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Politics, Religion, Science, Culture and Humanities => Politics & Religion => Topic started by: Crafty_Dog on January 15, 2007, 11:01:37 AM

Title: China
Post by: Crafty_Dog on January 15, 2007, 11:01:37 AM

Sunday January 7, 2007


New China. New crisis

In the last decade China has emerged as a powerful, resurgent economic force with the muscle to challenge America as the global superpower. But, in his controversial new book, Will Hutton argues that China's explosive economic reforms will create seismic tensions within the one-party authoritarian state and asks: can the centre hold?

For more than 2,000 years, China's conceit was that it was the celestial kingdom, the country whose standing was endowed by heaven itself and whose emperors tried to reproduce heavenly harmony on Earth. All China basked in the reflected glow; foreigners were barbarians beyond the gilded pale who should not be allowed even to learn the art of speaking and writing Chinese.


When I first visited China in the autumn of 2003, such articles of Confucian faith seemed very far away, submerged by the lost wars and the 26 humiliating treaties of the 19th century, subsequent communist revolution and now the economic growth to which Beijing's motorway rings and Shanghai's skyline are tribute. This was a new China that had plainly left behind obeisance to the canons of Confucianism and the later cruelties of Mao. More than three years and a book later, I am less convinced.


All societies are linked to their past by umbilical cords - some apparent, some hidden. China is no different. Imperial Confucian China and communist China alike depended - and depend - upon the notion of a vastly powerful, infallible centre: either because it was interpreting the will of heaven or, now, of the proletariat. In neither system have human rights, constitutional checks and balances or even forms of democracy figured very much. As a result, China has poor foundations on which to build the subtle network of institutions of accountability necessary to manage the complexities of a modern economy and society. Sooner or later, it is a failing that will have to be addressed.


China is both very confident about its recent success and very insecure about its past, a potent mix that breeds a deep-seated xenophobia and shallow arrogance. China's economy in 2007 will be nearly nine times larger than it was in 1978 when Deng Xiaoping won the power struggle with the Maoists and began his extraordinarily sinuous, gradualist but successful programme of market-based economic reforms, groping for stones to cross the river, as he called it. China is now the fourth largest economy in the world - after the United States, Japan, and Germany - and is set to become the second largest within a decade. More than 150 million workers have moved to China's booming cities and 400 million people have been removed from poverty. It is a head-spinning achievement.


China is the new factor in global politics and economics, and its rulers and people know it. It now has more than $1 trillion of foreign exchange reserves, the world's largest. It is the single most important financier of the United States' enormous trade deficit. It is the world's second largest importer of oil. Before 2010, it will be the world's largest exporter of goods. It is, comfortably, the world's second largest military power. Last year, the Pentagon's four-yearly defence review stated that China is the power most likely to 'field disruptive military technologies that could over time offset traditional US military advantages'. A new great power is in the making, but one whose pursuit of its self-interest takes the amorality of power to a new plane. It is not just the Chinese who should be concerned about its institutional and moral failings; all of us should be.


In China, you can almost smell the new self-confidence: it is in the skyscrapers built in months; it is in the brash and unashamed willingness to rip off and copy Western brands; it is in the well-groomed and inscrutable demeanour of the rich entrepreneurs, self-confident officials and assured academics.


I sat in a Beijing bar just over a year ago with a typical member of China's new class of rich businessmen who double up as members of the party, a combination of commercial and political power that China knew well as the old Confucian mandarinate, now strangely reproducing itself in a new guise after Mao tried to eliminate it forever in the Cultural Revolution.


In surprisingly fluent English and with his Mercedes waiting outside, he praised China's communist regime and its curious mix of capitalism and communism with all the enthusiasm of a Tory businessmen praising Thatcher. Chinese corruption? Think of Enron and party-funding scandals in London, he declaimed. Double standards between communist rhetoric and practice? What about the US and Britain's invasion of Iraq, and Guantanamo Bay? What I failed to realise, he insisted, betraying both assurance and insecurity, is that China will not surrender again the natural rank that it should never have lost. Western values, institutions and attitudes were being revealed for being straw men, blown away by resurgent China and the pragmatism of its communist leaders.


Yet Western values and institutions are not being blown away. The country has made progress to the extent that communism has given up ground and moved towards Western practices, but there are limits to how far the reformers can go without giving up the basis for the party's political control. Conservatives insist that much further and the capacity to control the country will become irretrievably damaged; that the limit, for example, is being reached in giving both trade unions more autonomy and shareholders more rights. It is the most urgent political debate in China.


The tension between reform and conservatism is all around. For example, the party's commitment now is no longer to building a planned communist economy but a 'socialist market' economy. The 26,000 communes in rural China, which were once the vanguard of communism, were swept away by the peasants themselves in just three years between 1979 and 1982, the largest bottom-up act of decollectivisation the world has ever witnessed. Hundreds of millions of peasants are, via long leases, again farming plots held by their ancestors for millenniums. China's state-owned enterprises no longer provide life-long employment and welfare for their workers as centrepieces of a new communist order; they are autonomous companies largely free to set prices as they choose in an open economy and progressively shedding their social obligations.


Equally amazing, China's communists have declared that the class war is over. The party now claims to represent not just the worker and peasant masses but entrepreneurs and business leaders, whom it welcomes into its ranks. The party refers to this metamorphosis as the 'three represents': meaning that the party today represents 'advanced productive forces' (capitalists); 'the overwhelming majority' of the Chinese (not just workers and peasants); and 'the orientation ... of China's advanced culture' (religious, political and philosophical traditions other than communism).


Party representatives say that the country is no longer pledged to fight capitalism to the death internationally, but, instead, wants to rise peacefully. China has joined the World Trade Organisation and is a judicious member of the United Nations Security Council, using its veto largely in matters that immediately concern it, such as Taiwan.


But for all that, it remains communist. The maxims of Marxist-Leninst-Maoist thought have to stand, however much the party tries to stretch the boundaries, because they are the basis for one-party rule. Yet the system so spawned is reaching its limits. For example, China's state-owned and directed banks cannot carry on channelling hundreds of billions of pounds of peasant savings into the financing of a frenzy of infrastructure and heavy industrial investment. The borrowers habitually pay interest only fitfully, and rarely repay the debt, even as the debt mountain explodes. The financial system is vulnerable to any economic setback.


Equally, China is reaching the limits of the capacity to increase its exports, which, in 2007, will surpass $1 trillion, by 25 per cent a year. At this rate of growth, they will reach $5 trillion by 2020 or sooner, representing more than half of today's world trade. Is that likely? Are there ships and ports on sufficient scale to move such volumes - and will Western markets stay uncomplainingly open? Every year, it is also acquiring $200bn of foreign exchange reserves as it rigs its currency to keep its exports competitive. Can even China insulate its domestic financial system from such fantastic growth in its reserves and stop inflation rising? Already, there are ominous signs that inflationary pressures are increasing.


These ills have communist roots. It is the lack of independent scrutiny and accountability that lie behind the massive waste of investment and China's destruction of its environment alike. The pace of desertification has doubled over 20 years, in a country where 25 per cent of the land area is already desert. Air pollution kills 400,000 people a year prematurely. A hacking cough in the Beijing smog or the stench when the wind comes from the north in Shanghai are reminders of just how far China still has to go.


Energy is wasted on an epic scale. But the worst problem is water. One-fifth of China's 660 cities face extreme water shortages and as many as 90 per cent have problems of water pollution; 500 million rural Chinese still do not have access to safe drinking water. Illegal and rampant polluting, a severe shortage of sewage treatment facilities, and chemical pollutants together continue to degrade China's waterways. In autumn 2005, two major cities - Harbin and Guangzhou - had their water supplies cut off for days because their river sources had suffered acute chemical spills from state-owned factories.


Enterprises are accountable to no one but the Communist party for their actions; there is no network of civil society, plural public institutions and independent media to create pressure for enterprises to become more environmentally efficient. Watchdogs, whistleblowers, independent judges and accountable government are not just good in themselves as custodians of justice; they also keep capitalism honest and efficient and would curb environmental costs that reach an amazing 12 per cent of GDP. As importantly, they are part of the institutional network that constitutes an independent public realm that includes free intellectual inquiry, free trade unions and independent audit. It is this 'enlightenment infrastructure' that I regard in both the West and East as the essential underpinning of a healthy society. The individual detained for years without a fair trial is part of the same malign system that prevents a company from expecting to be able to correct a commercial wrong in a court, or have a judgment in its favour implemented, if it were against the party interest.
Title: Part Two
Post by: Crafty_Dog on January 15, 2007, 11:02:21 AM
The impact is pernicious. The reason why so few Britons can name a great Chinese brand or company, despite China's export success, is that there aren't any. China needs to build them, but doing that in a one-party authoritarian state, where the party second-guesses business strategy for ideological and political ends, is impossible. In any case, nearly three-fifths of its exports and nearly all its hi-tech exports are made by non-Chinese, foreign firms, another expression of China's weakness. The state still owns the lion's share of China's business and what it does not own, it reserves the right to direct politically.


Mark Kitto, a former Welsh Guardsman, has found at first-hand how difficult it is to sustain private ownership in China. He built up three Time Out equivalents in Beijing, Shanghai and Guangzhou but, after seven years of successful magazine publishing, learnt last year that he was about to become a partner of the state. The only terms on which his licence to publish could be retained was if he were to accept a de facto takeover from China Intercontinental Press, controlled by China's State Information Council, the propaganda mouthpiece of the Communist party. It did not matter that he owned the shares, wanted to retain his independence and had been careful to stay within the party's publishing guidelines. The party now wanted control of his magazines and simply took it. It is an example repeated many times over.


China must become a more normal economy, but the party stands in the way. Chinese consumers need to save less and spend more, but consumers with no property rights or welfare system are highly cautious. To give them more confidence means taxing to fund a welfare system and conceding property rights. That will mean creating an empowered middle class who will ask how their tax renminbi are spent. Companies need to be subject to independent accountability if they are to become more efficient, but that means creating independent centres of power. The political implications are obvious.


China's future is shrouded in uncertainty. My belief is that what is unsustainable is not sustained. Change came in the Soviet Union with the fifth generation of leaders after the revolution; the fifth generation of China's leaders succeed today's President Hu Jintao in 2012. No political change will happen until after then, but my guess is that sometime in the mid to late 2010s, the growing Chinese middle class will want to hold Chinese officials and politicians to account for how they spend their taxes and for their political choices. What nobody can predict is whether that will produce another Tiananmen, repression and maybe war if China's communists pick a fight to sustain legitimacy at home or an Eastern European velvet revolution and political freedoms. Either way, China's route to becoming a world economic power is not going to proceed as a simple extrapolation of current trends.


This book has been something of a personal intellectual odyssey. My hypothesis when I began was that China was so different that it could carry on adapting its model, living without democracy or European enlightenment values. I have changed my mind and now see more clearly than ever the kinds of connection I identified in The State We're In between economic performance and so-called 'soft' institutions - how people are educated, how trust relations are established and how accountability is exercised (just to name a few) - are central. They are equally important to a good society and the chance for individual empowerment and self-betterment.


Early in my research, I tried out the still-emergent thesis at a small dinner in Lan Na Thai, one of the restaurants in Shanghai's Ruijin guest house, a complex of refurbished old mansions and traditional pavilions in the French quarter where communist leaders reputedly once ate and slept.


Over stir-fried curried chicken and crispy fried flying sea bass, the Chinese guests repeated politely and persuasively that China was making up new economic and political rules. Afterwards, I chanced to have a few words alone with one of the local rising government stars as we walked out of the complex. He kept his eyes on the ground. 'Don't allow yourself to be dissuaded, despite what you have heard. You are right that China is not different. I want my children to see a China with human rights and democratic institutions. And I am not alone.' He jumped into a taxi and was gone.


I have often thought about that chance exchange. Britain and the West take our enlightenment inheritance too easily for granted, and do not see how central it is to everything we are, whether technological advance, trust or well-being. We neither cherish it sufficiently nor live by its exacting standards. We share too quickly the criticism of non-Western societies that we are hypocrites. What China has taught me, paradoxically, is the value of the West, and how crucial it is that we practise what we preach. If we don't, the writing is on the wall - for us and China.


China's quest for oil


China's foreign policy is increasingly driven by the need to feed its growing appetite for oil. General Xiong Guangkai, deputy chief of the Chinese general staff, has said that China's energy problem needs to be taken 'seriously and dealt with strategically'.


That means less reliance on the Middle East; less transportation of oil via sea-lanes policed by the US navy; more capacity for the Chinese navy to protect Chinese tankers; and more oil brought overland by pipeline from central Asia.


Over the past two years, China has pulled off a string of strategic oil deals. In April 2005, Petro China and Canadian company Enbridge signed a memorandum to build a $2bn 'gateway' pipeline to move oil from Alberta to the Pacific Coast. In Venezuela, President Hugo Chavez is to build a Chinese-financed pipeline to the Pacific coast through Colombia, having given China oil and gas exploration rights in 2005. Saudi Arabia surrendered to Chinese courtship in 2004 and accorded exploration rights.


In Sudan, a major source of oil, China's blind eye to human rights and mass murder if it hinders its interests is demonstrated by Zhou Wenzhong's comment when Deputy Foreign Minister about the situation in Darfur where more than 250,000 have died.'Business is business,' he said. 'We try to separate politics from business and, in any case, the internal position of Sudan is an internal affair, and we are not in a position to influence them.'


Wrong: China has substantial influence on Sudan if it chose to exercise it. It does not, a commentary on China's approach to foreign policy and an awesome warning of the future if an unreconstructed China became yet more powerful.


Tiananmen: the legacy


The image of a single student halting a tank in Tiananmen Square is one of the most arresting in modern history. But the protests spread well beyond Beijing for six weeks in spring 1989 to encompass demonstrations in 181 cities.


The party and army were divided over how to respond; 150 officers openly declared that they would not fire on demonstrators after martial law was declared, and at least a third of the central committee wanted to reach a compromise with the protesters. The party's then general secretary, Zhao Ziyang, proposed a partial meeting of demands for reform. Nobody should be killed.


That was not the view of Deng and the party elders - the eight 'immortals', veterans of the Revolution. A 'counter-revolutionary' riot had to be suppressed. But before Deng could act, he had to leave Beijing to ensure that army groups 28 and 29, personally loyal to him, would provide the core of the force rather than the uncertain army groups based around the capital. Once in place, Zhao was then brutally deposed, remaining under house arrest until his death in 2005. Martial law was imposed on 19 May and a fortnight later the tanks rolled into Tiananmen Square. Official estimates were that 5,000 soldiers and police officers were wounded and 223 killed. Civilian losses - 2,000 wounded and 220 killed - were lower. Many still languish in prison.


Tiananmen is the event that cannot be discussed in China; websites mentioning it are blocked. It was no 'counter-revolutionary riot' but a demand for freedoms that infected all China and very nearly succeeded.


Current leader Hu Jintao and his successors know they are not Deng and cannot command the loyalty of key elements of the army in the same way. Their best strategy is to deliver growth and jobs while trying to keep the lid on China's growing but still disconnected social protests. Whether the policy will carry on working is the open question asked daily in Beijing's inner circles.


· An edited extract from The Writing on the Wall: China and the West in the 21st Century to be published by Little, Brown on 15 January, £20.

©Will Hutton 2007
Title: Re: China
Post by: Crafty_Dog on January 24, 2007, 06:03:02 PM

Space and Sea-Lane Control in Chinese Strategy
By George Friedman

Aviation Week & Space Technology magazine, citing U.S. intelligence sources, has reported that China has successfully tested an anti-satellite (ASAT) system. According to the report, which U.S. officials later confirmed, a satellite was launched, intercepted and destroyed a Feng Yun 1C weather satellite, also belonging to China, on Jan. 11. The weather satellite was launched into polar orbit in 1999. The precise means of destruction is not clear, but it appears to have been a kinetic strike (meaning physical intercept, not laser) that broke the satellite into many pieces. The U.S. government wants to reveal as much information as possible about this event in order to show its concern -- and to show the Chinese how closely the Americans are monitoring their actions.

The Jan. 17 magazine report was not the first U.S. intelligence leak about Chinese ASAT capabilities. In August 2006, the usual sources reported China had directed lasers against U.S. satellites. It has become clear that China is in the process of acquiring the technology needed to destroy or blind satellites in at least low-Earth orbit, which is where intelligence-gathering satellites tend to operate.

Two things about this are noteworthy. The first is that China is moving toward a space warfare capability. The second is that it is not the Chinese who are announcing these moves (they maintained official silence until Jan. 23, when they confirmed the ASAT test), but Washington that is aggressively publicizing Chinese actions. These leaks are not accidental: The Bush administration wants it known that China is doing these things, and the Chinese are quite content with that. China is not hiding its efforts, and U.S. officials are using them to create a sense of urgency within the United States about Chinese military capabilities (something that, in budgetary debates in Washington, ultimately benefits the U.S. Air Force).

China has multiple space projects under way, but the one it is currently showcasing -- and on which the United States is focusing -- involves space-denial capabilities. That makes sense, given China's geopolitical position. It does not face a significant land threat: With natural barriers like the Himalayas or the Siberian wastes on its borders, foreign aggression into Chinese territory is unlikely. However, China's ability to project force is equally limited by these barriers. The Chinese have interests in Central Asia, where they might find power projection an enticing consideration, but this inevitably would bring them into conflict with the Russians. China and Russia have an interest in containing the only superpower, the United States, and fighting among themselves would play directly into American hands. Therefore, China will project its power subtly in Central Asia; it will not project overt military force there. Its army is better utilized in guaranteeing China's internal cohesiveness and security than in engaging in warfare.

Geopolitics and Naval Power

Its major geopolitical problem is, instead, maritime power. China -- which published a defense white paper shortly before the ASAT test -- has become a great trading nation, with the bulk of its trade moving by sea. And not only does it export an enormous quantity of goods, but it also increasingly imports raw materials. The sea-lanes on which it depends are all controlled by the U.S. Navy, right up to China's brown water. Additionally, Beijing retains an interest in Taiwan, which it claims as a part of China. But whatever threats China makes against Taiwan ring hollow: The Chinese navy is incapable of forcing its way across the Taiwan Strait, incapable of landing a multidivisional force on Taiwan and, even if it were capable of that, it could not sustain that force over time. That is because the U.S. Navy -- using airpower, missiles, submarines and surface vessels -- could readily cut the lines of supply and communication between China and Taiwan.

The threat to China is the U.S. Navy. If the United States wanted to break China, its means of doing so would be naval interdiction. This would not have to be a close-in interdiction. The Chinese import oil from around the world and ship their goods around the world. U.S. forces could choose to stand off, far out of the range of Chinese missiles -- or reconnaissance platforms that would locate U.S. ships -- and interdict the flow of supplies there, at a chokepoint such as the Strait of Malacca. This strategy would have far-reaching implications, of course: the Malacca Strait is essential not only to China, but also to the United States and the rest of the world. But the point is that the U.S. Navy could interdict China's movement of goods far more readily than China could interdict American movement of goods.

For China, freedom of the seas has become a fundamental national interest. Right now, China's access to the sea-lanes depends on U.S. acquiescence. The United States has shown no interest whatsoever in cutting off that access -- quite the contrary. But China, like any great power, does not want its national security held hostage to the goodwill of another power -- particularly not one it regards as unpredictable and as having interests quite different from its own. To put it simply, the United States currently dominates the world's oceans. This is a source of enormous power, and the United States will not give up that domination voluntarily. China, for its part, cannot live with that state of affairs indefinitely. China may not be able to control the sea itself, but it cannot live forever with U.S. control. Therefore, it requires a sea-lane-denial strategy.

Quite naturally, China has placed increased emphasis on naval development. But the construction of a traditional navy -- consisting of aircraft carriers, nuclear attack submarines and blue-water surface systems, which are capable of operating over great distances -- is not only enormously expensive, but also will take decades to construct. It is not just a matter of shipbuilding. It is also a matter of training and maturing a generation of naval officers, developing viable naval tactics and doctrine, and leapfrogging generations of technology -- all while trying to surpass a United States that already has done all of these things. Pursuing a conventional naval strategy will not provide a strategic solution for China within a reasonable timeframe. The United States behaves in unexpected ways, from the Chinese point of view, and the Chinese will need a solution within five years -- or certainly within a decade.

They cannot launch a competitive, traditional navy in that period of time. However, the U.S. Navy has a general dependency on -- and, therefore, a vulnerability related to -- space-based systems. Within the U.S. military, this is not unique to the Navy, but given that the Navy operates at vast distances and has sea-lane-control missions -- as well as the mission of launching aircraft and missiles against land-based targets -- it has a particular dependency on space. The service relies on space-based systems for intelligence-gathering, communications, navigation and tactical reconnaissance. This is true not only for naval platforms, but also for everything from cruise missile guidance to general situational awareness.

Take out the space-based systems and the efficiency of the Navy plummets dramatically. Imagine an American carrier strike group moving into interdiction position in the Taiwan Strait without satellite reconnaissance, targeting information for anti-ship missiles, satellite communications for coordination and so on. Certainly, ship-board systems could substitute, but not without creating substantial vulnerabilities -- particularly if Chinese engineers could develop effective jamming systems against them.

If the Chinese were able to combine kinetic ASAT systems for low-Earth orbit, high-energy systems for communications and other systems in geostationary orbit and tools for effectively denying the electromagnetic spectrum to the United States, they would have moved a long way toward challenging U.S. dominance of space and limiting the Navy's ability to deny sea-lanes to Chinese ships. From the Chinese point of view, the denial of space to the United States would undermine American denial of the seas to China.

Conjecture and Core Interests

There has been some discussion -- fueled by Chinese leaks -- that the real purpose of the Chinese ASAT launch was to prompt the Americans to think about an anti-ASAT treaty. This is not a persuasive argument because such a treaty would freeze in place the current status quo, and that status quo is not in the Chinese national interest.

For one thing, a treaty banning ASAT systems would leave the Chinese without an effective means of limiting American naval power. It would mean China would have to spend a fortune on a traditional navy and wait at least a generation to have it in place. It would mean ceding the oceans to the United States for a very long time, if not permanently. Second, the United States and Russia already have ASAT systems, and the Chinese undoubtedly assume the Americans have moved aggressively, if secretly, to improve those systems. Treaty or no, the United States and Russia already have the technology for taking out Chinese satellites. China is not going to assume either will actually dismantle systems -- or forget how to build them fast -- merely because of a treaty. The only losers in the event of an anti-ASAT treaty would be the countries that do not have them, particularly China.

The idea that what China really wants is an anti-ASAT treaty is certainly one the Chinese should cultivate. This would buy them time while Americans argue over Chinese intentions, it would make the Chinese look benign and, with some luck, it could undermine U.S. political will in the area of the military utilization of space. Cultivating perceptions that an anti-ASAT treaty is the goal is the perfect diplomatic counterpart to Chinese technological development. But the notion itself does not stand up to scrutiny.

The issue for the United States is not so much denying space to China as ensuring the survivability of its own systems. The United States likely has the ability to neutralize the space-based systems of other countries. The strategic issue, however, is whether it has sufficient robustness and redundancy to survive an attack in space. In other words, do U.S. systems have the ability to maneuver to evade attacks, to shield themselves against lasers, to continue their missions while under attack? Moreover, since satellites will be damaged and lost, does the United States have sufficient reserve satellites to replace those destroyed and launchers to put them in place quickly?

For Washington, the idea of an ASAT treaty is not the issue; the United States would love anything that blocks space capabilities for other nations. Rather, it is about building its own space strategy around the recognition that China and others are working toward denying space to the United States.

All of this is, of course, fiendishly expensive, but it is still a lot cheaper than building new naval fleets. The real problem, however, is not just money, but current military dogma. The U.S. military is now enthralled by the doctrine of asymmetric warfare, in which nonstate actors are more important than states. Forever faithful to the assumption that all wars in the future will look like the one currently being fought, the strategic urgency and intellectual bandwidth needed to prepare for space warfare does not currently exist within the U.S. military. Indeed, an independent U.S. Space Command no longer exists -- having been merged into Strategic Command, which itself is seen as an anachronism.

For the United States, one of the greatest prices of the Iraq war is not simply the ongoing conflict, but also the fact that it makes it impossible for the U.S. military to allocate resources for emerging threats. That always happens in war, but it is particularly troubling in this case because of the intractable nature of the Iraq conflict and the palpable challenge being posed by China in space. This is not a challenge that many -- certainly not those at the highest levels of military leadership -- have time to think about while concerned about the future of a few city blocks in Baghdad; but U.S. leaders might, in 10 years, look back on 2007 and wonder what their predecessors were thinking about.

© Copyright 2006 Strategic Forecasting Inc. All rights reserved.

A friend comments:

Interesting piece; thanks for sharing.

I think the geo-political analysis of China and the US is very well done, although I disagree with the author’s conclusion: That the Iraq war has made it impossible for the US to address this crucial issue. I believe that the Pentagon is all over this (in spite of Iraq). One interesting book in this regard is: Another good one is Both these guys are very plugged-in to the Pentagon, and both talk extensively about this threat. Clearly (not just with China) our ability to protect our satellites is a crucial defense issue. That is, I think it to be NOT falling through Iraq's cracks.

Title: Disconnect between the American public and reality
Post by: ccp on June 17, 2007, 09:13:12 AM
The American public is underestimating the Chinese threat. As usual there are those who think if we just make nice everyone will love us. (a la Clinton)

The US military is well aware of what is going on.  Gertz is keeping us up on this real challenge:
Title: China's Military Build Up
Post by: buzwardo on August 31, 2007, 04:12:44 PM
Analysis: Military imbalance in the Taiwan Strait
HONG KONG, Aug. 31
Column: Military Might
During the past seven to 10 years China's rapid buildup of military power has tipped the balance in the Taiwan Strait strongly in its favor.

    Since 1999, when former Taiwan President Lee Teng-hui announced his "two states" theory -- daring to say that the People's Republic of China and the Republic of China are two different states, precipitating the PRC's aggressive stance against the island's independence -- there have been drastic changes in the balance of military power on the two sides. This includes the navies, air forces, and strategic campaign missiles, or ballistic missiles.

    The Taiwanese air force has not added a single new combat aircraft since 1999. It still has 148 F-16 Block 15 MTU, 58 Mirage2000-5 and 130 IDF fighters in service. The total number of its third generation fighters has remained around 336 over the past seven years. On the sea, the navy has added only four Kidd-class DDGs, the largest arms procurement since the Democratic Progressive Party came to power in 2000.

    In terms of the buildup of ballistic missiles (surface-to-surface missiles, or SSMs), China has achieved a great leap forward both in the number of SSMs in its arsenal and in their overall quality. In addition to its DF-15 and DF-11 SSMs, which have been upgraded continuously over the years, television footage released by the official Chinese media shows there are at least one or two new types of short-range ballistic missiles now in operational service.

    As far as the quality of the Chinese SSM is concerned, the export version of its B611M ballistic missile is now equipped with a GPS/GLONASS satellite positioning system, giving it a strike accuracy of around 50 meters (164 feet).

    China's improved position in the air is evidenced by the changes in the quantity and quality of its third generation combat aircraft from 1999 to 2007. In 1999 it had only 48 Su-27SK, two J-11 A/B, a few Su-27 UBK and five J-10A aircraft. In 2007 the figures are 48 Su-27SK, 95 J-11 A/B, 28 additional Su-27 UBK, 100 Su-30 MKK/MK2, 64 J-10A, at least 24 JH-7A, 4 KJ-2000 and at least two KJ-200.

    Based on these figures, the number of third generation combat aircraft in the fleet of the People's Liberation Army Air Force was only a modest 55 in 1999, while in 2007 the number has jumped to 369. In 2008 it will further surpass Taiwan's fleet.

    With the import of Su-30 MKK fighters, China's inventory of H-59ME and H-29TE TV-guided air-to-surface missiles, or ASMs; 1,500-pound Russian TV-guided bombs; H-31A anti-ship missiles; and H-31P anti-radiation missiles has also increased steadily over the last seven years. China has imported more than 1,000 RVV-AE active radar-guided air-to-air missiles, or AAMs, from Russia, while the number of AMR AAMs in the Taiwanese air force is no more than 120 now.

    In addition, China continues to import a substantial number of RVV-AE AAMs every year. The critical change here is that in 1999, the PLAAF did not even have the capability to use such advanced AAMs as the PL-12RVV-AE AAM and the precision guidance land-attack weapons that they have now.

    Given another two to three years, all the pilots of the PLAAF's 369 third generation fighters will have accumulated flight time of more than 1,000 hours. Around 2009 or 2010, the overall quality of the military personnel ready to take to the air over the Taiwan Strait will be fundamentally reversed, in favor of the PLA Air Force.

    In 1999, the PLAAF did not have the capability to engage in aerial early warning operations. In 2007, there are already four plus two AWACS/AEW&C aircraft in operational service. Although these AWACS aircrafts have encountered such problems as electromagnetic disturbances and their training activities are less frequent than before, the PLA at least has the airborne warning and control system. The number of AWACS platforms currently operational in the PLAAF is equivalent to the number in Taiwan.

    The PLAAF also has two refitted Y-8 electronic warfare aircraft, and other supporting electronic reconnaissance and countermeasure aircraft are under development. By contrast, the Taiwanese air force has had only one refitted C130 EW aircraft for years.

    Since 1999, the PLA Navy has prioritized and sped up the building of surface battleships over 4,000 tons, nuclear-powered submarines and conventional diesel submarines. In 1999 the navy had one 7,000-ton class 956E/EM DDG, one 6,000-ton class 051B DDG, four Kilo 887/636 SS and one 039A SS. The 2007 numbers are at least one 094 SSBN, at least two   093 SSNs, four 7,000-ton class 956E/EM DDGs, one 6,000-ton class 051B DDG, two 7,000-ton class 051C DDGs, two 052B DDGs, two 053C DDGs, four 054/A FFGs, 12 Kilo 887/636 SS, and at least 10 039A SS.   

    The most remarkable change is that the PLAN had only one type 051B and one type 956E missile destroyers (DDG), in 1999 that had a full-load displacement of more than 6,000 tons, whereas in 2007 it has 11 large surface battleships with a displacement of more than 6,000 tons, and two type 054A missile frigates (FFG) with a respective full-load displacement of more than 4,000 tons. By contrast, the only surface battleships in the Taiwanese navy with full-load displacement of more than 7,000 tons are the four Kidd-class DDGs.

    In terms of its range of anti-ship missiles, the PLAN is also edging ahead of the Taiwanese navy. The PLAN's stockpile of anti-ship missiles with a range of over 200 kilometers (125 miles) has increased steadily, including the YJ6-2 and 3M-54E anti-ship missiles with respective ranges of 280 kilometers (175 miles) and 220 kilometers (around 135 miles). Those missiles give the PLAN the capability to launch long-range attacks on the sea and underwater as well. Besides, the PLAN has widely deployed the 180-kilometer-range YJ8-3 SSM on its surface battleships.

    The PLAN's RIF-M, HQ-9 long range and HQ-16, Shtil-1 middle range ship-to-air missiles are also already in service. This means the overall range of ship-to-air missiles of the Taiwanese navy can no longer match that of the PLAN.

    Unlike the PLA Air Force's aircraft, however, most of the new battleships of the PLA Navy have only recently gone into operation, and may encounter difficulties in combat applications. For instance, the delivery of 8 Kilo 636 submarines started only in 2005, and the type 052C "Chinese Aegis" DDGs have remained anchored at the Sanya military port for most of this year. This indicates that these new battleships may have encountered problems.

    Particularly, the PLAN has not established an integrated combat system at sea. As for its Type 054A FFGs, they are still under construction, and two Type 054 FFGs were newly delivered in 2005.

    It will take time for China to resolve the problems with its new defense equipment. Nonetheless, the military power balance in terms of quantity and quality of weapons between the two sides of the Taiwan Strait continues to tilt markedly toward the side of the PRC.


    (Andrei Chang is editor-in-chief of Kanwa Defense Review, published in Hong Kong.)
Title: Re: China
Post by: Crafty_Dog on September 17, 2007, 09:32:25 AM
This piece from the WSJ goes where others fear to tread:


China's One-Child Mistake
September 17, 2007; Page A17

If China could take a single decision today to enhance the nation's long-term economic outlook, it would be to recognize that coercive population control has been a tragic and historic mistake -- and to abandon it, immediately.

Such a call might surprise the casual observer, for on its own terms, China's population program has been a superficial success. In the early 1970s, China's then-current childbearing patterns implied nearly five births per woman. At the start of the "one child policy" in 1979, China's total fertility rate was nearly three births per woman. Today, China's fertility rate is far below the "net reproduction rate" -- by many estimates, just 1.7 births per woman nationwide. In some major population centers -- Beijing, Shanghai and Tianjin among them -- the average number of births per woman today has fallen below one baby per lifetime.

