LESSONS FOR CHINA AND INDIA FROM META CRISIS

Stale Vision Led to Crisis

The parent company of Facebook, Meta, cutting 11,000 jobs, or 13 per cent of its workforce, did not come as a surprise to the global techie world watchers, since it was waiting to happen. Though the tech giant has termed the retrenchment as an attempt to become “leaner and more efficient,” it is a well-known fact that American tech companies are in the throes of an unprecedented crisis. The “American dream” is falling into a dark abyss.

The Meta crisis is the beginning of a turbulent era in Silicon Valley, which so far stood as a gigantic bastion of economic power. The United States has always boasted that this bastion is recession-proof, but now the Fort has been breached; according to Crunchbase, 50,000 U.S. techies have been laid off this year alone. Elon Musk gave marching orders to half of Twitter’s workforce; Peloton, a maker of internet-connected exercise bikes, has more than halved its workforce, Robinhood, a popular stock-trading app, also has cut its labour force by 30 per cent, and fin-tech platform Stripe has announced layoffs. Google and Amazon have decided to lay off 10,000 employees, each.

The crisis of Meta

In the case of Meta, apart from inflation, rising interest rates, and recession, aggressive COVID-era expansion is partly to blame. Meta increased its workforce by nearly 60 percent during 2020- 2021. Facebook grew its staff by 28 per cent, to 87,314, in the 12 months ending in September.

My article in China-India Dialogue

"At the start of COVID, the world rapidly moved online, and the surge of e-commerce led to outsized revenue growth," Mark Zuckerberg, founder of Meta and FB, wrote, announcing the layoffs. "Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did too, so I decided to significantly increase our investments. Unfortunately, this did not play out the way I expected. I got this wrong,” he lamented.

He got it wrong, because, he was not pursuing realistic dreams. The social-media platforms of Meta, such as Facebook, Instagram and WhatsApp, have a traditional business model that relies on advertising. It was hit hard by the recession. Several digital advertisers pulled back in the face of inflation and the instability caused by the Russia-Ukraine conflict, and customers scaled back spending. As the tech companies tightened their belts, the labour force became the first casualty.

In October, Meta posted its second-quarter revenue decline and its profit was cut in half from the prior year. Valued at more than $1 trillion in 2021, Meta's market value has since plunged to around $250 billion. It ceased to be the behemoth, once it was. Meta's stock lost more than 71 per cent of its value this year, and it became the worst performer in the S&P 500.

The gamble of the metaverse

Once a niche concept contained in the cyberpunk novel, Snow Crash (1992), the metaverse became a buzzword when Facebook rebranded itself as Meta on October 28, 2021.

The metaverse is a virtual world that exists parallel to the physical world. In the metaverse, our digital and physical lives are overlapping, in the domains of work, socialization, productivity, shopping, and entertainment. It is enabled by advanced technologies, such as VR, AR, and MR. It is the next-generation internet for businesses, investors, and developers.

The entry point for the metaverse is, Extended reality (XR), which is a combination of augmented, virtual and mixed-reality environments that are accessible and interactive in real time. It is the pioneer of inventive applications in fields such as gaming, entertainment, enterprise solutions and simulations, as well as in military and defence.

Also, blockchain technology will play a major role in building the metaverse. While the proponents o this aspirational technology are western, the global metaverse discourse is influenced by economic giants such as China and South Korea. An array of positive factors suggests that India has a prime role to play.

The Zuckerberg company, Meta's crisis came as it is taking a gamble on building the metaverse. The hiring boom at Meta has focused on building immersive digital realms accessed through virtual reality. Zuckerberg has maintained that it will be the next great computing platform after mobile phones. He expects metaverse to replace some in-person communication. Since it is a gamble based on a stale vision, the crisis was inevitable.

There seems to be little hope for Meta’s technology which Zuckerberg claims is his company’s and our future. But,  none of us or the world at large has so far viewed him as the Messiah. Also, the multipolar world has ceased to view the U.S. as the saviour, anymore. 

Renowned technologists, who study designing use behaviour in virtual worlds, had always felt that Zuckerberg’s vision is stale and the future of Meta is on the rocks. So, the stale vision is to be blamed for the current crisis, rather than the global recession. 

There are 3D multiperson chat environments that were popularized by online games, Second Life, and now Horizon Worlds. Microsoft’s V-Chat, Comic Chat and V-worlds and the tools for creating and customizing digital avatars were the initial forays into Zuckerberg’s dream world. But it was evident to Microsoft in the 1990s itself that trying to harness the potential of the metaverse amid dramatic shifts in our digital lives, was not worth the extravaganza.

The dreams seem endless, and it is like kids create and then abandon, as in Minecraft. The magical architecture of virtual worlds is possibly a critical ingredient in the user experience and hence Meta is keen on creating 3D environments for people to hang out. But techies at Microsoft had found that these “stage sets” did not play a particularly critical role in shaping user behaviour. Instead of roaming in the virtual space, one has to work one’s way into the social structure to figure out how are things happening. People don’t encounter any sense of real life while wandering around for hours in virtual life. The virtual gathering space then becomes boring and ultimately they become empty and abandoned. This is termed a “cold state problem” by former Microsoft technology expert, Robert Fabricant.

Meta's metaverse division posted a loss of $ 9.4 billion in the first nine months of 2022, but Zuckerberg pumped in $ 36 billion between January 2019 and September 2022 to prop it up in the hopes that, at some point, people will be fools to show up at the party. When the party was about to begin, the world was pushed into penury, and no one turned up!

A decade ago, when Facebook was at a critical inflexion point as a desktop web platform with a very limited HTML 5 browser-based mobile offering, the leadership failed to recognize the smartphone revolution. They didn’t shift their focus to a mobile-first product offering in time. By pursuing the metaverse, Zuckerberg is imagining that Meta is defining the next paradigm. But in doing so, Meta has forgotten the fundamental lesson of mobile computing: Only the computing experience that is with people all the time wins. Computing that accompanies people in the world will always win over computing that takes them out of the world. 

Hence, nobody is really playing Horizon Worlds, Meta's free-to-play virtual reality metaverse that lets users create and visit “worlds” with friends or strangers. WSJ reports that of all the user-created worlds in the game, only about nine per cent are visited by more than 50 players. The rest are never visited by anyone, except Zuckerberg. The end result is empty, barren digital lands.

So, Zuckerberg’s metaverse vision is just a nostalgia trip to escape a world of complex, multilateral reality and hence his metaverse has progressed very little, scripting an American tragedy. The creative imagination of a brilliant student can any time overtake Meta’s flimsy vision and invent a compelling digital world. And it is beginning to happen.

China and metaverse

China’s Fintech Development Plan for 2022-2025 mentions metaverse while discussing reshaping financial services with intelligence, as a key task. The plan proposes that “relying on the features of 5G with high bandwidth and low delay, visual technologies such as virtual reality (VR), augmented reality (AR), and mixed reality (MR) will be deeply integrated with banking scenes to promote physical branches to upgrade to multi-horizontal, immersive, and interactive smart branches.”

In a paper on metaverse in October 2021, the China Institute of Contemporary International Relations (CICIR), linked to the Ministry of State Security, warned of the need for lawmakers to deal with virtual crimes. Similarly, in November 2021, the government of Zhejiang province organized a “metaverse industry development symposium.”

On November 1, China's Ministry of Industry and Information Technology unveiled a five-year plan for 2022 to 2026, for the development of the VR industry, aiming to achieve a target exceeding 350 billion yuan ($48.1 billion) in 2026.

