Zanzibar - dhow caught in the late afternoon light 

The Indian prime minister Manmohan Singh will be arriving in Tanzania today . This visit , part of a six day trip in which he has attended the Indo-African summit too, is seen primarily in the context of India’s outreach to African nations. However, rather than carrying out the business and strategic dialogue between India and the East African countries under a general Indo-African dialogue, Indian interests could be served better by  reviving and strengthening the ancient trade and strategic links that once pervaded the Indian Ocean.

Unlike the Atlantic or the Pacific, Indian Ocean has been less of a barrier than a uniting force. It was a shared space , an arena for three way interaction between the Indian , East African and South East Asian cultures. The regularity and convenience of monsoon winds not only aided in navigation, but also helped bring about a diffusion of languages, cultures, people and ideas through out the vast Indian Ocean region. These ancient links had endured for centuries, until the arrival of first the Portuguese and then the English all but decimated them. As the major powers such as India, Indonesia, Oman , Kenya, came under foreign rule , the links between these countries were also severed. The economic decline of these major powers also led to a decline in the intraregional trade in the Indian Ocean community.

The situation is very different now. The major powers of the Indian Ocean region viz India, Indonesia, Malaysia, Singapore, Oman, Bangladesh, Kenya, Tanzania are all economies which are growing at a scorching rate. Not only is their trade with the developed world growing, the south-south trade is also booming.  They have also increasingly begin to share the same security and strategic concerns , be it the prevailing piracy near the Horn of Africa and the associated problem of the failed state of Somalia,  the security of vital sea lanes or the rising Chinese influence. These cultures also , and very importantly , mostly speak the same language : English and are by and large democratic, secular nations.

India has a central role to play in this community. As the pre-eminent naval power in the region , and also the largest economy , it is India’s responsibility to lay the foundations for a strong economic as well as strategic partnership with the Indian Ocean rim states. Not only would it make eminent economic sense, but also provide India with a framework to protect its interest in the Indian Ocean which it considers its backyard.

India has already made some progress in this direction.Much of it has however been in the characteristically lackluster and lethargic way which has been a hallmark of Indian foreign policy. The Indian Ocean Rim-Association for Regional Cooperation has been dead for years now though lately there has been some talk about reviving it. The Indian navy is slowly expanding its capabilities as a blue water force but much of its focus has been directed towards the East Asian region. Indian naval engagement with East Africa has thus far only consisted of some basing agreements with Madagascar, a multi lateral naval exercise with South Africa and Brazil , and some flag showing visits by the ships. The navy should redouble its efforts to effectively project power on the East African coast , particularly so in the context of the rising threat of piracy . The various multilateral events like the Indian Ocean Naval Symposium should also be further expanded in scope. But above all , what is needed is a strong will and a genuine desire from New Delhi to shed its usual ambiguity in foreign policy and closely integrate with other stake holders in a close knit economic and security framework.

It is inevitable that in the twenty first century , the Indian Ocean will eclipse  both the Atlantic and the Pacific oceans  and retake its place in the history as the most important trading and strategic region in the planet. The question is whether the Indian leadership has the vision and the energy to reestablish India as the preeminent power in the region.


These days Indian Institute of Foreign Trade(IIFT) , the business school from which I have recently graduated, is all abuzz about a new assignment from the Prime Ministers Office. IIFT has been tasked with setting up a new school of foreign trade in Africa to train professionals in international business management. As India and Africa inaugurate the second Indo-African summit , this initiative is a very good example of the way in which India and Africa can partner to achieve mutual prosperity and security in the 21st century.

It is now almost universally agreed that Africa would be a very important economic region in the 21st century.  It will not only be a supplier of crucial raw materials , but would also be a big and flourishing market in itself. Its combined GDP is now more than that of India and is expected to grow fast . The worlds leading economic powers are vying with each other to secure crucial supplies as well as to corner a slice of the consumer market. Mirroring the changing world geopolitical scenario, the strategic and economic influence of India and China is increasing in Africa at the expense of Western nations. At the same time the competition between India and China is increasing. Although , not a neo-colonial scramble for Africa , this rivalry is real and is  bound to intensify in the coming decades. India needs to stand up and fight for its interests in Africa , albeit with different tools.