This "success," however, comes with immense inadvertent costs and unintended consequences. Thanks to a decade and a half of sub-replacement fertility, China's working-age population is poised to peak in size, and then start to decline, more or less indefinitely, within less than a decade. A generation from now, China's potential labor force (ages 15-64) will be no larger than it is today, perhaps smaller. This presages a radical change in China's growth environment from the generation just completed, during which time (1980-2005) the country's working-age population expanded by over 55%.

"Composition effects" only make the picture worse. Until now, young people have been the life force raising the overall level of education and technical attainment in China's work force. But between 2005 and 2030, China's 15-24 age group is slated to slump in absolute size, with a projected decline of over 20% in store. In fact, the only part of the working-age population that stands to increase in size between now and 2030 is the over-50 cohort. Will they bring the dynamism we have come to expect from China in recent decades?

On current trajectories, China's total population will start to decline around 2030. Even so, China must expect a "population explosion" between then and now -- one entirely comprised of senior citizens. Between 2005 and 2030, China's 65-plus age cohort will likely more than double in size, to 235 million or more, from about 100 million now. And because of the fall-off in young people, China's age profile will "gray" in the decades ahead at a pace almost never before witnessed in human history. China is still a fairly youthful society today -- but by 2030, by such metrics as median population age, the country will be "grayer" than the United States -- "grayer," that is, than the U.S. of 2030, not the U.S. of today.

How will China's future senior citizens support themselves? China still has no official national pension system. Up to now, China's de facto national pension system has been the family -- but that social safety net is unraveling, and rapidly. Until very recently, thanks to relatively large Chinese families, almost every Chinese woman had given birth to at least one son -- under Confucian tradition, their first line of support. But just two decades from now, thanks to the "success" of the one-child policy, roughly a third of women entering their 60s will have no living son.

In such numbers, one can see the making of a slow-motion humanitarian tragedy. But the withering away of the Chinese family under population control has even more far-reaching implications.

In Beijing, Shanghai and other parts of China, extreme sub-replacement fertility has already been in effect for over a generation. If this continues for another generation, we will see the emergence of a new norm: a "4-2-1 family" composed of four grandparents, but only two children, and just one grandchild. The children in these new family structures will have no brothers or sisters, no uncles or aunts, and no cousins. Their only blood relatives will be their ancestors.

It is no secret that China is already a "low trust society": Personal and business transactions still rely heavily upon guanxi, the network of personal relations largely demarcated by family ties. What exactly will provide the "social capital" to undergird commercial and economic development in a future China where "families" are, increasingly, little more than atomized households and isolated individuals?

One final consequence of China's population-control program requires comment: the eerie, unnatural and increasingly extreme imbalance between baby boys and baby girls. Under normal circumstances, about 103 to 105 baby boys are born for every 100 baby girls. Shortly after the advent of the one-child policy, however, China began reporting biologically impossible disparities between boys and girls -- and the imbalance has only continued to rise. Today China reports 123 baby boys for every 100 girls.

Over the coming generation, those same little boys and girls will grow up to be prospective brides and grooms. One need not be a demographer to see from these numbers the massive imbalance in the "marriage market" in a generation, or less. How will China cope with the sudden and very rapid emergence of tens of millions of essentially unmarriageable young men?

All of these problems just described are directly associated with involuntary population control. Scrapping this restrictive birth-control policy would surely ease China's incipient aging crisis, its looming family-structure problems and its worrisome gender imbalances. Some in China's leadership may worry that the end of the one-child policy might mean the return to the five-child family -- but in reality, modern China is most unlikely to return to pre-industrial fertility norms.

In the final analysis, the wealth of nations in the modern world is not found in the ground, or the forests, or in other natural resources. The true wealth of modern countries resides in their people -- in human resources. China's people are not a curse -- they are a blessing. The Chinese people, like people elsewhere, are rational, calculating actors who seek to improve their own circumstances -- not heedless beasts who procreate without thought of the future.

Trusting China's people to act in their own self-interest -- not least of all, trusting their choices and preferences with respect to their own family size -- may very well prove to be the key to whether China ultimately succeeds in abolishing poverty and attaining mass affluence in the decades and generations ahead.

Mr. Eberstadt is a resident scholar at the American Enterprise Institute. This essay is excerpted from remarks delivered at the World Economic Forum's conference in Dalian, China earlier this month.
Title: Re: China
Post by: Crafty_Dog on September 17, 2007, 09:59:36 AM
Second post of the day. 

Let Taiwan Join the U.N.
September 17, 2007; Page A16

Tomorrow the United Nations will consider Taiwan's application for membership. It has formally sought admission every year since 1993, but this year's application is different.

First, the country is applying under its own name ("Taiwan") rather than its official appellation ("Republic of China"). Second, it is applying to the U.N. General Assembly, the organization's comprehensive body of member nations -- despite the rejection of its application this summer by U.N. Secretary General Ban Ki-moon and his legal office. Third, the application may be followed by a national referendum on whether Taiwan should apply for U.N. membership under its own name -- a plan that has elicited a sharp rebuke by the Bush administration.

The U.N.'s lawyers argued that, having transferred China's seat from Taipei to Beijing in 1971, the U.N. should reject Taiwan's latest application because Taiwan "for all intents and purposes" is "an integral part of the People's Republic of China." Taiwan presents a more compelling legal case: It meets all of the requirements of statehood under law.

It is already a full and productive member of international organizations such as the World Trade Organization and Asia-Pacific Economic Cooperation forum. It has never been a province or part of the local government of the People's Republic of China. Taiwan's recent transformation into a modern democratic state supersedes any decades-old determination that gives the PRC a United Nations seat -- even as the U.N. failed to determine that Taiwan is part of the PRC or bestow upon it the right to represent Taiwan.

Taiwan's political case for U.N. membership is equally strong. It is the 48th most populous country in the world. Its economy is the world's 16th largest. Its gross national product totals $366 billion, or $16,098 per capita. With $267 billion in foreign exchange reserves, it is one of the world's three largest creditor states. Taiwan is therefore poised to be a significant contributor to the U.N.'s operations and play a constructive role in the organization.

Unfortunately, the United States and the other major powers discourage Taiwan in its quest for de jure international recognition of its de facto sovereignty. This is because they do not want to raise the ire of the PRC, which, as a member of the U.N. Security Council, can block any significant U.N. action, and, as a global power, can interfere on a host of issues important to the U.S. and Europe.

Thanks to exponentially increased trade with the U.S. and Europe, Beijing feels less compelled than ever to seek political accommodation with Taiwan, or to decrease its military threat against the island nation. Expanding economic relationships may be good in and of itself, but predictions that this would produce political cracks in China's authoritarian regime have proved wrong.

Today, Beijing is using its newfound economic might to isolate Taiwan still further in international organizations and attempt to persuade the two dozen countries that recognize Taiwan diplomatically to switch their ties to China. Meanwhile, the people of the PRC enjoy fewer political rights and civil liberties than in all but a few of the world's countries.

A few short years ago, the U.S. seemed determined to change this. During his 2000 election campaign and the first months of his administration, President Bush and his team vowed to fashion a new foreign policy in which U.S. national interests, particularly in Asia, were advanced less exclusively through the prism of Beijing. In other words, the U.S. wanted to be less beholden to the communist regime.

One of the casualties of 9/11, and the subsequent war in Iraq, was that this policy agenda became less of a priority. Our cooperation with Pakistan in the effort to topple the Taliban, find Osama bin Laden and eradicate terrorism in the region meant that we focused less on developing a higher-tier relationship with India. We also concentrated less on drawing out Japan, by encouraging it to play a more active political and military role on the global stage. Equally important, we were unable to increase our promotion of democracy in the region by fostering closer ties with countries such as Taiwan and South Korea and escalating pressure on Beijing to reform.

The current U.S. administration still has time to correct this omission. Having been an advocate for Taiwan during my time in the Senate, and today as part of a law firm that represents Taiwan's interests in the U.S., I believe that President Bush should support Taiwan's application for U.N. membership. This should be quickly followed by active or tacit support for Taiwan's plans for a popular vote on this issue in March 2008. Our close Asian friend and ally needs and deserves this recognition and support, which would at the same time advance America's regional and global interest in promoting democratization.

Mr. Dole, a former Senate majority leader and the Republican candidate for president in 1996, is special counsel to Alston & Bird.

Title: Re: China
Post by: G M on September 17, 2007, 10:04:56 AM
IMHO, we'll see China move against Taiwan sometime in late 2008-2009. Most likely this will happen while the US is facing issues elsewhere, like major terror attacks CONUS and/or a open shooting war with Iran.
Title: Re: China
Post by: Crafty_Dog on September 17, 2007, 10:49:31 AM
Which could explain why some factions within the Pentagon are pushing strongly for more/faster troop withdrawals from Irag , , ,
Title: Re: China
Post by: Crafty_Dog on September 22, 2007, 04:37:01 AM
The long march to be a superpower

From The Economist print edition

The People's Liberation Army is investing heavily to give China the military muscle to match its economic power. But can it begin to rival America?

THE sight is as odd as its surroundings are bleak. Where a flat expanse of mud flats, salt pans and fish farms reaches the Bohai Gulf, a vast ship looms through the polluted haze. It is an aircraft-carrier, the Kiev, once the proud possession of the Soviet Union. Now it is a tourist attraction. Chinese visitors sit on the flight deck under Pepsi umbrellas, reflecting perhaps on a great power that was and another, theirs, that is fast in the making.

Inside the Kiev, the hangar bay is divided into two. On one side, bored-looking visitors watch an assortment of dance routines featuring performers in ethnic-minority costumes. On the other side is a full-size model of China's new J-10, a plane unveiled with great fanfare in January as the most advanced fighter built by the Chinese themselves (except for the Ukrainian or Russian turbofan engines—but officials prefer not to advertise this). A version of this, some military analysts believe, could one day be deployed on a Chinese ship.

The Pentagon is watching China's aircraft-carrier ambitions with bemused interest. Since the 1980s, China has bought four of them (three from the former Soviet Union and an Australian one whose construction began in Britain during the second world war). Like the Kiev, the Minsk (berthed near Hong Kong) has been turned into a tourist attraction having first been studied closely by Chinese naval engineers. Australia's carrier, the Melbourne, has been scrapped. The biggest and most modern one, the Varyag, is in the northern port city of Dalian, where it is being refurbished. Its destiny is uncertain. The Pentagon says it might be put into service, used for training carrier crews, or become yet another floating theme-park.

American global supremacy is not about to be challenged by China's tinkering with aircraft-carriers. Even if China were to commission one—which analysts think unlikely before at least 2015—it would be useless in the most probable area of potential conflict between China and America, the Taiwan Strait. China could far more easily launch its jets from shore. But it would be widely seen as a potent symbol of China's rise as a military power. Some Chinese officers want to fly the flag ever farther afield as a demonstration of China's rise. As China emerges as a trading giant (one increasingly dependent on imported oil), a few of its military analysts talk about the need to protect distant sea lanes in the Malacca Strait and beyond.

This week China's People's Liberation Army (PLA), as the armed forces are known, is celebrating the 80th year since it was born as a group of ragtag rebels against China's then rulers. Today it is vying to become one of the world's most capable forces: one that could, if necessary, keep even the Americans at bay. The PLA has little urge to confront America head-on, but plenty to deter it from protecting Taiwan.

The pace of China's military upgrading is causing concern in the Pentagon. Eric McVadon, a retired rear admiral, told a congressional commission in 2005 that China had achieved a “remarkable leap” in the modernisation of forces needed to overwhelm Taiwan and deter or confront any American intervention. And the pace of this, he said, was “urgently continuing”. By Pentagon standards, Admiral McVadon is doveish.

In its annual report to Congress on China's military strength, published in May, the Pentagon said China's “expanding military capabilities” were a “major factor” in altering military balances in East Asia. It said China's ability to project power over long distances remained limited. But it repeated its observation, made in 2006, that among “major and emerging powers” China had the “greatest potential to compete militarily” with America.

Since the mid-1990s China has become increasingly worried that Taiwan might cut its notional ties with the mainland. To instil fear into any Taiwanese leader so inclined, it has been deploying short-range ballistic missiles (SRBMs) on the coast facing the island as fast as it can produce them—about 100 a year. The Pentagon says there are now about 900 of these DF-11s (CSS-7) and DF-15s (CSS-6). They are getting more accurate. Salvoes of them might devastate Taiwan's military infrastructure so quickly that any war would be over before America could respond.

Much has changed since 1995 and 1996, when China's weakness in the face of American power was put on stunning display. In a fit of anger over America's decision in 1995 to allow Lee Teng-hui, then Taiwan's president, to make a high-profile trip to his alma mater, Cornell University, China fired ten unarmed DF-15s into waters off Taiwan. The Americans, confident that China would quickly back off, sent two aircraft-carrier battle groups to the region as a warning. The tactic worked. Today America would have to think twice. Douglas Paal, America's unofficial ambassador to Taiwan from 2002 to 2006, says the “cost of conflict has certainly gone up.”

The Chinese are now trying to make sure that American aircraft-carriers cannot get anywhere near. Admiral McVadon worries about their development of DF-21 (CSS-5) medium-range ballistic missiles. With their far higher re-entry velocities than the SRBMs, they would be much harder for Taiwan's missile defences to cope with. They could even be launched far beyond Taiwan into the Pacific to hit aircraft-carriers. This would be a big technical challenge. But Admiral McVadon says America “might have to worry” about such a possibility within a couple of years.

Once the missiles have done their job, China's armed forces could (so they hope) follow up with a panoply of advanced Russian weaponry—mostly amassed in the past decade. Last year the Pentagon said China had imported around $11 billion of weapons between 2000 and 2005, mainly from Russia.

China knows it has a lot of catching up to do. Many Americans may be unenthusiastic about America's military excursions in recent years, particularly about the war in Iraq. But Chinese military authors, in numerous books and articles, see much to be inspired by.

On paper at least, China's gains have been impressive. Even into the 1990s China had little more than a conscript army of ill-educated peasants using equipment based largely on obsolete Soviet designs of the 1950s and outdated cold-war (or even guerrilla-war) doctrine. Now the emphasis has shifted from ground troops to the navy and air force, which would spearhead any attack on Taiwan. China has bought 12 Russian Kilo-class diesel attack submarines. The newest of these are equipped with supersonic Sizzler cruise missiles that America's carriers, many analysts believe, would find hard to stop.

There are supersonic cruise missiles too aboard China's four new Sovremenny-class destroyers, made to order by the Russians and designed to attack aircraft-carriers and their escorts. And China's own shipbuilders have not been idle. In an exhibition marking the 80th anniversary, Beijing's Military Museum displays what Chinese official websites say is a model of a new nuclear-powered attack submarine, the Shang. These submarines would allow the navy to push deep into the Pacific, well beyond Taiwan, and, China hopes, help defeat American carriers long before they get close. Last year, much to America's embarrassment, a newly developed Chinese diesel submarine for shorter-range missions surfaced close to the American carrier Kitty Hawk near Okinawa without being detected beforehand.

American air superiority in the region is now challenged by more than 200 advanced Russian Su-27and Su-30 fighters China has acquired since the 1990s. Some of these have been made under licence in China itself. The Pentagon thinks China is also interested in buying Su-33s, which would be useful for deployment on an aircraft-carrier, if China decides to build one.

During the Taiwan Strait crisis of 1995-96, America could be reasonably sure that, even if war did break out (few seriously thought it would), it could cope with any threat from China's nuclear arsenal. China's handful of strategic missiles capable of hitting mainland America were based in silos, whose positions the Americans most probably knew. Launch preparations would take so long that the Americans would have plenty of time to knock them out. China has been working hard to remedy this. It is deploying six road-mobile, solid-fuelled (which means quick to launch) intercontinental DF-31s and is believed to be developing DF-31As with a longer range that could hit anywhere in America (see map below), as well as submarine-launched (so more concealable) JL-2s that could threaten much of America too.

All dressed up and ready to fight?

But how much use is all this hardware? Not a great deal is known about the PLA's fighting capability. It is by far the most secretive of the world's big armies. One of the few tidbits it has been truly open about in the build-up to the celebrations is the introduction of new uniforms to mark the occasion: more body-hugging and, to howls of criticism from some users of popular Chinese internet sites, more American-looking.

As Chinese military analysts are well aware, America's military strength is not just about technology. It also involves training, co-ordination between different branches of the military (“jointness”, in the jargon), gathering and processing intelligence, experience, and morale. China is struggling to catch up in these areas too. But it has had next to no combat experience since a brief and undistinguished foray into Vietnam in 1979 and a huge deployment to crush pro-democracy unrest ten years later.

China is even coyer about its war-fighting capabilities than it is about its weaponry. It has not rehearsed deep-sea drills against aircraft-carriers. It does not want to create alarm in the region, nor to rile America. There is also a problem of making all this Russian equipment work. Some analysts say the Chinese have not been entirely pleased with their Su-27 and Su-30 fighters. Keeping them maintained and supplied with spare parts (from Russia) has not been easy. A Western diplomat says China is also struggling to keep its Russian destroyers and submarines in good working order. “We have to be cautious about saying ‘wow’,” he suggests of the new equipment.

China is making some progress in its efforts to wean itself off dependence on the Russians. After decades of effort, some analysts believe, China is finally beginning to use its own turbofan engines, an essential technology for advanced fighters. But self-sufficiency is still a long way off. The Russians are sometimes still reluctant to hand over their most sophisticated technologies. “The only trustworthy thing [the Chinese] have is missiles,” says Andrew Yang of the Chinese Council of Advanced Policy Studies in Taiwan.

The Pentagon, for all its fretting, is trying to keep channels open to the Chinese. Military exchanges have been slowly reviving since their nadir of April 2001, when a Chinese fighter jet hit an American spy plane close to China. Last year, for the first time, the two sides conducted joint exercises—search-and-rescue missions off the coasts of America and China. But these were simple manoeuvres and the Americans learned little from them. The Chinese remain reluctant to engage in anything more complex, perhaps for fear of revealing their weaknesses.

The Russians have gained deeper insights. Two years ago the PLA staged large-scale exercises with them, the first with a foreign army. Although not advertised as such, these were partly aimed at scaring the Taiwanese. The two countries practised blockades, capturing airfields and amphibious landings. The Russians showed off some of the weaponry they hope to sell to the big-spending Chinese.

Another large joint exercise is due to be held on August 9th-17th in the Urals (a few troops from other members of the Shanghai Co-operation Organisation, a six-nation group including Central Asian states, will also take part). But David Shambaugh of George Washington University says the Russians have not been very impressed by China's skills. After the joint exercise of 2005, Russians muttered about the PLA's lack of “jointness”, its poor communications, and the slowness of its tanks.

China has won much praise in the West for its increasing involvement in United Nations peacekeeping operations. But this engagement has revealed little of China's combat capability. Almost all of the 1,600 Chinese peacekeepers deployed (including in Lebanon, Congo, and Liberia) are engineers, transport troops, or medical staff.

A series of “white papers” published by the Chinese government since 1998 on its military developments have shed little light either, particularly on how much the PLA is spending and on what. By China's opaque calculations, the PLA enjoyed an average annual budget increase of more than 15% between 1990 and 2005 (nearly 10% in real terms). This year the budget was increased by nearly 18%. But this appears not to include arms imports, spending on strategic missile forces and research and development. The International Institute for Strategic Studies in London says the real level of spending in 2004 could have been about 1.7 times higher than the officially declared budget of 220 billion yuan ($26.5 billion at then exchange rates).

This estimate would make China's spending roughly the same as that of France in 2004. But the different purchasing power of the dollar in the two countries—as well as China's double-digit spending increases since then—push the Chinese total far higher. China is struggling hard to make its army more professional—keeping servicemen for longer and attracting better-educated recruits. This is tough at a time when the civilian economy is booming and wages are climbing. The PLA is having to spend much more on pay and conditions for its 2.3m people.

Keeping the army happy is a preoccupation of China's leaders, mindful of how the PLA saved the party from probable destruction during the unrest of 1989. In the 1990s they encouraged military units to run businesses to make more money for themselves. At the end of the decade, seeing that this was fuelling corruption, they ordered the PLA to hand over its business to civilian control. Bigger budgets are now helping the PLA to make up for some of those lost earnings.

The party still sees the army as a bulwark against the kind of upheaval that has toppled communist regimes elsewhere. Chinese leaders lash out at suggestions (believed to be supported by some officers) that the PLA should be put under the state's control instead of the party's. The PLA is riddled with party spies who monitor officers' loyalty. But the party also gives the army considerable leeway to manage its own affairs. It worries about military corruption but seldom moves against it, at least openly (in a rare exception to this, a deputy chief of the navy was dismissed last year for taking bribes and “loose morals”). The PLA's culture of secrecy allowed the unmonitored spread of SARS, an often fatal respiratory ailment, in the army's medical system in 2003.

Carrier trade

The PLA knows its weaknesses. It has few illusions that China can compete head-on with the Americans militarily. The Soviet Union's determination to do so is widely seen in China as the cause of its collapse. Instead China emphasizes weaponry and doctrine that could be used to defeat a far more powerful enemy using “asymmetric capabilities”.

The idea is to exploit America's perceived weak points such as its dependence on satellites and information networks. China's successful (if messy and diplomatically damaging) destruction in January of one of its own ageing satellites with a rocket was clearly intended as a demonstration of such power. Some analysts believe Chinese people with state backing have been trying to hack into Pentagon computers. Richard Lawless, a Pentagon official, recently said China had developed a “very sophisticated” ability to attack American computer and internet systems.

The Pentagon's fear is that military leaders enamored of new technology may underestimate the diplomatic consequences of trying it out. Some Chinese see a problem here too. The anti-satellite test has revived academic discussion in China of the need for setting up an American-style national security council that would help military planners co-ordinate more effectively with foreign-policy makers.

But the Americans find it difficult to tell China bluntly to stop doing what others are doing too (including India, which has aircraft-carriers and Russian fighter planes). In May Admiral Timothy Keating, the chief of America's Pacific Command, said China's interest in aircraft-carriers was “understandable”. He even said that if China chose to develop them, America would “help them to the degree that they seek and the degree that we're capable.” But, he noted, “it ain't as easy as it looks.”

A senior Pentagon official later suggested Admiral Keating had been misunderstood. Building a carrier for the Chinese armed forces would be going a bit far. But the two sides are now talking about setting up a military hotline. The Americans want to stay cautiously friendly as the dragon grows stronger.
Title: Re: China
Post by: Crafty_Dog on September 22, 2007, 05:19:33 AM
Second post of the morning:



21st-Century Monk
Tibet's spiritual leader thanks America for its support.

Saturday, September 22, 2007 12:01 a.m. EDT

DHARAMSALA, India--"So, Rupert Murdoch is buying your newspaper?"

It's unclear whether the Dalai Lama's private secretary is making small talk about News Corp.'s impending takeover of Dow Jones, or if he's obliquely reminding me of Mr. Murdoch's oft-quoted reference to his boss as "a very political old monk shuffling around in Gucci shoes." I'm momentarily flummoxed--how does one reply when surrounded by monks?--but I recover as we make our way through clouds to the Dalai Lama's residence here in the Himalayan foothills.

For more than 40 years, the man better known as "His Holiness"--or, if you're in China, the "splittist," "separatist" or--the ultimate slight--"politician"--has been waging a peaceful campaign for a free Tibet, which was invaded by Communist China in 1949 and has been brutally suppressed ever since. His "middle way" diplomacy, a talk-and-talk-some-more approach, has produced distinctly middling results. In the lead-up to next summer's Beijing Olympics, the atrocities in Tibet have barely been mentioned--overshadowed by China's weapons sales in Darfur, a world away.

Over the border, China is tightening its vise. The State Administration for Religious Affairs declared last month that all Buddhist reincarnations must get government approval, a move that sets the stage for Beijing to name its own Dalai Lama once this one passes. The Party's "Go West" campaign is flooding Tibet with Han Chinese, marginalizing the native Tibetans. And a wave of recent political crackdowns has been left largely unnoticed in the Western press.

But the Dalai Lama seems unperturbed, even buoyant. He emerges from the mist, shuffling down a footpath to minister to a waiting line of devotees. He chats with a group of former Tibetan special forces personnel who helped whisk him over the border in 1959 ("let's take a photograph"); then he tends to the sick ("visit a doctor"), and blesses visiting Buddhist pilgrims.

In the line also stand two teenage Tibetan schoolgirls whose father was imprisoned last month for standing up at Tibet's annual Lithang horseracing festival and denouncing the local monks for cooperating with the communists--sparking sympathetic protests and subsequent crackdowns all over the province. "Your father is a brave man," the he tells the ponytailed girls, who look simultaneously awed and sad. (The secretary is translating for me in a jarringly perfect American accent; he spent time in New Jersey as a youth.)

The girls had trekked over the Himalayas to Nepal and, later, to India and freedom. Like many of the approximately 3,000 refugees who come here every year, they may never see their family again. The Dalai Lama, the private secretary whispers in my ear, grants each of them an audience upon his arrival in Dharamsala. Moving into a sitting room, we leave the misty courtyard behind.

There is room for cautious optimism for Tibetans that things will improve in their homeland, but perhaps not in the Dalai Lama's lifetime. As China gets richer and citizens search for spiritual fulfillment, underground religious movements are budding across the country. Last year, more than 500 mainland Chinese trekked to southern India to hear the Dalai Lama preach, according to the Tibetan government-in-exile. Others now come to Dharamsala to learn Buddhism and then return to China. When Zhao Ziyang, China's former premier, passed away, his family asked the Dalai Lama for a blessing.

"Chinese society is now ruled by autocrats," the Dalai Lama says with a laugh, as we start our formal interview. "But the society is still Chinese society." (The New Jersey-infused private secretary sits nearby, helping with translations when necessary.) "Chinese society built many, many Buddhist temples. . . . Now with a little liberalization, or lenient policy, their religious faith is now, khare-zego-re [Tibetan for 'what is the word?'], returning, reviving, including the Buddhist faith." I must have looked surprised at his cheerful optimism. "Mmm," he murmurs, shifting slightly in his chair.

Authoritarian, closed societies are "unpredictable," but the Dalai Lama insists that he's taking the right approach. "We are not seeking independence," he says. "We want a solution according to the Chinese Constitution." The Constitution, as his negotiators often remind Beijing, says "all nationalities in the People's Republic of China are equal," and adds "the state protects the lawful rights and interests of the minority nationalities and upholds and develops the relationship of equality, unity and mutual assistance among all of China's nationalities."

Beijing, of course, insists that this the "splittist" wants "independence," not autonomy. That was true--30 years ago. Through the upheaval of the Great Leap Forward and the Cultural Revolution, there wasn't much dialogue to be had with Beijing. In the early 1970s, as the Cultural Revolution was peaking, the Dalai Lama decided to shift to a call for autonomy, not independence, as a sign of good faith. At the time, he described it as a "middle approach."
Since then, the monk who's never been far from politics has tried to separate himself from the process to give it real legitimacy. The Tibetan government-in-exile founded a parliament in 1960. But in 1991, a new constitution, the Charter of Tibetans in Exile, transferred the power to select its members to the Tibetan people. In 2001, the charter was amended to allow the direct election of the prime minister--Samdhong Rinpoche, a reincarnate lama himself. "I have no longer any political status," the Dalai Lama emphasizes. "I remain just a simple Buddhist monk," he says, "quiet!"

Beijing hasn't responded in kind to these gestures. If anything, the relationship has deteriorated over six rounds of talks. Last year President Hu Jintao's administration launched an intensive round of attacks against the Dalai Lama, calling him "unworthy" of being a religious leader. China's rhetorical venom has created a growing sense of fury in the Tibetan exile community. Many Tibetans worry that the Communist Party is playing a waiting game, stringing along the Tibetan negotiators until the Dalai Lama passes--a fear that the Buddhist leader acknowledges.

"There's certainly more and more signs of frustrations, not only on our side, but inside," the Dalai Lama admits. A Tibetan youth tried to immolate himself when Mr. Hu visited Mumbai last year; another tried last month. In Tibet, violent tendencies have been crushed by the communists, but that doesn't mean they won't surface. "The suicides, the bombings, these things . . . it's possible," the Dalai Lama acknowledges, sighing slightly, with his hands now open. "But then, we always ask people to keep, keep peace."

One way of doing that is to institutionalize the Tibetan cause in the younger generation. Through private donations, the Tibetan government funds the Tibetan Children's Village, a network of schools for refugee children. Others are educated at Indian government-funded institutions. All teach Tibetan language, culture and a version of Chinese history that would never see the light of day on the mainland.
"In the past, Tibetans, particularly the nomads and also the farmers, they simply carried their centuries-old way of life . . . completely ignorant about the current world," the Dalai Lama says. "We Buddhists must be Buddhists of the 21st century." (Maybe that's why the secretary is following Mr. Murdoch's purchases so closely.)

Another way to perpetuate the movement--especially inside China--is to debunk the Communist Party's characterization of religion as a destabilizing force. The Dalai Lama preaches what he dubs "secular ethics"--the idea that there are common experiences that all people, regardless of religious faith, share. In his view, all spiritual traditions talk about basic concepts of love, compassion, forgiveness, tolerance, contentment, self-discipline. While these ideas may come packaged in different philosophies, the message is the same.

"The main thing is some kind of usefulness to others." He pauses. "That's the meaning of life," he says, leaning forward and pointing his finger at me gently.

Despite his optimism, there's little chance that the "middle way" will spark a breakthrough anytime soon. From Beijing's perspective, the Dalai Lama's return to Tibet would galvanize Tibetans to rally behind their leader and push for independence--an example that China, which has suppressed other ethnic groups, such as the Uighurs, could not tolerate.

For the Communist Party, Tibet remains the third rail of politics--a topic so sensitive that it turns mild-mannered Chinese bureaucrats red in the face at a mere mention. The party toyed briefly with liberalization of the region in the 1980s, only to find Tibetans gleefully displaying the Dalai Lama's image and calling for independence. In 1989, a crackdown ensued, overseen by now-President Hu, then the party secretary of the Tibet Autonomous Region. Since taking office, Mr. Hu has installed a loyal hard-liner to oversee the area.
China's economy is increasingly providing political cover for its suppression of Tibet; it's too big and important to let a little bright light shine on human-rights abuses in a faraway land. The Dalai Lama's cause is especially lonely in Asia, given China's economic rise and its rapidly accruing military clout. "Very few" democracies in the region publicly support Tibet, with the notable exception of India--which comes under pressure frequently from Beijing. The silence is deafening, given that many Asian democracies, including those in Japan and South Korea, are home to large populations of Buddhists.

Even Western democratic nations come under intense pressure from Beijing. Belgium cancelled an official visit with the Dalai Lama before an EU-China meeting in May this year. Australian Prime Minister John Howard hesitated to meet the Buddhist leader in June, but, after intense lobbying from Washington, acquiesced. Germany's Angela Merkel is proving braver--she's hosting the Dalai Lama's first-ever visit to the German chancellery on Sunday.

"When we look at Tibet issue locally, then almost hopeless," the Dalai Lama concedes. But from a "wider perspective," the Tibet cause is "always hopeful." Recalling how the Soviet Union changed, he muses for a moment on how China is developing. "China is communist without communist ideology--only power," he declares. "So logically, no future!" The "only future" for China is "democracy, rule of law, free press, religious freedom, free information. China's future depends on these factors." That's something, he adds, that President Hu must know. "I really feel sympathy" for him.

The U.S. has always proved a strong supporter of the Tibetan cause--a close relationship that makes the Dalai Lama feel "proud." America, he says is a "champion of democracy, freedom and liberty. So their full support means they recognize our struggle as a just cause and a moral issue." Next month's Congressional Gold Medal award ceremony has sent the Chinese Embassy into high defensive gear. But that hasn't stopped President Bush from scheduling a private audience with the Dalai Lama.
"Of course, sometimes I have disagreement with . . . President Bush, but as a person, I always made clear, personally, I like him. He's very straightforward," the Dalai Lama recalls, "down to earth." House Speaker Nancy Pelosi is a "close friend of me personally and, I should say, a close friend of Tibet."

As we end, the Dalai Lama drapes a traditional white katag scarf around my neck and presents me with a pin depicting Potala Palace in Lhasa, his ancestral home. Then, like a child might, he throws his arms around me, and whispers into my ear: "We are passing through a difficult period," he says. "One ancient nation, with a unique heritage in a way, dying. So support from the free world is very much appreciated."

But will the free world follow through?

Ms. Kissel is The Wall Street Journal Asia's editorial page editor.
Title: Shifting Thinking, Eroding Advantage
Post by: Crafty_Dog on October 05, 2007, 08:40:24 AM
China, Taiwan: Shifting Thinking, Eroding Advantage
October 04, 2007 22 40  GMT


A potential shift in China's thinking about contingency war planning for conflict with Taiwan could herald some significant alterations in the military dynamic between the island and the mainland. Such a shift would come at a time of eroding technological advantage for Taipei.