This action plan is China’s first national-level policy that supports metaverse development. The document bats for creating fundamental technologies that support immersive AR, VR, and mixed-reality experiences. The policy calls for innovation in fields like full-body motion capture, gesture, eye, expression tracking, and technologies for rendering graphics.  

In China, so far over 16,000 metaverse-related trademark applications have been filed. Six of China’s tech giants – including Baidu Inc, Alibaba Group Holding Ltd, and Tencent Holdings Ltd (collectively known as BAT) – made it to the top 10 firms globally, that filed the most VR/AR patent applications in the past two years. In 2019, most of these developments happened in the fields of retail shopping, education, gaming, marketing, information display, and industrial manufacturing.

China’s VR industry accounted for about 44 per cent or US$8 billion of the global market, by the end of 2020. Big Chinese firms lack the expertise to develop VR devices, and they are investing in startups. China has over 900 million smartphone users, making VR accessible through smartphones, a priority.  AR generates less revenue than VR, and AR revenues reached RMB 21.3 billion (US$3.09 billion) in 2021. Virtual reality and virtual idols are booming, comprising an industry that is worth RMB 51 billion (US$8 billion) and RMB 3.5 billion (US$548 million) respectively.

Deloitte-China estimates that the metaverse market in China will hit 40 trillion yuan ($5.79 trillion) by 2030, equivalent to 20 per cent of China's GDP, and the electronic products and wearable devices in the metaverse will be worth $100 billion. 

According to a report by Morgan Stanley, leading Chinese tech firms have already begun to invest in a metaverse market that may be worth up to US$8 trillion in the future. J P Morgan, in a September report, suggested that the metaverse could triple China’s online-gaming market to $131 billion from $44 billion. The Bank estimates a $4 trillion total addressable market (TAM) for the metaverse in China from “converting offline consumption across physical goods and services.”

The metaverse development will have a notable impact on the entire technology, media and telecom (TMT) ecosystem. Tencent, NetEase, Bilibili, Sea, Krafton and Bandai Namco stocks could benefit from the metaverse.

Software and service vendors, such as Sight Plus, Hisense, and Mayitegong, have entered the AR market. Baidu launched a metaverse app on Chinese history, in December 2021, called “Land of Hope.” Tencent, the creator of WeChat, launched on the QQ platform, a new feature called Super QQ Show, which introduced a 3D interactive space where users can interact and play games together. 

A new app called Jelly, launched this year and developed and owned by Beijing Yidian Entertainment Technology, allows users to create online avatars of themselves and engage with up to 50 pals. It surpassed WeChat to become the most downloaded app in China’s iOS store. Byte Dance, the parent firm of TikTok, has designed two metaverse apps: Party Island for the Chinese market, and Pixsoul for the Southeast Asian one.

Metaverse was a key theme of the 5th World Artificial Intelligence Conference (WAIC2022), in Shanghai in September. Chinese internet platforms offered a "metaverse-like" viewing experience enabled by 5G and virtual reality (VR), during the Qatar World Cup soccer carnival.

Metaverse in India

China’s neighbour India is in the vanguard to build the metaverse. With the Government trying to foster a digital economy worth up to $1 trillion, the market of video streaming and gaming is seeing fresh heights. Reports project that the Indian gaming market will more than triple to $7 billion by 2026. 

 

India released its National Blockchain Strategy in December 2021. The pilot of the blockchain-backed Digital Rupee will be issued by the Reserve Bank of India, in December. The spectrum auctions to the rollout of 5G mobile services, would accelerate demand for cloud applications – including those for gaming and the metaverse. 

 

The operational challenge of building the metaverse remains, and if India is to take a leading role, investments in the private sector need to accelerate. The 18 months to August 2021 saw over $1bn of capital infused into the local video games ecosystem – more than the preceding five years combined.

 

Deloitte has predicted that the metaverse industry in India could have an economic impact worth between $79 billion and $148 billion by 2035. 

The report notes that India is among the pacesetters in the industry and that India was one of the first jurisdictions to include the metaverse in its policy considerations on cyberbullying and sexual abuse. With the country inching toward unveiling the Digital India Act, it is expected that a proper framework will be established to prevent the crimes of inciting violence and spreading misinformation on the metaverse.

India has stated that it will provide an enabling environment for Web 3 firms to experiment with new offerings for consumers in the industry. Union Minister of State for Skill Development and Entrepreneurship Rajeev Chandrasekhar announced that nothing prevents firms from exploring metaverse or non-fungible tokens (NFTs).

However, the country has signalled to use its G20 presidency to push for global digital asset regulations. The government has been relying on distributed ledger technologies (DLT) in recent months, using them for its central bank digital currency (CBDC) and streamlining local land registries’ operations.

The future of the metaverse can likewise be a big contributing factor to the development of the virtual economy. 

The ethical questions on meta-governance

India is debating the regulation of the technologies that will underpin the metaverse. The budget levies a 30% tax on income from transfers of Virtual Digital Assets (VDAs). Owning and trading non-fungible tokens (NFTs) is a pathway towards a new digital economy and this will impact the development of the metaverse. 

Beyond crypto, the metaverse raises ethical questions on privacy and security. Online risks may worsen the metaverse, through pervasive, intrusive and unwanted contacts. Pioneering efforts to find governance mechanisms for virtual worlds have to be in place and should be supported with digital literacy, safety, security and privacy which guarantee meaningful participation for participants in online communities while navigating through harmful content and behaviours.

Within the tech ecosystem, several standards have been proposed for the metaverse, but the incentives for adopting them are governed by the self-interests of a few western companies in taking control. It will not be possible for a single metaverse to exist if laws for monetising and moderating the metaverse are made and enforced differently around the world. Until recently, the western policy agenda has dominated companies, products, and rules.

The European Commission has suggested that plans to create an all-encompassing virtual reality environment would pose new challenges for antitrust regulators in the EU and has demanded further scrutiny of the development of the economic models of the metaverse. 

South Korea recently created a ‘metaverse alliance’ to facilitate the development of virtual and augmented reality platforms. In China, a metaverse industry group, the Metaverse Industry Committee, formed under the state-supervised China Mobile Communications Association in December 2021, has the stated objectives of strengthening innovation and integration among metaverse builders, organizing the training of professionals, and promoting new thinking.

India always has espoused the doctrine, of Vasudhaiva Kutumbakam, a Sanskrit phrase found in ancient texts such as Maha Upanishad, which means “The world is one family”. This expression is a constant refrain in Prime Minister Narendra Modi’s speeches. During his speech at the Davos Agenda 2022, he indicated that a collective and synchronized, global approach is needed towards addressing challenges with cryptocurrencies. 

This policy of oneness should be applicable, in the case of the metaverse, too. All the Indian scriptures expound on the victory of good over evil, and in a war between reality and virtual reality, in a conflict between reality and metaverse, reality has to be victorious and spread its wings even in the mythical and mysterious horizons.

© Ramachandran 

INDIA DEFEATS EUROPEAN CONQUESTS

Cultural Nationalism in India

There had been a European conquest in India, but they could not destroy Hinduism, because of the inner strength of that religion, which is pluralism. Pluralism, in turn, is democratic, whereas monotheism, which is the hallmark of Europe, contributed to dictatorships, even in the Marxian model. Thus, democracy is ingrained in Hinduism, and hence, Sri Rama, hero of the Indian epic Ramayana, during his jungle sojourn, asked his brother Bharata whether he is honouring the Charvakas properly or not. Charvakas were the materialists and atheists of that period, and Rama was exhorting a principle of democracy-honour the opposition. So, India was aware of cultural nationalism, as a civilization, and could resist even Alexander of Greece with philosophical elan.