Most of the Chinese engagement in Africa usually consists of  heavy investment  in physical infrastructure with a view of securing access to natural resources. A majority of these deals are financed by the Chinese Export Import Bank and are usually executed by Chinese contractors. The projects are executed by Chinese managers using Chinese instruments and Chinese labor. Some labor gangs are even reported to bring their own prostitutes from China. Although ensuring efficiency, this model increasingly alienates the Chinese businesses from the local population and have little trickle down effect . To a population which is very sensitive about colonial exploitation, this high handedness is slowly adding to public resentment which might one day explode.

India cannot and should  not emulate this. India must carefully position itself as a partner to Africa in growth. Our focus should not be on investing in physical infrastructure as much as on the social infrastructure.Rather than being state sponsored, Indian engagement with Africa should be led by private sector. Robust people to people ties should be built and encouraged.  Indian businesses should be encouraged to invest into those sectors which are most crucial to African growth, such as water, agriculture productivity, medicine , education. Indian businesses should also provide as much employment as possible to the local people, even if that means investing heavily into training employees.

And all this should be done not because it is nice to say and do , but because it makes ample business sense. This is the 21st century , and todays Africa will never accept any colonial master. As its people become more educated , and more aware , they are more likely to share their wealth with a friend than an oppressor. We need to extend them a firm hand of friendship with a clear heart and conscience.

Côte d'Ivoire Children

Ibrahim Coulibaly, the leader of Invisible Commandos, a militia that helped Ivory Coast President Alassane Ouattara defeat rival Laurent Gbagbo , was killed in a gun battle on Wednesday .Coulibaly’s ‘Invisible Commando’ insurgents had fought alongside what is now the Ivorian national army to topple Gbagbo, but had been accused of not meeting a deadline to lay down their arms and join the new army.

Ivory Coast

Supporters of Coulibaly had accused Ouattara’s prime minister Guillaume Soro of killing Coulibaly without any provocation.  Coulibaly had a bitter fallout with Soro during the 2002-03 rebellion and since then he had been locked in a bitter and often violent dispute with Soro.

Ibrahim Coulibaly was a very ambitious man. Born in 1964, he started his career as a lowly soldier. His origins in the North , and his basketball talents got him a promotion to the bodyguard unit of Alassane Ouattara when he was the prime minister in the government of Félix Houphouët-Boigny. Ibrahim never looked back . His charisma, boldness, and political dexterity saw him emerge as one of the leading power brokers in Ivory Coast and was involved in numerous coups. However, a series of miscalculations led to a marked decline in his influence and he was forced to lie low during Gbagbo’s regime.

The current conflict gave him a chance to again rise to prominence. He was one of the chief military commanders of the Ouattara forces. His Invisible Commandos, who were reputed to be 5000 strong, played prominent part in military operations against Gbagbo forces in Northern Ivory coast. However, they were often accused of atrocities against civilians.

Coulibaly was increasingly seen as a  liability by the regime due to his violent reputation and aggressive posturing. His death, with or without official acquiescence should come as no surprise.  His death  could  signify the consolidation of power by Ouattara and his removal of potential rivals from the scene. Or more worryingly , it could mark the start of a deadly new phase in Ivory Coast politics where faction fights faction for political supremacy and military leaders considerably weaken and eventually displace Ouattara’s power.

Ivory Coast , long a beacon of stability and prosperity in Africa , certainly does not deserve the second .

#Cartoon - #Yemen wants Ali Abdullah Saleh OUT!  on Twitpic

Yemen’s president Ali Abdullah Saleh has decided to leave power and hand over the reins of  government to a transitional government  in exchange for immunity from persecution. It seems that Saleh is now, finally , on his way out . What implications this holds for Yemen ? More mayhem perhaps.

Map picture

Yemen has long been on the brink of being a failed state . It is an impoverished state which imports most of its food from outside. Its suffers from high population growth and a large unemployed youth population . The sources of revenue for the government are dwindling, with oil reserves running out . Yemen could also be the first state in the world to run out of water. Tribal divisions run deep. Add to that prevalence of widespread Khat intoxication , and you have the prefect socio-economic nightmare .

The problems of Yemen don’t end here. The  country has a large population of Zaidi Shias . These have long been engaged in a bitter conflict with Saleh government . The government has long tried to supress their rebellion , with direct Saudi and covert American help, with little effect.

Al-Qaeda has also been active in Yemen and have frequently attacked government forces. The recent parcel bomb attacks on board FedEx and UPS have originated in Yemen .Al-Qaeda in Arabian Peninsula has publicly identified Yemen as the base for their operations in Saudi Arabia.

