

In the latest move, China’s armed forces, known as the People’s Liberation Army (PLA), published Friday rare images of Chengdu J-10 and Shenyang J-11 fighter jets landing in Tibet, the western region that borders India, after exercises that Chinese military expert and commentator Song Zhongping linked to recent escalations.
“Strengthening the 3.5-generation fighter jets or even stationing more advanced fighters in the Western Theater Command has been urgent for the PLA,” Song told Chinese Communist Party organ The Global Times in an article then posted to the official China Military Online.
“With India importing new jets, China will continue strengthening its fighter jets in the Western Theater Command,” he added.
A Chengdu J-10 fighter jet attached to an aviation brigade of the air force under the People’s Liberation Army Western Theater Command taxies on the runway during an aerial combat training exercise in western China on February 13.

Song noted that such upgrades to China’s defenses have often been first implemented in its southern and eastern commands. 

The western command, however, has received more attention as the rivalry with India heated up.
China and India have long quarreled over stretches of territory along their shared border and this even exploded into a war between the two in the early 1960s. 

One region, known as Doklam or Donglang, which borders India’s Sikkim State, Chinese Tibet and the Ha Valley of the tiny kingdom of Bhutan, revived hostilities last summer. 

India argued that Chinese construction near the trilateral border area last June threatened Bhutan’s claim to the region and deployed troops to confront the Chinese military in the area.
The standoff lasted nearly a month and a half and was believed to have resolved after both sides withdrew. 

Xi Jinping was seen shaking hands with his Indian counterpart Nehru Modi on the sidelines of the September 2017 BRICS Summit in Xiamen, China. 

This detente, however, has been undermined by recent statements from both sides claiming they won last summer’s dispute and could take on the other in a future fight.
During a regular press conference Thursday, Chinese Foreign Ministry spokesman Geng Shuang criticized a visit earlier that day by Modi to the nearby disputed Indian state of Arunachal Pradesh, which China claimed as part of southern Tibet. 

Geng said China was “firmly opposed to the Indian leader’s visit to the disputed area” and would “lodge stern representations with the Indian side.”
Soldiers assigned to a brigade of the People’s Liberation Army 78th Group Army conduct a combat readiness training exercise in full battle gear during the 2018 spring festival holiday, in northeastern China, on February 15. China and India have long quarreled over stretches of territory along their shared border.

The Chinese military has also used recent remarks from Indian generals to justify its own urgent transformation into a force fully prepared to fight a war between states. 

Xi’s ongoing, massive bid to revolutionize his armed forces had the dual purpose of modernizing China’s military power and streamlining it to make it capable of protecting not only Chinese borders but also Chinese interests abroad. 

Xi has also sought tight ties with Pakistan, a crucial Chinese economic ally—and India’s longtime foe.
Following last week’s air force drills in Tibet, the Chinese military continued training through the week-long Chinese New Year, or spring festival, holiday. 

The Chinese navy and army were also pictured conducting maneuvers aimed toward realizing Xi’s goal of preparing his armed forces to handle any external threat.