Hence, Irish Indologist Vincent Arthur Smith wrote about Alexander's campaign, in his Ancient History of India: (1)

“The campaign, although carefully designed to secure a permanent conquest, was in actual effect no more than a brilliantly successful raid on a gigantic scale, which left upon India no mark save the horrid scars of bloody war. India remained unchanged. The wounds of battle were quickly healed; the ravaged fields smiled again as the patient oxen and no less patient husbandmen resumed their uninterrupted labours; and the places of slain myriads were filled by the teeming swarms of a population. India was not Hellenised. She continued to jive her life of splendid isolation and forgot the passing of the Macedonian storm. No Indian author, Hindu, Buddhist, or Jain, makes even the faintest allusion to Alexander or his deeds.”

Smith describes further resilient India: (2)

"Alexander stayed only nineteen months in India, and however far-reaching his plans may have been, it is manifestly impossible that during those few months of incessant conflict, he should have found Hellenic institutions on a permanent basis, or materially affected the structure of Hindu polity and society. As a matter of fact, he did nothing of the sort, and within two years of his death, with the exception of small garrisons under Eudemos in the Indus valley, the whole apparatus of Macedonian Rule had been swept away. After the year 316 BC, not a trace of it remained. The only mark of Alexander's direct influence on India is the existence of a few coins modelled in imitation of Greek types which were struck by Saubhuti (Sophytes), the chief of the Salt Range, whom he subdued at the beginning of the voyage down the rivers."

Alexander

Alexander made the work of Chandragupta Maurya simpler and paved the path for his Hindu imperial power in the Greek-invaded areas. Observes historian Radha Kumud Mookerji: “Alexander’s invasion promoted the political unification of the country. Smaller states which handicapped unity were now merged into the larger ones, such as those of Paurava, Abhisara or Taxila. These conditions were favourable for the rise of an Indian Empire to be shortly founded by Chandragupta.” (3)

Alexander's campaign just passed like an evil spectacle. Historian R C Majumdar records: "The invasion of Alexander the Great has been recorded in minute details by the Greek historians who naturally felt elated at the triumphant progress of their hero over unknown lands and seas. From the Indian point of view, its importance lies in the fact that it opened up a free interchange between India and and the western countries which were big with future consequences. For the rest, there was nothing to distinguish between his raid in Indian history. It can hardly be called a great military success as the only military achievements to his credit were the conquest of petty tribes and States by instalments. He never approached even within a measurable distance of what may be called the citadel of Indian military strength, and the exertions he had to make against Poras, the ruler of a small district between the Jhelum and the Chenab, do not certainly favour the hypothesis that he would have found it an easy task to subdue the mighty Nanda empire. Taking everything into consideration, a modern historian unprejudiced by the halo of the Greek name may perhaps be excused for the belief that the majority of Greek writers did not tell the whole truth when they represented the retreat of Alexander as solely due to the unwillingness of his soldiers to proceed any further; nor can he dismiss, as altogether fictitious, the view recorded by more than one ancient Greek  historian, that the retreat of Alexander was caused by the terror of the mighty power of the Nandas." (4)

The Nanda dynasty, which resisted Alexander, ruled in the northern part of the Indian subcontinent during the fourth century BCE, and possibly during the fifth century BCE. The Nandas overthrew the Shaishunaga dynasty in the Magadha region of eastern India and expanded their empire to include a larger part of northern India. Based on the Buddhist tradition recorded in the Mahavamsa, they appear to have ruled circa 345–322 BCE.

The Nandas built on the successes of their Haryanka and Shaishunaga predecessors and instituted a more centralised administration. Ancient sources credit them with amassing great wealth, which was probably a result of the introduction of new currency and taxation systems. Ancient texts also suggest that the Nandas were unpopular among their subjects because of their low-status birth, excessive taxation, and their general misconduct. The last Nanda king was overthrown by Chandragupta Maurya, and the latter's mentor Chanakya.

Subsequent European invasions in India faced the same fate; the cultural consciousness of India remained intact, and it is called cultural nationalism today.

Cultural nationalism is nationalism in which the nation is defined by a shared culture, rather than on the concepts of common ancestry or race. (5) Cultural nationalism is usually a moderate position within a larger spectrum of nationalist ideology. Thus, moderate positions in Hindu nationalism are, "cultural nationalism", while such movements also include forms of ethnic nationalism and national mysticism. For instance, the Rashtriya Swayamsevak Sangh (RSS) General Secretary, in reply to the Tribunal constituted under the Unlawful Activities (Prevention) Act 1967 to hear the case on the RSS, explained the position: (6)

"The term Hindu in the conviction as well as in the constitution of the RSS is a cultural and civilizational concept and not a political or religious dogma. The term as a cultural concept will include and did always include all Sikhs, Buddhists, Jains, Muslims, Christians, and Parsis. The cultural nationality of India, in the conviction of the RSS, is Hindu and it was inclusive of all who are born and who have adopted Bharat as their Motherland, including Muslims, Christians, and Parsis. The answering association submits that it is not just a matter of RSS conviction, but a fact borne out by history that the Muslims, Christians, and Parsis too are Hindus by culture although as religions they are not so."

This is a moderate position, and at the same time, inclusive. V D Savarkar writes that every individual who is born in India and who considers India to be his fatherland (Pitrubhumi) and Holy land (Pavitrubhumi) is a Hindu. However, Savarkar pointed out that Christians and Muslims consider their holy land elsewhere. 

Culture, on which civilization is based, is an organic constituent of human development. It is a state of being, a mode of thinking, a way of living, and a set of commonly shared values, beliefs, and practices. It is a holistic entity comprising a stock of knowledge, beliefs, customs, conduct, morals, and intellectual pursuits. It is a totality of heritage borne by society. It is the intellectual and spiritual wealth generated and preserved by society, over the centuries. It enhances the meaning and quality of life. Thus, it enriches the fullness of life, sharpens intellect and ushers in the plenitude of serenity.

The rule of dharma

India is the cradle of global civilization, and it possesses one of the finest cultures in the world in the form of Vedic wisdom. It advocates the fundamental unity of all existences, both animate and inanimate. Everything in this cosmos has a common source and sustenance. The Puruṣa Sūkta of Ṛig Veda declares that whatever existed, whatever exists and whatever shall come into existence, all are manifestations of the same Divine Being. The īśāvāsyopaniṣad of the Yajur Veda states that in this mutating world, every element is divine and is permeated by the Divine. It says about the relation of the individual's soul to the divine supreme spirit: "That is Whole and this is Whole, the perfect has come out of the perfect; having taken the perfect from the perfect, only the perfect remains. ("Om Poornam-Adah Poornam-Idam Poornaat-Poornam-Udachyate |Poornasya Poornam-Aadaaya Poornam-Eva-Avashishyate ||)

It is one unitary, self-existing principle which manifests itself diversely, says the Nāsadīya Sūkta of Ṛig Veda. It is also experienced and expressed diversely.