Then there is the movement for South Yemen , which aims to create a separate State of South Yemen . This movement, centred in Aden , perceives itself to be exploited and marginalised by the northerners and aims to set it right by creating a separate state of South Yemen.`

This country in short is an almost impossible place to govern. The fact that Saleh was able to hang in for 32 years, is a testimony to the amazing political skills the man possessed. He used every trick in the book to keep these political demons under the lid .Saleh has described his 33-year rule and his power plays with the leaders of the country’s many tribes, as a "dance on snake heads."   But now he is gone and there seem to be nobody on the  Yemeni political scene with the skill and the wherewithal to keep these snakes in check.

The current opposition is held together by a common hatred of the regime and is very likely to disintegrate post Saleh. The various competing interests of the Southerners, the Islamists, the Houthis are likely to ensure a weak government in the days to come.  There are already signs of dissent within opposition ranks . Further none of the opposition leaders have a mass following.

This absence of credible leadership post Saleh would enable the separatist movements to further gain steam . Al-Qaeda is probably already watching with glee the prospect of a weak government at the helm. Yemen with its difficult terrain and proximity to Saudi Arabia will be the perfect base for them .

Regimes like that of Saleh  , for all their brutishness and corruption , have brought stability to historically unstable places like Yemen.  Long entrenched , these have been felled like oaks in a storm by the youth revolt . But the world may soon find out that these youth have little experience in running a country, let alone one as complex as Yemen .

Although this doesn’t justify their continued existence, there is certainly a case for their more orderly phasing out. The sudden demise of these regime might just have left a  vacuum which would be difficult to fill and which ,like all vacuums, would be very destructive to the geopolitical fabric of middle east.

After the bloody killings on “Great Friday “ , the Syrian government has decided to violently nip these protests in the bud. In a heavy handed response reminiscent of Hafez Al-Assad’s brutal crackdown of the Hama uprising in 1982, government forces have entered the city of Dar’a.

Map picture

Though there are no definitive accounts, there are reports of at least 25  deaths. The government forces are reported to be using heavy artillery, light mortars and resorting to indiscriminate firing. The twitter is abuzz with reports of many innocent deaths.

An innocent girl killed in Daraa by the bullet of a government sniper

This is one of the defining moments of this Arab Spring. The revolution which started as a genuine outburst of public resentment against corrupt leaders has started to founder on the ground realities of Middle East realpolitik.

A regime which should have long perished by the weight of its own inefficiencies, is managing to ruthlessly repress popular aspirations and hold onto power by cleverly exploiting tribal dissensions and insecurities. On the other hand, a widely inclusive message which was supposed to be secular and democratic in nature has been hijacked by the fundamentalists painting this as a fight between the heretic and the believer.

In my opinion . Dar’a is fast turning into a battle ground between hardliners of Muslim Brotherhood and the Alawite security establishment. These religious tones of the revolution have crystallized the support of the Army and the otherwise anti-Assad and pro-democracy Alawites towards the Assad regime.

Although the Assad regime has not succeeded in markedly improving the lot of the average Alawi . it is widely perceived as a  safeguard against religious persecution by Sunni Muslims who consider the Alawis as heretics and have historically engaged in vigorous persecution.

The recent outbreak of protests in Dar’a and other towns of the Sunni heartland are widely considered in Syria to be a Muslim Brotherhood conspiracy to enforce a Sunni fundamentalist rule in Syria. In view of these events, the army whose officer cadre is largely Alawi has decided to support the regime in what it largely considers as an existential battle for survival.

This heavy handed response by the Alawite army brass has generated even more resentment among the  Sunni populace. There are unconfirmed reports about the refusal of the largely Sunni rank and file to obey orders to fire on coreligionists. Syria, it seems, is moving rapidly down a fast descending spiral of violence and religious acrimony.

This video purportedly shows Syrian soldiers executed for refusing to obey orders

This is deplorable. The Assad regime has done little good for the common Syrian, Alawi or Sunni . It should have gone long ago. But in in the middle east , the regressive politics of tribe, religion , and ethnicity have long propped up the most brutal tyrants even when they have bled their nations dry.

Syria: Ethnic Questions

April 24, 2011

Syria has entered into a tailspin of political chaos. The Assad regime has brutally cracked down on the protests of “ Great Friday “ causing much bloodshed and a lot of resentment among the populace.