A new aspect of Chinese contingency war planning for dealing with Taiwan in the event that the island declares independence is emerging from Chinese researchers and semigovernmental think tanks. These sources suggest that if Beijing feels such action against Taiwan is necessary, it will sacrifice even the 2008 Olympic Games, which are of paramount importance for the Communist Party of China. Though an outright declaration of Taiwanese independence is unlikely in the near future, there is still plenty Taiwanese President Chen Shui-bian can do to get creative.

China's potential strategy centers on a punishing bombardment of Taiwan rather than a full-scale amphibious invasion. The combined tonnage of ballistic and cruise missiles, airstrikes and naval gunfire would focus specifically on the Taiwanese military's command-and-control infrastructure, with the objective of obliterating Taipei's ability to meaningfully coordinate a defense of the island. It appears China hopes to accomplish this in less than a week, and possibly as quickly as 24 hours, with the objective of forcing the direct capitulation of the government or compelling the population in general, the Kuomintang opposition in particular or the military itself to force the government into that capitulation. The ultimate goal of such a strategy would be a return to the status quo, rather than reunification.

While there are a number of problems with this strategy, the shift in thinking -- away from occupying the island and bringing it back into the mainland fold and toward bombardment and restoring the status quo -- is significant. And while it is ever-important for Beijing to appear politically firm on all things Taiwan, talk of sacrificing the Olympics is not idle banter in China.

The long-standing objective of an amphibious assault to retake the island has massive operational problems. Chinese ships laden with troops, tanks and supplies would be unlikely to survive the push across the 100-nautical-mile Taiwan Strait -- especially against an enemy that has spent decades preparing for just that. The island's coast bristles with anti-ship missiles.

Meanwhile, Taiwan already has begun to acquire the latest U.S. Patriot air defense system, the PAC-3, which offers a terminal-phase ballistic missile defense capability, in addition to its anti-aircraft heritage. There also is the matter of the island's Republic of China Air Force, which promises to make any assault from the mainland a costly one.

While there are infinite complexities to this dynamic, with the open sea as a buffer, Taiwan is in a good geographic position for its self-defense. But it cannot endure an endless onslaught from the mainland. Taiwan boasts less than a fifth of the combat-capable aircraft of the People's Liberation Army Air Force (PLAAF), though frontline pilots on both sides of the strait reportedly get a very respectable 180 hours of flying per year.

Meanwhile, the mainland's modernization of the PLAAF -- both in terms of air defenses and aircraft -- has evoked strong concerns even from U.S. Lt. Gen. Bruce Wright, commander of U.S. Forces Japan and the U.S. 5th Air Force. Wright said during the week of Sept. 23 that he considered China's air defenses "nearly impenetrable" to all but the most modern U.S. aircraft -- a strong statement from the U.S. Air Force.

The trajectory of this modernization outpaces Taiwan's, in terms of both technology and sheer numbers. The island's F-16s are the Block 20 variant and are a significant asset. But its F-5E Tiger IIs and French Mirage 2000Ei-5s are dated. Its Ching Kuo Indigenous Defense Fighter (a sort of hybrid of the U.S. F-16 and F/A-18 Hornet designs), while an eminently respectable design and production achievement, already is slated for replacement by the newer Block 50 F-16s Taipei hopes to import soon.

The PLAAF already has imported more than 70 of the latest Su-30MKK Flanker fighters from Russia. Using these aircraft, the Indian air force occasionally has outperformed U.S. pilots in fourth-generation aircraft in exercises. Meanwhile, the indigenous production of the J-11, a licensed copy of the earlier Su-27 Flanker design, already has yielded more than 100 airframes. Production of the domestically designed J-10 fighter also is well under way.

Thus, while not true in all regards, Taipei's technological advantage in the realm of fighter aircraft is slowly being eroded. How both the Ching Kuo and J-10 would perform in combat remains an open question, as is the effectiveness of the PLAAF's nascent airborne early warning (AEW) and control aircraft, which might not even be available for operational deployment. Taiwan's E-2 Hawkeye AEW fleet -- which dates back to 1989 -- is far better established and would be of great significance, however.

Advantage in quality is an essential counter to disadvantage in quantity, but Taiwan simply is not in the position it was a decade ago. Meanwhile, the new evidence that China is contemplating more realistic military options for dealing with Taiwan (bombardment not invasion, restoring the status quo rather than reabsorbing the island) means Beijing's focus might no longer be a doomed amphibious assault, which would have represented a massive black hole for People's Liberation Army efforts -- to Taipei's benefit.

However things plays out, the avenues for escalation quickly expand. China and Taiwan could quickly find themselves engaged in the largest two-way air battle since World War II. This would be only one aspect of a complicated dynamic. And of course, U.S. or even Japanese intervention on behalf of Taiwan could radically alter the picture.

Such intervention is nearly guaranteed in the event of a Chinese military incursion into Taiwan, given Washington's legal obligation to come to Taiwan's aid. The USS Kitty Hawk, homeported in Yokosuka, Japan, is never far. Ultimately, the prospect of a short, furious bombardment of the island that does not involve a prolonged Chinese military commitment on the ground might be enticing for Beijing and has significant implications for foreign intervention.
Title: Re: China
Post by: Crafty_Dog on January 02, 2008, 03:23:51 PM
China Flexes Its Muscles
January 2, 2008; Page A11

The U.S. Navy said it was "befuddled" by Beijing's last-minute November denial of a long-arranged port call for the Kitty Hawk carrier group in Hong Kong. This turndown was on top of China's refusal to provide shelter for two U.S. minesweepers seeking refuge from a storm, and its rejection of a routine visit for a frigate, the Reuben James. The Air Force also received a "no" for a regular C-17 flight to resupply the American consulate in Hong Kong.

The immediate causes of these rebuffs may be American arms sales to Taiwan, which China regards as sovereign territory, and the award of a congressional medal to the Dalai Lama, with whom Beijing has had a multi-decade spat. But so many turndowns suggest the decisions were made at the highest levels of the Chinese central government -- and at a time when senior leaders are reorienting the country's foreign policy. Washington's relations with Beijing, in short, appear headed for increasing disagreement and tension.

Deng Xiaoping, who turned China away from Maoist revolution, believed that the country should "bide time" and keep a low profile in international affairs. Deng wanted Beijing to "seek cooperation and avoid confrontation," especially with the U.S. China, after a series of disastrous episodes like the Cultural Revolution and the Tiananmen massacre, needed a peaceful environment and the help of outsiders to rebuild its shattered economy.

Deng's successor, Jiang Zemin, followed this general approach even though he wanted Beijing to pursue his "big country" ambitions. Mr. Jiang desired recognition for China's growing status, but he saw his nation working cooperatively with the U.S. and its allies as partners.

Current President Hu Jintao has shifted China in a new direction. Like Mr. Jiang, he believes that the country should assert itself. But unlike his predecessor, he seems to think that China should actively work to restructure the international system to be more to Beijing's liking. In short, the current leader appears to see his country mostly working against the U.S.

The shape of China's grand strategy became apparent after a series of meetings in Beijing in the second half of 2006. In August, the Communist Party convened its Central Work Conference on Foreign Affairs. The meeting, the culmination of a half-year, top-to-bottom review of the country's external policies, brought together for the first time all members of the Politburo, provincial governors and Party secretaries, the State Council and central government ministers, about 60 ambassadors and 30 other diplomats, and key military officers with foreign affairs responsibilities.

Significantly, the public summary of the meeting did not include references to the invariably cited "bide time" strategy of Deng Xiaoping -- an indication of a fundamental change in thinking. Adopting the new tone, that same month Beijing's top U.N. diplomat in Geneva, Sha Zukang, told the U.S. to "shut up" about China's military buildup.

Later in the year, senior leaders met one or more times to confirm the new foreign policy direction. As veteran China watcher Willy Lam has noted, Mr. Hu and the leadership decided "to make a clean break with Deng's cautious axioms and instead, embark on a path of high-profile force projection."

Mr. Hu's reorientation of foreign policy is a consequence of his increasing reliance on the People's Liberation Army as a political base inside the Party. Since the middle of 2004, he stepped up efforts to court senior generals for support of his efforts to assert supremacy over Jiang Zemin, who has been clinging to power and blocking some of his initiatives. The military, for example, appears to have been behind Mr. Hu's partially successful effort, in the run-up to last year's 17th Party Congress, to pick his own successor.

It seems that at the massive conclave, held once every five years, Mr. Hu obtained the assistance of the more hawkish officers of the PLA in return for accelerating increases in military spending, promoting some of them to senior positions -- especially Gen. Chen Bingde to be the chief of general staff -- and steering the country toward a more assertive posture toward other nations in general, and Taiwan in particular.

There are several other incidents consistent with China's new assertive posture. In October 2006, a Chinese submarine for the first time surfaced in the middle of an American carrier group. This episode, occurring in the Philippine Sea southeast of Okinawa, was an obvious warning to the U.S. Navy to stay away. And in January of last year, the PLA, in an unmistakable display of military power, destroyed one of China's old weather satellites with a ground-based missile.

Beijing's military has also started to boast about its new weapons and war-fighting capabilities. Peace Mission 2007, cooperative military exercises in Central Asia in August, was China's first large-scale foreign military deployment, and recent military maneuvers, apparently rehearsals to take Taiwan and disputed islands in the South China Sea, were remarkable in scope and sophistication.

China's new ambitions have been confirmed by Hong Yuan, a military strategist at the Chinese Academy of Social Sciences, who noted a significant departure from Beijing's prior posture. China, he said in October, intended to project force in areas "way beyond the Taiwan Strait."

China's military assertiveness has been matched by tougher diplomacy. Last year, a series of high-level meetings showed that Beijing has moved closer to Moscow to cement their "friendship for generations" and confirm their opposition to American initiatives, especially to stop the Iranian nuclear program.

China's sustained campaign against German Chancellor Angela Merkel for meeting the Dalai Lama in September is also notably intense. China even threatened military and political responses over economic disputes -- such as those relating to market barriers and intellectual property piracy -- at last month's session of the "Strategic Economic Dialogue," the high-level talks between the U.S. and China.

The Kitty Hawk port call fits into this pattern. In the past, this snub would have merely been the product of petulance. Today, it is another indication of a change in China's approach to the world.

Last month, Washington and Beijing agreed to put the Kitty Hawk and similar incidents behind them. Now, the challenge for the U. S. is to recognize that Chinese attitudes have turned a corner, and to craft new policies in response.

Mr. Chang is the author of "The Coming Collapse of China" (Random House, 2001).
Title: Re: China
Post by: DougMacG on April 04, 2008, 06:39:15 PM
CCP had an interesting comment under Miliary Science: "...the US military sees China as our number one enemy"

It's true, but it's different from threats or enemies of the past, a very complex relationship.  China is clearly the number one potential threat because of size, military strength, economic strength and contention over certain geopolitical issues, particularly Taiwan. OTOH we don't want to control any inch of their land and they don't want ours. 

We had a couple of close calls that could have escalated but didn't. In May 1999 the US bombed the Chinese embassy in Yugoslavia by mistake. Also the crisis of April 2001 when a Chines bomber plane collided into an American reconnaissance plane that had to make an emergency landing on a Chinese runway.  The Chinese held 24 American crew members for 11 days, then released them, and they held our plane for over 2 months.

In the case of having their embassy bombed the Chinese showed restraint.  In the case of having our Navy flight crew detained, the US showed restraint.  The reason was the fear of war as deterrence but also the complexly intertwined economies IMO.

Title: Re: China
Post by: Crafty_Dog on April 04, 2008, 11:34:15 PM
I like that Doug begins a discussion about the complexity of our relationship with China.

In addition to the well known platitudes, I offer to the mix:

1)  China as a unique demographic profile due to the one child policy.  What are the implications thereof?

2) China is a toxic dump, an ecological disaster;

3)  China's banking industry's books make Enron a paradigm of financial rectitude.  Is there a disaster in the making?  Or will it lead to an even worse version of what happened to former econ juggernaut Japan?


Title: Re: China
Post by: DougMacG on April 06, 2008, 12:00:52 AM
Responding to three points Crafty made regarding China:

"1)  China as a unique demographic profile due to the one child policy.  What are the implications thereof?"

There is an enormous field of study and thought regarding the effect of birth order on personality and I am no expert on that, but I am raising an only child - now 13.  One observation would be that only child gets the extensive to undivided attention of sometimes 6 adults, counting grandparents, where many of us probably grew up in the opposite situation where children outnumbered adults and competed for or shared attention and received  less.  IMO there are pluses and minuses so I don't draw any big conclusions from that. I  would go a couple of different directions with this.  The one-child policy including the horrific abortion situation and loss of freedom solved the population explosion on this piece of the planet.  One theory that was posted by Karsk says that the limits of physical resources places limits our potential for economic growth. (I owe him a reply that is half-written and partially disagrees on that.) Under that theory the population controls helps the sustainability of China's economic growth. Under other theories of demographics, they will be in big trouble when too few workers in the newer generations need to support too many retirees that likely will live longer and longer with rising costs.  I don't know how these things will resolve themselves.

"2) China is a toxic dump, an ecological disaster"

I don't know why bloody totalitarian regimes don't have more environmental protesters (sarcasm). We saw the toxic mess when communist east Europe was freed.  There is a correlation between prosperity, consensual government and cleaning up our environment.  Right now China is moving toward prosperity without moving toward consensual government.  Uncharted territory as far as I can see.  They have the regulatory authority, they just need the desire from the rulers since there is no electorate.

3)  China's banking industry's books make Enron a paradigm of financial rectitude.  Is there a disaster in the making?  Or will it lead to an even worse version of what happened to former econ juggernaut Japan?

I agree with the premise.  Japan had prolonged stagnation.  China will someday have a real downturn.  My credibility is lousy here.  I predicted since the Tiananmen Square protests of 1989 that their house of cards economy would suffer setbacks and the ruling regime would not survive that.  So far, I'm wrong.

Title: Re: China
Post by: G M on April 06, 2008, 08:27:14 AM
I like that Doug begins a discussion about the complexity of our relationship with China.

In addition to the well known platitudes, I offer to the mix:

1)  China as a unique demographic profile due to the one child policy.  What are the implications thereof?

War. China has a growing wave of males with no chance of ever finding a mate. These tend to be from rural stock, as urbanites, especially China's upwardly mobile tend towards valuing a daughter as much as a son while the peasants are still overwhelmingly "son-centric" and willing to commit infanticide and/or gender selection abortion. The PRC will ensurte the wave of poor, rootless males doesn't threaten it's existance.

2) China is a toxic dump, an ecological disaster;

A story out the other day labled China the most polluted place on the planet. I remember how horrified I was seeing the pollution firsthand. The air in China's cities makes LA look like a ecological paradise. My wife traveled to places in China where plating factories dumped chem waste directly into the rivers that were the water supply for villages downstream.

3)  China's banking industry's books make Enron a paradigm of financial rectitude.  Is there a disaster in the making?  Or will it lead to an even worse version of what happened to former econ juggernaut Japan?

China is running as fast as it can to stay in one place. Sooner or later, this won't be enough.


Title: Re: China
Post by: G M on April 12, 2008, 03:15:46 PM
11/04/08 - World news section

Why China is the REAL master of the universe

Cecil Rhodes, the businessman-imperialist of Africa, the creator of Rhodesia, suffered no flicker of doubt about who were the masters.

"To be born an Englishman," he mused, "Is to win first prize in the lottery of life."

It wasn't idle boasting. In the jingoistic triumphalism of the late 19th century, when waving the Union Jack was a simple pleasure, people sang: "Rule Britannia! Britannia, rule the waves" without any irony. It was a statement of fact.

A quarter of mankind lived under the British flag in the largest empire the world had ever known.

And many of those parts that weren't under Britain's rule - such as the U.S. - had been created by Britain.

British missionaries had opened up the Dark Continent almost unchallenged.

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The British Army found it easier to invade troublesome nations - or most of them - than it does nowadays.

Britain was the workshop of the world, dominating science, manufacturing and trade.

To many Victorians, unquestioning of the ideology that underpinned much imperialism, British supremacy was a simple matter of racial supremacy - Europeans, and the English in particular, were fated to be the masters.

The truth is that we are masters of the world no more.

The global power shift from the West to the East is no longer just a matter of debate confined to learned journals and newspaper columns - it is a reality that is beginning to have a huge impact on our daily lives.

What would those Victorian masters of old have made of the fact that Chinese security men were on the streets of London this week, ordering our own police about and fighting running battles with British protesters while bewildered athletes carried the Olympic torch on its relay through the capital?

It was a brazen display of how confident China has become of its new place in the world, just as the British Government's failure to take a firm stand on Chinese abuses of human rights shows how craven we have become.

The dire warnings from the International Monetary Fund this week that the West now faces the largest financial shock since the Great Depression, while the Asian economies are still powering ahead, simply underlines our vulnerability in this new world order.

The desperately weakened American dollar appears to be on the verge of losing its global dominance, in the same way as sterling lost it a lifetime ago.

The credit crunch has brought home to all of us in Britain how over-reliant our country has become on financial services. Meanwhile, the loss of our manufacturing industries to Asia continues unabated.

Last month, an Indian company, Tata, bought up what was once the cream of British manufacturing - Jaguar and Land Rover.

A couple of years ago, Nanjing Automotive, a Chinese company, snapped up MG Rover.

Just as the 19th century was the British century, and the 20th century was the American century, the 21st century is the Asian century.

But the handover of global power from the UK to the U.S. was trivial compared to what is happening now.

The U.S. was Britain's offspring, based on the same values and the same language.

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It, too, was an Anglo-Saxon country, and passing the baton across the Atlantic ensured the continuation of the Anglo-Saxon world order, based on democracy, free trade and a belief in human rights, upheld through international institutions that both powers supported.

But the world order we have grown used to - and comfortable with - over the last century is coming to an end.

Napoleon III compared China to a sleeping giant and warned: "When China awakes, she will shake the world."

After a long hibernation, China, and her 1.3 billion people - twice the population of the U.S. and EU combined - is awaking almost overnight.

And not just China. The world's second most populous country, India, is industrialising at a historically unprecedented pace.

Their economies are growing on a long-term basis about four times the speed of the UK's and that of the United States. Goldman Sachs, the bank, recently predicted that by 2050, China and India would have overtaken the U.S. to be the world's first and second biggest economies.

We have long heard about the benefits this brings, in terms of plentiful cheap goods from toys to TVs, and huge opportunities for Western companies to sell their wares in these booming markets.

But there are also downsides, which are becoming more apparent. Unskilled workers in the West have become unsettled by the threat to their jobs as production moves East.

The most vulnerable Western workers have found their wages stagnate as they struggle to compete in an increasingly global market place.

And competition for raw materials is pitting East against West.

The economic explosion of China, and to a lesser extent India, has given them an almost overpowering hunger for raw materials with which to build their factories, homes and cars.

Wherever you turn, the rise of Asia is making its impact felt on our existence.

Every time you complain about the price of petrol being over £1 a litre, it is to the Far East you have to look to find the culprits.

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There are even reports that manholes in Britain have been disappearing to feed the monstrous appetite for scrap steel in the other side of the world.

China is spending 35 times as much on crude oil as it did eight years ago, and 23 times as much on copper.

As it builds gleaming skyscrapers on its fields, China alone consumes half the world's cement and a third of its steel.

What is happening is so extraordinary that economists have had to invent a new word for it - this is not an economic cycle, but a supercycle, a shift in the world economy of historic proportions.

When demand increases and supply stands still, prices shoot up. Iron, wheat and oil are all at record prices, despite slackening demand in the faltering Western economies.

The cost of living in Britain is now rising faster than wages, making the British on average poorer year on year.

Asia's expansion means that its influence is starting to be felt more directly around the world.

Asian countries are not just buying up foreign raw materials, but as their companies try to become global leaders, they are buying up Western companies.

It is not just Land Rover, Jaguar and MG Rover. The Malaysian company Proton owns Lotus. Indian company Tata owns Corus, once British Steel, as well as Tetley Tea.

The hunger for raw materials is also making China lose its shyness and venture out into the world. Like Germany and Russia, China has traditionally been a land empire, focusing its expansionist energies on countries it had borders with, and it eschewed the world-conquering exploits of Europe's sea-faring maritime nations.

Europeans have, for half a millennium, been unchallenged as the global colonisers, but last month the respected Economist magazine dubbed the Chinese "The New Colonists".

While the Congo in central Africa was once over-run by Belgians, it is now the Chinese that can be found wondering around its mining belts.

In Lubumbashi, the capital of the Congo's copper-rich region Katanga, the Economist reported "a sudden Chinese invasion".

Troubled Angola recently shunned Western financial aid because of the amount of Chinese money pouring into it, in return for commodities.

From Kazakhstan to Indonesia to Latin America, Chinese firms are gobbling up oil, gas, coal and metals.

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Canadian authorities were recently alarmed to find the Chinese interested in exploring the Arctic Ocean, in a bid to get a share of the minerals beneath the thawing icecap.

In eastern Siberia, Russians worry that China is by default taking over their empty land.

The West has long seen Africa as its backyard, but Western diplomats now worry that not just Africa, but South America, too, is being lost to China.

And Western governments are concerned that the rules of the game are changing. Most worryingly, as China's brutal suppression of the once independent Tibet shows, this is not a superpower that respects Western standards on human rights.

From Darfur to Myanmar, China is cuddling up to murderous dictators.

At home, it holds mass executions of criminals with bullets in the back of the head while transplant surgeons stand by to harvest their still pulsating organs.

Yet Western governments have been in such awe of China's looming power that their response has not been to challenge its abuses, but to try to silence their own protesters at home.

From the UN to the IMF to the World Bank, the international institutions that attempt to govern the planet were made in the image of the victors of World War II. Now power is shifting from West to East, the whole liberal democratic world order will face its first serious challenge in decades.

Many fear that things could get ugly.

There is only one thing worse than an unchallenged superpower - it is a superpower with a victim mentality, which feels the world owes it a favour.

And the bitter truth is that, after centuries of humiliation in foreign affairs, there is a nationalist mood in China that the country's time has come again, that it can again claim its rightful place as the world's most powerful country.

Its comparative weakness over the last few centuries is, in fact, but a blip in the last 2,000 years, during which China was the world's most economically and culturally advanced nation.

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It is an accident of history that Europeans took advantage of their window of opportunity in the last half of the second millennium to take over the world.

The cause was a combination of factors such as the development of maritime technology in Europe, the competition between European countries that drove them to look outwards and find new ways to increase prosperity, and the fact China remained firmly locked in its agrarian, introspective past.

Now things have changed, and already the shift in the world economy is starting to have dramatic effects on migration patterns.

The emigration of poor people from China and India to the West is slowing down, as their citizens see more hope in their own rapidly advancing nations.

Instead, their expanding middle classes are paying large fees for their children to enjoy a Western university education, before returning home.

There are now 60,000 Chinese students in Britain, more than from any other country.

Westerners have become accustomed to being the only tourists in the world's tourist hotspots, but the Chinese and Indians want to enjoy the fruits of their labour by expanding their horizons, too.

Chinese tourists are likely to replace American tourists as popular irritants in Britain, and replace the Germans as competitors for the ski lifts.

As the opportunities flow from West to East, so too do the people.

India is luring the global Indian diaspora back, with laws that would be judged racist in Britain, offering visas to anyone living in the West with Indian blood in their veins.

Even some non-Indian Westerners are heading East for opportunities greater than they find at home.

The West's cultural supremacy is likely to be as challenged as its economic supremacy.

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As their economic confidence grows, Asians are discovering pride in their own cultures and are less inclined to mimic Western ones.

There is an infectious confidence in Bollywood, and the price of Chinese antiques is rocketing as the newly rich Chinese decide they want a slice of their history. Western culture, like the dollar, will soon find its heyday behind it.

But Western attitudes will change as well, with a likely shift to the political Right. White liberal guilt, the driving force behind political correctness, will subside as Westerners feel threatened by the global order changing, and their supremacy slipping away.

Anti-Americanism will disappear as Europeans realise how much better it was to have a world super power that was a democracy (however flawed) not a dictatorship.

There is even speculation that the intense economic pressure on countries such as Britain will cause them to trim down their bloated welfare state, simply because it will no longer be affordable at present levels.

Western attitudes of superiority to China and the rest of the East will also subside, as Westerners realise they are no longer the masters of the world.

The U.S. company Orient Express complained when Tata tried to buy it, that any association with the Indian company would damage the Orient Express's premium brand.

Responding, R K Krishna Kumar, a senior Tata executive, thundered that "Indian companies ... will take their rightful place in the international arena.

"Enterprises and individuals must recognise and adapt to these fundamental economic changes. We believe that those with a fossilised frame of mind risk being marginalised."

In a world in which we are no longer masters, it is a warning that we ignore at our peril.

Find this story at
Title: Re: China
Post by: Crafty_Dog on April 12, 2008, 11:02:57 PM
Of course there are several good points in this piece GM, but IMHO there is a fair amount of hyperventilating too.

China's population is contracting due to the one child policy.  The consequences of this unusual demographic remain to be seen, but are likely to be potent.  How will the few young support the many old?

China is a toxic dump.  The costs are staggering and have yet to be considered.

China's banking system is a giant ponzi scheme-- its bookkeeping is said by sources that seem responsible to me to be an utter fraud.

Freedom is seditious to a system like China and as Chinese mingle in the world, maintaining the old order is going to be a very good trick.

The dollar and the US were in worse shape in the Carter years than now.

The Japanese were feared to be taking over the world in the 80s, yet now they are fcuked-- in part due to demographics of few young supporting many old-- and China will have a worse hand in this regard than the Japanese.

Just some additional points to consider IMHO
Title: Re: China
Post by: G M on April 13, 2008, 06:36:51 AM

Every point you raise is true, still China and India will be shaping the next century.
Title: Re: China
Post by: G M on April 13, 2008, 12:32:41 PM

"Unrestricted Warfare"?
Title: Taiwan
Post by: Crafty_Dog on April 13, 2008, 11:59:21 PM

The plot thickens , , ,  Anyway, here's this:

Geopolitical Diary: Taiwan's Straitjacket
April 14, 2008
Taiwanese Vice President-elect Vincent Siew met Chinese President Hu Jintao Saturday on the sidelines of the Boao Forum for Asia Annual Conference 2008. It was the first time Taiwan’s incoming government held a formal meeting with the Beijing regime. Siew gave a positive evaluation of his meeting with Hu — quite a contrast to outgoing President Chen Shui-bian’s typically provocative stance against Beijing. However, the meeting itself has not changed, nor will it change, the fundamental bilateral relationship. Not by one iota.

In fact, it is not really a bilateral relationship but a trilateral one. Taiwan remains sandwiched between the two largest geopolitical players of the Asia-Pacific region: China and the United States. Taipei has little if any room for maneuver within this trilateral framework. Despite Chen’s pro-independence posturing and rhetoric, Taipei has never been a free actor in this space between China and the United States. It is consigned to play the role of a pawn in the wider geopolitical interaction between its patron of choice, Washington, and its other aspiring patron, Beijing.

China will not tolerate Taiwan getting too close to the United States. Keeping alive the “one China” myth is important to the Chinese regime — Beijing’s legitimacy is predicated on its ability to hold together a far-flung and geographically diverse country with a strong central authority. Like Tibet, Taiwan is considered a linchpin in the carefully balanced social and political structure of mainland China. In truth, China stands next to no chance of successfully invading and forcibly reabsorbing Taiwan, given that its current naval capabilities are a generation or two behind those of the United States. However, Beijing does need to buffer itself against Washington’s growing influence in Asia — if not in military reality, then in domestic perception at least.

Likewise, the United States will not put up with a Taipei that pursues too close a relationship with China. While defending Taiwan’s democratic integrity plays well with the voters back home, a more fundamental reason behind Washington’s fierce protection of the island revolves around the security of maritime trade routes into and out of the Asia Pacific region. A key source of U.S. geopolitical power is its dominance over the world’s oceans, a supremacy that Washington will not give up voluntarily. That is why American airpower, missiles, submarines and surface vessels have never left Taiwan since the U.S. Navy’s seventh fleet first swept to the island’s rescue in 1950.

So long as China does not invade or physically reclaim Taiwan and Taipei does not formally declare independence, an uneasy half-truth is perpetuated, and both sides go about their business.

Politically and superficially, Siew’s visit to China marks a change from the previous Taiwanese regime. But geopolitically, just as Chen could talk but not walk Taiwan towards independence, neither will Siew or President-elect Ma Ying-jeou be able to change the dynamic. There might be some movement along the spectrum of possibilities between independence and reunification, but the geopolitical reality of the Taiwan Straits is that that movement will be narrow and constrained. Taiwan has nowhere to go.

Title: WSJ: Rise and Collide
Post by: Crafty_Dog on May 09, 2008, 01:26:24 PM
Rise and Collide
May 9, 2008; Page A15

By Bill Emmott
(Harcourt, 342 pages, $26)

The rise of China is easy to exaggerate and even easier to fear. China is a vast country of 1.3 billion people, governed by menacing authoritarians who are plowing money into its military complex and managing a stunning economic transformation; before long it will dominate Asia, and someday it will threaten America's place in the world. Or at least that is the argument of certain worried pundits these days.

For a striking counterargument – and some much-needed nuance – look no further than Bill Emmott's "Rivals." Mr. Emmott, a former editor of The Economist and a longtime Asia-watcher, acknowledges that China will continue its remarkable rise for years to come. But he thinks that a modernizing India and a resurgent Japan could end up jostling for Far East supremacy, too, pitting "Asians against Asians." A balance-of-power politics could evolve resembling Europe's in the 19th century.

How this transformation will unfold, and whether it will be entirely peaceful, is anyone's guess. But one thing is certain: All three of Asia's emerging giants are being forced to open up at speeds that none is quite comfortable with. China's Communist Party has freed a wide cross-section of its economy, bringing a new prosperity to much of the population. India is shedding its socialist shackles at whatever pace its vibrant, contentious democracy will allow. Japan's dominant political party, notoriously resistant to change, is still struggling to pull the country out of a decade-long economic nosedive; but the push for reform is becoming ever more urgent as Japan's population ages.

In "Rivals," Mr. Emmott mines the past for clues to the future. Start with China: Most analysts conclude that the 21st century will belong to China because the country's economy is now roaring ahead. But its growth rates aren't unprecedented. Like China today, Japan by the 1970s had reached a high investment-to-GDP ratio (roughly 40%) and enjoyed double-digit, export-led industrial growth. South Korea followed a similar path. By those measure, Mr. Emmott says, China's growth is "excellent, but not exceptional."

China also faces some bumps in the road, not least of which is rising inflation – a problem that Japan once also faced. Capital inflows are pushing up wages and expanding the monetary base, which is in turn inflating asset bubbles in stocks and property. Something has got to give. "The longer a change in economic policy and direction is delayed," Mr. Emmott writes, "the bigger the risk that mere adjustment turns into something more dramatic."

India's trajectory, meanwhile, most closely follows China's – at least at the moment. With the liberalizing of India's economy, its investment and savings have grown along with its standard of living. In 2006, India's exports of goods and services, as a percentage of GDP, had risen to a point that they were "roughly the same as China's in 1996," Mr. Emmott notes. The common view of India – as a land dominated by extremes of wealth and poverty – is simply out of date; in fact, India's income inequality is about the same as Britain's. The question now is whether the government will speed up India's growth by upgrading its shoddy infrastructure and liberalizing its energy industries so that domestic producers can make adequate returns and afford to increase output.

Japan's future is harder to forecast. The crash of the 1990s was bad, though hardly of Depression-like dimensions. That it was not worse, Mr. Emmott says, has a lot to do with Japan's free flow of trade and capital and its fiscal surplus. Oddly (for a writer long affiliated with the laissez-faire Economist magazine), Mr. Emmott praises the Japanese government for its Keynesian interventions in the 1990s. Huge spending programs, he claims, "helped prevent an economic drama from becoming a disaster." Perhaps. But they also prevented Japan from embracing low taxes and liberalizing its markets – surely a speedier means to growth and widespread prosperity.

Mr. Emmott notes that Japan, for all the exporting it does, isn't really a "globalized country." Its trade with the outside world, measured by imports plus exports as a percentage of GDP, is dwarfed by China's. And its level of English proficiency – now essential for global players – is low. If anything, Mr. Emmott says, "Japan needs to emulate America in the 1990s, when the 'new economy' " – that is, the Internet revolution – "brought a sharp and unexpected jump in U.S. productivity." Without doing something "dramatic" to kickstart growth, he argues, Japan's leaders will simply be "managing the country's relative decline," eclipsed by India and China.

Of course, the future of Asia's economies depends in part on the future of its regional politics. India has rocky relationships with its neighbors – and some of them, including Nepal, Pakistan and Burma, are led by unstable regimes. China, meanwhile, has border disputes with Bhutan and India, not to mention disputes over sovereignty with Tibet and Taiwan. Japan has only recently moved to mend ties with South Korea's new leadership. But a nuclear-armed North Korea remains the biggest menace. Mr. Emmott believes that, if "regime change" comes about in North Korea, it will be of the homegrown variety and not imposed from the outside. The result may be "a risky moment," as China, South Korea and factions within North Korea vie for power.