It is a unique feature of Indian culture which exhorted not to have the European/ biblical/ Islamic psyche of “I versus thou”. Instead, Hinduism advocates the attitude of “I and we”. (7) Indian sages cherished a spiritual global family. The ‘other’ for French philosopher Jean-Paul Sartre was "hell".  But for a Hindu, the 'other' is not external or alien or separate. The ideal to be emulated is the universalisation of ‘self’, feeling indivisible with the entire cosmos. In this global family, there are both individual entities (piṇḍa) and their organic totality (brahmāṇḍa), in perfect harmony. A distinction has to be drawn between the two but they are inseparable, they are indivisible. It is an inclusive matrix to accommodate and absorb diversity. It advocates its members live in solidarity with the Whole, enjoying an individual existence and yet partaking and sharing experiences with the Whole. Since it is social pluralism, Europe could not destroy the inherent virtues of India.

About those virtues, the Urdu poet Mohammad Iqbal (1877-1938) sang in his well-known poem, “Sāre jahān se achhā Hindusatān hamārā” (Taranaa-e-Hind-1904): 

Kucha baat hai ki hasti, mitati nahin humaari

Sadiyon rahaa hai dushman daur-e-jahaan hamaara

(There is something momentous in Indian culture because of which it could not be wiped out in spite of the onslaughts of inimical forces for centuries together.)

The underpinning spirit behind Indian cultural nationalism is the universal and unifying dharma-centric worldview sustained by the Sanatana dharma (eternal values). Pandit Deen Dayal Upadhyaya pointed out that the nation and the state are two distinct entities: A nation like India is an organic entity. It is not created, but a nation creates institutions. A nation consists of several institutions and the State is one of them. It is important but not supreme. It is to be based on Dharma, and dharma is sovereign. Dharma is the depository of a nation’s soul and should permeate all its institutions. Fundamental principles of dharma are eternal and universal. They are not rigid and need to be adapted to changing times and places.

Deendayal Upadhyaya was born on 25 September 1916, in Dhanakiya, a small village situated on the Jaipur-Ajmer rail route, his father a railway station master, like his grandfather. After the formation of the Bharatiya Jan Sangh in 1951, he became one of its general secretaries, and early in January 1968 its president. Although Jan Sangh set out as a political party, its intimate connection with the RSS remained. 

His speeches and writings, in Hindi, were published in three collections: Rashtra Jivan ki Samasyaen, or ‘The Problems of National Life’, 1960; Ekatma Manavavad, or ‘Integral Humanism’, 1965; and Rashtra Jivan ki Disha, or ‘The Direction of National Life’, 1971. In these three works, he talks of dharma-rajya.

The proposition around which Upadhyaya’s thoughts revolve, like those of M S Golwalkar, second Sarsanghchalak ("Chief") of R S S is that the existence of a nation lies in its distinctive consciousness. It rises or falls to the same degree as that consciousness comes into light or is obscured. But, Upadhyaya perceives it as centred on dharma. Upadhyaya's concern is to bring to light the real nature of Indian consciousness, its citi, as he calls it; for it is only then that one can obtain a satisfactory answer to the question, ‘what direction shall India take?’

For him, Dharma is not a sect, a philosophical opinion, or any one spiritual path. In short, dharma is not ‘Religion’. It is not a religion because if Dharma is described as Religion, in the next step all the social disorders which Religion in the West produced are quickly attached to dharma as well. He says, ‘'Of the very many damages done to us by English translations, this is one of the greatest’'.  (8) The fundamental cause of the numerous problems that modem India is faced with lies, according to Upadhyaya, in the indiscriminate application of the Western forms of thought to Indian political life, obscuring thereby the true nature of Indian consciousness. The policies that have been advanced after independence reflect, not that consciousness, but one Westernism or another. Far from achieving coherence and harmony of social purpose, the national life of India has been turned into a battleground of conflicting economic and political philosophies. Socialists and communists constitute this group. He has not termed it as the Nehruvian legacy, though it is explicit.

For Upadhyaya, a nation is consciousness-Nation arises out of a deeper life force; it is self-created, swayambhu. Western thinkers believe that a nation can be created; it cannot be done, for the common elements of national life are only expressions of an inherent consciousness at work, which cannot be created artificially by political means. Each nation has its own unique consciousness. So long as that consciousness, the citi, lives, that nation lives; when it dies, the nation dies. A nation dies, not by the loss of territory, or by a decrease in its population; a nation dies when its consciousness ceases to exist. (9)

Thus, in the Indian context, cultural nationalism is not something artificial, it is the consciousness flowing through the soul of the civilization.

Dharma is sovereign, not Nation or State. Democracy is the preferable form of governance but it should be based on dharma. It should be dharmarājya or Rāmarājya, a dharmocracy and not a theocracy. The concepts of Varnashrama dharma and Purushartha which were the guiding principles of social life in the Vedic period were based on this dharma-centric vision of life.

At the same time, the creative character of the Vedic culture was lost post-Vedic period onwards, especially since the advent of the caste system, made rigid by the conquering forces. The universal vision of Sanatana Dharma was misinterpreted in conformity with the rising requirements of colonial interests.

Hence, it is important to examine the religious and cultural onslaught of foreign powers and modern western civilisation on Indian spirituality, society, culture, economy and polity and to counter the same and establish the rationality and spiritual science behind Indian ethos, religious faiths and practices.

With vested interest, eurocentric scholars and left historians have tried to project a distorted picture of Indian culture and civilization. They have questioned the relevance of cultural nationalism in the emerging Indian social scenario characterised by rising conflicts and violence among various social groups. But, they have failed in their nefarious design as the unbiased mind has not acceded to their sinister move.

Civic vs Cultural nationalism

There is a discourse, civic nationalism versus cultural nationalism, that has dominated the Indian debate in recent decades. The former subsumes the liberal values of freedom, tolerance, individual rights and multiculturalism, with constitutional guarantees. Cultural nationalism encompasses a sense of belonging and anchoring in a specific cultural and civilizational milieu. (10)

Indian culture and society have adhered to democratic values for thousands of years. Indians are imbued with the syncretic sense of being and feeling Indian regardless of language or religion. It is this cultural nationalism that defines all Indians. India is a melting pot in which foreign influences were assimilated in an inclusive manner to create a uniquely Indian identity.

Cultural nationalism is neither a chimaera that must be vanquished. The values of pluralism and tolerance should not merely be a function of constitutional guarantees. They should be ingrained and rooted in a more enduring Indian cultural ethos. Civic nationalism is self-limiting and is defined merely by political institutions and liberal values as legal constructs. It fails to synthesise the rich social traditions or cultural conventions of India.

A nation is made up of people having a sense of a common bond (geist), which is its lifeblood. It is only through an inherent sense of belonging, what Ibn Khaldun called ‘asabiyyah’ in Arabic and a national culture that a State can achieve a distinctive identity and sustainability in the longer run. (11)

The concept of asabiyyah was familiar in the pre-Islamic era. Still, it became popularized in Arab Historian Ibn Khaldun's Muqaddimah (1377), which is described as the fundamental bond of human society and the basic motive force of history, pure only in its nomadic form. (12) Khaldun argued that asabiyyah is cyclical and directly relevant to the rise and fall of civilizations: it is strongest at the start of civilization, declines as the civilization advances, and then another more compelling asabiyyah eventually takes its place to help establish a different civilization. (13)

In India’s context, Cultural nationalism plays a major role in forging social cohesion and solidarity, transcending demographics. Hence, to reduce the State of India to the level of a ‘civic nation’, bound by a single albeit highly revered document in the form of the Indian Constitution, would be tantamount to disregarding the country’s rich heritage. India as a nation predates its Constitution.

The concept of a nation in Europe can be traced back to the Peace of Westphalia in 1648. Even prior to the treaty, political boundaries were being redefined throughout the European Continent. After the treaty, the concept of sovereignty was introduced when Protestantism was officially recognised as a different religion from Catholicism (14). 

