Column

In popular perception, pandas are adorably cute, furry and slothful beasts that are begging to be hugged. But as anyone who has allowed themselves to be swayed by their cuddly demeanour into attempting to pet the seemingly genial giants will know, ‘panda-hugging’ is risky business: they bite, and fiercely defend their territory against perceived intrusion.

In the world of geopolitics too, ‘panda-hugging’ — defined loosely as cosying up to China and wilfully blinding oneself to the underside of China’s economic rise — is fraught with perils.

Nothing illustrates this better than the rising tension between Australia and China over an ongoing case in China involving four employees of the Anglo-Australian mining giant Rio Tinto, who have been detained on suspicion of bribing Chinese officials and “stealing Chinese state secrets”.The case holds lessons for Indian businesses and commentators too, given their endless obsession with and envy of the Chinese “growth miracle” and given India’s deepening economic relationship with China.

Earlier this month, the four Rio Tinto employees were detained in Shanghai on suspicion of violating state secrecy laws, but the circumstances surrounding their detention lent credence to the theory that the real reason for this drastic action may lie elsewhere.

Australia and China are caught up in a symbiotic relationship: Australia is one of the world’s major exporters of commodities, and China is the world’s largest consumer of those commodities. The Australian economy rides China’s growth boom, but this increasingly interlocked commercial relationship — which many see as the first symptoms of ‘panda-hugging’ — is also posing strains in these times of global economic downturn.

Earlier this year, when Chinalco, a Chinese company, sought to acquire a stake in Rio Tinto, it whipped up a political backlash in Australia, with opposition politicians talking up the perils of ‘panda-hugging’. Eventually the deal collapsed when Rio Tinto walked away from it.

A wounded China was snubbed again when the annual negotiations for iron ore contract prices ended with China being forced to accept a smaller cut in prices than it was holding out for. It signalled China’s inability to leverage its “commercial clout” — as the world’s largest consumer — to lower ore prices at will. The detention of the four Rio Tinto employees came soon after.

The irony isAustralian prime minister Kevin Rudd, who speaks fluent Chinese and is considered a “friend of China”, was seen as an interlocutor who could help build bridges between China and the West. But as he would have realised, the panda will bite even a friend when it is in a foul mood.

The Rio Tinto experience holds important lessons for ‘panda-hugging’ Indian businessmen and commentators who favour a deeper economic engagement with China as an antidote to the lingering political distrust between the two countries.

In recent years, the Sino-Indian economic relationship has intensified even beyond the best-case expectations of policymakers, with bilateral trade expected to touch $60 billion next year; but although individual businesses are profiting from the escalation of trade ties, the terms of that engagement are increasingly weighted in favour of China. As with Australia, commodities account for the bulk of India’s exports to China; manufactured goods account for much of the reverse flow.

This runs the risk of leading India into a ‘culture of dependency’ on China, with negative implications for our domestic industry. As China scouts for new export markets, following the collapse of its markets in the US and Europe, it is eyeing emerging markets, including India.

The political tension will ratchet up when the cuddly panda transforms into a ‘kung fu panda’ that’s out to pry open new markets. If anything, this is the time for heightened self-interest, not for wide-eyed, innocent ‘panda-hugging’.