“Qin Peng’s Observation: CCP Cedes Territory to India, BRICS Unable to Challenge USD”

Hello audience, welcome to “Qin Peng Observation.”

Today’s focus: The latest border agreement between the CCP and India has been reached, but research has found that the CCP has once again betrayed Chinese territory to India. So, what did they get in return?

The BRICS summit seemed lively on the surface, but substantive issues were not resolved. The father of BRICS, Jim O’Neill’s dream of challenging the US dollar with BRICS yuan is unrealistic.

Wealthy Chinese individuals are accelerating their departure, with over $200 billion escaped in the past year.

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This week, the biggest international topic concerning China is that the CCP leader Xi Jinping has once again traveled abroad to Russia to meet Putin and also met with Indian Prime Minister Modi. Xi Jinping even told Putin that China and Russia should be friends for generations. Everything seems all fine and dandy, but keen observers have noticed many anomalies before and after these events.

Firstly, the Russian leaders who welcomed Xi Jinping at the airport were mysteriously downgraded. Previously, the lowest rank was a Deputy Prime Minister, but this time it was just a leader from the Tatarstan Republic, -Minihanov. Was this intentional disrespect or did Russia also realize that Xi Jinping’s power has been weakened by Vice Chairman of the Military Commission Zhang Yuxia and the elders, giving him a show of force? We do not know.

Secondly, Xi Jinping, the CCP leader, speaking about the generational friendship between China and Russia, was criticized on social media. Because in modern times, Soviet Russia not only brought bloody Marxism-Leninism and the Chinese Communist Party to China but also took away over 1 million square kilometers of Chinese territory. Moreover, there have been several conflicts and the Zhenbao Island war between the CCP and the Soviet Union. The renewal of friendship came during the 1989 Chinese student movement when Soviet Communist Party General Secretary Gorbachev visited Beijing. But soon after, the Soviet Union disintegrated, the Soviet Communist Party entered the garbage heap of history, Putin regretfully lost the glory of a great power, and Xi Jinping lamented the sudden disappearance of the rogue proletarians’ homeland, the Soviet Union, with no one to uphold this tyranny, saying, “there is not a single courageous man among them.”

Given this history, can we really talk about generational friendship?

The third anomaly is Xi Jinping and Modi’s jovial meeting, which came at a great cost.

On the day before the summit, the Indian Ministry of External Affairs released a statement, announcing that the two countries had reached an agreement on the patrolling arrangements along the Himalayan border. The next day (October 22nd), foreign media reporters asked the CCP Ministry of Foreign Affairs to confirm the news and explain the details. CCP spokesperson Lin Jian admitted to the agreement, stating that the CCP side must implement the above solution well, but refused to disclose the specifics of the solution.

According to Chinese military self-media analysis, the truth is that the CCP agreed to withdraw from two crucial outposts and territories controlled, with a total area exceeding a thousand square kilometers.

After the 2020 conflict, India demanded that the CCP withdraw all troops “crossing the actual control line” and return to the status quo prior to April. At the same time, India severed a series of normal economic, cultural, and diplomatic exchanges between the two countries, making their relationship “abnormal.” The disputed border areas are as shown in the picture, with green representing areas controlled by India claimed by the CCP and red representing areas controlled by the CCP claimed by India, with India claiming the entire Aksai Chin region and Pangong Lake area.

After years of negotiations, the two sides have reached agreements on four areas, resolving 75% of the issues, according to the Indian Foreign Minister. Foreign media and local sources revealed that the CCP actually abandoned the Pangong Lake where several Chinese soldiers died due to the conflict.

This time, the CCP has given up territory to India, which is not the first time. The most famous previous occasion was in 1962 when India occupied about 90,000 square kilometers of land south of the McMahon Line previously invaded by the British: the fertile land of South Tibet, which was part of China’s Tibet.

In 1962, CCP troops crossed the McMahon Line and deep into Indian territory, achieving victory. But unexpectedly, in November of that year, CCP Premier Zhou Enlai announced a ceasefire, not only restoring the lost 92,000 square kilometers of South Tibet but also giving more than 1,000 square kilometers.