The Peace of Westphalia is the collective name for two peace treaties signed in October 1648 in the Westphalian cities of Osnabrück and Münster. They ended the Thirty Years' War (1618–1648) and brought peace to the Holy Roman Empire, closing a calamitous period of European history that killed approximately eight million people. Holy Roman Emperor Ferdinand III, the kingdoms of France and Sweden, and their respective allies among the princes of the Holy Roman Empire participated in the treaties. (15)

These treaties ended the war, with the Habsburgs (rulers of Austria and Spain) and their Catholic allies on one side, battling the Protestant powers (Sweden and certain Holy Roman principalities) allied with France, though Catholic, strongly anti-Habsburg under King Louis XIV.

Several scholars of international relations have identified the Peace of Westphalia as the origin of principles crucial to modern international relations, (16) collectively known as Westphalian sovereignty. However, some historians have argued against this, suggesting that such views emerged during the nineteenth and twentieth centuries in relation to concerns about sovereignty during that time. (17)

Thus, in most contexts in Europe, a “nation is a community of people that can be organised around the idea of self-determination” (18). Keeping this idea of the nation in mind, nationalism can be defined as either devotion (political or emotional) to one’s nation or as a policy of national independence (19). Therefore, a nation or the idea of a nation must exist in order for a national identity to be founded.

There is also Anderson’s absurd idea of a nation which is an ‘imagined political community’ (20). This is if a nation is considered as something imaginative, the very elements that are required for it to exist can be a myth. Even if a community does not share a common language, religion or ethnicity, a nation is formed on the basis of a strongly formed identity. Anderson used the term ‘imagined’ because members of even the smallest nations will not know everyone and yet they will be aware of their image of the entire communion.

From an anthropological perspective, Max Weber speaks about ethnic groups that are formed on the belief of common descent. He says there is a sense of affinity to a particular nation which relies on community living (21). According to American sociologist Michael Hechter, nationalism constitutes several political activities whose aim is to create political boundaries of the nation that are 'culturally distinctive, collectivity aspiring towards self-governance (22). 

Deendayal Upadhyaya

It is equally important to distinguish between the civic and ethnic ties of nations. According to Stephan Shulman, the primary difference between the Western and the Eastern European Countries is that the former developed as civic nations while the latter as ethnic nations (23). While ethnic nations can be characterised by extending kinship principles to the imagined community of the nation, the former can be defined by common political values and loyalties shared by the population of a sovereign territory (24). The Czech Scholar Hans Kohn argued that nationalism in the West, primarily in countries like France and England was primarily political. Nationalism in the western context struggled against the dynastic rule and equated citizenship with membership in the nation. Hence, in this model, the state usually precedes the creation and development of the nation (25).

On the other hand, in Eastern European and in the colonial context, where these regions were comparatively backward, the notion of nationalism arose with little or no cultural and ethnic boundaries. The Ottoman empire is an example. Kohn argues that nationalism had to struggle to “redraw political boundaries in conformity with ethnographic demands” (26). Considering this statement, one could say that nations in the East were created on the basis of people than the idea of citizenship.

In the Indian context, this idea can be translated as the idea of creating an “Akhand Bharat” or undivided India. It revolved around reuniting the ancient Indian civilisation by fighting the British. In the modern scenario, many Hindu organisations are staunch advocates of this idea which propagates the unity of present-day India, Pakistan, Bangladesh, Sri Lanka, Myanmar, Bhutan, and Nepal.

It was only when colonialism reached its peak in the late 19th century did the need to arrive at a common language, culture, and identity arose among the people (27). Since then, the world is experiencing a rapid increase in nationalistic sentiment.  Renowned Anthropologist Margaret Mead was studying the ‘national character’ of the Americans and the English when she came to the conclusion that cultural values play a significant role in the integration of people belonging to a particular nation (28). 

Every nation has certain specific traits that differ from the others. To quote Jelena Petkovic, “cultural theories adopt the stand that a nation is formed through cultural continuity and thus the issue of national identity is almost inseparable from the issue of the cultural identity of a people” (29). This means that a cultural national identity reveals itself as an attachment to an individual’s particular culture. Hence, with the increase in the notion of individual consciousness and with the development and improvement of the channels of communication, human civilisation has become more aware of the differences that reside between them. While culture binds a group of people together, it also has the ability to separate them.

Nationalism manifests itself differently in pluralistic nation-states. 

Most pluralist nations are located in the African, Asian and Latin American continents. Colonialism played a big role in shaping their history. Through the process of divide and rule, the European colonialists created a sense of confusion between different communities. In India, despite living together for centuries before colonisation, the Hindus and Muslims became increasingly polarised during colonisation. This led to a constant feeling of neglect within both communities. At a macro-level or a more pan-India level, nationalism was viewed as being anti-colonial with the dual aims of getting rid of oppressive colonisers and establishing a sovereign republic. On the other hand, at a more provincial level, nationalism was a form of cultural consciousness that aimed to protect different cultural communities in their homeland (30).

The conqueror's agenda

What is ironic about India is that a nation possessing the largest civilizational history had to struggle against the distortions engineered by successive invasions. During the Islamic invasions, myriads of temples were plundered including those of Somnath, Ayodhya, Kashi and Madhura. The university of Nalanda was pillaged. All these were an assiduous bid to marginalise native culture and heritage and to remind them with an ocular demonstration for all the time that they were crushed. (31)

The despotic Islamic rule was succeeded by British rule, which from the very beginning sought to distort India's history and culture as a matter of conspiracy in order to legitimize its own rule. The two dozen Western Indologists who appeared as saviours of India proved to be steered by an agenda. Some of them may not have resorted to religious sabotage deliberately, but they were obviously prisoners of myopic perception within Christian mythology and white superiority. (32)

For instance, William Jones tried to employ Biblical myth in Hindu systems. To him, no human civilization is possible, earlier than 4004 BCE since Adam and Eve "appeared" that year. He deconstructed Indian History by applying the Biblical narrative that Noah was a descendant of Adam and he variously attributed Manu to Adam and Noah. According to his version, once Noah's eldest son Ham cast a glance at Noah's naked body, for which the latter cursed the former that he would be a slave in future. According to Jones, a fierce deluge broke out in 2349 BCE and Ham became a slave. Without any basis, Jones says Ham's descendants were none but the Aryans who came down to India and were hence constrained to continue as a depraved race. Jones also attributed Hindu Gods and goddesses including the characters of Ramayana to those of the Greeks. (33) It is evident that Jones had been an agent of colonialism, and hence he tried to sell absurd platitudes.

Patriotic upsurges

The combination of the British East India Company's standards in the Indian subcontinent during the eighteenth century realized financial changes which prompted the ascent of an Indian white-collar class and relentlessly disintegrated pre-provincial socio-religious organizations and boundaries. The developing monetary influence of Indian entrepreneurs and shippers and the expert class carried them progressively into a struggle with the British Raj. There were other skirmishes as well.

Within thirteen years after the decisive victory of the British at the Battle of Plassey in 1757, a Hindu revolution broke out in Bengal. The Sannyasi rebellion or monk rebellion of 1770-77 was a revolt by Hindu ascetics in Bengal which took place around Murshidabad and Baikunthapur forests of Jalpaiguri under the leadership of Pandit Bhabani Charan Pathak. It was an early war for India's independence from foreign rule since the right to collect tax had been given to the British East India Company after the Battle of Buxar in 1764.