In economics and business, Mr. Emmott notes, competition generally has "overwhelmingly positive results." But "in politics, we cannot be so sure." To separate the two spheres so sharply, though, seems forced, at best. China's economic prosperity increasingly relies on its integration with its rivals and with the rest of the world – a trend that may someday change the way the country is governed, for the better. That is a future to welcome, not to fear.

Ms. Kissel is editor of The Wall Street Journal Asia's editorial page.
Title: WSJ: The Challenge from China
Post by: Crafty_Dog on May 13, 2008, 07:20:51 AM
I have mixed feelings about this piece, but post it as representing one POV:

The Challenge From China
May 13, 2008; Page A17

Even as our hearts go out to the Chinese who have perished in the earthquake, we cannot lose sight of the fact that every day China is growing stronger. The rate and nature of its economic expansion, the character and patriotism of its youth, and its military and technical development present the United States with two essential challenges that we have failed to meet, even though they play to our traditional advantages.

The first of these challenges is economic, the second military. They are inextricably bound together, and if we do not attend to both we may eventually discover in a place above us a nation recently so impotent we cannot now convince ourselves to look at the blow it may strike. We may think we have troubles now, but imagine what they will be like were we to face an equal.

Beijing: Delegates from China's military attend the annual session of the National People's Congress.
China has a vast internal market newly unified by modern transport and communications; a rapidly flowering technology; an irritable but highly capable workforce that as long as its standard of living improves is unlikely to push the country into paralyzing unrest; and a wider world, now freely accessible, that will buy anything it can make. China is threatened neither by Japan, Russia, India, nor the Western powers, as it was not that long ago. It has an immense talent for the utilization of capital, and in the free market is as agile as a cat.

Unlike the U.S., which governs itself almost unconsciously, reactively and primarily for the short term, China has plotted a long course, in which with great deliberation it joins economic growth to military power. Thirty years ago, in what may be called the "gift of the Meiji," Deng Xiaoping transformed the Japanese slogan fukoku kyohei (rich country, strong arms) into China's 16-Character Policy: "Combine the military and the civil; combine peace and war; give priority to military products; let the civil support the military."

Japan was able to vault with preternatural speed into the first ranks of the great powers because it understood the relation of growth to military potential. A country with restrained population increases and a high rate of economic expansion can over time dramatically improve its material lot while simultaneously elevating military spending almost beyond belief. The crux is to raise per-capita income significantly enough that diversions for defense will go virtually unnoticed. China's average annual growth of roughly 9% over the past 20 years has led to an absolute tenfold increase in per-capita GNP and 21-fold increase in purchasing-power-parity military expenditure. Though it could do more, it prudently limits defense spending, with an eye to both social stability – the compass of the Chinese leadership – and assimilable military modernization.

As we content ourselves with the fallacy that never again shall we have to fight large, technological opponents, China is transforming its forces into a full-spectrum military capable of major operations and remote power projection. Eventually the twain shall meet. By the same token, our sharp nuclear reductions and China's acquisitions of ballistic-missile submarines and multiple-warhead mobile missiles will eventually come level. The China that has threatened to turn Los Angeles to cinder is arguably more cavalier about nuclear weapons than are we, and may find parity a stimulus to brinkmanship. Who will blink first, a Barack Obama (who even now blinks like Betty Boop) or a Hu Jintao?

Our reductions are not solely nuclear. Consider the F-22, the world's most capable air dominance aircraft, for which the original call for 648 has been whittled to 183, leaving, after maintenance, training, and test, approximately 125 to cover the entire world. The same story is evident without relief throughout our diminished air echelons, shrinking fleets, damaged and depleted stocks, and ground forces turned from preparation for heavy battle to the work of a gendarmerie.

As the military is frustrated and worn down by a little war against a small enemy made terrible by the potential of weapons of mass destruction, the shift in the Pacific goes unaddressed as if it is unaddressable. But it is eminently addressable. We can, in fact, compete with China economically, deter it from a range of military options, protect our allies, and maintain a balance of power favorable to us.

In the past we have been able to outwit both more advanced industrial economies and those floating upon seas of cheap labor – by innovating and automating. Until China's labor costs equal ours, the only way to compete with its manufactures is intensely to mechanize our own. Restriction of trade or waiting for equalization will only impoverish us as we fail to compete in world markets. The problem is cheap labor. The solution, therefore, is automation. Who speaks about this in the presidential campaign? The candidates prefer, rather, to whine and console.

We must revive our understanding of deterrence, the balance of power, and the military balance. In comparison with its recent history, American military potential is restrained. Were we to allot the average of 5.7% of GNP that we devoted annually to defense in peacetime from 1940-2000, we would have as a matter of course $800 billion each year with which to develop and sustain armies and fleets. During World War II we devoted up to 40% of GNP to this, and yet the economy expanded in real terms and Americans did not live like paupers.

The oceans have been our battlefields since the beginning; we invented powered flight; and our automobiles still await us on the surface of the moon – our métiers are the sea, air and space. Thus, we have been blessed by geography, for with the exception of South Korea our allies in the Pacific are islands. With Japan, Australasia, our own island territories, and Admiral Nimitz's ocean, we can match and exceed indefinitely any development of Chinese strategic power – which, by definition, must take to the sea and air.

* * *

And there we will be, if we are wise, not with 280 ships but a thousand; not eleven carriers, or nine, but 40, not 183 F-22s, but a thousand; and so on. That is, the levels of military potential that traditional peacetime expenditures of GNP have provided, without strain, throughout most of our lives. As opposed either to ignominious defeat without war, or war with a rising power emboldened by our weakness and retirement, this would be infinitely cheaper.

And yet what candidate is alert to this? Who asserts that our sinews are still intact? That we can meet any challenge, especially when it can be answered with our historical strengths? That beneath a roiled surface is a power limitless yet fair, supple yet restrained? Who will speak of these things in time, and who will dare to awaken them?

Mr. Helprin, a senior fellow at the Claremont Institute, is the author of, among other works, "Winter's Tale" (Harcourt) and "A Soldier of the Great War" (Harcourt). This piece was adapted from a speech given at Stanford University's Hoover Institution.
Title: Re: China
Post by: G M on June 29, 2008, 01:55:10 PM
Christianity is flourishing in China

José M. Osorio / Chicago Tribune
Zhang Ming-Xuan speaks at a church in Shandong province that sued the government for shutting it down. The ruling Communist Party is officially atheist.
The religion, long repressed and often outlawed in the communist nation, appeals to citizens seeking a moral framework amid the chaotic rise of capitalism.
From the Chicago Tribune
June 28, 2008

BEIJING -- The Rev. Jin Mingri peered out from the pulpit and delivered an unusual appeal: "Please leave," the 39-year-old pastor urged his followers, who were packed, standing-room-only on a Sunday afternoon, into a converted office space in China's capital. "We don't have enough seats for the others who want to come, so please, only stay for one service a day."

A choir in hot-pink robes stood to his left, beside a guitarist and a drum set bristling with cymbals. Children in a modern playroom beside the sanctuary punctuated the service with squeals and tantrums. It was a busy day at a church that, on paper, does not exist.

Christianity -- repressed, marginalized and, in many cases, illegal in China for more than half a century -- is sweeping the country, swamping churches and posing a sensitive challenge to the officially atheist ruling Communist Party.

By some estimates, Christian churches in China, most of them underground, have roughly 70 million members, about as many as the party itself. A growing number of those Christians are in fact party members.

Christianity is thriving in part because it offers a moral framework to citizens adrift in an age of Wild West capitalism that has not only exacted a heavy toll in corruption and pollution but also harmed the global image of products labeled "Made in China."

Some Chinese Christians say their faith is actually a boon for the party, because it shores up the economic foundation that is central to sustaining communist rule.

"With economic development, morality and ethics in China are degenerating quickly," prayer leader Zhang Wei told the crowd at Jin's church as worshipers bowed their heads. "Holy Father, please save the Chinese people's soul."

At the same time, Christianity is driving citizens to be more politically assertive, emboldening them to push for more freedoms and testing the party's willingness to adapt. For decades, most of China's Christians worshiped in secret churches, known as "house churches," that shunned attention for fear of arrest on charges such as "disturbing public order."

But in a sign of Christianity's growing prominence, in scores of interviews for a joint project of the Tribune and PBS' "Frontline/World," clerical leaders and worshipers from coastal boomtowns to inland villages publicly detailed their religious lives for the first time.

They voiced the belief that the time has come to proclaim their place in Chinese society as the world focuses on China and its hosting of the 2008 Olympics in August.

"We have nothing to hide," said Jin, a former Communist Party member who broke away from the state church last year to found his Zion Church.

Jin embodies a historic change: After centuries of foreign efforts to implant Christianity in China, the growing popularity of the religion is being led not by missionaries but by evangelical citizens at home. Where Christianity once was confined largely to poor villages, it's now spreading into urban centers, often with tacit approval from the regime.

It reaches into the most influential corners of Chinese life: Intellectuals disillusioned by the 1989 crackdown on dissidents at Tiananmen Square are placing their loyalty in faith, not politics; tycoons fed up with corruption are seeking an ethical code; and party members are daring to argue that their religion does not put them at odds with the government.

The boundaries of what is legal and what is not are constantly shifting. A new church or Sunday school, for instance, might be permissible one day and taboo the next, because local officials have broad latitude to interpret laws on religious gatherings.

Overall, though, the government is allowing churches to be more open and active than ever, signaling a new tolerance of faith in public life. President Hu Jintao even held an unprecedented Politburo "study session" on religion last year, in which he told China's 25 most powerful leaders that "the knowledge and strength of religious people must be mustered to build a prosperous society."

This rise, driven by evangelical Protestants, reflects a wider spiritual awakening in China. As communism fades into today's free-market reality, many Chinese describe a "crisis of faith" and seek solace from mystical Taoist sects, Bahai temples and Christian megachurches.

Today, the government counts 21 million Catholics and Protestants -- a 50% increase in less than 10 years -- though the underground population is far larger. The World Christian Database's estimate of 70 million Christians amounts to 5% of the population, second only to Buddhists.

At a time when Christianity in Western Europe is dwindling, China's believers are redrawing the world's religious map with a growing community that already exceeds all the Christians in Italy.

And increasing Christian clout in China has the potential to alter relations with the United States and other nations.

But much about the future of faith in China is uncertain, shaped most vividly in bold new evangelical churches such as Zion, where a soft-spoken preacher and his fervent flock do not yet know just how far the Communist Party is prepared to let them grow.

"We think that Christianity is good for Beijing, good for China," Jin said. "But it may take some time before our intention is understood, trusted, even respected by the authorities. We even have to consider the price we may have to pay."

Researcher Xu Wan contributed to this report.

Title: WSJ: Taiwan
Post by: Crafty_Dog on July 17, 2008, 04:47:31 PM
Arming Taiwan
July 18, 2008

Among the many challenges facing the United States in an election year is the issue of arms sales to Taiwan. Before he leaves office, President Bush must decide whether or not to approve various major sales to the island, including 60 additional F-16s, Patriot PAC III missiles and Apache and Blackhawk helicopters. At present, the Department of State and the National Security Council are holding up these sales. This is an issue which deserves President Bush's immediate attention.

A little history helps illuminate what's going on. In 2001, shortly after President Bush took office, he approved in principle several billion dollars in new arms sales to Taiwan. This decision reflected the President's concern for China's military build-up and a continuing U.S. commitment to the Taiwan Relations Act, which obligates the U.S. to provide the island with weapons to defend itself.

During the eight-year tenure of former Taiwan president Chen Shui-bian, political infighting between the ruling Democratic Progressive Party and the opposition Kuomintang stalled the funding for these weapons purchases. At the same time, Mr. Chen's independence-leaning policies angered China's leaders. Washington was displeased by Mr. Chen's inability to push through the arms purchases, and because his actions and outspokenness interfered with improving U.S.-China relations.

The damage those eight years did to U.S.-Taiwan relations was considerable. Taiwan's relative air, missile defense and antisubmarine warfare capabilities fell further behind as important Taiwan military acquisitions were postponed. China, however, purchased advanced weapons from the Soviet Union and increased funding for its own military research and development programs.

Equally important, mutual confidence between Taipei and Washington may have been permanently weakened. U.S. leaders lost confidence in Taiwan's leaders at a time when the U.S. was becoming increasingly dependent on improved U.S.-China relations. In Taiwan, more than ever, domestic political considerations took precedence over national security issues. And although last year the Kuomintang-dominated legislature in Taipei finally passed a defense budget funding many new arms purchases, the damage to U.S.-Taiwan relations already had been done. The U.S. had become increasingly reluctant to take the heat from China over weapons sales it was not confident Taiwan would follow through on.

When Taiwan's current president, Ma Ying-jeou, assumed office in May, he ushered in a policy of Taiwan-China détente and subsequently has expressed his desire for resumed purchases of U.S. arms. Still, the lingering fallout from the previous eight years and President Bush's personal reluctance to anger Beijing continue to hold up various pending arms sales.

Whether or not President Bush approves some or all arms sales after the Beijing Olympics in August -- he will attend the opening ceremony -- remains an open question. High-ranking officials at State and the White House fear major U.S. arms sales, even then, would undermine Taiwan-China détente and do major damage to U.S.-China relations. They also ask why Taiwan needs more weapons packages now. Why not let the next U.S. President address this issue, while the sale of other, less provocative systems, training and spare parts continue?

Herein lies the crux of the problem. How much risk can the U.S. take with Taiwan's security? If it was certain that Taiwan-China détente would go forward without sacrificing Taiwan's young and still fragile democracy, none of this would be of concern.

Beijing has proven all too often, however, that it will demand much and give little and that it sees the use and threat of force as an instrument of diplomacy. Has it demonstrated otherwise? Taiwan democratically elected a president who ran on a platform of détente with China. What has changed on the China side of the equation?

Until Beijing removes short- and medium-range ballistic missiles targeting Taiwan and reduces the number of combat aircraft and troops on its side of the Taiwan Strait, why should the U.S. delay in responding to Taiwan's requests for arms purchases? It will take months for the next administration to sort out its China/Taiwan policies, only delaying important decisions further. In the meantime, China's pressure on the U.S. will only increase as it continues to finance U.S. debt and leaves Washington worried that it won't cooperate with it in the international arena if the U.S. proceeds with major arms sales.

As Taiwan enters this challenging period of détente with China, it needs strong U.S. moral and material support more than ever. By taking action on U.S. arms sales to Taiwan before he leaves office, President Bush would bolster a democratic Taiwan and make it much easier for his successor to withstand pressure from Beijing as arms sales contracts are concluded and weapons systems are delivered. At the same time, President Ma must assure Washington that he is committed to Taiwan's defense and that if Washington approves the sale of F-16s and other major weapons, Taiwan will follow through with signed contracts and adequate funding.

It is time to demonstrate clearly that, while the U.S. supports Taiwan-China détente, it stands firmly behind Taiwan's democracy.

Mr. Ross, a defense consultant, is the former principal director for operations in the Defense Security Cooperation Agency. He writes a weekly Internet column at
Title: Re: China
Post by: Crafty_Dog on July 19, 2008, 04:32:54 PM
Bush Should Keep His Word on Taiwan
July 19, 2008; Page A9

In 2001, President Bush made a bold and principled decision to offer Taiwan a range of military equipment for its security. In 2008, as he prepares to leave office, the president seems to have reneged on that commitment.

On Wednesday, Adm. Timothy Keating, commander of the U.S. Pacific Command, confirmed that the administration has frozen arms sales to the island nation, acknowledging Beijing's displeasure by way of explanation. "The Chinese have made clear to me their concern over any arms sales to Taiwan," he said at a Heritage Foundation forum in Washington. However, the decision to freeze arms sales is mistaken and dangerous.

The People's Republic of China has been expanding its military capabilities at a rapid pace. Included in this impressive buildup are weapons directly intended for use against Taiwan: hundreds of short-range ballistic missiles, scores of new fighter bombers and several types of attack submarines. In accordance with the 1979 Taiwan Relations Act, the Bush administration originally proposed an arms package designed to improve Taiwan's capacity for self-defense. Included were Patriot 3 missile-defense systems, P3C antisubmarine warfare aircraft, Apache helicopters, Kidd-class destroyers, diesel submarines and a modern command, control and communications system.

While defense experts in Taipei and Washington debated the utility of some of these systems for Taiwan's defense, as a package they constituted a powerful signal of America's long-standing commitment to Taiwan's defense and contained important elements of a stronger Taiwanese deterrent against potential Chinese aggression. The offer made good on Mr. Bush's promise that the U.S. would "do whatever it takes" to defend Taiwan.

In addition to the arms package, Mr. Bush also altered policy to normalize security relations with Taiwan, permitting it to request additional weapons systems as its military identified new requirements. Taiwan subsequently asked for 66 F-16 aircraft to replace its aging fighter fleet.

Unfortunately, Taiwan's domestic politics prevented speedy action on elements of the original U.S. offer. While it purchased the Kidd-class destroyers, the P3C aircraft, some elements of a missile defense system and a new command and control system, much of the American package became hostage to partisan bickering in Taipei. After significant delay, last year Taiwan's legislature finally acted, appropriating the money required to purchase most of the rest of the items offered by the U.S. in 2001.

The Bush administration now appears unwilling to follow through on its side of the bargain.

Why the volte-face? Following its initial offer of assistance, the Bush administration came to regard former Taiwanese President Chen Shui-bian as a reckless provocateur, determined to push his self-governing island toward formal independence from Beijing despite the risk of war. Fearful that selling Mr. Chen arms would only embolden him, some administration officials were quietly thankful for the continuing turmoil and indecision in Taipei.

Whatever the validity of these concerns, they no longer apply. In May 2008, the Taiwanese people elected opposition leader Ma Ying-jeou to the presidency. Mr. Ma is dedicated to improving cross-straits ties and eschews Mr. Chen's inflammatory rhetoric. But, like his predecessor, he is committed to strengthening Taiwan's self-defense capabilities.

Since Sept. 11, 2001, the Bush administration has been anxious to avoid antagonizing Beijing and eager to win its support on a variety of issues, especially its continuing efforts to denuclearize North Korea. Though the extent to which China has actually been helpful is debatable, the administration has increasingly subordinated many aspects of its Asia policy to the overarching aim of not offending Beijing.

The policy of not offending China, no matter what the costs, does not serve U.S. interests in the Taiwan Straits. First, it undermines Mr. Ma's ability to deal with Beijing from a position of strength, and to that extent it undermines the common objective of peaceful reunification, should the Taiwanese desire it.

Denying Taiwan the minimal capabilities required to cope with China's massive military buildup also increases the burdens on U.S. forces if they should ever intervene in a future cross-straits confrontation.

Moreover, the administration overstates the damage arms sales to Taiwan will do to cross-strait relations and to the overall relationship between the U.S. and China, important as that is. Beijing presumes Washington would move forward with arms it promised to sell to Taiwan some seven years ago. And, after adding several hundred advanced fighters to its own fleet, Beijing has no military reason to complain about the sale of 66 F-16s to Taiwan. None of the elements in the U.S. arms package in any case seriously increases Taiwan's offensive capabilities -- which are inconsequential to begin with.

Meanwhile, time is running out. The funds Taipei has appropriated to buy arms from the U.S. will lapse by the end of the 2008 and become unavailable. The process of Congressional notification necessary to conclude the sale too is lengthy and requires immediate administration action.

The administration should therefore move urgently to supply Taiwan with the capabilities promised in defense against China's growing ballistic missile, air and naval threats. Leaving office without approving these sales would be a strategic failure with far-reaching implications.

At stake is not only the defense of a democratic friend, but the credibility of the Ma government. Also at stake are America's commitment to protect its long-term interests throughout the Asia-Pacific, and Mr. Bush's determination to defend freedom. Failure to act would also set a dangerous precedent. For the first time since its opening to China, the U.S. government would have sidestepped its obligation to assist Taiwan in hopes of appeasing Beijing. Now is the time to change policy and move forward: both principle and pragmatism demand it.

Mr. Blumenthal is a resident fellow at the American Enterprise Institute. Mr. Friedberg is professor of politics at Princeton. Mr. Tellis is a senior associate at the Carnegie Endowment for International Peace. Mr. Schriver is a partner at Armitage International. All served in Asia policy positions under George W. Bush.

See all of today's editorials and op-eds, plus video commentary, on Opinion Journal.

And add your comments to the Opinion Journal forum.

Title: Stratfor: Escalating Internal Crisis
Post by: Crafty_Dog on July 24, 2008, 08:47:51 AM
Geopolitical Diary: The Escalating Internal Crisis of a Changing China
July 23, 2008
Japanese Chief Cabinet Secretary Nobutaka Machimura, speaking at a news conference in Tokyo on Tuesday, noted a recent rise in “incidents” in China as the “dissatisfaction of people in China” turned against authorities. Machimura added that he hoped such incidents would not “become obstacles to a smooth holding of the Beijing Olympics,” and expressed some understanding as Japan faced similar “social turmoil” during its period of rapid economic expansion.

While Machimura may have been using his comments to make a subtle jab at his neighbor’s insecurities regarding image and the Olympics, his comments hit directly at the major crisis facing the government in Beijing: managing the social and security consequences of a changing China.

Beijing is well aware of the “contradictions,” as the Chinese Communist Party would call them, littering China’s economic, social and political landscape. Highlighting this point, the Politburo is holding a special session this week to discuss the state of the Chinese economy, particularly in the coastal growth engines, and security and stability during the upcoming Olympics. For Beijing, the Olympics have been both a blessing and a curse, bringing about impetus for economic and social developments, media openings and a sense of national pride spreading far beyond the mainland, yet also stirring up new and old security issues, providing opportunity for critics of the government at home and abroad, and ultimately exacerbating policy differences among the top leadership.

This year alone, Beijing has been faced with numerous crises. Some of these were natural disasters (though perhaps compounded by human factors), such as heavy snow and floods early in the year hitting the southern croplands followed by the Sichuan earthquake in May; others were security related, such as the attempted downing of a Chinese airliner by suspected Xinjiang Islamist militants, the Tibetan uprising, and bus bombings in Shanghai and Kunming; some were diplomatic, including criticism of support for Sudan, a deferred arms shipment to Zimbabwe, and territorial spats with Vietnam and Japan; and still others, such as numerous public demonstrations, riots, and attacks on government buildings and security forces over economic issues, reflected rising social tensions. Perhaps all of these have been exacerbated by the more open media environment inside China in recent years related both to the pre-Olympic “opening” and to changes in Beijing’s image and information management.

There have been similar occurrences in China in any given year over the past several decades. Natural disasters of one form or another aren’t exactly infrequent and security concerns with Tibet, Xinjiang, or other ethnic, religious, political or social movements spring up fairly often. Balancing its international image is a constant challenge and China admits each year to thousands of security incidents and social instabilities. But in recent years, such things have appeared more intense, more concentrated and more frequent. Whether this is a reflection of an actual intensification, as Machimura noted, or of increased media openness in China is unclear, but that these issues are troubling to Beijing is obvious.

But while these sorts of troubles rise and fall in China, Beijing faces added pressure this year, first from the Olympics (pressure it has brought on itself) and second — and perhaps more significant in the long run — from the rapid rise in global commodity prices and the simultaneous slowing of global economies. With the former, China tried to use the Olympics to highlight its self-proclaimed role as one of the “big” powers, opening up various restrictions at home to divert criticism from abroad while at the same time tightening the screws in other areas to prevent “embarrassing” situations from arising in full sight of the increased international scrutiny.

This is a very difficult balance in the best of times, but when the second factor — the commodity crisis — struck, it became nearly unmanageable as economic strains destabilized some of the carefully balanced contradictions Beijing had set in place. (China’s yuan policy and its simultaneous attempts to drive businesses to the interior and keep the money flowing in from the coast are just two obvious examples.) When social stresses exceeded the expected Olympic patriotism, the newfound openness let information about the troubles inside China spread rapidly, with or without Beijing’s consent, limiting the management options for the leadership. The system has been stressed by this short-term event, but it comes at a critical time in the longer-term view of Chinese national control and management.

Throughout history, China has run through cycles of strong centralized leadership, a devolution of power to a large bureaucracy designed to maintain control over the sheer size of the Chinese nation and population, and the eventual loss of central control over the regional and local leaders and economic elite — which in turn triggers an attempt at re-centralization of power frequently accompanied by social and political upheaval before the re-establishment of a strong center. When Deng Xiaoping talked about black cats and white cats both catching mice and opened up the coasts and ultimately the rest of China to economic growth and its attendant social changes, he was in a sense devolving power out to the local bureaucracies. While this led to the meteoric rise of China economically (though not without its social consequences throughout, including Tiananmen Square, a resurgent Uighur uprising in the mid 1990s, the Falun Gong stand-off and the recent Tibetan rising), it also weakened the central leadership’s ability to change course if necessary.

Like the rest of Asia, China’s economic miracle was not so much a reflection of some profound but long overlooked new way of doing business; rather it was the tried and true Asian method of economic growth — one with much less concern for profits, sustainability or efficiency than for… well… growth. In 1992, when the rest of the world was scrambling to learn Japanese and seeing the United States as a waning economic power in the face of Japan’s rising, Tokyo suddenly realized the consequences of the Asian growth model. It was followed half a decade later by the other Asian tigers, as Thailand, Indonesia, Malaysia and South Korea all stumbled in the Asian economic crisis. China avoided both, but like its neighbors, China’s time is coming, and while they may not want to admit it publicly, it seems China’s leaders have recognized this as well.

The government has been working for several years, slowly at first but now with more vigor, to reclaim centralized control over the economy, to stave off a major economic crisis, or at least reclaim central control to manage the consequences. President Hu Jintao has repeatedly called for a shift from a raw economic growth focus to the creation of a “harmonious society;” a pleasant way of saying the redistribution of wealth from the rich to the poor. Add to that the raft of new security regulations and policies put in place in the lead up to the Olympics, which may well serve to secure the venues for a few weeks in August and to batten down the hatches as a social storm swells. We may well be entering the crunch time in China’s historical cycle, and the confluence of the openness of the Olympics and the crisis of commodities at this critical moment of re-centralization may well be more than Beijing can manage.

If August passes, and September and October, and the new security, social and economic regulations put in place in the past few months don’t revert to their pre-Olympic status, it will be clear that Beijing sees a crisis coming. But seeing the hurricane bearing down on you doesn’t necessarily mean you can avoid it or weather it. China is reaching a critical moment, and as Machimura noted in classic understatement, “I suppose that overcoming such incidents will be a major theme for Chinese society in the future.”
Title: Re: China
Post by: G M on July 29, 2008, 10:49:38 AM
Look, Ma, No Arms   
By Matthew Continetti
The Weekly Standard | Tuesday, July 29, 2008

Early in 2001, President Bush approved the export of arms to democratic Taiwan. At the time, Bush said the United States would do "whatever it takes" to defend its tiny, besieged Pacific ally. That was yesterday. Today, it's looking more like Bush was just kidding.

How else to explain the administration's recent decision to freeze $16 billion worth of the arms deals? Bush approved the sale of Patriot missiles, Apache helicopters, and submarines to Taiwan more than seven years ago. Since then Taiwan has also requested 66 F-16 fighter jets to replace its aging planes. The Taiwanese legislature has appropriated the money with which to buy the weapons. In some cases it has already even put down payments. In return, America has given Taiwan a whole lot of nothing.

On July 16, the head of Pacific Command, Admiral Timothy Keating, told an audience at the Heritage Foundation that the administration has concluded "there is no pressing, compelling need for, at this moment, arms sales to Taiwan of the systems that we're talking about." This must have been news to the Taiwanese government, which says the weapons are needed to defend Taiwan. And it certainly must have been a surprise to the authors of the Pentagon's annual report on Chinese military power, who have for the past several years noted the dangerous shift in the military balance of power between Taiwan and China.

Taiwan president Ma Ying-Jeou took office last May, pledging to improve relations between Taiwan and China while protecting his democracy's sovereignty. To that end, in recent months the two countries have resumed cross-strait talks, allowed direct flights between the mainland and Taipei, and pursued further economic integration.

Yet Ma also understands that he must negotiate from a position of strength. For the United States to renege on its commitments would weaken Ma's hand at a critical time. After all, his government is only a few months old and Beijing is no doubt searching for weaknesses. American self-doubt and lack of follow through--in effect, a lack of American resolve and confidence in Ma's government--may lead Chinese policymakers to think that they can act provocatively.

Beijing has already gotten away with a lot. China is a rising autocratic power that has suffered no consequences for its gross human rights violations and support for rogue regimes. The military buildup on the Chinese side of the Taiwan Strait continues uninterrupted. There are now more than a thousand Chinese missiles pointed at Taiwan. In the last decade the Chinese have deployed more than 300 advanced aircraft across the Strait. China has five ongoing submarine programs. A massive, underground nuclear submarine base was recently detected on Hainan Island.

China has reasons for its buildup. It is meant, among other things, to deter unilateral declarations of Taiwanese independence. The authors of the Defense Department's 2008 report on Chinese military power wrote, the "ongoing deployment of short-range ballistic missiles, enhanced amphibious warfare capabilities, and modern, long-range anti-air systems opposite Taiwan are reminders of Beijing's unwillingness to renounce the use of force." The greater the military imbalance between China and Taiwan, the more likely China is to use military force in a cross-strait dispute. This is another reason the deal is necessary. Taiwan requires arms to serve as a deterrent against the mainland.

Why the delay? The administration has provided only a series of excuses. First the deal was held up because Washington was displeased with Taiwan president Chen Shui-bian's pro-independence rhetoric. Now Chen is gone, replaced by Ma's quietist diplomacy. The new excuse is that fulfilling our end of the bargain would upset China on the verge of next week's Beijing Olympics. Even if this were the case, and it probably is not, the administration has to shoulder much of the blame. Its foot-dragging in years past helped produce this impasse (though Taiwan's then-opposition Kuomintang party was also a problem). And once the Olympics are over, and the weapons still have not been exported, expect the administration to say that it cannot fulfill its commitments to Taiwan because to do so may jeopardize China's participation in the North Korean denuclearization talks.
All of these excuses point to the actual reason for the delay: America's current Taiwan policy is motivated by fear. We are afraid of upsetting China and afraid, in turn, of what an upset China might do in response. And the consequence of this fear is a weakened position for the United States and its East Asian allies.

On a visit to Taipei last week, former Deputy Defense Secretary Paul Wolfowitz told reporters that he expected the arms sales will be approved. We hope he is right. Let's not forget, however, that the Taiwan Relations Act also gives Congress a say in the defense assistance provided to Taiwan. Should the White House continue to drag its feet, it will fall to Congress to speak out in support of a democratically. And the message Congress might deliver is simple: Who is served when America neglects her friends in a misguided effort not to offend her rivals?
Title: Re: China
Post by: Crafty_Dog on July 29, 2008, 02:26:48 PM
Woof GM:

I share the aritcles sentiments, but it would have been nicer if they mentioned that we were ready to perform a couple of years ago and the Taiwanese were not , , ,

Anyway, here's this from Stratfor.  I am curious what you make of your theories after reading it.


China, the Olympics and the Visa Mystery
July 29, 2008

By Rodger Baker

Related Links
Managing Change in China
Related Special Topic Pages
2008 Olympics: Beijing’s Hopes and Hurdles
China’s Economic Imbalance
Something extraordinary is happening in China, and we are not talking about the Olympics. Rather, Chinese officials have been clamping down on visa applications and implementing bureaucratic impediments to new and renewed visa applications under the guise of pre-Olympic security.

In some ways, Beijing’s plan for a safe and secure Olympics appears based on the premise that if no one shows up, there can be no trouble. But placing restrictions on the movement of managers and employees of foreign businesses operating in China, even if for a limited time as Chinese officials have been at pains to reassure, makes little sense from the standpoint of gaining political and economic benefits from hosting the Olympics. Something just isn’t right.

The Post-’70s Economic Framework
Since China’s economic reform and opening in the late 1970s, China’s economic policy — and thus the basis for the overall development of the nation — has been based on a simple two-part framework. First, draw in as much foreign investment as possible and use the money and technology to strengthen China while using the subsequent economic leverage to secure China. And second, encourage growth for growth’s sake to ensure an ever-increasing flow of money through the system to provide employment and social services to a massive and urbanizing population.

Key to this policy has been creating a very open environment for foreign businesses, which bring money, technology and expertise and use their influence with their own governments to keep stable international relations with China — hence reducing international and economic frictions and increasing the efficiency of the supply chain. For more than two decades, Chinese national strategy has thus revolved around the principle of encouraging investment, joint ventures and wholly-owned foreign enterprises in China. There have been two foundations for this strategy: the evolution of financial facilities for transferring and controlling foreign money with a level of transparency nearing international standards, and the ease of movement of personnel in and out of China.