At that time, the CCP’s intention was to lead Asia and Africa, so it sought to gain the support of the largest developing country, India.

So, what is the purpose of the CCP giving up land this time? It is very likely for its so-called global strategy. Retired CCP military officer and mainland military commentator Song Zhongping told the New York Times that although the new agreement did not mean the end of all border disputes between the two countries, at least it could temporarily set aside conflicts, focus on solving domestic economic issues, and avoid being manipulated by other countries, especially the US.

It seems reasonable, but can this earn India’s respect for China, and will India give up the quadrilateral alliance with the US, Japan, and Australia and not confront the CCP? Wishful thinking.

In addition to the two reasons mentioned by Song Zhongping, I believe the CCP hopes to please India and continue to strengthen the international organization built by the CCP and Russia, the BRICS.

However, even the internationally renowned expert known as the father of BRICS, believes that the CCP’s ambitions are overstated.

Jim O’Neill, the then chief economist at Goldman Sachs, introduced the term “BRICS” in a research paper in 2001, highlighting the enormous growth potential of Brazil, Russia, India, and China, and the necessity of reforming global governance to include them. Since then, he has been known as Mr. BRICS.

Recently, O’Neill told Reuters that “the idea of BRICS potentially being a proper global economic club, like the G7, sounds lovely like a fairy tale, but they see themselves as some alternative global thing, which is very worrying because it clearly isn’t viable.”

He also believes that as a whole, the BRICS countries have achieved very little over the past 15 years.

He added that without the US and Europe, it is impossible to solve real global problems, just as the West could not solve real global problems without China, India, Russia, and Brazil.

However, the CCP and Russia apparently do not think so. In recent years, they have been working hard to expand the BRICS organization, attracting more and more regional powers to join. Currently, the BRICS organization represents over 40% of the global population and 37% of the total economic output. The CCP is also attempting to push for de-dollarization and establish a common currency and a common cross-border payment system.

In the joint declaration at this year’s summit titled “Kazan Declaration,” criticism was also directed at unilateral sanctions against some member countries like Russia and Iran, stating that these sanctions harm the poorest populations in those countries. Despite the strong statements, it was noted that the declaration did not address the global reserve currency status issue frequently brought up by Russia during its chairmanship or the use of a single currency and cryptocurrency by BRICS countries. Instead, the Kazan Declaration welcomed the use of local currencies in financial transactions between BRICS countries and their trading partners.

The use of local currencies actually acknowledges that the ambitions of de-dollarization have stumbled.

On October 22nd, Al Jazeera also noted that the path to challenging Western hegemony for BRICS is long and thorny.

First, there are internal flaws and divisions within the organization, intensified by the recent entry of new members, with Brazil and India expressing opposition.

Second, Putin was issued an arrest warrant by the International Criminal Court for initiating the Russo-Ukrainian War, raising doubts about the legitimacy of the organization.

Third, different countries have different deep-rooted interests as they join the organization. This is quite different from other large international organizations. It is widely known that these countries are mostly attracted by Chinese money and technology, hoping for a cash cow rather than having much thought of confrontation with the US.

This has led to many weaknesses in the BRICS organization, including differences in the political system and economic orientation of member countries, lack of a permanent organization or stable structure compared to the EU, differing views on economic, trade, and financing issues among founding countries, economic and trade competition between some member countries, especially between India and China, concerns about CCP’s dominance, dumping policies, lack of market coordination, and political and border disputes and tensions between founding countries, especially between China and India, as well as potential conflicts with the US (especially with Russia and China), which could turn into a new cold war, close relations of some BRICS countries with the US, such as India.

Regarding de-dollarization, both China and Russia have expressed a desire to establish independent payment systems, while India remains reserved.