But much before Plassey, In Kerala's Attingal, on April 14, 1721, about 120 Britishers were massacred. a party of 12o British merchants and 30 slaves, led by Gyfford, Burton Fleming and Malheiro sailed by sea to the palace,6 kilometres away, with 17000 Panam as tribute, and Vishukkazhcha. Since old Vanchimuttam was inebriated, the party was received by the young Kudamon. Cowse became suspicious when the talk on the gifts to the Pillai s was extended; he alerted Gyfford but was rebuffed. The party had left the guns in the ship, whereas, the Nairs were, as usual armed. Gyfford and the team were asked to spend the night on the palace's premises in small batches. Gyfford also became suspicious and sent a messenger to Robert Sewell, storekeeper/Adjutant/Captain. In the night, the combined Attingal forces, led by Kudamon Pillai, fell upon the Britishers and butchered them. The party had left only the women, children, pensioners and only four males to hold the Fort. Gyfford, Malhiero and Fleming were cut to pieces. The tongues of Gyfford and Malheiro were pulled out, the tongue of Gyfford cut to pieces and thrown into the Vamanapuram river. His body was nailed on a log, and thrown into the river, to float. Cowse, who tried to escape in Malayali dress, was caught by a Muslim who owed him money and was killed. A total of 133 were butchered.

It is now well known that it was not Jhansi Rani Lakshmi Bai (1823-1858), who revolted first against the British; it was Kitturu Rani Chennamma (1778-1829) of Karnataka, who first declared war against them, in 1824. When Chennamma's son died in 1824, she adopted Sivalingappa as her heir. The East India Company refused to accept it, applying the doctrine of lapse, which was officially codified later, during 1848-1856, by Lord Dalhousie. The Company ordered his expulsion, but Chennamma defied it. When the Governor of Bombay, Mountstuart Elphinstone turned down her letter, war broke out. Several people lost their lives, including the Collector and Political Agent for Southern Mahratta Doab region, St John Thackeray, and John Munro, Sub Collector of Sholapur.

Likewise, the first Sepoy mutiny in India, was not in 1857-a Sepoy mutiny happened, 45 years before, in Kollam in Kerala. It was an uprising against the British, which was crushed by executing the 29 Indian soldiers who revolted, by the Resident of Travancore, John Munro. He implicated the ousted Dewan of Travancore, Ummini Thampi, and the imprisoned 'crown prince', Visakham Thirunal Kerala Varma, who was the mastermind of the revolt and sentenced them to death. Kerala Varma was the son of Princess Atham Thirunal of Mavelikara Arattukadavu Koyikkal palace. They originally were from the Chenga palace branch of Kolathunad, in Malabar. Maybe, the reason behind Munro relinquishing his Travancore job in 1814, is revealed in this episode.

After Plassey, something extraordinary began to shake Bengal. The Bengal Renaissance was a cultural, social, intellectual, and artistic movement that took place in the Bengal region of the British Raj, from the late 18th century to the early 20th century. Historians have traced the beginnings of the movement to the victory of the British East India Company at the 1757 Battle of Plassey, as well as the works of reformer Raja Rammohan Roy, born in 1772. For almost two centuries, the Bengal renaissance saw the radical transformation of Indian society, and its ideas have been attributed to the rise of Indian anticolonialist and nationalist thought and activity. The Bengali renaissance was predominantly led by Bengali Hindus, who at the time were socially and economically more affluent in colonial Bengal. Well-known figures include the social reformer Raja Rammohan Roy, writer Rabindranath Tagore, and the physicist Satyendra Nath Bose.

The Renaissance also embraced the religious sphere, bringing forward spiritual figures such as Debendranath Tagore, Keshab Chandra Sen, Bijoy Krishna Goswami, Ramakrishna Paramahamsa, Sarada Devi, Swami Vivekananda, Aurobindo, Bamakhepa, Lokenath Brahmachari, Bhaktisiddhanta Sarasvati, Bhaktivinoda Thakur, Paramahansa Yogananda, Lahiri Mahasaya, Tibbetibaba, Nigamananda Paramahansa, Vishuddhananda Paramahansa, Ram Thakur, Sitaramdas Omkarnath, Anandamayi Ma. Related to them, reformist movements and organizations like Brahmo Samaj, Arya Samaj and Ramakrishna Mission sprung up.

Freedom with dharma

A rising political cognizance among the local Indian social top echelons encouraged a developing patriot estimation in India in the nineteenth century. The creation in 1885 of the Indian National Congress in India by the political reformer A.O. Hume strengthened the procedure by giving a significant stage from which requests could be made for political advancement, expanded self-sufficiency, and social change. The pioneers of the Congress upheld discourse and discussion with the Raj organization to accomplish their political objectives. Not satisfied with moderation, radical forces developed in Bengal, Punjab, Maharashtra, Madras and different zones over the south.

Rajaram Mohan Roy

French political scientist Christophe Jaffrelot (34) has pointed out that Indian patriotism was created as an idea during the Indian autonomy development battle against the provincial British Raj. India has been bound together under numerous sovereigns and governments over a long period. Old writings notice India under the ruler Bharata. The Mauryan Empire was the first to join all of India and South Asia.

He is of the view that the investigation of patriotism is critical to dissect world governmental issues today and patriotism can be characterized as either political or passionate to one's country or as an approach to national autonomy. Along these lines, a country or the possibility of a country must exist altogether for a national character to be established.  

The 1857  war of independence finished East India Company's standard, alongside changes in the British strategy towards the Indian States. A standout amongst the most significant results of the revolt was that it offered an ascend to patriotism. Indian individuals turned out to be progressively mindful of their sages who yielded their lives for the nation with the goal that others may live in free India in times to come. But the revolt scarred the connection between Hindus and Muslims with the Divide and Rule Policy, embraced by the British. They felt that on the off chance that they needed to proceed with their standard in India, it was imperative to partition the Hindus and Muslims. 

Nationalism in third-world countries was and is a response to colonialism and most pluralist nations evolved in the Asian, African and Latin American Continents, where colonialism played a very important role in the formation of these states.  The conquerors had failed to consider the multi-cultural set-up of these colonies. The colonial power played an important role in creating or fostering identities to ensure control by using the policy of divide and rule while the process of state formation during the process of independence from the colonial power, ignored and even curbed the multiculturalist set-up to create a single identity.

In the 19th century, John Stuart Mill argued that nationalist movements were dependent on ethnicity, language and culture. These were the basis of the demand for statehood. But it was at the peak of colonialism in the mid-19th century that the colonised world witnessed the rise in nationalistic sentiments with an emphasis on the idea of a common language, religion, ethnicity etc. While the western idea of nationalism aims to set up a uni-nation, uni-culture dictum, nationalism operates on different principles in a multi-national, pluralist context.

Nationalism had a dual role to play in the last century through the many nationalistic upheavals leading to the decolonization of most of Latin America, Africa and Asia. At a macro level, nationalism was viewed as being anti-colonial with the aims of liberating the country from oppressive rule and establishing a sovereign state while at a more local level, nationalism was perceived to be a form of cultural consciousness that aimed to protect different cultural communities within their homeland (35).

In most liberal democratic societies, minorities are protected by the law and the state needs to take them into consideration while formulating federal policies. In India, Hindu nationalists maintain that the word of the majority community should prevail over the others in a modern democratic state. To elaborate further, colonial thinkers like Savarkar and members of organisations like the RSS maintain that Hinduism is a religion of tolerance and allows minority groups to flourish and hence, constitutes an integral part of Indian national culture (36). 