It is this latter point that recently has been hit the hardest. Over the past several months as the Beijing Olympics drew nearer, the Chinese government has effectively frozen up most financial reform plans. It also has issued a raft of new security measures not entirely unlike other host cities in the post 9/11 security environment. But China has gone several steps further than its predecessor hosts, placing official and bureaucratic impediments on visa applications. This not only has targeted potential “troublemaking” rights advocates, it has also impacted foreign businesses ranging from invited guests to the Olympic games to managers and employees of foreign companies in China.

Business and the New Visa Hassles
The visa restrictions in particular have been a source of angst for foreign businesses and business associations. Many smaller operations may circumvent Chinese regulations and travel on tourist visas (provided they can still obtain them). And there are ways around the tighter regulations or bureaucratic hurdles if one has the right connections or the willingness to apply several times or from different locations. But multinational corporations are less willing to jeopardize their operations by skirting the laws. Instead, they are making their concerns known to Beijing and hoping that restrictions are eased in September, as Beijing has rumored and hinted will occur.

In general, these visa restrictions have been brushed aside by foreign observers as simply paranoia on China’s part regarding protests or terrorist attacks during the Olympics. In many ways, however, this makes little sense. First and most obvious, the Olympics were supposed to highlight the opening of China — not restrict the very people who have made China a key part of the global economy. Second, imposing tight restrictions in Shanghai, the center of the Chinese foreign-domestic economic nexus, makes little sense on grounds of Olympic security since Shanghai is playing only a minor role in the games compared to Beijing and Qingdao. (Think shutting down visas to New York during the Atlanta games in the name of security, though Shanghai admittedly is hosting some soccer matches.)

Shutting down business visas to keep terrorists out makes little sense anyway — it is hard to imagine Uighur militants traveling on business visas as representatives of foreign multinationals. Furthermore, by restricting business visas — even if not across the board in a coherent fashion — China is putting a massive strain not only on the ability of businesses to trust Chinese regulations and business relations with the government, but also on the fluidity of the global supply chain. Shutting down or impeding visas affects much more than delaying the movement of a single individual into China; it impacts the ability of multinational corporations to move, replace or supplement managers and dealmakers in China. A delayed visa applications of just three months still represents an entire quarter that multinational corporations cannot reliably manage their businesses operations in China, and that doesn’t take into account the visa backlog when restrictions are loosened or lifted.

Disrupting an integral part of the global economy for a full quarter because of an international exposition makes little sense. The Germans in 1936 didn’t do it, the Russians in 1980 didn’t — no one has. One doesn’t simply shut down international business transactions for three months or more to stop a terrorist — and particularly not China, which depends on foreign direct investment. This is not simply an inconvenience for some people: It is the imposition of friction on a part of the system that is supposed to be frictionless. And it is not merely individuals who are affected, but the relations between mammoth companies.

A Period of Erratic Policies
China’s behavior has been erratic for several months now, if not for the past few years, with the implementation of new and often contradictory security and economic policies. These have all been brushed aside as somehow related to preparation for the Olympics. But they are in fact anomalous. China’s behavior is not that of a country trying to show its best side for the international community, nor that of a nation simply concerned about potential terrorist or public relations threats to the Olympic games. In another two months, after the Olympics and Paralympics have ended, it will become clearer whether this was a spate of excessive paranoia or a reflection of a much more significant crisis facing the Chinese leadership — and the evidence increasingly points toward the latter.

As mentioned, China’s economic policies in the reform and opening era have been based on the idea of growth. This in many ways simply reflects the Asian economic model of maintaining cheap lending policies at home, subsidizing exports, flowing money through the system and focusing on revenue rather than profits. In essence, it is growth for the sake of growth. This was the policy of Japan, South Korea, Indonesia, Malaysia and Thailand. And it led each of those countries to a final crisis point, striking Japan first in the early 1990s and the rest of the Asian tigers a few years later. But China managed to avoid each of the previous Asian economic crises points, as it was on the lagging end of growth and investment curves.

Following the Asian economic crisis, China fully recovered from the international stigma of Tiananmen Square and became the global economic darling. By the time the 21st century rolled around, China was already taking on the mantle of the Japanese and other Asians. It began to be labeled both an economic miracle and a rising power; a future challenge to U.S. economic dominance with all the political ramifications that brought. Were it not for 9/11, Washington would have squared off with Beijing to prevent the so-called China rise. The reprieve of international pressure that came when U.S. attention turned squarely toward Afghanistan and then Iraq freed China’s leaders from an external stress that could have brought about a very different set of economic and political decisions.

With the United States preoccupied, and no other major power really challenging China, Beijing shifted its attention to domestic issues, and its review quickly revealed the stresses to the system. These did not primarily come from “splittist” forces like the Tibetans or the Falun Gong, but rather from the economic policies that had brought China from the Third World to the center of the global economic system. Beijing is well-aware that should it continue with its current economic policies, it will face the same risk of crisis as Japan, South Korea and the rest of Asia. It is also aware that growing internal challenges — from the spread and invasiveness of corruption to geographic economic imbalances, from rising social unrest to massive dislocation of populations — are causing immediate problems.

Economics from Mao to Hu
Mao Zedong built a China designed to be self-sufficient and massively redundant. Every province, every city, every factory was supposed to be a self-contained unit, making the country capable of weathering nearly any military attack. Deng Xiaoping didn’t get rid of these redundancies when he opened the economy to foreign investment. Instead, he and his successors encouraged local officials to work to attract foreign investment and technology so as to raise China’s economic standard more rapidly. By the time Jiang Zemin was in power it had become clear that the regionally and locally driven economic policies threatened to throw China back into its old cycle of decentralization — and, ultimately, competing centers of power. Attempts by Jiang to correct this through the Go West program, for example, came to naught after meeting massive resistance in the wealthy coastal provinces. The central government accordingly backed off, shifting its attention to reclaiming centralized authority over the military.

Hu Jintao has sought once again to try to address the problem of the concentration of economic power in China’s coastal provinces and cities through his Harmonious Society initiative. The idea is to redistribute wealth and economic power, regain central authority over the economy, and at the same time reduce redundancies and inefficiencies in the Chinese economy. With minimal external interference, Hu was able to test policies that by their very nature were going to sacrifice short-term social stability in the name of long-term economic stability. Growth was replaced by sustainability as the target; longer-term redistribution of economic growth engines would replace short-term employment and social stability.

This was a risky proposition, and one that met strong resistance in China. But the alternative was to sit back and wait for the inevitable economic crisis and the social repercussions thereto. In some ways, Hu was suggesting that China risk stability in the short term to preserve stability in the long run. But Hu didn’t anticipate the massive surge in global commodity prices, particularly of food and oil. This was compounded by increased international scrutiny over China’s human rights record ahead of the Olympics, natural disasters hitting at the availability and distribution of goods, a rise in domestic social unrest triggered by local government policies and economic corruption, several attempted and successful attacks against China’s transportation infrastructure, and the uprising in Tibet. Thus, the already-risky policies the central government was pursuing suddenly looked more destructive than constructive from the point of view of continued rule by the Communist Party of China (CPC).

The global economic slowdown was the external impetus China feared — something that could undermine the flow of capital and leave Beijing unable to control the outcome of a reduction in the inflow of capital. At the same time, the internal social tensions triggered both by Hu’s attempts to reshape the Chinese economy and by the slow pace of those changes created a crisis for the Chinese leadership. It was hard enough internally to control a measured economic slowdown to reshape the economic structure of China, but quite another thing altogether to have such a slowdown imposed on China from outside at the very moment social stability was in a critical state at home.

A Government in Crisis
China’s rapid and contradictory economic and security policies, rising social tensions, and seemingly counterproductive visa regulations appear to be signs of a government in crisis. They are the reactionary policies of a central leadership trying to preserve its authority, stabilize social stability and postpone an economic crisis. At the same time, we see signs that the local governments, and even organs of the central government, are putting up steady resistance to the announcements coming from Beijing. Slapping restrictions on foreign businessmen may make little sense from a broader business continuity sense, but if the point is to begin breaking the backs of the local governments — whose strength lies in their relations with foreign businesses — then the moves may make more sense.

If the central government has reached the point that it is willing to risk its international business role to rein in wayward local officials, however, then the Chinese leadership sees a major crisis looming or already under way. It is one thing to toss out a few local leaders and replace them, quite another to undermine the structure of the Chinese economy for the sake of regaining control over local officials. But if Chinese history since 1949 (and really quite a ways before) is any guide, the core of the CPC leadership is willing to sacrifice social and economic stability to preserve power. One need only look at the Great Leap Forward, the Cultural Revolution or the crackdown at Tiananmen Square for evidence of this. Revolution is not, after all, a dinner party, and maintaining CPC control is paramount to the government.

After each major revolution or crisis, China eventually has recovered. The Cultural Revolution was followed by diplomatic relations with the United States, Tiananmen Square was put aside as China joined the World Trade Organization and surged ahead in gross domestic product (GDP). Certainly, there was change among the leadership and in the way the party dealt with policies at home and abroad. But if there is the likelihood of loss of control due to an impending economic crisis, better to have some role in shaping the crisis to preserve the chance of maintaining a role in the future political structure than to sit by and try to clean up as things fall apart. The Party in fact has a long history of taking a self-generated crisis/revolution over an externally or domestically initiated one.

It may be that the contradictory policies Beijing is tossing around these days will simply fade away after September and things will get back to “normal.” But already, Chinese officials are downplaying the previously hyped political and economic benefits of the Olympic games. They are now warning that economic conditions may not be so strong in the future, and at least internally discussing the distinct possibility that at least certain regions of China are facing the same economic crises faced by their mentors Japan, South Korea and the Asian tigers.

Internal Crises vs. the Economy
A recent article in the Global Times, a paper that addresses myriad topics of domestic and international significance and is read among China’s leaders, discussed how economics is not the best measure of strength. It referred to the overall comparative GDP and the size of China’s military in the late 1800s. Then, China was considered at its weakest, but from an economic or military perspective it could have been considered comparable to the global powers of the day. This hints at the deeper internal debate in Beijing, where true national strength and the role of the economy is under discussion. Assumptions that China is only focused on continued good economic ties with the world shouldn’t be taken as gospel — China has a track record of shutting down external connections when internal crises brew.

Numerous polices are being thrown around in firefighting fashion, including blocking or at least hindering foreign business movement in and out of the country and tightening the flow of foreign capital in both directions. They are coming in reaction to flare-ups in economic, environmental, public relations and social arenas. Energy policies are making less sense, imbalances in supply and demand are growing and seemingly contradictory policies are being issued. Social unrest, or at least local media coverage of such unrest, seems to be increasing; either is a sign of weakening control. Local officials are still failing to fall in line with central government edicts. Strategic state enterprises like China National Petroleum Corp., China Petroleum & Chemical Corp. and the China Development Bank are all defying state-council orders — and the State Council itself is apparently going head-to-head with major policy bodies long given control over economic policies.

Something extraordinary is happening in China. And while not everyone may want that to be the case, and so have sought to use the Olympics to explain things away, the easy explanation simply doesn’t make enough sense
Title: Re: China
Post by: G M on July 29, 2008, 06:03:29 PM
Well, it appears that Stratfor and I agree that something has the Chinese power structure is acting like there is a major crisis looming. Their analysis is more sophisticated and nuanced than mine. If their actions start to affect international investment in China, they could be inducing a major crisis and normally Beijing isn't that stupid.

Something is going on behind the curtain, this much is true.
Title: Re: China
Post by: G M on July 29, 2008, 06:59:55 PM
**My reaction to the article below is "old news".**

China spying on Olympics hotel guests-US senator

, Tuesday July 29 2008
By Richard Cowan
WASHINGTON, July 29 (Reuters) - China has installed Internet-spying equipment in all the major hotel chains serving the 2008 Summer Olympics, a U.S. senator charged on Tuesday.
"The Chinese government has put in place a system to spy on and gather information about every guest at hotels where Olympic visitors are staying," said Sen. Sam Brownback.
The conservative Republican from Kansas, citing hotel documents he received, added that journalists, athletes' families and others attending the Olympics next month "will be subjected to invasive intelligence-gathering" by China's Public Security Bureau. He said the agency will be monitoring Internet communications at the hotels.
The U.S. senator made a similar charge a few months ago but said that since then, hotels have come forward with detailed information on the monitoring systems that have been required by Beijing.
Brownback refused to identify the hotels, but said "several international hotel chains have confirmed the existence of this order."
Spokesmen at the Chinese Embassy in Washington were not available for comment.
Brownback, who staged an unsuccessful campaign for president this year, released documents that he said were notices to the hotels on Internet security. The authenticity of the documents could not be checked and portions were redacted.
One document said: "In order to ensure the smooth opening of Olympic in Beijing and the Expo in Shanghai in 2010, safeguard the security of Internet network and the information thereon in the hotels ... it is required that your company install and run the Security Management System."
Brownback said the hotels "have invested millions of dollars in their Chinese properties" and "could face severe retaliation from the Chinese government" if they refused to comply.
The senator called on China to reverse its policy, but said the hotels are advising guests that "your communications and Web site activity are not private" and that e-mails and Web sites being visited are accessible to local law enforcement.
More than two years ago, a U.S. House of Representatives committee held a hearing to probe U.S. firms' compliance with China's Internet censorship demands.
Brownback has been a critic of China on human rights issues and has been among U.S. lawmakers calling on President George W. Bush to boycott the Olympics opening ceremonies, largely to highlight allegations of Beijing's supply of arms to Sudan in return for oil. Those weapons have been used to carry out genocide in Darfur, according to China critics.
China has called human rights allegations nothing more than "noise pollution" and is hoping the Olympic Games will boost its international image. (Editing by Doina Chiacu)
Title: "Autocratic" democracy vs "liberal" democracy
Post by: ccp on August 10, 2008, 04:03:50 PM
I thought this is a fascinating thought piece:

Liberal democracy vs. autocratic democracy:

***Patrick J. Buchanan
Democracy -- A Flickering Star?

In his 1937 "Great Contemporaries," Winston Churchill wrote, "Whatever else may be thought about (Hitler's) exploits, they are among the most remarkable in the whole history of the world."

Churchill was referring not only to Hitler's political triumphs -- the return of the Saar and reoccupation of the Rhineland -- but his economic achievements. By his fourth year in power, Hitler had pulled Germany out of the Depression, cut unemployment from 6 million to 1 million, grown the GNP 37 percent and increased auto production from 45,000 vehicles a year to 250,000. City and provincial deficits had vanished.

In material terms, Nazi Germany was a startling success.
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And not only Churchill and Lloyd George but others in Europe and America were marveling at the exploits of the Third Reich, its fascist ally Italy and Joseph Stalin's rapidly industrializing Soviet state. "I have seen the future, and it works," Lincoln Steffins had burbled. Many Western men, seeing the democracies mired in Depression and moral malaise, were also seeing the future in Berlin, Moscow, Rome.

In Germany, Hitler was winning plebiscites with more than 90 percent of the vote in what outside observers said were free elections.

What calls to mind the popularity of the Third Reich and the awe it inspired abroad -- even after the bloody Roehm purge and the Nazi murder of Austrian Chancellor Dollfuss in 1934, and the anti-Semitic Nuremberg laws -- is a poll buried in The New York Times.

In a survey of 24 countries by Pew Research Center, the nation that emerged as far and away first on earth in the satisfaction of its people was China. No other nation even came close.

"Eighty-six percent of Chinese people surveyed said they were content with the country's direction, up from 48 percent in 2002. ... And 82 percent of Chinese were satisfied with their national economy, up from 52 percent," said the Times.

Yet, China has a regime that punishes dissent, severely restricts freedom, persecutes Christians and all faiths that call for worship of a God higher than the state, brutally represses Tibetans and Uighurs, swamps their native lands with Han Chinese to bury their cultures and threatens Taiwan.

China is also a country where Maoist ideology has been replaced by a racial chauvinism and raw nationalism reminiscent of Italy and Germany in the 1930s. Yet, again, over 80 percent of all Chinese are content or even happy with the direction of the country. Two-thirds say the government is doing a good job in dealing with the issues of greatest concern to them.

And what nation is it whose people rank as third most satisfied?

Vladimir Putin's Russia.

Moscow is today more nationalistic, less democratic and more confrontational toward the West than it has been since before the fall of communism. Power is being consolidated, former Soviet republics are hearing dictatorial growls from Moscow and a chill reminiscent of the Cold War is in the air.

Yet, wrote the Times, "Russians were the third most satisfied people with their country's direction, at 54 percent, despite Western concerns about authoritarian trends."

Of the largest nations on earth, the two that today most satisfy the desires of their peoples are the most authoritarian.

High among the reasons, of course, are the annual 10 percent to 12 percent growth China has experienced over the last decade, and the wealth pouring into Russia for the oil and natural gas in which that immense country abounds. Still, is this not disturbing? In China and Russia, the greatest of world powers after the United States, people seem to value freedom of speech, religion or the press far less than they do a rising prosperity and national pride and power. And they seem to have little moral concern about crushing national minorities.

Contrast, if you will, the contentment of Chinese and Russians with the dissatisfaction of Americans, only 23 percent of whom told the Pew poll they approved of the nation's direction. Only one in five Americans said they were satisfied with the U.S. economy.

Other polls have found 82 percent of Americans saying the country is headed in the wrong direction, only 28 percent approving of President Bush's performance and only half that saying they approve of the Congress. In Britain, France and Germany, only three in 10 expressed satisfaction with the direction of the nation.

Liberal democracy is in a bear market. Is it a systemic crisis, as well?

In his 1992 "The End of History," Francis Fukuyama wrote of the ultimate world triumph of democratic capitalism. All other systems had fallen, or would fall by the wayside. The future belonged to us.

Democratic capitalism, it would appear, now has a great new rival -- autocratic capitalism. In Asia, Africa, the Middle East and Latin America, nations are beginning to imitate the autocrats of China and Russia, even as some in the 1930s sought to ape fascist Italy and Nazi Germany.

The game is not over yet. We are going into extra innings.****

Title: Re: China
Post by: G M on August 16, 2008, 06:47:51 AM

Worth watching.
Title: Re: China
Post by: Crafty_Dog on August 16, 2008, 07:38:28 AM
Fleshing out GM's rather laconic description, his post is of an interview about the Chinese educational system and contrasts it to the US one.
Title: Re: China
Post by: G M on August 17, 2008, 04:16:03 AM
Sorry, I should have added more.

I think that it's important to examine how various nations/cultures educate and socialize their children as this will be a good starting point in attempting to extrapolate the long term trajectories of those cultures/nations.

I'm not sure I agree with all the points made by the professor, but it's an interesting perspective.
Title: Reeducating Septuagenarians
Post by: Body-by-Guinness on August 20, 2008, 09:05:31 AM
August 21, 2008
Two Women Sentenced to ‘Re-education’ in China

BEIJING — Two elderly Chinese women have been sentenced to a year of “re-education through labor” after they repeatedly sought a permit to demonstrate in one of the official Olympic protest areas, according to family members and human rights advocates.

The women, Wu Dianyuan, 79, and Wang Xiuying, 77, had made five visits to the police this month in an effort to get permission to protest what they contended was inadequate compensation for the demolition of their homes in Beijing.

During their final visit on Monday, public security officials informed them that they had been given administrative sentences for “disturbing the public order,” according to Li Xuehui, Ms. Wu’s son.

Mr. Li said his mother and Ms. Wang, who used to be neighbors before their homes were demolished to make way for a redevelopment project, were allowed to return home but were told they could be sent to a detention center at any moment. “Can you imagine two old ladies in their 70s being re-educated through labor?” he asked. He said Ms. Wang was nearly blind.

A man who answered the phone at the Public Security Bureau declined to give out information about the case.

At least a half dozen people have been detained by the authorities after they responded to a government announcement late last month designating venues in three city parks as “protest zones” during the Olympics. So far, no demonstrations have taken place.

According to Xinhua, the state news agency, 77 people submitted protest applications, none of which were approved. Xinhua, quoting a public security spokesperson, said that apart from those detained all but three applicants had dropped their requests after their complaints were “properly addressed by relevant authorities or departments through consultations.” The remaining three applications were rejected for incomplete information or for violating Chinese law.

The authorities, however, have refused to explain what happened to applicants who disappeared after they submitted their paperwork. Among these, Gao Chuancai, a farmer from northeast China who was hoping to publicize government corruption, was forcibly escorted back to his hometown last week and remains in custody.

Relatives of another person who was detained, Zhang Wei, a Beijing resident who was also seeking to protest the demolition of her home, were told she would be kept at a detention center for a month. Two rights advocates from southern China have not been heard from since they were seized last week at the Public Security Bureau’s protest application office in Beijing.

Ms. Wu and Ms. Wang were well known to the authorities for their persistent campaign for greater compensation for the demolition of their homes. Mr. Li said his family had given up their home in 2001 with the expectation that they would get a new one in the development that replaced it. Instead, he said, the family has been forced to live in a ramshackle apartment on the capital’s outskirts.

“I feel very sad and angry because we’re only asking for the basic right of living and it’s been six years, but nobody will do anything to help them,” Mr. Li said.

He said that he and Ms. Wang’s daughter tried to apply for their own protest permit on Tuesday but that the police would not even give them the necessary forms.

The two elderly women were given administrative sentences to re-education through labor, known as laojiao, which seeks to reform political and religious dissenters and those charged with minor crimes like prostitution and petty theft. Government officials say that 290,000 people are detained in re-education centers for terms ranging from one to three years, although detentions can be extended for those whose rehabilitation is deemed inadequate.

Human rights advocates have long criticized the system because punishment is handed down by officials without trials or means of appeal. Last year, the government briefly grappled with revamping the system but backed off in the face of opposition from public security officials.

Although it is unlikely that women as old as Ms. Wu and Ms. Wang would be forced into hard labor, many of those sentenced to laojiao often toil in agricultural or factory work and are forced to confess their transgressions.

Tang Xuemei contributed research.
Title: iCan't Download Protest Music
Post by: Body-by-Guinness on August 20, 2008, 12:57:44 PM
iTunes Store embroiled in Olympic protest over Tibet
By Charles Jade | Published: August 20, 2008 - 02:19PM CT

As if Apple didn't have enough problems right now with iPhone woes and a MobileMe meltdown, The Sydney Morning Herald is reporting that the iTunes Store has become part of an international incident. The story began shortly before the start of the Olympics when a pro-Tibet organization, The Art of Peace Foundation, cobbled together an album from some 20 artists, Songs for Tibet - The Art of Peace. From superstars and plastic surgery addicts like Madonna to the totally hot Regina Spektor—what pipes hath she!—the music, while not new, really isn't too bad. There's also 15 minutes of video from some guy wearing sheets for those who buy the album. Unless you are in China, that is.

It seems that foreigners living in China have begun to have problems with accessing the iTunes store. The Herald reports what is allegedly the response of Apple customer support to a blogger named JeninShanghai.

"iTunes is not being blocked in China from our end, but access to the iTunes Store IS restricted in some areas in China. This would also explain why it's happening to your friends there as well," the response reads.

"I would advise that you contact your ISP [internet service provider] about this matter. Please also note though that accessing the US iTunes Store outside of the geographic region of the United States is not supported, and that attempting to access it while in China is at your own risk."

The catalyst for this apparent interruption of service may have been a stealth protest instigated by The Art of Peace foundation. Its album was to be given away free to athletes, and "over 40 Olympic athletes in North America, Europe and even Beijing" downloaded it. And for those thinking this is simply a reactionary response from an authoritarian regime, one need only visit the iTunes Store and peruse the reviews. Besides one-star ratings and plenty of hanz, there is no shortage of hilarious broken-English comments.

Tibet is China forever! Taiwan is! We are all Chinese Nation! Chinese people to roar! Chinese is the roar! This genuine peace cheers! Love China!

Dalai Lama = LIAR. Tibet separatists are mainly funded by the CIA. Dalai Lama was biggest slave holder in human history.

Apple Inc is really, really so stupid of putting an album like this on the very position of iTunes Store.
Setting aside whether the Dalai Lama is like Hitler—how do you say Godwin's Law in Mandarin?—the nationalist sentiment is not really surprising, but that last comment is something to think about. Apple just opened its first store in Beijing and is actively pursuing negotiations over bringing the iPhone to China. An issue like this certainly doesn't help. Of course, it's not like Apple will pull the album, but it's an open question whether politically-sensitive albums like a second Songs for Tibet, let alone something like Songs for Palestine, will be debuting at the iTunes Store any time soon.
Title: Re: China
Post by: G M on August 22, 2008, 12:40:40 PM
China Looks Across the Strait   
By Dan Blumenthal and Christopher Griffin
The Weekly Standard | Friday, August 22, 2008

For Beijing, Russia's invasion of Georgia has been a mixed blessing. Vladimir Putin stole China's limelight during the Olympics' opening ceremonies with a fireworks display of his own in the Caucasus and embarrassed his Chinese hosts. On the other hand, Putin's Olympics offensive has a long-term upside for Beijing: that the West dithered during the invasion of an upstart democracy must have provided comfort to those in China who want to settle the Taiwan issue by force.
The U.S. response to the invasion of Georgia was embarrassing. President Bush chose not to interrupt his Beijing itinerary of watching basketball and beach volleyball, and his administration's lackadaisical actions sent a clear message to his Chinese hosts about waning American will to stand by its allies. The initial call by both presidential candidate Barack Obama and President Bush that both aggressor and victim stand down must have been music to China's ears.
For years China has been selling the argument that Taiwan is a provocateur. Beijing argued throughout the administration of independence-leaning Taiwan president Chen Shui-bian that "separatists" in Taipei had hijacked Chinese "compatriots" on the island who really want unification with the Chinese motherland. Remove the separatists, China's rhetoric went, and Taiwan will return to the motherland--allow them to govern, and China will one day have to attack.
The election of the more accommodationist President Ma Ying-jeou has somewhat stalled China's belligerence, but Taiwan is a democracy and the "separatists" will be voted back in one day. The Taiwanese public, moreover, is itself becoming more separatist--only a tiny and diminishing minority wants to unify with China. This fact may explain why, even after Ma's election, China has not halted its military build-up across the Strait: Over 1,000 ballistic missiles, 300 advanced fighters, dozens of submarines and destroyers are poised to wreak havoc on the small, isolated island. As China grows stronger it is no longer fanciful to imagine it pulling a Putin, trumping up any number of Taiwanese "provocations" as a pretext to attack.
The underlying tensions in the Taiwan Strait bear important similarities to those in the Caucasus. Just as authoritarian Russia objects to a democratic, pro-American Georgia, so too authoritarian China sees a democratic, pro-American Taiwan as a gaping wound on its periphery. The main cause of tensions is domestic politics. An authoritarian China, like authoritarian Russia, needs fervent nationalism to retain its shaky legitimacy. The "sacred goal" of reunifying the motherland serves that purpose well.
America's tepid response to Russia's invasion of Georgia has harmed its ability to act as a global deterrent. If Washington was slow in response to Georgia, a country that it sponsored for NATO membership, whose president it feted at the White House in 2006 and that hosted President Bush in 2005 with great fanfare, Beijing must wonder if the United States would do anything for isolated Taiwan. Unlike Georgia, Taiwan is a pariah in the international community.
Washington's complicity in Taiwan's isolation only tempts Chinese aggression. While Russia's actions have sent a harmful signal to all would-be aggressors, a Chinese invasion of Taiwan is far from inevitable. The United States can recapitalize its maritime and air forces in the Pacific, and make it clear that it will defend Taiwan from attack. America is a $15 trillion economy that can afford the weapons it needs to keep the peace in the Pacific. While Beijing's military threat to Taiwan should be taken seriously, China is a $3 trillion economy with a host of domestic problems.
In the end, though, the true path to peace in the Strait is a reformed and liberalized China focused on its manifold domestic problems rather than on a bellicose nationalism.

Dan Blumenthal is a resident fellow and Christopher Griffin a research fellow at the American Enterprise Institute.
Title: WSJ: Blair on China
Post by: Crafty_Dog on August 26, 2008, 06:19:19 AM
We Can Help China Embrace the Future
August 26, 2008; Page A21

The Beijing Olympic Games were a powerful spectacle, stunning in sight and sound. But the moment that made the biggest impression on me came during an informal visit just before the Games to one of the new Chinese Internet companies, and in conversation with some of the younger Chinese entrepreneurs.

These people, men and women, were smart, sharp, forthright, unafraid to express their views about China and its future. Above all, there was a confidence, an optimism, a lack of the cynical, and a presence of the spirit of get up and go, that reminded me greatly of the U.S. at its best and any country on its way forward.

These people weren't living in fear, but looking forward in hope. And for all the millions still in poverty in China, for all the sweep of issues -- political, social and economic -- still to be addressed, that was the spirit of China during this festival of sport, and that is the spirit that will define its future.

During my 10 years as British leader, I could see the accelerating pace of China's continued emergence as a major power. I gave speeches about China, I understood it analytically. But I did not feel it emotionally and therefore did not fully understand it politically.

Since leaving office I have visited four times and will shortly return again. People ask what is the legacy of these Olympics for China? It is that they mark a new epoch -- an opening up of China that can never be reversed. It also means that ignorance and fear of China will steadily decline as the reality of modern China becomes more apparent.

Power and influence is shifting to the East. In time will come India, too. Some see all this as a threat. I see it as an enormous opportunity. But we have to exercise a lot of imagination and eliminate any vestiges of historic arrogance.

The volunteer force that staged the Games was interested, friendly and helpful. The whole feel of the city was a world away from the China I remember on my first visit 20 years ago. And the people are proud, really and honestly proud, of their country and its progress.

No sensible Chinese person -- including the country's leadership -- doubts there remain issues of human rights and political and religious freedom to be resolved. But neither do the sensible people -- including the most Western-orientated Chinese -- doubt the huge change, for the better, there has been. China is on a journey. It is moving forward quickly. But it knows perfectly well the journey is not complete. Observers should illuminate the distance to go, by all means, but recognize the distance traveled.

The Chinese leadership is understandably preoccupied with internal development. Beijing and Shanghai no more paint for you the complete picture of China than New York and Washington do of the U.S. Understanding the internal challenge is fundamental to understanding China, its politics and its psyche. We in Europe have roughly 5% of our population employed in agriculture. China has almost 60%. Over the coming years it will seek to move hundreds of millions of its people from a rural to an urban economy. Of course India will seek to do the same, and the scale of this transformation will create huge challenges and opportunities in the economy, the environment and politically.

For China, this economic and social transformation has to come with political stability. It is in all our interests that it does. The policy of One China is not a piece of indulgent nationalism. It is an existential issue if China is to hold together in a peaceful and stable manner as it modernizes. This is why Tibet is not simply a religious issue for China but a profoundly political one -- Tibet being roughly a quarter of China's land mass albeit with a small population.

So we should continue to engage in a dialogue over the issues that rightly concern people, but we should conduct it with at least some sensitivity to the way China sees them.

This means that the West needs a strong partnership with China, one that goes deep, not just economically but politically and culturally. The truth is that nothing in the 21st century will work well without China's full engagement. The challenges we face today are global. China is now a major global player. So whether the issue is climate change, Africa, world trade or the myriad of security questions, we need China to be constructive; we need it to be using its power in partnership with us. None of this means we shouldn't continue to raise the issues of human rights, religious freedoms and democratic reforms as European and American leaders have done in recent weeks.

It is possible to hyperbolize about the rise of China. For example, Europe's economies are still major and combined outreach those of China and India combined. But, as the Olympics and its medal tables show, it is not going to stay that way. This is a historic moment of change. Fast forward 10 years and everyone will know it.

For centuries, the power has resided in the West, with various European powers including the British Empire and then, in the 20th century, the U.S. Now we will have to come to terms with a world in which the power is shared with the Far East. I wonder if we quite understand what that means, we whose culture (not just our politics and economies) has dominated for so long. It will be a rather strange, possibly unnerving experience. Personally, I think it will be incredibly enriching. New experiences; new ways of thinking liberate creative energy. But in any event, it will be a fact we have to come to terms with. For the next U.S. president, this will be or should be at the very top of the agenda, and as a result of the strength of the Sino-U.S. relationship under President Bush, there is a sound platform to build upon.

The Olympics is now the biggest sporting event in the world, and because of the popularity of sport it is therefore one of the events that makes a genuine impact on real people. These Games have given people a glimpse of modern China in a way that no amount of political speeches could do.

London 2012 gives Britain a tremendous chance to explore some of these changes and explain to the East what the modern West is about. One thing is for certain: Hosting the Olympics is now a fantastic opportunity for any nation. My thoughts after the Beijing Games are that we shouldn't try to emulate the wonder of the opening ceremony. It was the spectacular to end all spectaculars and probably can never be bettered. We should instead do something different, drawing maybe on the ideals and spirit of the Olympic movement. We should do it our way, like they did it theirs. And we should learn from and respect each other. That is the way of the 21st century.

Mr. Blair, former prime minister of Great Britain, is teaching a course on faith and globalization at the Yale Schools of Management and Divinity.
Title: China Helps Pakistan w/ Nukes
Post by: Body-by-Guinness on September 05, 2008, 05:58:46 AM
China sees India as a strategic opponent; appears they've decided to give India something to think about, and have been doing so for a while.