This brutal repression has been widely condemned by the world community. But what is missing in the misty eyed analysis of the Syrian revolution is a proper understanding of the sectarian nature of the revolt.

Syrian population is composed of various ethnicities and religions . The Sunni Arabs dominate the population but there are sizeable numbers of Alawites, Druze , Christians and Kurds.

This is a mainly Sunni revolt against the minority Alawites. The revolt has thus far been restricted to mainly Sunni towns and has found little or no resonance in the Alawite , Kurd or Druze areas of the country .

The below map is a map of the old French protectorate of Greater Syria. During those times the boundaries of the various governorates corresponded with ethnicities. The State of Damascus and the State of Aleppo were predominantly Sunni Arab whereas the Druze and the Alawite had their own separate provinces , the State of Jabal ad-Druze and the state of Alawites respectively.

And this is a map showing the location of the protests currently happening of Syria.

map_of_revolustion 15.04.2011

As is plainly visible , that most the blood is spilled in the area of the old provinces of State of Damascus,  the Sunni heartland of the country. This essentially Sunni nature of the revolt is bad tiding for a country like Syria. If the regime falls, there could be widespread jockeying for power between the various ethnic groups which might very quickly descend into strife or worse, civil war.

It would be wrong to see the various uprisings in the Arab world as identical uprisings of the disgruntled youth against corrupt leaders. These revolts had very different meanings in different places. In Syria , it is about a natural correction in a distorted power structure. A correction which is propelled by the vested interests of people who have very different aims than the idealistic youths of the Arab street.



Syria’s Bashar Al-Assad is in trouble. Widespread  protests have engulfed the country and are spreading from city to city. The opposition has called for even bigger protest on Friday . These protesters who are fighting against the draconian regime , swear by their democratic credentials. But reality could be murkier , and  for India and the world , even dangerous.

The current Syrian regime has been reprehensibly tyrannical and guilty of severe human rights violations. But this regime has brought stability and peace to land which has been traditionally wrecked by violent conflict within the various sects and sub sects that inhabit these lands. In fact, present day Syria is a wholly artificial construct created out of colonial necessity .

The current regime ideologically inherits from the Baath party’s Arab socialist political movement and still professes the Baathist ideals of secularism and socialism . Although it exclusively has its power base among the minority Alawites, it also initially had a wide degree of support from the middle class progressive Arabs of Syria who wanted a progressive alternative to Islamic fundamentalism.

Much of that support base has been eroded , largely due to the Assad’s regimes clannish power structure , widespread corruption and most importantly due to its inability to provide the burgeoning young population with a political platform to voice its concerns. However, substantial as this erosion in public approval of Assad regime was ,it could not possibly explain the sudden eruption of such widespread protests . 

And I cannot possibly buy the arguments that these protests are largely spontaneous. That happens only in a democratic utopia. In real world, these protests have to be financed, organized and directed , even if loosely. And in societies like Syria, where there was never a vibrant political sphere , there is no expertise or initiative available with the common citizens to direct such protests.

So what or who could be behind these protests? Certainly not the Iranians who have a deep interest in ensuring the survival of the regime . Certainly not Hezbollah , who is a large recipient of tacit and material aid from the current regime and a staunch supporter of the regime.

And contrary to what the current Syrian government claims , it could not be the Israelis or the US . Israel would prefer to have a deal with a firmly in control Syrian despot than a fractious diplomatic government, And the United States also does not want to further murky the situation in Middle East.

It could be possibly the Lebanese 14th of March movement, but they don’t have the resources . nor the reach to create something of this magnitude.

Than it leaves only one another actor, the Muslim Brotherhood. They have the motive as well as the means to do so. Brutally suppressed by Bashar’s father Hafez-Al Assad, they hate the current regime not only for denying the Brotherhood of its legitimate role in Syrian politics. but also for being hated apostates.

The situation reminds me of the Iranian revolution of 1979. The revolution , started by students and communists, was soon hijacked by the religious right . Brutal suppression by the Shah has paradoxically helped in strengthening the organizational structure of the right wing fundamentalists by enforcing the espirit de corps . Not only that , the elimination of the first and second level leadership by the dreaded SAVAK, indirectly helped in splintering of the movement into tiny autonomous cells. These when activated were very hard to suppress because of their very distributed nature.

Could it be the case in Syria too ? If yes, then it is a frightening scenario. Frightening for me, frightening for India, and indeed frightening for the world.