Thus, by secularising Hinduism, nationalists point out that it is the shared identity of the entire population, no matter which religion one belongs to. Not surprisingly, the rise of Hindu nationalism directly coincided with India’s integration into global systems of production and consumption. For Hindu nationalists, Islamic fundamentalism is a huge obstacle for India to emerge as a strong nation in the modern world. The idea of modernity globally today is linked to “full and unequivocal cultural and national identities”. 

The origins of Hindu nationalism can be traced back to the revivalist movements during the colonial era. To name a few, The Arya Samaj and the Brahmo Samaj went back to the Vedas and made a strong attempt to reform Hinduism to counter the rising number of conversions of the backward classes into Islam and Christianity. The central idea of the Hindu nationalist movement is the concept of Hindutva which is the exact opposite of the pseudo-secular ideals of the Indian National Congress and the Marxists. Marxism doesn't recognize nationalism; it bats for Internationalism. In India, cultural nationalism is here to stay, as long as the civilization is there to ignite it.

Dharma is eternal. It is not sufficient that democracy is understood only as the rule of the people; it must also be a rule for the good of the people. What is good for the people can be determined only by Dharma. Hence democracy will have to be also dharma-rajya, the rule of dharma. True democracy is one where both freedom and dharma combine. 

_______________________

1. Smith, Vincent, Early History of India, pp 117-118

2. ibid, 252-253

3. Mookerji, R K, Hindu Civilization: From the Earliest Times Up To the Establishment of the Maurya Empire, pp 294-295

4, Majumdar, R C, Ancient India, pp 101-102.

5. Nielsen, Kai. (1999). Cultural Nationalism, Neither Ethnic nor Civic. In R. Beiner (Ed.), Theorizing nationalism (pp. 119-130). Albany: State University of New York Press

6. Organiser, June 6, 1993

7. S R Bhatt, Cultural Nationalism: Indian Scenario, https://indiafoundation.in/articles-and-commentaries/cultural-nationalism-indian-scenario/

8. Chaturvedi Badrinath, Dharma, India and the World Order: Twenty-One Essays, Pahl-Rugesntein and St Andrew Press, 1993
9. ibid

10. Sujan Chinoy, India predates Constitution, It is cultural nationalism that makes us Indians, The Print, 4 February 2022.

11. ibid

12. Ibn Khaldun. The Muqaddimah, translated by F. Rosenthal

13. Tibi, Bassam. Arab Nationalism. 1997, p. 139

14. Straumann B (2008), The Peace of Westphalia as a Secular Constitution. Blackwell Publishing Ltd 15: 173-188

15. Clodfelter, Micheal (2017). Warfare and Armed Conflicts: A Statistical Encyclopedia of Casualty and Other Figures, 1492–2015. McFarland. p. 40

16. Patton, Steven (2019). The Peace of Westphalia and its Affects on International Relations, Diplomacy and Foreign Policy. The Histories

17. Osiander, Andreas (2001). Sovereignty, International Relations, and the Westphalian Myth. International Organization. 55 (2): 251–287

18. Nodia G (1994) Nationalism and Democracy. Diamond Nationalism Ethnic Conflict and Democracy. Johns Hopkins University Press

19. Simpson J (1991), The Compact Oxford English Dictionary. Clarendon Press

20. Anderson B. (1983) Imagined Communities. Verso, New York

21. Weber M (2003), What is an Ethnic Group? In: The Ethnicity Reader. M. A. Guibernau (ed.) Polity Press

22. Hechter M (1999), Internal Colonialism. Oxford University Press

23. Mead M (1972), National Character. Anthropology Today 642-667.

24. Gans J (2000), The Liberal Foundations of Cultural Nationalism. Canadian Journal of Philosophy 30: 441-466

25. Kohn H (1961) The Idea of Nationalism. Cambridge University Press

26. ibid

27. Gans J (2000), The Liberal Foundations of Cultural Nationalism. Canadian Journal of Philosophy 30: 441-466

28. Mead M (1972), National Character. Anthropology Today 642-667

29. Petkovic J (2011), Cultures in nations and nationalism. Nis: Center for Sociological Research of the Faculty of Philosophy 10: 141-152

30 . Rodrigues V (2004), Shodhgana. Debates on Nationalism in India

31. Atanu Mohapatra, D D Pattanayak, Cultural Nationalism in Indian Perspective, The Indian Journal of Political Science, Vol 75, no 1, 2014, pp 59-70

32. ibid

33. ibid

34. Jaffrelot, Christophe (1999), The Hindu Nationalist Movement and Indian Politics. Penguin Books India, pp. 13–15

35. Sunil Kumar (2017), Contribution of Western Culture in Nationalism of India. International Journal of History and Cultural Studies (IJHCS) ISSN 2454-7646, Volume 3, Issue 4, PP 22-25

36.Savarkar V (1928), Essentials of Hindutva: Who is a Hindu?

© Ramachandran 

TWO SESSIONS AND CHINA'S GROWTH TRAJECTORY

What to Expect in China's Economy

China's Two Sessions or lianghui of the NPC and CPCC in 2023 have lifted hope to new levels by designing a blueprint for sustainable development, with the true essence of socialism with Chinese characteristics, as envisaged by the 20th National Congress of CPC.

The Two Sessions refer to the annual meetings of the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC), which preside over the main economic agenda for 2023, as well as significant governmental restructuring. The CPPCC is a consultative body that includes over 2172 members from various segments of Chinese society. The NPC with 2977 deputies is China’s top legislative body. The Two Sessions are the only fixed annual meetings of these two political bodies.

The annual Government Work Report (GWR) presented at the session contained both the achievements and challenges of 2022 and the country’s socioeconomic development agenda for the year.

The goal for China is to realize socialist modernization by 2035; This rejuvenation is also part of achieving the Party's second centenary goals.

China Rebounds

In the first year of re-opening after the pandemic, China is emerging from its bruises; The lifting of COVID-19 restrictions in late 2022 has already boosted economic sectors.

China’s factory activity for February 2023 bounced further into expansion territory, according to data from the National Bureau of Statistics, released on March 1. The official manufacturing Purchasing Manager's Index (PMI) reached the highest level in nearly 11 years in February – 52.6, proving China’s factory activity has expanded at the fastest pace in more than a decade. The world’s second-largest economy staged what economists are calling a very rapid rebound after reopening from zero-Covid. It is the highest level since April 2012. In January, the reading was 50.1, a sharp increase from 47 in December, as the pandemic restrictions were starting to fade. A reading below 50 indicates contraction, while anything above that shows expansion.

The PMI for large enterprises rose by 1.4 points to 53.7, while the reading for small enterprises increased by 4 points to 51.2. The PMI for small businesses was back in expansion territory for the first time since May 2021.

Non-manufacturing PMI in February also grew further to 56.3 from January’s 54.4, when it saw a sharp improvement backed by a recovery in services and construction activity. It recorded its best level in two years. The Caixin/Markit manufacturing PMI, a private gauge of the country’s factory activity, jumped to 51.6 in February from 49.2 in January. It was the first expansion in seven months.

The official PMIs mainly cover larger businesses and state-owned companies, while the Caixin readings are more focused on smaller businesses and private companies.

The rapid expansion came amid the accelerated resumption of factory output after the Chinese New Year holidays.

The broad-based improvements for both Manufacturing and non-Manufacturing PMIs reflect the solid momentum of post-reopening recovery. While stimulus policies are expected, the People’s Bank of China would be mindful of inflation risks and may tilt to a natural policy once the economy is back on track.