China tested nukes for Pakistan, gave design

WASHINGTON: While an assortment of non-proliferation hardliners and hi-tech suppliers treat India with immense suspicion in the matter of nuclear trade predicated on tests, it turns out that the United States and the west were fully aware of Chinese nuclear weapons proliferation to Pakistan, including conducting a proxy test for it, as far back as 1990.

In some of the most startling revelations to emerge on the subject, a high-ranking former US official who was also a nuclear weapons designer has disclosed that ''in 1982 China's premier Deng Xiaoping began the transfer of nuclear weapons technology to Pakistan.'',prtpage-1.cms

The whistleblower isn't a think-tank academic or an unnamed official speaking on background. Thomas Reed, described as a former U.S ''nuclear weaponeer'' and a Secretary of the Air Force (1976-77) writes in the latest issue of Physics Today that China’s transfers to Pakistan included blueprints for the ultrasimple CHIC-4 design using highly enriched uranium, first tested by China in 1966. A Pakistani derivative of CHIC-4 apparently was tested in China on 26 May 1990, he adds.

Reed makes an even more stunning disclosure, saying Deng not only authorized proliferation to Pakistan, but also, "in time, to other third world countries.'' The countries are not named. He also says that during the 1990s, China conducted underground hydronuclear experiments—though not full-scale device tests—for France at Lop Nur.

Reed’s disclosures are based on his knowledge of and insights into the visits to China by Dan Stillman, a top US nuclear expert who went there several times in the late 1980s at Beijing invitation, in part because the Chinese wanted to both show-off and convey to the US the progress they had made in nuclear weaponisation.

One of Stillman's visit to the Shanghai Institute of Nuclear Research (SINR), writes Reed, ''also produced his first insight into the extensive hospitality extended to Pakistani nuclear scientists during that same late-1980s time period,'' which would eventually lead to the joint China-Pak nuclear test.

Chinese nuclear proliferation to Pakistan, including the supply of hi-tech items like ring magnets in the early 1990s, has always been known to the non-proliferation community (which largely slept on the reports). But this is the first time it has been confirmed by such a senior official.

In the late 1980s, both the Reagan and the George Bush Sr administration repeatedly fudged the issue to certify that Pakistan had not gone nuclear despite obvious evidence to the contrary.

In his assessment of the Chinese nuclear program based on Stillman’s visits, Reed writes admiringly about Beijing’s successes, saying ''Over a period of 15 years, an intellectually talented China achieved parity with the West and pre-eminence over its Asian peers in the design of nuclear weapons and in understanding underground nuclear testing.''

"China now stands in the first rank of nuclear powers," he concludes.

In trenchant observation, Reed writes, ''Any nuclear nation should consider its nuclear tests to be giant physics experiments. The Chinese weaponeers understood that well; other proliferators do not. Many states have considered their early nuclear shots to be political demonstrations or simple proof tests. In China, however, extremely sophisticated instrumentation was used on even the first nuclear test.''

Chronicling the progress of China’s nuclear weapons program, Reed writes: Atop a tower on 16 October 1964, China's first nuclear device, 596, was successfully fired. US intelligence analysts were astonished by the lack of plutonium in the fallout debris and by the speed with which China had broken into the nuclear club, but that was only the beginning.

Eighteen months later, in the spring of 1966, China entered the thermonuclear world with the detonation of a boosted-fission, airdropped device that used lithium-6, a primary source of tritium when bombarded with neutrons. That test, their third, achieved a yield of 200–300 kilotons. By the end of the year, they made the leap to multistage technology with a large two-stage experiment that yielded only 122 kilotons, but it again displayed 6Li in the bomb debris.

The Chinese then closed the circle on 17 June 1967, unambiguously marching into the H-bomb club with a 3.3-megaton burst from an aircraft-delivered weapon. On 27 December 1968, the Chinese bid the Johnson administration farewell with an improved, airdropped 3-megaton thermonuclear device that for the first time used plutonium in the primary.

It is clear from the reactor-to-bomb progression times that by 1968 China had unequivocally entered the European nuclear cartel on a par with the U, says Reed. Furthermore, China had become a thermonuclear power. It had achieved the leap from the initial A-bomb test to a 3.3-megaton thermonuclear blast in a record-breaking 32 months. It had taken the US more than seven years to accomplish that feat.

Title: Re: China
Post by: Body-by-Guinness on September 05, 2008, 06:02:27 AM
2nd post. In view of recent reports of US incursions, this is interesting.

   China to provide Pakistan four AWACS aircrafts
    Updated at: 1510 PST, Friday, September 05, 2008
    ISLAMABAD: Air Chief Marshall Tanvir Mahmood Ahmed on Friday said China would provide four AWACS aircrafts to Pakistan for the purpose of aerial surveillance, adding an agreement in this regard has been signed by the two countires.

Talking to Geo News, he said talks were also underway to purchase FC-20 aircrafts from China and added 30 to 40 planes would be provided to Pakistan under the agreement signed by China and Pakistan.

Air chief Marshall further said four such aircrafts were being also acquired from Sweden for aerial surveillance.
Title: Re: China
Post by: Crafty_Dog on September 12, 2008, 05:09:20 PM

China vs. the environment/the planet
Title: Re: China
Post by: tankerdriver on September 18, 2008, 09:07:45 PM
China right now is an experiment. Only time will tell if they are right. They have all this structure from the government, but you can't take human nature out of the equation.
Title: Re: China
Post by: tankerdriver on September 27, 2008, 08:27:54 AM

China has first Space Walk!
Title: China's African Imperialism, 1
Post by: Body-by-Guinness on September 28, 2008, 09:55:40 AM
PETER HITCHENS: How China has created a new slave empire in Africa

Last updated at 12:00 PM on 28th September 2008

Narrow escape: Peter Hitchens
I think I am probably going to die any minute now. An inflamed, deceived mob of about 50 desperate men are crowding round the car, some trying to turn it over, others beating at it with large rocks, all yelling insults and curses.

They have just started to smash the windows. Next, they will pull us out and, well, let's not think about that ...

I am trying not to meet their eyes, but they are staring at me and my companions with rage and hatred such as I haven't seen in a human face before. Those companions, Barbara Jones and Richard van Ryneveld, are - like me - quite helpless in the back seats.

If we get out, we will certainly be beaten to death. If we stay where we are, we will probably be beaten to death.

Our two African companions have - crazily in our view - got out of the car to try to reason with the crowd. It is clear to us that you might as well preach non-violence to a tornado.

At last, after what must have been about 40 seconds but that felt like half an hour, one of the pair saw sense, leapt back into the car and reversed wildly down the rocky, dusty path - leaving his friend behind.

By the grace of God we did not slither into the ditch, roll over or burst a tyre. Through the dust we churned up as we fled, we could see our would-be killers running with appalling speed to catch up. There was just time to make a crazy two-point turn which allowed us to go forwards and so out-distance them.

We had pretty much abandoned our other guide to whatever his fate might be (this was surprisingly easy to justify to myself at the time) when we saw that he had broken free and was running with Olympic swiftness, just ahead of pursuers half hidden by the dust.

We flung open a rear door so he could scramble in and, engine grinding, we veered off, bouncing painfully over the ruts and rocks.

We feared there would be another barricade to stop our escape, and it would all begin again. But there wasn't, and we eventually realised we had got away, even the man whose idiocy nearly got us killed.

He told us it was us they wanted, not him, or he would never have escaped. We ought to be dead. We are not. It is an interesting feeling, not wholly unpleasant.

Why did they want to kill us? What was the reason for their fury? They thought that if I reported on their way of life they might lose their livings.

Livings? Dyings, more likely.

Peking power: A Chinese supervisor cajoles local workers as they dig a trench in Kabwe, Zambia
These poor, hopeless, angry people exist by grubbing for scraps of cobalt and copper ore in the filth and dust of abandoned copper mines in Congo, sinking perilous 80ft shafts by hand, washing their finds in cholera-infected streams full of human filth, then pushing enormous two-hundredweight loads uphill on ancient bicycles to the nearby town of Likasi where middlemen buy them to sell on, mainly to Chinese businessmen hungry for these vital metals.

To see them, as they plod miserably past, is to be reminded of pictures of unemployed miners in Thirties Britain, stumbling home in the drizzle with sacks of coal scraps gleaned from spoil heaps.

Except that here the unsparing heat makes the labour five times as hard, and the conditions of work and life are worse by far than any known in England since the 18th Century.

Many perish as their primitive mines collapse on them, or are horribly injured without hope of medical treatment. Many are little more than children. On a good day they may earn $3, which just supports a meagre existence in diseased, malarial slums.

We had been earlier to this awful pit, which looked like a penal colony in an ancient slave empire.

Defeated, bowed figures toiled endlessly in dozens of hand-dug pits. Their faces, when visible, were blank and without hope.

We had been turned away by a fat, corrupt policeman who pretended our papers weren't in order, but who was really taking instructions from a dead-eyed, one-eared gangmaster who sat next to him.

By the time we returned with more official permits, the gangmasters had readied the ambush.

The diggers feared - and their evil, sinister bosses had worked hard on that fear - that if people like me publicised their filthy way of life, then the mine might be closed and the $3 a day might be taken away.

I can give you no better explanation in miniature of the wicked thing that I believe is now happening in Africa.

Out of desperation, much of the continent is selling itself into a new era of corruption and virtual slavery as China seeks to buy up all the metals, minerals and oil she can lay her hands on: copper for electric and telephone cables, cobalt for mobile phones and jet engines - the basic raw materials of modern life.

It is crude rapacity, but to Africans and many of their leaders it is better than the alternative, which is slow starvation.

The Congolese risk their lives digging through mountains of mining waste looking for scraps of metal ore
It is my view - and not just because I was so nearly killed - that China's cynical new version of imperialism in Africa is a wicked enterprise.

China offers both rulers and the ruled in Africa the simple, squalid advantages of shameless exploitation.

For the governments, there are gargantuan loans, promises of new roads, railways, hospitals and schools - in return for giving Peking a free and tax-free run at Africa's rich resources of oil, minerals and metals.

For the people, there are these wretched leavings, which, miserable as they are, must be better than the near-starvation they otherwise face.

Persuasive academics advised me before I set off on this journey that China's scramble for Africa had much to be said for it. They pointed out China needs African markets for its goods, and has an interest in real economic advance in that broken continent.

For once, they argued, a foreign intervention in Africa might work precisely because it is so cynical and self-interested. They said Western aid, with all its conditions, did little to create real advances in Africa, laughing as they declared: 'The only country that ever got rich through donations is the Vatican.'

Why get so het up about African corruption anyway? Is it really so much worse than corruption in Russia or India?

Is it really our business to try to act as missionaries of purity? Isn't what we call 'corruption' another name for what Africans view as looking after their families?

And what about China herself? Despite the country's convulsive growth and new wealth, it still suffers gravely from poverty and backwardness, as I have seen for myself in its dingy sweatshops, the primitive electricity-free villages of Canton, the dark and squalid mining city of Datong and the cave-dwelling settlements that still rely on wells for their water.

After the murderous disaster of Mao, and the long chaos that went before, China longs above all for stable prosperity. And, as one genial and open-minded Chinese businessman said to me in Congo as we sat over a beer in the decayed colonial majesty of Lubumbashi's Belgian-built Park Hotel: 'Africa is China's last hope.'

I find this argument quite appealing, in theory. Britain's own adventures in Africa were not specially benevolent, although many decent men did what they could to enforce fairness and justice amid the bigotry and exploitation.

Taking over: Chinese building workers in Zambia
It is noticeable that in much former British territory we have left behind plenty of good things and habits that are absent in the lands once ruled by rival empires.

Even so, with Zimbabwe, Nigeria and Uganda on our conscience, who are we to lecture others?

I chose to look at China's intervention in two countries, Zambia and the 'Democratic Republic of the Congo', because they lie side by side; because one was once British and the other Belgian.

Also, in Zambia's imperfect but functioning democracy, there is actual opposition to the Chinese presence, while in the despotic Congo, opposition to President Joseph Kabila is unwise, to put it mildly.

Congo is barely a state at all, and still hosts plenty of fighting not all that far from here.

Statues and images of Joseph's murdered father Laurent are everywhere in an obvious attempt to create a cult of personality on which stability may one day be based. Portraits of Joseph himself scowl from every wall.

I have decided not to name most of the people who spoke to me, even though some of them gave me permission to do so, because I am not sure they know just how much of a risk they may be running by criticising the Chinese in Africa.

I know from personal experience with Chinese authority that Peking regards anything short of deep respect as insulting, and it does not forget a slight.

I also know that this over-sensitive vigilance is present in Africa.

The Mail on Sunday team was reported to the authorities in Zambia's Copper Belt by Chinese managers who had seen us taking photographs of a graveyard at Chambishi where 54 victims of a disaster in a Chinese-run explosives factory are buried. Within an hour, local 'security' officials were buzzing round us trying to find out what we were up to.

This is why I have some time for the Zambian opposition politician Michael Sata, known as 'King Cobra' because of his fearless combative nature (but also, say his opponents, because he is so slippery).

Sata has challenged China's plans to invest in Zambia, and is publicly suspicious of them. At elections two years ago, the Chinese were widely believed to have privately threatened to pull out of the country if he won, and to have helped the government parties win.

Peking regards Zambia as a great prize, alongside its other favoured nations of Sudan (oil), Angola (oil) and Congo (metals).

Title: China's African Imperialism, 2
Post by: Body-by-Guinness on September 28, 2008, 09:56:10 AM
Fighting back: Peter Hitchens with Michael Sata, the opposition politician nicknamed 'King Cobra'
It has cancelled Zambia's debts, eased Zambian exports to China, established a 'special economic zone' in the Copper Belt, offered to build a sports stadium, schools, a hospital and an anti-malaria centre as well as providing scholarships and dispatching experts to help with agriculture. Zambia-China trade is growing rapidly, mainly in the form of copper.

All this has aroused the suspicions of Mr Sata, a populist politician famous for his blunt, combative manner and his harsh, biting attacks on opponents, and who was once a porter who swept the platforms at Victoria Station in London.

Now the leader of the Patriotic Front, with a respectable chance of winning a presidential election set for the end of October, Sata says: 'The Chinese are not here as investors, they are here as invaders.

'They bring Chinese to come and push wheelbarrows, they bring Chinese bricklayers, they bring Chinese carpenters, Chinese plumbers. We have plenty of those in Zambia.'

This is true. In Lusaka and in the Copper Belt, poor and lowly Chinese workers, in broad-brimmed straw hats from another era, are a common sight at mines and on building sites, as are better-dressed Chinese supervisors and technicians.

There are Chinese restaurants and Chinese clinics and Chinese housing compounds - and a growing number of Chinese flags flapping over factories and smelters.

'We don't need to import labourers from China,' Sata says. 'We need to import people with skills we don't have in Zambia. The Chinese are not going to train our people in how to push wheelbarrows.'

He meets me in the garden of his not specially grand house in the old-established and verdant Rhodes Park section of Lusaka. It is guarded by uniformed security men, its walls protected by barbed wire and broken glass.

'Wherever our Chinese "brothers" are they don't care about the local workers,' he complains, alleging that Chinese companies have lax safety procedures and treat their African workers like dirt.

In language which seems exaggerated, but which will later turn out to be at least partly true, he claims: 'They employ people in slave conditions.'

He also accuses Chinese overseers of frequently beating up Zambians. His claim is given force by a story in that morning's Lusaka newspapers about how a Zambian building worker in Ndola, in the Copper Belt, was allegedly beaten unconscious by four Chinese co-workers angry that he had gone to sleep on the job.

I later checked this account with the victim's relatives in an Ndola shanty town and found it to be true.

Evidence of China is never very far away
Recently, a government minister, Alice Simago, was shown weeping on TV after she saw at first hand the working conditions at a Chinese-owned coal mine in the Southern Province.

When I contacted her, she declined to speak to me about this - possibly because criticism of the Chinese is not welcome among most of the Zambian elite.

Denis Lukwesa, deputy general secretary of the Zambian Mineworkers' Union, also backed up Sata's view, saying: 'They just don't understand about safety. They are more interested in profit.'

As for their general treatment of African workers, Lukwesa says he knows of cases where Chinese supervisors have kicked Zambians. He summed up their attitude like this: 'They are harsh to Zambians, and they don't get on well with them.'

Sata warns against the enormous loans and offers of help with transport, schools and health care with which Peking now sweetens its attempts to buy up Africa's mineral reserves.

'China's deal with the Democratic Republic of the Congo is, in my opinion, corruption,' he says, comparing this with Western loans which require strong measures against corruption.

Everyone in Africa knows China's Congo deal - worth almost £5billion in loans, roads, railways, hospitals and schools - was offered after Western experts demanded tougher anti-corruption measures in return for more aid.

Sata knows the Chinese are unpopular in his country. Zambians use a mocking word - 'choncholi' - to describe the way the Chinese speak. Zambian businessmen gossip about the way the Chinese live in separate compounds, where - they claim - dogs are kept for food.

There are persistent rumours, which cropped up in almost every conversation I had in Zambia, that many of the imported Chinese workforce are convicted criminals whom China wants to offload in Africa. I was unable to confirm this but, given China's enormous gulag and the harshness of life for many migrant workers, it is certainly not impossible.

Sata warns that 'sticks and stones' may one day fly if China does not treat Zambians better. He now promises a completely new approach: 'I used to sweep up at your Victoria Station, and I never got any complaints about my work. I want to sweep my country even cleaner than I swept your stations.'

Some Africa experts tend to portray Sata as a troublemaker. His detractors whisper that he is a mouthpiece for Taiwan, which used to be recognised by many African states but which faces almost total isolation thanks to Peking's new Africa policy.

But his claims were confirmed by a senior worker in Chambishi, scene of the 2005 explosion. This man, whom I will call Thomas, is serious, experienced and responsible. His verdict on the Chinese is devastating.

He recalls the aftermath of the blast, when he had the ghastly task of collecting together what remained of the men who died: 'Zambia, a country of 11million people, went into official mourning for this disaster.

'A Chinese supervisor said to me in broken English, "In China, 5,000 people die, and there is nothing. In Zambia, 50 people die and everyone is weeping." To them, 50 people are nothing.'

This sort of thing creates resentment. Earlier this year African workers at the new Chinese smelter at Chambishi rioted over low wages and what they thought were unsafe working conditions.

When Chinese President Hu Jintao came to Zambia in 2006, he had to cancel a visit to the Copper Belt for fear of hostile demonstrations. Thomas says: 'The people who advised Hu Jintao not to come were right.'

He suspects Chinese arrogance and brutality towards Africans is not racial bigotry, but a fear of being seen to be weak. 'They are trying to prove they are not inferior to the West. They are trying too hard.

'If they ask you to do something and you don't do it, they think you're not doing it because they aren't white. People put up with the kicks and blows because they need work to survive.'

Many in Africa also accuse the Chinese of unconcealed corruption. This is specially obvious in the 'Democratic Republic of the Congo', currently listed as the most corrupt nation on Earth.

A North-American businessman who runs a copper smelting business in Katanga Province told me how his firm tried to obey safety laws.

They are constantly targeted by official safety inspectors because they refuse to bribe them. Meanwhile, Chinese enterprises nearby get away with huge breaches of the law - because they paid bribes.

'We never pay,' he said, 'because once you pay you become their bitch; you will pay for ever and ever.'

Another businessman shrugged over the way he is forced to wait weeks to get his products out of the country, while the Chinese have no such problems.

'I'm not sure the Chinese even know there are customs regulations,' he said. 'They don't fill in the forms, they just pay. I try to be philosophical about it, but it is not easy.'

Unlike orderly Zambia, Congo is a place of chaos, obvious privation, tyranny dressed up as democracy for public-relations purposes, and fear.

This is Katanga, the mineral-rich slice of land fought over furiously in the early Sixties in post-colonial Africa's first civil war. Brooding over its capital, Lubumbashi, is a 400ft black hill: the accumulated slag and waste of 80 years of copper mining and smelting.

Now, thanks to a crazy rise in the price of copper and cobalt, the looming, sinister mound is being quarried - by Western business, by the Chinese and by bands of Congolese who grub and scramble around it searching for scraps of copper or traces of cobalt, smashing lumps of slag with great hammers as they hunt for any way of paying for that night's supper.

As dusk falls and the shadows lengthen, the scene looks like the blasted land of Mordor in Tolkien's Lord Of The Rings: a pre-medieval prospect of hopeless, condemned toil in pits surrounded by stony desolation.

Behind them tower the leaning ruins of colossal abandoned factories: monuments to the wars and chaos that have repeatedly passed this way.

There is something strange and unsettling about industrial scenes in Africa, pithead winding gear and gaunt chimneys rising out of tawny grasslands dotted with anthills and banana palms. It looks as if someone has made a grave mistake.

And there is a lesson for colonial pride and ambition in the streets of Lubumbashi - 80 years ago an orderly Art Deco city full of French influence and supervised by crisply starched gendarmes, now a genial but volatile chaos of scruffy, bribe-hunting traffic cops where it is not wise to venture out at night.

The once-graceful Belgian buildings, gradually crumbling under thick layers of paint, long ago lost their original purpose.

Outsiders come and go in Africa, some greedy, some idealistic, some halfway between. Time after time, they fail or are defeated, leaving behind scars, slag-heaps, ruins and graveyards, disillusion and disappointment.

We have come a long way from Cecil Rhodes to Bob Geldof, but we still have not brought much happiness with us, and even Nelson Mandela's vaunted 'Rainbow Nation' in South Africa is careering rapidly towards banana republic status.

Now a new great power, China, is scrambling for wealth, power and influence in this sad continent, without a single illusion or pretence.

Perhaps, after two centuries of humbug, this method will work where all other interventions have failed.

But after seeing the bitter, violent desperation unleashed in the mines of Likasi, I find it hard to believe any good will come of it.

Find this story at
Title: WSJ
Post by: Crafty_Dog on November 05, 2008, 06:44:05 AM
At a time when global financial risks seem larger by the day, there's one risk that's receding: tension across the Taiwan Strait.

Yesterday China and Taiwan agreed to open new air, sea and postal links. This establishes the hitherto elusive "three links" -- direct trade, transport and mail -- that the two governments have been talking about for years. They also agreed to cooperate on food safety regulation as well as to hold further talks every six months, alternating between Beijing and Taipei.

This is a détente worth celebrating. The direct sea links alone will cut shipping costs by around $36 million a year, according to estimates from Taiwan's Mainland Affairs Council. This is no small change: More than 40% of Taiwanese exports went to China in 2007, and two-way trade was $130.2 billion -- yet the trade and the traders had to travel through a third country, usually Hong Kong. The number of direct charter flights will increase to 108 per week from 36, and new air routes will cut hours off flying times.

But the greatest benefit is the political truce yesterday's deal signals. Although the People's Republic has never ruled the island, China has claimed Taiwan as an integral part of its territory since 1949 and fears doing anything that might tacitly acknowledge Taiwan's independence. As recently as 1996, China fired live missiles into Taiwan's waters, and today China has more than 1,000 missiles aimed at the island.

Credit goes to Taiwan President Ma Ying-jeou for smoothing the waters. Elected in March on a platform of better relations with the mainland, Mr. Ma made it clear he wanted to negotiate on cross-Strait economic, transportation and cultural links on the basis of the "1992 Consensus," under which the two sides agreed to disagree about what constitutes "China." The Chinese delegation's very presence in Taipei this week suggests negotiations on an equal footing. That's a big change.

In Opinion Journal Today

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-- Jeffrey Scott ShapiroMr. Ma also had to overcome significant domestic hurdles to get to this point. The new agreements are not themselves controversial. But about one-third of Taiwan citizens advocate eventual independence for the island, and many of these believe that agreements with China, a country that still considers Taiwan a "renegade province," violate the spirit of Taiwan's independence. Last month, half a million protesters gathered in Taipei to voice their discontent.

It is easier for Beijing to come to the negotiating table, particularly since Mr. Ma has kept a much lower international profile than his predecessor. Beijing's policy makers are eager to promote these talks to the Chinese public as proof for their claim that Taiwan is part of China.

The next step forward may be on banking deregulation. The presidents of Chinese state-owned Industrial and Commercial Bank of China and the Bank of China are part of the official delegation in Taiwan this week. Next year China and Taiwan are expected to sign a memorandum of understanding that would allow Taiwanese banks to open branches in China. Taiwan's minister of the Mainland Affairs Council, Lai Shin-yuan, told us by telephone that more decisions will be made through channels outside the high-level talks -- for example, adding new travel destinations or more flights.

For decades, the Taiwan Strait has been a flashpoint with the potential to destabilize East Asia. Taiwan needs to maintain its defense capability in case politics changes on the mainland, but today's cooperative trend is welcome.
Title: Biz Info Competition in China?
Post by: Body-by-Guinness on November 14, 2008, 07:43:27 AM
Hmm, mayhaps the engines of commerce are loosening things up in China?

November 14, 2008
China Eases a Licensing Rule for Media

SHANGHAI — China agreed on Thursday to loosen restrictions on foreign news and information providers inside the country, settling a trade dispute with the United States, the European Union and Canada.

The agreement, which was signed in Geneva, allows international news and information agencies, like Bloomberg, Dow Jones & Company and Thomson Reuters, to more freely compete and sell their services inside China, where government controls were tightened in 2006.

The United States and European Union had filed a case against China at the World Trade Organization in March arguing that China unfairly required foreign news and financial information providers to be licensed by the Xinhua News Agency, a Chinese state-controlled entity that serves as the official outlet for the Communist Party and also a competitor of the foreign news companies. Canada later filed its own complaint against China.

According to the settlement, China agreed to remove the requirement that financial news providers be licensed by Xinhua and instead will set up an independent regulatory agency to oversee all financial news and information providers.

Foreign news and financial services companies are eager to sell their services into China’s booming financial services market, where a growing number of Chinese companies and government agencies are seeking valuable and timely news and financial information.

The United States trade representative, Susan C. Schwab, called the settlement a major step toward making financial information more widely available.

She said: “I am very pleased we have been able to sign an agreement with China today to allow financial information suppliers like Bloomberg, Dow Jones, Thomson Reuters to operate in China free of unfair restrictions that threatened to place them at a serious advantage.”

Title: WSJ: Laid off migrant workers returning to countryside
Post by: Crafty_Dog on December 03, 2008, 03:43:43 AM
SHUANGFU VILLAGE, China -- Fan Junchao has spent most of the past five years living hundreds of miles from his small family farm here. Encouraged by the local government, he leased out his meager plot and worked on construction crews in big cities, making several times what he could have earned on crops.

Laid off migrant workers across China are returning home to villages like Shuangfu, above.

Now his construction project has been halted, and Mr. Fan has returned home. "Right now, I don't have a plan," he says. "I'm just taking it one step at a time."

Mr. Fan is among hundreds of thousands of China's 130 million migrant workers -- known as the "floating population" -- being cast out of urban jobs in factories and at construction sites.

China's roaring industrial economy has been abruptly quieted by the effects of the global financial crisis. Rural provinces that supplied much of China's factory manpower are watching the beginnings of a wave of reverse migration that has the potential to shake the stability of the world's most populous nation.

Fast-rising unemployment has led to an unusual series of strikes and protests. Normally cautious government officials have offered quick concessions and talk openly of their worries about social unrest. Laid-off factory workers in Dongguan overturned patrol cars and clashed with police last Tuesday, and hundreds of taxis parked in front of a government office in nearby Chaozhou over the weekend, one of a series of driver protests.

On Wednesday, workers let go from a liquor factory in northern China mounted a protest in Beijing, at the parent company's headquarters. In the latest sign of economic stress, China's currency fell Monday by its single largest margin on record against the dollar, on expectations the central bank might devalue it to prop up sagging growth.

As the government tries to calm tensions in the cities, it also fears that newly unemployed migrants returning home could upend the already-strained social system in the countryside.

At a train station 30 miles from Mr. Fan's village, officials are keeping 24-hour tabs on arrivals to monitor how many of the surrounding area's two million migrants will return from industrial centers. Around 60,000 have already done so, they say -- and many more are expected, despite Beijing's efforts to persuade workers to stay in cities and train for potential new jobs.

Mr. Fan, a 55-year-old grandfather, helps support his grandchildren as well as himself and his wife -- and one of his two sons, now working as an apprentice after his factory wages were cut. Mr. Fan worries his other son, also a migrant worker, will next be out of a job. He offers guests cups of hot water instead of tea because he is trying to scrimp.

Many of the returning workers, like Mr. Fan, have too little income from the land to support their families. Beijing has been encouraging many to lease out their farms to more profitable cooperatives -- which don't share their increased earnings from the crops with the landholders -- at the same time it encouraged their moves into the cities, by loosening rules for doing both in the past few years. Those rules were formalized earlier this year.

 Chinese Migrant Workers Return Home
China's work force returns home to rural areas because of the slowing economy, but the land they used to subsist on is now being farmed by larger companies. (Dec. 1)
Others have no farms to come back to, having seen their land gobbled up by decades of previous Chinese urbanization drives, in which unscrupulous developers and corrupt officials often illegally seized peasants' land.

For workers accustomed to a decade of double-digit growth, China's sudden downturn has come as a shock to the system. Migrant workers -- estimated to make up a tenth of the country's population -- have powered China's economic success in the three decades since free-market reforms began.

They supply the low-cost labor for the country's rapidly growing infrastructure and dominant low-priced exports. The wages they send home have helped spread prosperity from the booming cities into the relatively poor countryside. But the global slump threatens a precarious balance if unemployment continues to grow. Already it has caused China's construction industry to seize up and prompted many factories that once churned out toys, electronics and clothing to cut work forces or close up shop.

Meng Jianzhu, China's minister of public security, told a conference of regional government officials late last month that there are "lots of social problems affecting stability under the current circumstances," the official Xinhua news agency reported. Among the major problems to address, Mr. Meng said: "Work should be improved on serving and managing the floating population." Beijing has been warning local officials to take extra efforts to ensure stability, focusing their efforts on re-employment programs.

National statistics on how many migrant workers have been laid off and returned home aren't available, but regional numbers are significant. Yin Weimin, minister of human resources and social security, estimated at a news conference this month that about 300,000 of the 6.8 million migrant workers from one province, Jiangxi, to the south of Mr. Fan's Anhui province, have returned home.

The situation "is continuing to develop, the number of rural migrant workers returning home is gradually increasing, and we are closely following this," he said. Other provinces have reported similar numbers.

Officials in the central province of Hubei estimate that they've also had 300,000 laid off workers come home just in the past two months. In Hubei's capital, Wuhan, officials estimate that the number will eventually total 600,000 in their city alone.

In Fuyang, the city nearest to Shuangfu, officials tracking returnees note that it's not easy for industrial workers to return to country life or work. "These aren't the same peasants like the peasants of yesterday," says an official from the city's Human Resource and Labor Bureau, stamping his foot one recent cold morning during a 12-hour shift outside the train station. "They don't raise crops, they have skills." He and other officials work to interview at least 200 migrants a day to find out their plans, where they're coming from and which they are returning to. The government also has had the chief local party official of each village conduct a regular head count of returnees.

Minutes after stepping off the train in Fuyang, 18-year-old Liang Wenzheng, just laid off from his job of three years on an electronics assembly line in Dongguan, shoulders his bags and surveys the future. "If I can't find a job, I'll have to farm at home. I don't want to do that -- I'm just 18," he said.

Migrant workers left their villages over the years because there was too little land for them to earn a decent living. China has roughly the same amount of farmable land as the U.S., where only 2% of workers are employed in agriculture. But China has some 730 million rural residents -- more than twice the entire American population.

Between 80 million and 100 million rural residents are either completely landless or don't have access to enough land for subsistence, estimates Joshua Muldavin, professor of geography and Asian studies at Sarah Lawrence College. "The increases right now with the large-scale return of peasants could add tens of millions to that," he says. "Its importance can't be exaggerated in China and internationally."

Despite China's recent prosperity, steamroller-flat Anhui province remains poor. The dirt road leading from the simple brick courtyard home Mr. Fan built heads past piles of charred old cloth shoes -- used as a cheap coal substitute for boiling tofu.

The newest change has come as farmers like Mr. Fan have rented their land to new agribusiness in a government-supported bid to boost rural incomes by combining farms into more efficient, modern operations. Mr. Fan two years ago transferred farming rights to three-fifths of his land -- which totals less than an acre -- to a new company established by a local government official to sell expensive, organically grown vegetables in greenhouses to supermarkets and hotels.

Mr. Fan, like others, got a standard price based on harvesting wheat, a staple but also an extremely cheap crop, while the cooperative has gone on to grow exotic vegetables that fetch higher prices from the new urban middle class.

Mr. Fan's rent from the farming company is about one-seventh what he was making in construction. His wife still supervises farming of the other portion. The combined income makes his family better off than some, but couldn't support his two sons, daughters-in-law and grandchildren.