It can be seen that the fundamental contradiction within BRICS is the relationship between China and India. The father of BRICS, O’Neill, said that in fact, this is a huge inherent problem facing BRICS countries: the relationship between China and India is not close enough and rarely reach consensus on anything.

“Is Xi Jinping trying to turn the BRICS group into his own ‘G7′? I don’t think the Indians would agree!”

O’Neill has also repeatedly stated in recent years about BRICS countries’ common currency as a pipe dream and fantasy. He said that any BRICS country’s currency would heavily depend on China, and Russia and Brazil would not be significant components.

“If they truly want to address economic issues seriously, why not really pursue reducing trade tariffs on each other?” he said.

In fact, when I graduated from university, I did a special study on international finance, leaving a deep impression on the complex history of the formation of the euro, the stringent conditions, and turbulent process. The euro is the result of multiple factors intertwined in thought, culture, political choices, and economic integration in the European continent. In order to form a unified currency, they specifically developed coordinated fiscal and monetary policies. Even with that, they faced various storms, such as the bankruptcy of Greece leading to the potential disbandment of the Eurozone, frequent changes in leadership leading to a lack of consistency and stability in policies, political correctness putting European companies at a disadvantage in global economic competition, fiscal policies, especially deficits exceeding standards in many countries, and so on, making the development of the euro region quite challenging.

Given this, with countries patched together like BRICS of differing views and deep-rooted interests, how well can BRICS countries function as a unit?

The CCP has always advocated for the internationalization of the yuan, but in reality, the yuan’s share in global foreign exchange reserves has decreased in recent years, from a peak of 2.8% in 2022 to about 2.3% currently.

So, how can they talk about challenging the US dollar?

The BRICS payment system conceived by the CCP has set up two currency pools, one for gold and one for local currencies. An initial contribution value is set, and then adjustments are made based on monthly trade surpluses and deficits. It seems decent on the surface, but on careful consideration, many problems arise, such as:

First, what system will operate it? Led by the CCP or Russia? Will other countries agree to it?

Second, how will the exchange rates be coordinated among these currencies? For example, due to severe inflation in Brazil, the country’s currency has experienced severe devaluation against the dollar in recent years. Will the CCP accept losses to accommodate other countries?

In fact, during the recent BRICS meeting in Russia, a funny incident occurred where Russia requested leaders of various countries to bring their own hard currencies such as dollars due to being sanctioned, making their credit cards unusable in Russia.

Speaking of the dollar, the CCP is also facing challenges. Although it appears to have a significant trade surplus, not only has capital outflows been substantial, but foreign exchange fleeing has been on the rise.

On October 23rd, The Wall Street Journal estimated that in the four quarters ending June this year, as much as $254 billion may have illegally flowed out of China.

To bypass government controls, people have used various methods, such as shipping valuables overseas or overpaying for imported goods. Some have come up with new ideas, such as transporting computer hard drives loaded with cryptocurrencies to other jurisdictions and exchanging them for cash from other countries.

Setting up companies overseas and acquiring domestic companies is another method. Art transactions have become an open secret for many to launder money out of the country. The method is simple: take a valuable painting or other artwork to Hong Kong for auction. However, the proceeds from the auction are not remitted back to mainland China but kept in Hong Kong in US dollars or other foreign currencies. Since Hong Kong has no capital controls, the seller can transfer the money elsewhere.

These are approximate statistics and not comprehensive.

Where does all this money go? Most of it goes to Europe, the US, Japan, and Australia. In recent years, a large number of wealthy Chinese individuals have increasingly gathered in Japan and Singapore, buying real estate and land, enjoying life.

Of course, many may wonder, doesn’t China have foreign exchange controls? Why is there still such a massive outflow of funds? This is not surprising because where there’s a will, there’s a way, and the CCP system serves the elite, so they will undoubtedly continue to allow capital flight.

This is what we see today, the CCP giving up disputed territories to India in exchange for anti-American sentiment, but internal factions within BRICS have their own intentions, and de-dollarization and anti-Americanism are practically impossible missions. At the same time, the elites within China are accelerating their departure.

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