Buoyed by the Two Session's outcome, there will be further improvement in consumption later this year. To further expand domestic demand in 2023, Two Sessions has proposed that 3.8 trillion yuan ($550 billion) be allocated for special-purpose bonds for local governments, compared to 3.65 trillion yuan in 2022.

But there remains a range of challenges, including sluggish domestic demand, persistent problems in the housing market, and unequal development across the country. The economic and legislative decisions made at the Two Sessions are of high importance to business leaders and foreign investors in China; they serve as a valuable window into China’s politics and reveal Beijing’s priorities and policy direction for the future.

GDP to Grow

Shortly after China’s factory activity data was released, Moody’s announced that it expects China’s economy to grow by 5% in 2023, an upgrade from its previous outlook of 4%. They expect pent-up demand for non-traded services to support a consumption rebound starting this spring.

After the data became public, Julian Evans-Pritchard, head of China economics at Capital Economics, wrote in a research note, "They underscore just how quickly activity has bounced back following the reopening wave of infections," adding that his firm's 5.5% growth forecast for China this year may be too conservative. The IMF recently forecast GDP growth of 5.2 percent for China this year and 2.9 percent for global growth.

Hence, the Two Sessions has set a realistic annual GDP growth target of 5 percent. In 2022, the GDP growth target was set at “around 5.5 percent”. However, China missed the target, growing 3 percent year-on-year, due mainly to the large outbreaks of COVID-19. But, China's GDP exceeded 100 trillion yuan ($14.55 trillion) for the third consecutive year in 2022 despite complex external challenges. It is expected to exceed 130 trillion yuan ($18.84 trillion) in 2023, an increase of about 10 trillion yuan from the previous year.

In reflection of the buoyant sentiment in China, provincial and municipal governments have announced ambitious local GDP growth targets for 2023: At the higher end, the provinces of Hainan, Tibet, Xinjiang, and Jiangxi have set targets of between 7 and 9.5 percent. At the lowest end, Beijing, Tianjin, Shanghai, and Guangdong have set targets of between 4 and 5.5 percent. The average of all the regional growth targets is around 5.9 percent.

An ambitious growth target means more effort into short-term growth, which could come in the form of more infrastructure investment, incentive policies, and consumption vouchers. A lower target allows the formulation of longer-term development plans to address systemic issues.

Two Sessions has set the deficit-to-GDP ratio at 3 percent for 2023, which is 0.2 percent higher than last year. It is a reliable indicator of a country paying its debts. Generally, a low debt-to-GDP ratio measures a healthy economy that doesn’t accumulate future debts.

FDI to Increase

China's Central Economic Working Conference (CEWC), held in December, has highlighted the need to increase foreign trade and investment cooperation to stimulate growth and proposed expanding market access.

Foreign direct investment into China grew by 14.5 percent from a year earlier to CNY 127.69 billion in January 2023. In dollar terms, FDI increased 10 percent to USD 19.02 billion in January. Manufacturing and high-tech industries continued to attract high levels of foreign investment despite the economic slowdown, and some regions, such as the EU, increased investment in China significantly.
Certain industries saw above-average rates of investment growth in 2022. Actual use of foreign capital in manufacturing reached RMB 323.7 billion (approx. US$47.8 billion), a year-on-year increase of 46.1 percent. This accounted for 26.3 percent of all foreign capital used in the country in 2022, a proportional increase of 7.8 percentage points from 2021.

Article in China-India Dialogue

The countries that saw a relatively high increase in investment in China included South Korea, Germany, and the UK, with investments increasing 64.2 percent, 52.9 percent, and 40.7 percent year-on-year, respectively. Investment from the EU also saw rapid growth, with investment from the bloc increasing by 92.2 percent year-on-year, a significant reversal from the 10.4 percent year-on-year decrease seen in 2021.

Investment from Belt and Road countries grew 17.2 percent, and from the nine ASEAN countries grew 8.2 percent.

It is likely that the government will introduce new incentives and beneficial policies for foreign investors in 2023. These could potentially target key development zones and emerging and high-tech industries.

The total amount of investment that has been made public by 18 provinces and regions for domestic projects reached nearly 10 trillion yuan recently. The Ministry of Finance will further expand the issuance of local government special-purpose bonds to support the construction of major domestic projects. New issues exceeding 4 trillion yuan in 2022 supported more than 30,000 projects.

In February, the New Export Orders Index was up 6.3 points to 52.4, ending 21 months of contraction and supporting domestic demand and the recovery of small firms.

Structural Changes

The approval of small structural changes to the government is a regular occurrence in China. They have a significant impact on how policy is formulated and implemented over the next five years. The structural changes made in 2018, when the 13th NPC convened for the first time, were wider and saw the creation of new ministries and branches of government, including the National Supervisory Commission, an anti-corruption agency.

This time, there was a focus on restructuring the Ministry of Science and Technology (MST) and establishing a National Financial Regulatory Administration. Directly under the State Council, China's cabinet, the new administration will replace the China Banking and Insurance Regulatory Commission (CBIRC) and be in charge of supervising the financial industry except for the securities sector. The new administration will also transfer certain functions of China's central bank and the securities watchdog China Securities Regulatory Commission (CSRC).

The new set-up is on the lines of the Central Financial Work Commission (CFWC), a financial supervisory body set up in 1998 in the wake of the Asian Financial Crisis, which was dissolved in 2003.

China will also establish a national data bureau, to boost the digital economy. It will be administered by the National Development and Reform Commission (NDRC).

Policy Changes

Since economic growth and recovery are at the forefront of the 2023 agenda, the legislative changes and policies mooted by the Two Sessions focused on areas such as advancing industry development, production, and consumption. Policies aimed at propping up strategic industries - healthcare, semiconductors, green technology, and agriculture to improve food security and self-sufficiency, will get priority.

In January 2022, China released the Opinions on Promoting Standardized, Healthy, and Sustainable Development of Platform Economy, which endorsed the international expansion of tech companies. China has reassured tech companies that the government would support them in going public on domestic and overseas stock exchanges.

Considering the Western sanctions on Chinese tech companies, one major change is the passing of revision to China’s Legislation Law. A major part of the latest revision involves giving the NPC exclusive legislative authority over the "establishment, organization, functions, and powers" of supervision commissions.
It clarifies that the National Commission of Supervision can formulate supervisory laws and regulations in line with the Constitution, law and the decision of the NPC Standing Committee. 

Last year, China unveiled its Anti-Foreign Sanctions Law to respond to reckless sanctions imposed by certain foreign countries. It is a basic foreign policy law, to make provisions for countermeasures. For acts that undermine China’s sovereignty, the law contains relevant provisions to firmly counter such acts.

China has already taken a series of moves to counter foreign sanctions. In 2021, the NPC passed an anti-sanctions law, providing legal backing for sweeping retaliation against any individuals, their families and organisations responsible for imposing sanctions against the country. Those steps include denying visas and freezing an individual’s assets.

The amended Law will further devolve certain legislative powers to provincial and municipal governments, to draft regulations on matters such as urban and rural construction and management, environmental protection, and historical and cultural protection.

Thus, the outcome of the Two Sessions is pro-growth. It means more support for industry, possibly through further tax incentives, more market access, and measures to boost consumption, in a robust environment of multilateralism.

Article in China-India Dialogue: http://chinaindiadialogue.com/chinas-economy-what-to-expect

In China Pictorial: http://china-pictorial.com.cn/chinas-economy-what-to-expect