Mr. Fan, a high-school graduate, was slow to leave his village even as others did. He learned how to be a bricklayer between harvests of wheat, soybeans and corn on his land, which was allocated to his and other families after China's farm communes were disbanded in the last 1970s.

In the mid-1990s, the government redistributed more land to farmers. It continued to keep ownership of the land public, but gave farmers long-term leases. Mr. Fan received one mu, a sixth of an acre, for each of the five people in his household -- himself, his wife, two sons and a grandparent. His family has doubled in size since then.

 After watching his neighbors return prosperous from city jobs for years, Mr. Fan in 2003 ventured hundreds of miles to work as a bricklayer in Heilongjiang province, on China's northern border with Russia. He gradually raised his bricklaying income from 30 yuan a day ($4.30) to 70 yuan.

In 2006, a medicine merchant in Shuangfu, Gao Dongfang, had an idea to raise more valuable vegetables on the village's land using techniques that the villagers didn't know about or couldn't afford. "We wanted to change the way things are done here," said his older brother, Gao Haifei. "It's always been wheat and beans, beans and wheat." The younger Mr. Gao obtained a post as village party secretary, and eventually consolidated 200 acres from farmers in neighboring villages. He brought in an expert from another agribusiness, who introduced vegetables like Israeli green peppers and Taiwanese eggplants.

The business, called Orient Modern Vegetable Cooperative, has earned up to 10 or more times the value from a given piece of land than villagers reaped using their traditional techniques and crops. Mr. Fan's wife signed a 10-year contract with the firm in 2006 while he was away working. The lease brings in 3,500 yuan per year, equal to $513.

This fall, Mr. Fan went to a new construction site, this time in Wuxi, a booming lakeside city near Shanghai. Days after he arrived to work on a 15-story, high-end apartment building, he started hearing rumors that the developer was having trouble selling apartments and wouldn't be able to pay his contractors. Two weeks later, the foreman of Mr. Fan's 40-man work team told them to collect their last paychecks and go home.

Mr. Fan now thinks a lot about his two sons, and what will happen if they also lose their current jobs. "I'm really worried," he says. He thought they would never have to farm again. They have worked as migrant laborers all their adult lives.

His younger son continues to work in a furniture factory. Older son Fan Yaxian, 29, is apprenticing as a truck driver after his factory wages were cut. "I don't know how to farm," Fan Yaxian says. He hopes to start his own small business.

Mr. Fan has no such aspirations. "I don't have a head for business," he says. "I can only go down the path of a migrant worker. If I can't be a migrant worker, I don't have any other ideas."

—Ellen Zhu in Shanghai and Andrew Batson in Beijing contributed to this article.
Write to Shai Oster at

Title: WSJ: China's Democratic Charter
Post by: Crafty_Dog on December 12, 2008, 09:58:57 AM
China's democracy movement has moved in fits and starts since the 1989 Tiananmen Square massacre. But a manifesto issued this week marks a brave new chapter in the fight for political freedom.

More than 400 Chinese citizens living inside China published "Charter 08" on the Internet. The document calls for a new constitution to establish multiparty democracy and includes a scathing account of Communist rule. It describes its ambition for a political system in which the military, courts, schools and churches are accountable to the constitution rather than to a political party.

In a year that has seen a crackdown on political dissent, especially during the Olympics and March Tibet protests, this is a bold step, and the authors don't mince words: "Our political system continues to produce human rights disasters and social crises." It continues: "[A]s the ruling elite continues with impunity to crush and to strip away the rights of citizens to freedom, to property, and to the pursuit of happiness, we see the powerless in our society . . . becoming more militant and raising the possibility of a violent conflict of disastrous proportions. The decline of the current system has reached the point where change is no longer optional."

An introduction to the charter by American Sinologist Perry Link -- who translated it into English -- likens it to Charter 77, the document signed by Vaclav Havel and other Czechoslovakian dissidents in 1977. Like those dissidents, two signers of Charter 08 were detained by police this week and about a dozen have been questioned, according to Amnesty International.

The Czech dissidents waited 13 years to realize their democratic dream. In China, the reality of self-government also seems far off and Charter 08 won't produce immediate change. But the boldness and bravery of its statement suggest that the democrats' day will come.
Title: Free Speech in China?!?
Post by: Crafty_Dog on January 16, 2009, 10:21:49 PM
Geopolitical Diary: Freedom of Speech and Beijing's 'Test'
January 16, 2009
An article promoting freedom of speech in China — published on Wednesday in the Beijing Daily News, a periodical affiliated with the Beijing committee of the Communist Party of China (CPC) — was being circulated and discussed in China on Thursday. The piece, titled “Truth Cannot Be Pursued Without Freedom of Speech; ‘Authoritative Determination of Nature’ Should Be Avoided By All Means” and published in the paper’s “Theory Weekly” column, criticizes authorities who try to act as a “judge of truth” and stifle dissenting opinions. Written by Shen Minte, a professor at the Communication University of China, the article delivers a subtle warning to officials not to quiet alternative voices hastily; it also suggests, however, that tolerance for alternative voices does not justify alternative actions — only ideas.

The article notes that freedom of speech is guaranteed by the Chinese constitution, and cautions that one cannot determine whether speech is absurd, progressive or reactionary if it is never allowed to be vocalized. Shen links his call for freedom of speech to Mao Zedong’s support for “a hundred schools of thought contending” — though in this, Chen appears to be subtly criticizing the ultimate outcome of the ensuing “hundred flowers blooming” movement, in which open debate was finally crushed once it became too critical of the CPC.

Shen says it is only in the open, and through the lens of history, that alternative ideas can be judged. He warns that the biggest threat comes when some “authority” declares itself the “judge of truth” and the masses follow blindly, endorsing or condemning the ideas based solely on the judgment of vocal authorities rather than judging the truth themselves. He raises as examples Ma Yinchu and Zhang Zhixin, two early Party members who raised ideas fundamentally contrary to conventional wisdom or the actions of the Party. Ma warned of the dangers of excessive population growth, and Zhang criticized the Cultural Revolution. Both were criticized, quieted and punished — in Zhang’s case, executed — but years later were proven correct in their assessments and were rehabilitated.

In essence, Shen, in a Party-sanctioned paper, is calling for freedom of speech and debate inside the Party, along with a greater responsibility for the citizens of China to test what their officials say, and for those officials to listen more to the people. Shen makes it clear that he is not advocating freedom of action, but only of speech and debate. But his article is a strong criticism of the way some Chinese officials have acted in the past.

It is also a critique of China’s culture of official corruption. The article was published the same day the CPC Central Commission for Discipline Inspection (CCDI) called for greater efforts to crack down on corruption in 2009 and reported that nearly 5,000 officials above the county-head level had been investigated and penalized in the year ending in November 2008. Then on Thursday, Prim Minister Wen Jiabao, speaking to a conference of central and state agencies of the CPC, warned that China and the Party face a “test” in 2009 amid the global economic crisis. He called on Party members and government officials to be models of proper behavior and not to abuse their power or positions for personal gain, and to work together for economic growth.

For China’s central leadership, Shen’s message is both welcome and dangerous. Encouraging greater citizen oversight and more input is seen as a necessary tool to help rein in corruption and rebuild trust in the Party and government. In addition, the central government has been seeking a wider variety of inputs in policy-making from academia, research institutes and government think-tanks. At the same time, one of the government’s biggest fears is losing control of its citizens: of social unrest and organized opposition rising up and bringing down the Party.

As with the Beijing Daily News’ October 2006 publication of Yu Keping’s influential and controversial article, “Democracy Is A Good Thing,” Shen’s article is designed to stimulate debate, but keep things within manageable parameters. Both Shen and Yu made it a point in their articles to avoid overstating the case. Neither promotes the end of the Party or even radical reform — just gradual change within limits — and both caution that their ideas should not be taken too far. Yu praises democracy but also explains its shortfalls, while Shen warns that freedom of speech goes both ways, arguing that both sides need space to express themselves and that neither side should take action based solely on its own ideas.

The publication of articles such as these sheds light on the way the CPC is trying to cope with its role in a changing China. The CPC, to some extent, has outlived itself. Economic reforms and the social and political changes that go along with them are outpacing the Party. The CPC is no longer at the forefront of the ideology as it once was; it is no longer able simply to promise people economic improvement, as it did through the 1980s and into the 1990s. Instead, the Party is struggling for relevance at the center of a changed China. It has recognized the need to change, but many Party functionaries have devolved from the leaders of the people into a group of individuals who are stuck in a bureaucracy or living in a system of collusion, self-aggrandizement and personal power relationships.

This has left the CPC weak and unable to function as a unit. It also has reduced the stature of the Party as a whole in the eyes of the populace. The people may not be actively trying to overthrow the government, but neither do they have respect for it. When they are not allowed to express their opinions, their frustrations and tensions may explode into protest and violence. Yet when they are allowed to express themselves, that too can become a threat to the Party itself.

This is Beijing’s dilemma. The Party cannot allow open opposition — but neither can it retain the loyalty of the people, and its own authority, if it does not allow the people to keep the officials honest.

Articles like Shen’s are exposing the failures and weaknesses of the Party, and are calling for gradual change (at least in mindset). However, they also are being used to try to revive the Party, and to try to help it adapt to a changed China. Beijing’s hope is to build some sense of public oversight to hold the Party officials accountable, but without actually allowing the people to challenge the authority of the CPC.

It is not an easy balance to strike, and in the end it may not work. But there are those in the CPC who know that if the Party does not change and adapt, it will die.

Tell Stratfor What You Think
Title: China Cooks the Books?
Post by: Body-by-Guinness on January 22, 2009, 11:59:10 AM
January 22, 2009
The Truth About China's Growth
by Derek Scissors, Ph.D.
WebMemo #2238
China just announced its economic results for 2008. The headline real GDP growth figure was 9.0 percent, featuring a drop to 6.8 percent, year-on-year, in the fourth quarter.The only thing certain about these figures is that they are wrong.

Almost every year, all Chinese provinces report larger GDP gains than the already-published national "average." This trend held true for the first three quarters of 2008.[1] Over the past decade, all counties within a province have frequently reported larger gains than the provincial "average." Similarly, basic macroeconomic accounting, such as that used to calculate the components of GDP, does not work with China's numbers. For political reasons, the PRC knowingly measures a crucial figure for unemployment incorrectly, understating the amount by a factor of two or three.

Beijing purports to be able to complete its annual economic surveys in less than half the time required by the U.S., despite having one billion more people to account for and much less in the way of resources with which to do so. Not surprisingly, then, China now calculates 2007 real GDP growth at 13.0 percent, having first estimated 11.4 percent. These revisions have important implications for assessing the 2008 data.

Official data on the economy are whatever the Communist Party wants--close to the mark, too low, or too high.[2] While surety is impossible, the available evidence indicates true growth for 2008 is far lower than officially announced. Reasons for general cynicism stem from deliberate obfuscation and internal inconsistency in official statistics. Reason to believe official GDP growth is greatly overstated come from old official statistics on GDP and power consumption.

More Reasons for Cynicism

Official GDP is 30.07 trillion yuan (about $4.4 trillion). The revised figure for 2007 was 25.73 trillion yuan.[3] This is a nominal growth rate of 16.9 percent and, thus, an implicit GDP deflator of 7.9 percent. The latter is considerably larger than the 5.9 percent increase in the official consumer price index but not wildly larger. So far, so good.

For the fourth quarter, official data imply GDP was 9.90 trillion yuan. However, this cannot be directly compared to GDP for the fourth quarter of 2007 because there is no revision available for the individual quarters of 2007 but only for the full year. This has been true since China began revising data in 2005--basic quarterly GDP cannot be verified.

Worse, the same is true for all major parts of the economy. Investment and consumption were presumably revised for 2007 because GDP was revised. But changes in these components were not announced, so their fourth-quarter growth cannot be determined either. For that matter, it is not known if official growth for the first three quarters is still correct, for GDP or anything else. Nor will these figures be released in systematic fashion later. Some follow-on revisions spill out unannounced at random times; some are never made public. Chinese economic data is permanently unverifiable.

Consumption Illusion

On closer inspection, the picture is no better. The benchmark measure for consumption is retail sales. This is followed with great interest within and without China on hopes that consumption will begin to drive the Chinese and even the world economy. In the fourth quarter, global consumption took a heavy blow, but implied (from incomplete revisions) growth in Chinese retail sales was over 20 percent, on-year. For 2008 as a whole, retail sales soared 21.6 percent. This is a 13-year high and considerably faster than the (unrevised) 16.8 percent rise in 2007.[4]

Unfortunately, such an increase is very hard to believe. Passenger car sales added 7.3 percent in 2008, much slower than the 21.7 percent jump registered in 2007.[5] Sales of residential real estate plunged an unprecedented 21 percent through November.[6] What are Chinese consumers buying? Not imports. Import volume--the only verifiable element of consumption--fell 8.8 percent in the fourth quarter.

While all this is disturbing, there is a more fundamental problem. Per capita rural income was said to climb 15 percent in 2008 while per capita urban income climbed 14.5 percent. Real urban income somehow accelerated noticeably in the fourth quarter though GDP decelerated sharply. Even if that is true, incomes trailed sales by a good margin.

This should indicate that personal savings growth was small, as most income went to spending. But household deposits soared 26.6 percent. Individual Chinese are said to be both spending and saving much faster than they earn.[7] Moreover, saving was said to sharply accelerate while the economy slowed--as to be expected--yet retail sales still hardly slipped at all. In this light, it is difficult to credit rapid consumption gains.

Knockout Blow from Power

The Chinese economy's last serious slump was during the Asian financial crisis. It is now widely accepted that official GDP growth for 1998 and perhaps 1999 was heavily exaggerated. Evidence was first found in power consumption growth, which dropped like a stone in the late 1990s while GDP growth merely moderated. Last year was 1998 all over again.

An Official Discrepancy (percent change)[8]


GDP Growth

Power Consumption Growth



















The present boom started in 2003. The speed of GDP growth has been catching up to power consumption growth since then. Nonetheless, GDP growth has been below power consumption growth all through the boom, even with the large upward revision in 2007 GDP. In 2008, though, as the economy came under duress, GDP was suddenly much faster than power consumption.[9] The fourth quarter was far starker: GDP growth was said to hold 6.8 percent even while power demand contracted an (unweighted) 6.7 percent.[10]

Electricity consumption cannot be magically slashed from year to year, much less quarter to quarter. If it could, China's excessive coal use would long since have been resolved. Based on power consumption, a reasonable figure for 2008 annual growth is 6 percent with very little growth in the fourth quarter.

Rescuing Official Numbers, Partly

Is there anything useful to be gleaned from official statistics? A simple way to extract some value is to consider them one quarter ahead. In a difficult data-gathering environment, China presses statistics personnel to reach remote areas and adjudicate regional boasts in just three weeks after a quarter ends. Most likely, survey information gathered ostensibly for the quarter in question more accurately reflects the previous quarter.

This would explain much. One quarter's worth of 6.8 percent growth should not have caused six million migrants to lose their jobs already or pushed urban unemployment to 9.4 percent by the end of November.[11] But if growth had already fallen to 6.8 percent in the third quarter then, considering power consumption and imports, fell toward zero in the fourth quarter, the spike in unemployment is sensible. So is the increasingly frantic response of Chinese policy-makers starting in October.

This analysis only goes so far. Official growth for the first quarter of 2009 may better reflect the fourth quarter of 2008, but the Party will never acknowledge it as close to zero. More tea leaves will need to be read three months from now. Nonetheless, a reasonable profile of 2008 growth stands at roughly 10 percent in the first quarter, 9 percent in the second, 7 percent in the third, and 1 percent in the fourth.

The world is going to hear endlessly that, while China is slowing, it is still the fastest-growing economy and other countries would do well to learn from its example. It is closer to the truth that China has suffered more from the financial crisis than any other country in terms of lost growth and jobs.

Among other things, China's economic difficulties have implications for Sino-American trade relations and the Strategic Economic Dialogue (SED), now under review by the new American Administration. Our nation needs a mechanism like the SED, but the U.S. needs to focus it on what are now the most salient parts of the economic relationship, such as Chinese energy price liberalization and access to sheltered industries for foreign companies. Official statistics notwithstanding, China is not a crisis-resistant model of growth and prosperity. The true picture demonstrates continued scope for dialogue grounded in free market principles. 

Derek Scissors, Ph.D., is Research Fellow in Asia Economic Policy in the Asian Studies Center at the Heritage Foundation.
Title: Stratfor: China looking grim?
Post by: Crafty_Dog on January 23, 2009, 09:36:34 PM
Geopolitical Diary: For China, Grim Data and a Grimmer Economy

January 23, 2009

China’s National Bureau of Statistics on Thursday released preliminary gross domestic product (GDP) figures for 2008. According to the report, the country’s economy expanded by 6.8 percent in the fourth quarter of 2008, compared to the same quarter a year earlier. This marks a further drop from the 10.6 percent growth year-on-year in the first quarter, 10.1 percent in the second quarter and 9.0 percent in the third quarter. For the whole of 2008, China’s GDP grew just 9 percent — marking the first time annual growth has fallen into the single digits since 2003, and the lowest annual GDP figure since 2001. Moreover, China’s 2007 GDP growth rate was recently revised to 13 percent, the highest in more than a decade.

China needs high growth rates much more than other countries do. The legitimacy of the government is derived primarily from its ability to stimulate and maintain economic growth, which in China is synonymous with employment. Should that fail, the Chinese people tend to take issue with their leaders, as evidenced by the repetition of social revolutions in Chinese history.

Many Chinese policymakers use 8 percent GDP growth as a rule-of-thumb measure for basic stability — the level needed to absorb the roughly 2 million new workers who enter the labor pool every year. Chinese leaders believe this is the level of growth needed to keep social pressures from exploding. So long as everyone has a job, Beijing does not worry overmuch about details like financial efficiency, profitability or transparency.

The same goes for accuracy, and Stratfor tends not to trust Chinese statistics. The regional data that local officials generate is not particularly reliable; stories abound about instances of padding data to make local statistics more impressive. This flawed data is then fed into the national statistics.

Chinese leaders in the late 1990s — particularly then-Premier Zhu Rongji — recognized that China’s economic statistics collection methods were fundamentally flawed. Leaders did not have a true picture of the Chinese economy, leaving them unable to manage growth and economic stability effectively. An effort began in 2000 to use statistical methods recommended by the Organization for Economic Cooperation and Development — but even with a good-faith effort, getting everything straightened out in less than a decade would be (and has proven) nearly impossible.

The Chinese economy is rapidly evolving from an overpopulated, agrarian subsistence economy to a hybridized industrial economy complete with large populations of roving migrants. The type of data that needs to be collected amid such a transformation changes more rapidly than new collection systems can be developed. In such an environment, collecting the right types of information accurately is, at best, a Herculean task, and each change in the process results in massive adjustments to previous estimates.

The severe downturn in the Chinese growth rates — admitted by a country known for massaging numbers — suggests things may be far worse than the headline 6.8 percent figure. Indeed, Stratfor sources peppered throughout China’s electronics, textiles, retail, energy, aviation and manufacturing sectors are painting a sobering picture. Exports to established markets are failing, foreign investors are desperate to find non-Chinese alternatives, protests by unemployed and underemployed workers are being reported by the state-controlled media. In general, the country is under severe stress from top to bottom.

The last time major contractions in China’s growth came in 2001 and 2003, and in those cases, Beijing simply reverted to its tried-and-true methods of subsidization of exports and a focus on gross revenues over profits. In recent years, the Chinese leadership has sought to reshape at least parts of the economic structure — using high growth rates as a way to compensate for the social and financial impact of industrial consolidation, increased labor costs and an attempt to push its exports up the value chain — while also seeking to boost domestic consumption as a component of economic activity.

But with the global economic downturn, China is losing export markets. It is holding onto significantly devalued stockpiles of primary commodities and primary products (such as steel) that were bought and manufactured during a commodity boom. It is slowing imports from regional partners — whose resulting drop in revenues will in return dry up much of China’s incoming foreign investment, another key component of economic growth and job formation.

China’s leadership is facing compounding problems and scrambling — desperately — for solutions. Compared to previous crises, they are off the map.

Title: Re: China
Post by: G M on January 24, 2009, 06:19:23 AM
I think things could get very ugly very quickly in China. All it will take is the right spark.
Title: Bond, Debt, and China
Post by: Body-by-Guinness on January 27, 2009, 12:33:48 PM
January 27, 2009
The U.S.–China Economic Relationship: In Need of Counseling, Not Divorce
by Derek Scissors, Ph.D.
WebMemo #2249
The process of demonizing the U.S.-China economic relationship has begun. It is being called out both as principally responsible for our nation's economic turmoil and as driven largely by devastating Chinese policies. There is certainly bad Chinese policy to be found. The yuan is misaligned and, more important, the People's Republic of China's (PRC's) tight controls on capital movement caused global economic adjustment to be more violent than it should have been.

Unfortunately, bad American economic policy made a proportionally greater contribution to this crisis. It is vital to recall that America's economy is much bigger than China's. The U.S. is the heart of the global economy. Moreover, there are many core benefits of the Sino-American economic relationship, benefits now being recognized even by some of China's harshest critics. On the U.S. side, these benefits include cheaper goods and still-cheap capital, simultaneously, a rare and valuable combination.

Blaming China First

For his congressional confirmation hearings, Treasury Secretary-designate Timothy Geithner submitted written testimony indicating that President Obama considers China to be manipulating its currency.[1] This testimony should be considered the first shot in a trade battle that has been looming since the start of the current economic crisis.[2]

Geithner's comments immediately sparked a debate over the role of Chinese policy in U.S. economic performance, with assessments ranging from principal blame for the PRC to no blame at all for the PRC.[3] One of the reasons for the sharp divergence in views is the availability of easy targets when attacking Chinese economic policy.

From the end of 2004 to the end of 2008, the yuan climbed more than 17 percent against the dollar and more than 14 percent against the euro.[4] In the same period, however, China's overall trade surplus went from $32 billion to $295 billion, an increase of more than 800 percent.[5] The currency movement has been insufficient.[6]

Another source of confusion is the, sometimes belated, recognition that the U.S. gains even from bad Chinese policy. One reason for the dangerous explosion in easy credit in the U.S. was the Chinese buying American bonds with proceeds from their massive trade surplus. This recycling was forced ultimately by the PRC's capital controls, whereby the foreign currency earned from exports cannot be freely used within China. Such currency can only be spent abroad and American bonds are the only market that can absorb $250 billion or more each year.

The closed-capital account has been trumpeted for years in Beijing as a great contributor to stability. As with all state attempts to control the market, it merely postponed the day of reckoning. Rather than addressing the ongoing minor instability of free capital movement across its borders, the closed-capital account and forced recycling contributed to the biggest patch of instability for the PRC since Tiananmen Square.

But Chinese politicians are not the only ones caught on their own hook. The principal advocates of trade action against China may have just recognized that the trade deficit the U.S. runs finances Chinese purchases of American bonds. Consequently, such purchases may now appear indispensable in light of plans to greatly expand the U.S. budget deficit.[7]


There is rhetorical and policy inconsistency on both sides of the Pacific because assigning blame runs headlong into the fact the U.S. and China both want to enjoy the benefits of their irresponsibility.

The inadequate American savings the PRC has harped on for years effectively sustained millions of Chinese jobs--jobs Beijing is desperate to keep.[8] In fact, despite its massive 2008 trade surplus, China is looking to boost exports further, relying on foreign consumption for still more help.[9]

On the U.S. side, Chinese purchases of American bonds will support the "pump-priming" designed by the Obama Administration. But American gains from the relationship go beyond that. Chinese exports to the U.S. are led by consumer electronics--computers, phones, and televisions. Clothing and textiles are the other major component.[10] Competition and products from the PRC have yielded lower prices and higher quality for American consumers, developments that are welcome when times are good and more urgent now that household income is stagnant or dropping.

It is a mistake, though, to translate these gains for the U.S. into a belief that China has disproportionate influence over the American economy. In 2007, the PRC's exports to the U.S. were equivalent to 2.3 percent of American GDP; they were 9.1 percent of Chinese GDP.[11] China's holdings stood at 5.3 percent of U.S. public debt securities on the most recent measure and much less than that when private debt is included.[12]

Just as important is the nature of the bilateral economic relationship. Fannie Mae and Freddie Mac do not sell debt to finance U.S. government intervention in the housing market; China cannot buy that debt, no matter how many dollars Beijing holds. The same is true of the bonds sold to finance U.S. federal deficit. If Americans choose not to buy as many goods, the PRC cannot sell as many, no matter how high production goes. There are plenty of substitutes for Chinese goods and capital, even if, at higher prices, there is no substitute for the American bond market and consumer.

The U.S. has benefited from Chinese over-saving, and China, from American under-saving. Poor policies on both sides of the Pacific led to excess and the current crisis. But it is inaccurate and potentially dangerous to lay most of this at the feet of the Chinese. Yes, the PRC shares blame for the global imbalance that is now unwinding. Given the size and centrality of the American economy, the problem and the solution start in the U.S. To determine otherwise is to trust, mistakenly, our nation's economic fate to others and risk a trade war in the bargain.

Derek Scissors, Ph.D., is Research Fellow in Asia Economic Policy in the Asian Studies Center at the Heritage Foundation.

[1]"China's Yuan 'Manipulation' an Issue--Geithner," Reuters, January 21, 2009, at (January 26, 2009).

[2]Derek Scissors, "The Coming U.S.-China Trade Conflict," Heritage Foundation WebMemo No. 2172, December 12, 2008, at
/Research/AsiaandthePacific/wm2172.cfm (January 26, 2009).

[3]Sebastian Mallaby, "What OPEC Teaches China," The Washington Post, January 25, 2009, at
dyn/content/article/2009/01/23/AR2009012303291.html (January 26, 2009); Bret Swanson, "Geithner Is Exactly Wrong On China Trade," The Wall Street Journal, January 26, 2009, at (January 26, 2009).

[4]"FXHistory: Historical Currency Exchange Rates," Oanda.Com, at (January 26, 2009).

[5]China Monthly Statistics, Vol. 12, 2004.

[6]This is not the same as manipulation. As with so many of its policies, China's currency policy is dictated by obsession with stability. A relatively minor shift in July 2005 aside, the yuan has not changed since the 1994 devaluation. The stability obsession was very useful to the U.S. during the Asian financial crisis. What has changed since then is primarily U.S. goals for Chinese currency policy, not the policy itself.

[7]Joseph J. Schatz, "Geithner Signals Change in Policy on China Currency," Yahoo News, January 22, 2009, at
m/s/cq/20090122/pl_cq_politics/politics3016257_1 (January 26, 2009).

[8]"Mood Not Bullish as China Greats Year of the Ox," Google News, January 25, 2009, at
LeqM5ixfonH0Ud6wKGldX4fHpW1spnJxQ (January 26, 2009).

[9]"More Textile Export Rebates Soon," China Economic Net, November 21, 2008, at
Industries/200811/21/t20081121_17458415.shtml (January 26, 2009).

[10]U.S. Census Bureau, U.S. International Trade Statistics, see "China (mainland)," at (January 27, 2009).

[11]Eugene P. Sesky and Shelly Smith, "Annual Revision of the National Income and Product Accounts," U.S. Department of Commerce, Bureau of Economic Analysis, August 2008, at
20August/0808_nipa_annrev.pdf (January 26, 2009); and

"China 2007 GDP Growth Revised up to 13%," China Daily, January 14, 2009, at (January 26, 2009), and

U.S. Census Bureau, U.S. International Trade Statistics, see: China (mainland), at (January 27, 2009).

[12]Wayne M. Morrison, et al., "China's Holdings of U.S. Securities: Implications for the U.S. Economy," Congressional Research Service, January 9, 2008, at (January 26, 2009).
Title: Re: China
Post by: HUSS on January 27, 2009, 03:08:07 PM
When all else fails, blame China

Timothy Geithner, the nominee for US Treasury Secretary, has risked damaging the global economy even before his confirmation by the full Senate. In a written answer to questions from US senators, Geithner said: "President Obama - backed by the conclusions of a broad range of economists - believes that China is manipulating its currency". In the US, the words "currency manipulation" are fighting words. If the US administration were to formally name China as a currency manipulator, a range of trade sanctions could be imposed by the US government.
The threat to world trade comes from the Omnibus Trade and Competitiveness Act of 1988. The section dealing with the exchange rate, bilateral current account balances and the overall current account balance is a monument to economic illiteracy.

Under the Omnibus Trade and Competitiveness Act of 1988, "The Secretary of the Treasury shall analyze on an annual basis the exchange rate policies of foreign countries, in consultation with the International Monetary Fund, and consider whether countries manipulate the rate of exchange between their currency and the United States dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade."

"If the Secretary considers that such manipulation is occurring with respect to countries that (1) have material global current account surpluses; and (2) have significant bilateral trade surpluses with the United States, the Secretary of the Treasury shall take action to initiate negotiations with such foreign countries on an expedited basis, in the International Monetary Fund or bilaterally, for the purpose of ensuring that such countries regularly and promptly adjust the rate of exchange between their currencies and the United States dollar to permit effective balance of payments adjustments and to eliminate the unfair advantage."
Should the US Treasury officially determine China to be a currency manipulator, the US Administration can unleash a range of remedies, including antidumping measures, countervailing duties, and safeguards. Although the World Trade Organization permits certain retaliatory responses from importing nations which can prove that they suffered material injury due to unfair trade practices, much of what the US Congress and some members of the Obama administration have in mind is likely to be in clear violation of the United States' WTO obligations. It would certainly provoke a response from China. The bilateral trade war that is likely to result could easily spread to the EU, Japan and emerging markets outside China.

Overall and bilateral current account imbalances and nominal and real, bilateral and effective exchange rates

The overall current account deficit of the US is the excess of US domestic investment over US national saving. The overall current account surplus of China is the excess of China's national saving over China's domestic investment. Bilateral trade balances are of no economic interest, unless there are only two countries in the world. Note that the first quote from the Omnibus Trade and Competitiveness Act of 1988 slides seamlessly from overall current account imbalances to bilateral trade imbalances, ignoring the transfer payments and foreign investment income items that are included in the current account but not in the trade balance. Trade balances and current account balances (bilateral or aggregate) can and do move in opposite directions.

There is no reason in economic theory or empirical fact why there should be any reliable correlation, between nominal exchange rates (bilateral or trade-weighted (effective) ) and the bilateral or aggregage trade balance, let alone a clear causal connection from any nominal exchange rate to the trade balance. Certain kinds of shocks and policy actions may produce an empirical association (not a causal relation) between a depreciation of the effective (trade-weighted) real exchange rate and an increase in the aggregate trade surplus. This is the case, for instance, for most aggregate demand shocks, e.g those produced by contractionary Keynesian fiscal policies. But supply shocks may produce the opposite correlation, that is, a depreciation of the effective real exchange rate and a reduction in the aggregate trade balance surplus.

In any case, as Chart 1 below shows, there has been a steady appreciation of the real effective exchange rate of the Yuan since the beginning of 2005. JP Morgan's broad real effective exchange rate index for the Yuan shows a 27 percent real appreciation since December 2004. The from a macroeconomic perspective uninteresting nominal bilateral US$-Yuan exchange rate appreciated 21 percent over the same period.
Title: China Broadcasting System?
Post by: Body-by-Guinness on February 04, 2009, 09:16:59 AM
First time I've encountered this source, and am suspicious of inside info out of China's politburo, but the piece is intriguing.

China: Beijing Plans to Infiltrate Mainstream Western Media(to buy & control failing MSM)
Boxun ^ | 01/28/09

Beijing Plans to Infiltrate Mainstream Western Media

By (translation)

Jan 28, 2009 - 11:06:03 AM

Boxun Exclusive

In mid-January 2009, a week before Chinese New Year, the Politburo of the Central Committee of the Chinese Communist Party held a meeting to discuss its plan for foreign propaganda work in the year to come. It summarized the past decade's progress in co-opting international Chinese-language media into doing the propaganda work of the Chinese Communist Party.

The Politburo decided that in addition to continuing its Chinese-language international image promotion, it plans to infiltrate and influence mainstream Western media. The meeting cited the example of the Russian former KGB officer and present tycoon who has purchase the defunct British newspaper The Evening Standard. This overt an approach is undesirable, the meeting concluded, and instead influential overseas Chinese in the media business should be utilized to purchase and operate mainstream Western media organs.

The spring 2008 coverage of the uprising in Tibet by CNN and other Western mainstream media organs sounded an alarm. China's Politburo concluded that it must counter this by infiltrating and influencing Western coverage of China and China's image in the international media.

The opportunity is presently ripe because of the downturn in the world economy. Many media organizations are in economic difficulty, even going bankrupt, and they can be purchased and it will look like an investment and business opportunity and not the attempt of the Chinese government to infiltrate Western media organs and influence Western popular opinion toward China that it is.

Full Chinese report at:
Title: The PLAN probes Barry for signs of a spine
Post by: G M on March 09, 2009, 10:05:59 AM


March 9, 2009 --
WASHINGTON - Five Chinese vessels "shadowed and aggressively maneuvered'' towards a US Navy ship in the South China Sea -- at one point closing to within 25 feet of the boat, the Pentagon said today.