Kandahar again

April 21, 2011

India is facing a Kandahar like situation again .However, this time it is not set in the bleak wind blown barrenness of Kandahar , but in the warm tropical waters of Indian ocean off the coast of Somalia.

Over the weekend, a group of pirates holding the Asphalt Venture, a Panamanian-flagged merchant vessel, were supposed to let the ship’s Indian crew go after receiving a $3.5 million ransom. But in a first for Somali pirates, the brigands decided they wanted to punish India for its aggro anti-pirate stance.

The pirates kept the money and released only eight hostages, holding onto seven. They then demanded India swap their 120 comrades captured by the Indian navy over the past weeks, vowing to hold onto any Indian nationals taken until then.



And true to its style , the Indian government doesn’t appear to know what to do yet. On Monday, it announced that the INS Talwar, which conducts anti-piracy patrols in the Gulf of Aden, will set sail for the eastern coast of Somalia towards the Asphalt Venture. Officially, the Talwar won’t launch any swashbuckling boarding operations, as it’s just there to “keep a close eye on the situation.” Officials have ruled out using their special forces to free the hostages.

Whether the Talwar launches a raid to free the remaining hostages or not, it’s clear that some kind of threshold has been crossed here. The pirates holding the Asphalt Venture aren’t just looking to pressure a company for ransom now, but to scare off India from launching rescue missions later.

This could be just another example of pirate solidarity which was much threatened but never actually carried out. Or perhaps this is another manifestation of the commonly held perception of  India as a soft state which can be easily cowed into submission. Or perhaps it could be part of a wider terrorist-pirate complex with wider aims and probably backing from some powerful third party actors.

But whatever it is , it is no less an ominous portent then Kandahar was . As Kandahar singled out India as a soft state to the terrorists and convinced them to redouble their efforts in trying to destabilize India, this incident too is going to decide whether India , the logical custodian of Indian Ocean , can establish its will on the waters of its ocean.


Piracy is a growing danger.  India is already facing more pirate attacks closer to its shores and a further proliferation of piracy would be disastrous for India’s trade much of which passes through these waters. Moreover, India has over 35,000 nationals employed globally as seamen on commercial ships sailing under various flags. If pirates now won’t release Indian hostages, this may have an effect on insurance premiums for ships employing Indian crew.

However, appeasement definitely wont work . Any bad precedent set by the Indian government, as was set in Kandahar, would only further embolden pirates. This could turn out to be even more worrisome if there is a sort of pirate-terrorist alliance which would have more than monetary reasons to target Indian shipping.

India needs to aggressively  take the lead in stamping out piracy . This might not be a painless process in the short term but would help protect not only our vast seaborne trade but also consolidate India’s profile as the pre eminent naval power in Indian Ocean.

But perhaps I dream too much. In this country , fixated with Amar Singh and his political shenanigans, this incident is not even front page news.

Demons from Hell

October 30, 2010

The recovery on Friday of explosive packages  ,dispatched from Yemen to synagogues in Chicago  on board FedEx and UPS flights,  served to clearly underscore the growing threat from Yemen. Sadly , without a massive overhaul of the country’s economic, social and political infrastructure, there is little that can be done to prevent Yemen from becoming the next Al-Qaeda command post.

For the price of a few hundred dollars,terrorists were able to set off a broad terrorism scare. Law enforcement agencies in several countries were put on high alert, two global corporations — FedEx and UPS — had to disrupt services and inspect dozens of packages around the world, Canadian fighter jets were mobilized, passengers on board a completely innocent commercial flight were scared out of their wits . Even the president of the United States made a short statement on this.

These terrorists, Al Qaeda in Arabian Peninsula as they call themselves , have yet again demonstrated their ability to cause disproportionate losses to the western world and to disrupt the western way of life. They are fanatical , motivated, and most importantly they seem to have found the perfect hideaway for themselves: Yemen


Yemen is a terrorist paradise. Its geography is extreme in its ruggedness. It has a long and porous border with Saudi Arabia and an equally porous maritime border with Somalia.Yemen is also desperately poor. Most of its population lives on less than $2 a day. The mainstay of its economy , oil is projected to run out by 2017


More worryingly , Yemen might well be the first country in the world to run out of water. Large scale exploitation of water resources, mainly for the cultivation of Khat , a mildly narcotic chewing substance, has led to a severe shortage. Scientists fear that the country is literally chewing itself to death and might have no water left by 2017.

Wadi Dahr khat plantations

To make it worse , the central government has only a tenuous hold on the country. The Houthi rebellion in the north and the tensions between the various tribes in the south has led to the steady erosion of central authority. President Saleh has till now been able to buy off the tribes with the oil money. With oil running out , these rented loyalties might soon evaporate.

All these factors together with the widespread illiteracy, pervasive gun culture, and proximity to Wahhabi ideological centres,  make Yemen  one of the world’s most conducive environment for global terrorist networks to fester and operate. Yemen also provides the ideal geo-strategic location to these groups. Its location on the Arabian peninsula , provides the Al-Qaeda with a terrific  launching platform to overthrow the hated monarchies of the Arabian peninsula. Its proximity to the lawless regions of Somalia ensures safe haven for terrorist leadership in case of any international operation. Yemen is the ultimate geo-strategic nightmare for the western strategist.

In face of the threats, the response of the world community has at best been amateur. Apart from extending millions of dollars in aid to President Saleh, little has been done.  Much of this aid money had been siphoned off by corrupt government officials. There have been no efforts to invest into upgrading the social and physical infrastructure of the country. Nothing has been done to  diversify the nation’s income sources and stave off the looming financial collapse.

Yemen is on its way to becoming another Afghanistan . Something which the world could ill afford.  The war on terrorism , if it starts on this land, might be not winnable at all. The world needs to end this war, before it starts . Terrorism must be stamped out before it takes root in this society. And to do that, we need to do more than throw dollars and send drones.

Reading Chinese tea leaves

October 22, 2010

China’s GDP and Inflation figures for the quarter ending September are out . And they look promising indeed . GDP at 9.6% although a tad lower is still pretty impressive. Inflation at 3.6% per cent is a little more than August’s 3.5% .

Default template

The figures mean that  China is growing robustly and the economy is not yet on the threshold of overheating . And this provides an interesting perspective to Tuesday’s interest rate hike by the Peoples Bank of China .

The 25 basis point interest rate hike, the first in three years ,  was in itself not a ground shaking event. But it had a huge psychological impact . Markets all over the world were spooked amidst fears that the world’s fastest growing economy is overheated and planning to curb growth .

Although the markets are right to worry about the overheating of Chinese economy, Tuesday’s move by the Central Bank ,like all things Chinese , was based on  much more complex, and political, reasons.

This rate hike is to be seen as a signal to US before the coming G-20 summit . One of the major argument proposed by US favouring a devaluation of the Yuan was based on the premise that a weak Yuan causes inflation in China , and in todays era of sluggish economic growth it is in China’s interest to let the Yuan appreciate rather than going for the more risky option of interest rate hike. China has hit back by doing the exact opposite.

China has let it be known that it has enough confidence in its growth to accept the risk of interest rate hikes. Tuesday’s cuts are a signal to the world that the China is not going to do much about its currency and would prefer to handle any inflationary pressures through domestic policies.

Impressive indeed . But behind all this nationalistic grandstanding , lurks a very real and potent danger to the Chinese miracle : a rapidly building asset price bubble. And  the Chinese leaders, who are busy proclaiming the resurgence of their nation and letting it be known to the whole wide world that China would not cave in to any external pressure ever again,  are doing precious little to tackle it.

china image

China is awash in money. As the great Chinese middle class becomes richer and richer, a boom mentality is setting in . Interest rates in the Chinese informal market are running at 20%, rates that were last seen during the dot com bubble in US. There is a mad rush towards the real estate sector. Couples are faking divorces to get past the “one house per  family” policy. High-end property prices in dozens of Chinese cities have doubled during the global financial crisis.   An asset price bubble, particularly in the real estate sector , appears to be rapidly building up.

Sooner or later this asset price bubble would spill over as inflation in the customer price index . Although, the September figures show only a marginal increase, there is a clear and persistent danger of inflationary trends in the Chinese economy.

Precious little is being done by the Chinese political mandarins to rectify the situation . Much of Chinese competitiveness , as this article points out , is based on low interest rates. The Chinese government is worried about the potential adverse effects any monetary tightening could have on this competitiveness. More worryingly, powerful political interests in China have vested interests in not letting the rates rise . Tuesdays interest rate hikes, by their relative ineffectuality, serve to demonstrate, at least for the time being,  the unwillingness of the government to tackle the situation head on .

But again , we must not rush to draw conclusions . One of the best strategy when dealing with the Dragon is patience. Let us wait and watch , because this could well turn out to be more complex than it seems .