The US ship was operated by a civilian crew under contract with the Defense Department.

The Chinese vessels "shadowed and aggressively maneuvered in dangerously close proximity" to the USS Impeccable, which was conducting routine operations Sunday in international waters, the Defense Department said.

The Defense Department identified the Chinese vessels as a Navy intelligence ship, a bureau of maritime fisheries patrol vessel, a state oceanographic administration boat and two other small patrol vessels.

Two Chinese vessels surrounded the Impeccable, while two closed to within 50 feet waving Chinese flags and telling the US Navy ship to leave at once. The Navy ship responded by spraying one of the vessels with its fire hoses, but the Chinese ship responded by closing in further to within 25 feet.

US officials said the Impeccable informed the Chinese ships by radio that it was leaving the area and requested a safe path to navigate. That's when two of the Chinese vessels stopped directly in front of the American ship and dropped pieces of wood in its path, according to the Defense Department.

The US ship was eventually allowed to leave.

"We will be certainly letting the Chinese officials know of our displeasure with respect to this careless and reckless, unprofessional ... maneuver," said Pentagon spokesman Bryan Whitman.

U.S. officials said a protest was to be delivered to Beijing's military attache at a Pentagon meeting today.

"The unprofessional maneuvers by Chinese vessels violated the requirement under international law to operate with due regard for the rights and safety of other lawful users of the ocean," said Marine Maj. Stewart Upton, a Pentagon spokesman.

The incident came just a week after China and the U.S. resumed military-to-military consultations following a five-month suspension over American arms sales to Taiwan.

It also comes as Chinese Foreign Minister Yang Jiechi is due in Washington this week to meet with U.S. officials.

And it brings to mind the first foreign policy crisis that former President George Bush suffered with Beijing shortly after he took office - China's forced landing of a spy plane and seizure of the crew in April of 2001.

The Pentagon said the incident came after several other incidents involving the Impeccable and another U.S. vessel Wednesday, Thursday and Saturday.

It described those as the following:

- On Wednesday, a Chinese Bureau of Fisheries Patrol vessel used a high-intensity spotlight to illuminate the entire length of the ocean surveillance ship USNS Victorious several times as it was operating in the Yellow Sea, about 125 nautical miles (231 kilometers) from China's coast, the Pentagon said, adding that the Chinese ship Victorious' bow at a range of about 1400 yards (1,280 meters) in darkness without notice or warning. The next day, a Chinese Y-12 maritime surveillance aircraft conducted 12 fly-bys of Victorious at an altitude of about 400 feet and a range of 500 yards. (457 meters)

- On Thursday, a Chinese frigate approached USNS Impeccable without warning and crossed its bow at a range of approximately 100 yards (91 meters), the Pentagon said. This was followed less than two hours later by a Chinese Y-12 aircraft conducting 11 fly-bys of Impeccable at an altitude of 600 feet (183 meters) and a range from 100-300 feet. The frigate then crossed Impeccable's bow yet again, this time at a range of approximately 400-500 yards (366 meters-457 meters) without rendering courtesy or notice of her intentions.

- On Saturday, a Chinese intelligence collection ship challenged USNS Impeccable over bridge-to-bridge radio, calling her operations illegal and directing Impeccable to leave the area or "suffer the consequences."

With Post wire services
Title: Re: China
Post by: G M on March 09, 2009, 10:33:18 AM
Clinton Urges Continued Investment in U.S.
By Glenn Kessler
Washington Post Staff Writer
Monday, February 23, 2009; A12

BEIJING, Feb. 22 -- Secretary of State Hillary Rodham Clinton on Sunday urged China to keep investing its substantial foreign-exchange reserves in U.S. Treasury securities, arguing that "we are truly going to rise or fall together."

China is the biggest foreign holder of U.S. debt, which helped finance the spending binge the United States went on before the current economic crisis. Some experts have expressed concern that China's substantial holding of U.S. debt gives it increased leverage in dealings with Washington because any halt in Chinese purchases would make it more difficult to finance the government bailout and stimulus packages.

Clinton, in unusually direct comments during an interview with China's Dragon TV before returning to Washington, said that reality made it an imperative for China to keep purchasing U.S. Treasury bonds, because otherwise the U.S. economy would not recover and China would suffer as well.

"Our economies are so intertwined," she said. "The Chinese know that in order to start exporting again to its biggest market . . . the United States has to take some drastic measures with the stimulus package. We have to incur more debt."

"The Chinese are recognizing our interconnection," Clinton added. "We are truly going to rise or fall together. By continuing to support American Treasury instruments, the Chinese are recognizing" that interconnection.

At a joint news conference with Clinton on Saturday, Foreign Minister Yang Jiechi sidestepped a question about whether China was looking for alternative investments for its foreign exchange reserves. He said China looks for safety, good value and liquidity for its investments.

Treasury bonds are "a good investment [and] a safe investment," Clinton told the interviewer Sunday.
Title: Oh, really? answer the Chinese
Post by: Crafty_Dog on March 09, 2009, 10:45:23 AM
Chinese political advisors propose making yuan an int'l currency  2009-03-07 20:18:22  Print

NPC, CPPCC Annual Sessions 2009
Special Report: Global Financial Crisis

BEIJING, March 7 (Xinhua) -- China should speed up reforming its financial system to make the yuan an international currency, said political advisors Saturday.

"A significant inspiration to draw from the global financial crisis is that we must play an active role in the reconstruction of the international financial order," said Peter Kwong Ching Woo, chairman of the Hong Kong-based Wharf (Holdings) Limited.

The key to financial reform is to make the yuan an international currency, said Woo in a speech to the Second Session of the 11th National Committee of the Chinese People's Political Consultative Conference (CPPCC), the country's top political advisory body.
That means using the Chinese currency to settle international trade payments, allowing the yuan freely convertible on the capital account and making it an international reserve currency, he said.

China's yuan, or Renminbi, can be freely convertible on the current account but not on the capital account, preventing it from being a reserve currency or a choice in international trade settlement. China has announced trial programs to settle trade in the yuan, a move analysts say will facilitate foreign trade as Chinese exporters might face losses if they continue to be paid in the U.S. dollar. The dollar's exchange rate has become more volatile since the global financial crisis. Economists say the move will increase the acceptance of the currency in Asia, which will help it become an international currency in the long run.

The status of the yuan as an international currency will benefit China by giving it a bigger say in world financial issues and reducing the reliance of its huge foreign reserves on the U.S. dollar, some analysts say.

Other analysts argue a fully convertible yuan will hurt China as it would allow massive capital outflow during a financial crisis.
Meanwhile, Chinese authorities remain cautious.

It's possible that the global financial crisis will facilitate the process of making the yuan internationally accepted, but there's no need to push for that, Yi Gang, vice central bank governor, told Xinhua earlier this month. That process should be conducive to all sides, he said.

Xu Shanda, former vice director of the State Administration of Taxation and a CPPCC National Committee member, urged for faster paces in making the yuan an international currency as a way of increasing national wealth. He said the United States and the European Union have obtained hefty royalties from the international use of their currencies while China has become the biggest source of that income.

A royalty, or seignior age, results from the difference between the cost of printing currency and the face value of the money.
"China's loss due to royalty payment has far exceeded the benefit of not making the yuan an international currency," he said in a speech to the annual session of the CPPCC National Committee, without elaborating. China's State Council, or Cabinet, said last December it would allow the yuan to be used for settlement between the country's two economic powerhouses -- Guangdong Province and the Yangtze River Delta -- and the special administrative regions of Hong Kong and Macao. Meanwhile, exporters in Guangxi Zhuang Autonomous Region and Yunnan Province will be allowed to use Renminbi to settle trade payments with ASEAN (Association of Southeast Asian Nations) members.
Title: Re: China
Post by: G M on March 09, 2009, 10:52:54 AM
China knows that they can push Obamerica around. I wonder what the button Hillary gave them said....

Sorry Taiwan, Hong Kong. You are on your own now.
Title: Re: China
Post by: G M on March 09, 2009, 11:17:06 AM
"U.S. Hegemony Ends"   
By William R. Hawkins | Monday, March 09, 2009

The United States and the People’s Republic of China resumed military-to-military talks February 27-28 in Beijing. The tone of the Defense Policy Coordination Talks (DPCT) showed the same American desire to accommodate China’s rise to peer power status that was shown a week earlier by Secretary of State Hillary Clinton’s trip to the Chinese capital.

Deputy Assistant Secretary of Defense David Sedney, a hold over from the Bush Administration, led the U.S. delegation that included officials from the Defense Department, the State Department, the Pacific Command and the Joint Chiefs of Staff. Among the Chinese participants were mid-level officers from the People’s Liberation Army, navy and air force as well as some civilians termed “military scholars.” Sedney held 13 hours of talks on Feb. 27 with a delegation led by Maj. Gen. Qian Lihua, the Chinese Defense Ministry's head of foreign affairs. A shorter meeting took place the next morning with Lt. Gen. Ma Xiaotian, deputy chief of the General Staff for the PLA.

This was the fifth meeting of the DPTT since its inception in 2005. China had suspended most military contacts last October over Washington's agreement to sell $6.5 billion in advanced weaponry to Taiwan, the self-governing island democracy that the mainland Communist regime claims is a renegade province. When Sedney journeyed to Beijing last December to ask that the DPCT meetings resume, he was turned down. China’s leaders were clearly waiting for the Obama Administration to take office.

Beijing took a hard line towards the talks. China’s state-run news agency Xinhua quoted Maj. Gen. Qian as saying that contacts would remain tenuous unless the U.S. removes remaining obstacles to improvement. “China-U.S. military relations still stay at a difficult period. We expect the U.S. side to take concrete measures for the resumption and development of our military ties,” said Qian.

The Obama administration seems in the mood to make concessions. After the DPCT meeting, Sedney told a news conference, “The focus was not at all on obstacles. The focus was on how we can move forward, how we can make progress, and how we can try to make joint achieve common goals.” On major points, it was Beijing’s goals of expanding its influence in key regions that were advanced with American blessings.

Sedney thanked Beijing for hosting the Six Party Talks on North Korea, as had Secretary Clinton during her visit. Yet, two days before the DPCT, China had hosted a delegation from North Korea as part of the celebration of 2009 as the “Year of China-DPRK Friendship” marking 60 years of their alliance. Just as China sent the PLA to fight against the U.S.-led UN forces during the Korean War, China has used the Six Party Talks to diplomatically protect the Pyongyang regime from any concerted action that could endanger its rule. According to the official newspaper The People’s Daily, “Jia Qinglin, chairman of the National Committee of the Chinese People's Political Consultative Conference (CPPCC), told a delegation from the Workers' Party of Korea (WPK) that Sino-DPRK relations, fostered by leaders of older generations, had been continuously developed…but also looking into the future.”

Sedney praised China's contribution to the anti-piracy flotilla patrolling the Gulf of Aden off the Somali coast. Beijing sent two destroyers and a supply ship to the region in December. This naval deployment into the Indian Ocean marks a significant projection of Chinese influence towards East Africa where Beijing has been supporting the Sudan regime’s genocidal rule in exchange for control of its oil fields. The deployment also puts Chinese forces closer to the Persian Gulf and its ally Pakistan as tensions increase in Afghanistan and with India.

Sedney said he discussed possible Chinese contributions to non-military programs in Afghanistan. For what possible reason would the U.S. want to encourage any direct Chinese participation in Afghanistan? When the U.S. invaded Afghanistan, China was working with the Taliban regime building its infrastructure and an air-defense system.

The Taliban was the creation of Pakistan in an attempt to conquer Afghanistan so as to cover its western flank in its confrontation with India to the east. China supported its ally because of its own strategic rivalry with India. As the U.S. has tried to exert more pressure on Islamabad to take action against Taliban sanctuaries on its soil, Beijing has stepped up its diplomatic support for Pakistan, along with investment funds and arms.

President Barack Obama warned Islamabad that it would he held accountable for security along the Pakistan-Afghan border on February 10. The next day, Pakistan Foreign Minister Shah Mahmood Qureshi reaffirmed his country’s "all weather" alliance with China. Last October, newly elected Pakistan President Asif Ali Zardari made as his first foreign trip a pilgrimage to Beijing. Just before he left, he told a press conference, "China is the future of the world. A strong China means a strong Pakistan.”

In a February 23 editorial, The People’s Daily addressed U.S. strategy in Afghanistan, with a focus on improving Pakistan’s position against India. “It is clear that without Pakistan's cooperation, the US cannot win the war on terror. Therefore, to safeguard its own interests in the fight against terrorism in South Asia, the US must ensure a stable domestic and international environment for Pakistan and ease the tension between Pakistan and India.” This means supporting Pakistan’s position on Kashmir, the Indian province against which Pakistan-based terrorists have operated for decades. India-Pakistan tensions have been high since the November 26 terrorist attacks in Mumbai which killed 179 people.

Afghanistan's foreign minister Rangin Dadfar Spanta said on January 21 that India and Afghanistan were both victims of terrorism. “Afghanistan believes there are some entities in our region that are using terrorism as a tool for foreign policy. We have to end this. We share your pain, the pain of the Indian people because Afghanistan is the victim of same terror with same sources," Spanta said after a meeting with Indian Foreign Minister Pranab Mukherjee in Kabul.

China, of course, does not want the U.S. to take this view of the situation, as it would further what Beijing fears most; closer U.S.-Indian ties against a common threat from the Pakistani-Chinese alignment. The Chinese line is that Washington must support Pakistan against India in order to win Islamabad’s cooperation against the Taliban. This would isolate India, a primary goal of Chinese strategy. 

The editorial declared, “the US must make sure that Russia is appeased. The Central Asia region, where Afghanistan lies, used to be Russia's backyard. Following the September 11 terrorist attacks, the US raised its anti-terrorism war banner to move deep into this region and revoked the color revolution in Kyrgyzstan. To Russia, all this feels just like a thorn in the flesh.” The editorial noted that Kyrgyzstan has expelled the U.S. from its Manas air base. 

So, again, why would the Obama administration want China to become more involved in Afghanistan? Larry Wortzel, Vice-Chairman of the U.S.-China Economic and Security Review Commission, a bipartisan panel of experts created by Congress, asked Sedney this question at a hearing on March 4. Sedney’s response was that the U.S-NATO mission in Afghanistan is short on resources, and the Chinese could help by providing economic assistance and expanded trade. The Chinese model of trade would not help the Afghans, and any economic assistance would be used to buy influence with government and tribal elites that would undermine American objectives. Inviting China into Afghanistan is an act of desperation that has not been thought through. 

The day after the Afghanistan editorial (and two days after Secretary Clinton left China), The People’s Daily ran another opinion piece entitled,” The U.S. Hegemony ends, the era of global multipolarity enters.” It started by reveling in the economic crisis that has swept America and “signals a swift reduction of U.S. strength as a unipolar power.” Its conclusion was stark. “Does the decline of U.S. geopolitical hegemony make multilateral global governance more likely? Perhaps it is still too early to rush any conclusion, but at least one thing is certain: the U.S. strength is declining at a speed so fantastic that it is far beyond anticipation. The U.S. is no longer 'King of the hill,' as a new phase of multipolar world power structure will come into being in 2009, and the international order will be correspondingly reshuffled.” 

The opening hands played by the Obama administration with China would indicate that Washington agrees with Beijing’s assessment.

William Hawkins is a consultant on international economics and national security issues.
Title: Re: China
Post by: Crafty_Dog on March 09, 2009, 02:07:47 PM
In that light, there's this:

U.S.: Chinese ships harass Navy
Obama administration officials cite days of 'increasingly aggressive' acts
The Associated Press
updated 8:22 a.m. PT, Mon., March. 9, 2009
WASHINGTON - The Defense Department charged Monday that five Chinese ships shadowed and maneuvered dangerously close to a U.S. Navy vessel in an apparent attempt to harass the American crew.

Obama administration defense officials said the incident Sunday followed several days of "increasingly aggressive" acts by Chinese ships in the region.

U.S. officials said a protest was to be delivered to Beijing's military attache at a Pentagon meeting Monday.

The USNS Impeccable sprayed one ship with water from fire hoses to force it away. Despite the force of the water, Chinese crew members stripped to their underwear and continued closing within 25 feet, the department said.

"On March 8, 2009, five Chinese vessels shadowed and aggressively maneuvered in dangerously close proximity to USNS Impeccable, in an apparent coordinated effort to harass the U.S. ocean surveillance ship while it was conducting routine operations in international waters," the Pentagon statement said.

The Chinese ships included a Chinese Navy intelligence collection ship, a Bureau of Maritime Fisheries Patrol Vessel, a State Oceanographic Administration patrol vessel, and two small Chinese-flagged trawlers, officials said.

"The Chinese vessels surrounded USNS Impeccable, two of them closing to within 50 feet, waving Chinese flags and telling Impeccable to leave the area," defense officials said in the statement.

"Because the vessels' intentions were not known, Impeccable sprayed its fire hoses at one of the vessels in order to protect itself," the Defense statement said. "The Chinese crew members disrobed to their underwear and continued closing to within 25 feet."

Emergency stop

Impeccable crew radioed to tell the Chinese ships that it was leaving the area and requested a safe path to navigate, the Pentagon said.

But shortly afterward, two of the Chinese ships stopped directly ahead of the Impeccable, forcing it to an emergency stop in order to avoid collision because the Chinese had dropped pieces of wood in the water directly in front of Impeccable's path, the Pentagon said.

Defense officials said the incident took place in international waters in the South China Sea, about 75 miles south of Hainan Island.

"The unprofessional maneuvers by Chinese vessels violated the requirement under international law to operate with due regard for the rights and safety of other lawful users of the ocean," said Marine Maj. Stewart Upton, a Pentagon spokesman.

"We expect Chinese ships to act responsibly and refrain from provocative activities that could lead to miscalculation or a collision at sea, endangering vessels and the lives of U.S. and Chinese mariners," Upton added.

Military-to-military consultations resumed

The incident came just a week after China and the U.S. resumed military-to-military consultations following a five-month suspension over American arms sales to Taiwan. It also comes as Chinese Foreign Minister Yang Jiechi is due in Washington this week to meet with U.S. officials. And it brings to mind the first foreign policy crisis that former President George Bush suffered with Beijing shortly after he took office — China's forced landing of a spy plane and seizure of the crew in April of 2001.

The Pentagon said the incident came after several other incidents involving the Impeccable and another U.S. vessel Wednesday, Thursday and Saturday.

It described those as the following:

On Wednesday, a Chinese Bureau of Fisheries Patrol vessel used a high-intensity spotlight to illuminate the entire length of the ocean surveillance ship USNS Victorious several times as it was operating in the Yellow Sea, about 125 nautical miles from China's coast, the Pentagon said, adding that the Chinese ship Victorious' bow at a range of about 1400 yards in darkness without notice or warning. The next day, a Chinese Y-12 maritime surveillance aircraft conducted 12 fly-bys of Victorious at an altitude of about 400 feet and a range of 500 yards.

On Thursday, a Chinese frigate approached USNS Impeccable without warning and crossed its bow at a range of approximately 100 yards, the Pentagon said. This was followed less than two hours later by a Chinese Y-12 aircraft conducting 11 fly-bys of Impeccable at an altitude of 600 feet and a range from 100-300 feet. The frigate then crossed Impeccable's bow yet again, this time at a range of approximately 400-500 yards without rendering courtesy or notice of her intentions.

On Saturday, a Chinese intelligence collection ship challenged USNS Impeccable over bridge-to-bridge radio, calling her operations illegal and directing Impeccable to leave the area or "suffer the consequences."
Title: Stratfor: The naval incident
Post by: Crafty_Dog on March 10, 2009, 10:37:33 PM
China, U.S.: A Naval Incident and Wider Maritime Competition
STRATFOR Today » March 10, 2009 | 1041 GMT

Military Sealift Command
The USNS Impeccable (T-AGOS 23)Summary
Chinese vessels appear to be acting with increasing aggression toward a pair of U.S. ocean surveillance ships in the Yellow and South China seas. Though such aggression is not unprecedented, it is a departure from China’s behavior of recent years, and it could indicate rising maritime tensions among many of the region’s naval powers.

Chinese sailing vessels have behaved with increasing aggression toward two U.S. ocean surveillance ships operating in the Yellow and South China seas. Though this recent behavior is not unprecedented, the U.S. 7th Fleet is characterizing it as a departure from normal interactions and the most aggressive behavior the fleet has seen from China in a long time. These aggressive moves might herald things to come as the maritime environment around China becomes increasingly active — and crowded.

Related Special Topic Page
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China: The Deceptive Logic for a Carrier Fleet
On March 4, the USNS Victorious (T-AGOS 19) had an encounter at night with a Chinese Bureau of Fisheries patrol vessel in the Yellow Sea. The USNS Impeccable (T-AGOS 23) was approached more aggressively in the South China Sea the next day, when a Chinese People’s Liberation Army-Navy (PLAN) frigate reportedly crossed the Impeccable’s bow at a range of about 100 yards, and the Impeccable was buzzed nearly a dozen times at low altitude by a Y-12, a Chinese-made twin-engine turbo prop. Reportedly, the ship was threatened verbally over bridge-to-bridge radio on March 7 as well.

But it was the March 8 incident with the Impeccable that garnered the most attention. According to reports, a PLAN intelligence collection ship, a Bureau of Maritime Fisheries patrol vessel, a State Oceanographic Administration patrol vessel and two small Chinese-flagged trawlers were all involved in what the U.S. Navy has characterized as coordinated harassment of the Impeccable. Some of the ships were within 25 feet of the Impeccable at one point and stopped in front of the U.S. ship so close that the crew executed an emergency all stop to avoid a collision.

(click image to enlarge)
The Impeccable is an ocean surveillance ship, part of the Military Sealift Command, and is operated by a mixed crew of civilian and military personnel. Capable of deploying towed acoustic arrays, the U.S. ship was operating within 75 miles of Hainan Island, where a number of sensitive PLAN and other military activities are conducted (reportedly including the deployment of the PLAN’s next-generation nuclear-powered attack and ballistic missile submarines). China would at least be concerned about the United States refining its knowledge of the submarine operating environment, and likely felt compelled to assume that the Impeccable was conducting other surveillance and intelligence-gathering activities.

This is not a new dynamic. It is the same basic dynamic that gave rise to the EP-3 Ares II incident in 2001, in which a Chinese aircraft collided with a U.S. signals intelligence aircraft, forcing the EP-3 to land at Hainan Island. Normally, these activities are routine, and both sides abide by internationally accepted or even unspoken sets of rules. But when one side chooses to escalate the situation, matters can quickly spiral out of control.

Part of this is simply a matter of increased PLAN activity, characteristic of a larger shift in how Beijing employs its navy. But with the PLAN’s 60th anniversary approaching in April (a formal announcement about its plans for an aircraft carrier fleet is anticipated), and the impending return of its first squadron deployed to the coast of Somalia, the Chinese navy is undoubtedly feeling rather confident and accomplished these days.

But internal tensions may also be at play. With the financial crisis in full swing, the PLAN may also be attempting to drum up incidents for budgetary purposes, to forestall major fiscal cuts to its accounts.

More importantly, the March 8 incident is emblematic of broader maritime tensions in the East Asian sphere — and not just between China and the United States. Over the past several months, tensions over long-standing maritime territorial disputes have once again risen across the region. North Korea has once again declared that it does not abide by the Northern Limit Line, the maritime extension of the Demilitarized Zone in the West/Yellow Sea, warning that a clash with South Korean naval vessels patrolling the area could occur. Japan, meanwhile, has launched a 10-year seabed mapping and underwater resource prospecting program, triggering warnings from Seoul and Beijing not to use the operations to lay claim to the disputed Tokdo/Takeshima and Senkaku/Daiyoutai islands respectively. And China’s competing claims over islands in the South China Sea are also resurfacing, provoking counterclaims from the Philippines, Malaysia and Vietnam.

In short, the waters around China are becoming more crowded and the mood increasingly contentious. The March 8 incident could herald increased volatility in the maritime environment — across the region — for years to come.
Title: WSJ: LOST aspect to this
Post by: Crafty_Dog on March 11, 2009, 05:58:44 AM
second post:

So once again we are reminded of why Ronald Reagan sank the Law of the Sea Treaty.

Thanks of a sort here go to China, which last week sent several ships to shadow and harass the USNS Impeccable, an unarmed U.S. Navy surveillance ship, as it was operating in international waters about 70 miles south of Hainan Island. The harassment culminated Sunday when the Chinese boats "maneuvered in dangerously close proximity" to the Impeccable, according to the Pentagon, forcing the American crew to turn fire hoses on the Chinese. Undeterred, two of the Chinese ships positioned themselves directly in front of the Impeccable after it had radioed its intention to leave and requested safe passage. A collision was barely averted.

The Chinese have a knack for welcoming incoming U.S. Administrations with these sorts of provocations. In April 2001, a hotdogging Chinese fighter pilot collided with a slow-moving U.S. Navy surveillance aircraft, forcing the American plane to make an emergency landing on Hainan, where its 24-member crew remained for 11 days. They were released only after the U.S. issued a letter saying it was "sorry" for the incident without quite apologizing for it.

Thereafter, the Chinese kept their distance from U.S. surveillance planes, and Beijing's relations with the Bush Administration were generally positive. But the Chinese military remains strategically committed to dominating the South China Sea, and it has recently built a large submarine base on Hainan. China also makes a contentious claim to the oil-rich Spratly and Parcel Islands -- an endless source of friction with the Philippines, Malaysia, Taiwan and Vietnam, which also have their claims. Following Sunday's incident, the Chinese accused the U.S. of violating Chinese and international law.

Which brings us to the U.N.'s Law of the Sea Treaty -- which the Gipper sent to the bottom of the ocean, but the Chinese have signed and which the Obama Administration intends to ratify, with the broad support of the U.S. Navy. The supposed virtue of the treaty is that it codifies the customary laws that have long guaranteed freedom of the seas and creates a legal framework for navigational rights.

The problem is that, as with any document that contains 320 articles and nine annexes, the treaty creates as many ambiguities as it resolves. In this case, the dispute involves the so-called "Exclusive Economic Zones," which give coastal states a patchwork of sovereign and jurisdictional rights over the economic resources of seas to a distance of 200 miles beyond their territorial waters.

Thus, the U.S. contends that the right of its ships to transit through or operate in the EEZs (and of planes to overfly them) is no different than their rights on the high seas, including intelligence gathering, and can point to various articles in the treaty that seem to say as much. But a number of signatories to the treaty, including Brazil, Malaysia, Pakistan and China, take the view that the treaty forbids military and intelligence-gathering work by foreign countries in an EEZ. Matters are further complicated by the claims China made for itself over its EEZ when it ratified the Law of the Sea in the 1990s.

We don't have a view on the legal niceties here, which amounts to a theological dispute in a religion to which we don't subscribe. But the incident with the Impeccable is another reminder that China's ambitions for regional dominance, and for diminishing U.S. influence, remain unchanged despite a new American Administration; and that the Law of the Sea Treaty, far from curbing ambitions or resolving differences, has served only to sharpen both.

Next time the Impeccable sails these waters -- and for the sake of responding to China's provocation it should be soon -- President Obama ought to dispatch a destroyer or two as escorts.

Title: Re: China
Post by: Crafty_Dog on March 11, 2009, 07:13:20 PM
Saw this on another forum-- I have no idea as the the validity of the source, but find the question about the likely dramatic decline of Chinese exports and the domestic consequences thereof to be an interesting one.


In this Global Guerrillas post John Robb talks about the effect a global depression might have on China.

I've included the comments as well.

Wednesday, 11 March 2009
JOURNAL: Will China Survive a Depression? Don't bet on it...

The surge in China’s exports could prove to be as unsustainable as the rise in US (and some European) home prices. They might end up being mirror images … as Americans and Europeans could only import so much from China so long as they could borrow against rising home prices. Brad Setser, CFR blog.

China's exports cratered in February, a drop of 25.7%, in line with the drops in exports experienced by other mercantilist countries (Japan, Germany, Korea, and Taiwan). However, unlike those countries, China doesn't have an organic source of legitimacy except for its ability to deliver economic growth. As I have said earlier, the real threat from China isn't that is a potential peer competitor (a device used to sell big weapon systems), its that it could collapse:

So, what happens when China's high performance, globally connected capitalist economy which is flying at dangerously high speeds hits the inevitable speed bump? The answer is: it will derail (hollow out and fragment). The chaos it will produce in SE Asia is the real threat we have to deal with. Predicting the black swan that kicks off the death spiral is impossible, but as we have seen in other export-oriented Asian economies the shock will likely be economic. At that point, the dream of upward ascent and rising expectations, reinforced by global media, will be seen as a lie.

In anticipation of this, the Chinese government is following the lead of many other nations by radically improving the capabilities of its paramilitary force for domestic security (to the tune of one million men). However, this many not be enough. Global guerrilla theory indicates that the endemic corruption will combine with the same forces of anti-state guerrilla action we have seen in other places in an attempt to disconnect portions of China from the central government... (it will work).

Posted by John Robb on Wednesday, 11 March 2009 at 01:09 PM | Permalink

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Title: Re: China
Post by: G M on March 13, 2009, 06:53:57 AM

From The Times
March 12, 2009
US warships head for South China Sea after standoff
Tim Reid in Washington

A potential conflict was brewing last night in the South China Sea after President Obama dispatched heavily armed American destroyers to the scene of a naval standoff between the US and China at the weekend.

Mr Obama’s decision to send an armed escort for US surveillance ships in the area follows the aggressive and co-ordinated manoeuvres of five Chinese boats on Sunday. They harassed and nearly collided with an unarmed American vessel.

Washington accused the Chinese ships of moving directly in front of the US Navy surveillance ship Impeccable, forcing its crew to take emergency action, and to deploy a high-pressure water hose to deter the Chinese ships. Formal protests were lodged with Beijing after the incident.

On a day that Mr Obama and his senior officials met the Chinese Foreign Minister, Yang Jiechi, in Washington, Beijing showed no sign of backing down. Its military chiefs accused the unarmed US Navy ship of being on a spying mission.

The US keeps a close eye on China’s arsenal, including its expanding fleet of submarines in the area. Washington says that the confrontation occurred in international waters, but Beijing claims nearly all the South China Sea as its own, putting it in conflict with five other nations that have claims over different parts of the waters.

The episode complicated fragile military relations between the US and China, which appeared to have improved after the two held defence talks in Beijing last month.

Mr Obama yesterday urged more military dialogue with China to avoid similar incidents after talks with Mr Yang, the White House said. “The President also stressed the importance of raising the level and frequency of military-to-military dialogue,” it said.

A hotline was established between the Chinese Defence Ministry and the Pentagon in April last year, but it was not used during or after Sunday’s standoff, defence officials said. The US Government immediately protested to Chinese authorities after the incident, about 75 miles south of Hainan Island.

Beijing has rejected the US account and demanded that the United States cease what it calls illegal activities in the South China Sea. The Chinese maintain the area is part of the country’s exclusive economic zone.

Washington insists that the area is part of international waters and that US ships have a legal right to operate there.
Title: Re: China
Post by: Crafty_Dog on March 13, 2009, 07:15:02 AM
My initial reaction is that it is a pleasant surprise to see BO dispatch the destroyers.

Maybe these incidents will cause him to reconsider signing the LOST?
Title: Re: China
Post by: DougMacG on March 13, 2009, 08:44:32 AM
Crafty: "I find the question about the likely dramatic decline of Chinese exports and the domestic consequences thereof to be an interesting one."

I have long believed that the Chinese rulers would not survive a serous downturn in their economy, but I also have learned over time that I am more offended by the oppressive regime there than the Chinese people are.  I don't know how an uprising would happen nor do I understand how such a small ruling class could contain a billion people over these years as they watched most of the globe move to consensual government.  In any case, they haven't been tested with real economic troubles.  The words of Rahm come to mind - you hate let a good crisis go to waste.

The leaders know to pre-empt upheaval by flexing their military strength and commitment.  As they try to energize nationalism, maybe Obama is of some advantage in this situation.  When they try to play the U.S. as the reason to pull together, maybe the evil, pre-emptive warmonger George W. Bush was a more convincing bogeyman for the masses than the affable, green behind the ears, can-we-talk, Barack.  As they see the disarm, talk and surrender foreign policy of this administration it will be hard try to convince your people that your nation is under a serious threat from afar.
Title: Chinese intelligence defector
Post by: ccp on March 25, 2009, 03:57:14 PM
From Bill Gertz.  A Chinese intelligence officer defects to the US and is seeking asylum tell all (was it water boarding, cash, or idealism, or seeking a better life that did it?):
Title: China's bluff
Post by: Crafty_Dog on March 25, 2009, 10:31:59 PM
Geopolitical Diary: China's Calculated Currency Rhetoric
March 25, 2009
One of the more popular conventional wisdoms is that the United States is in decline and that it is a simple matter to select options that will edge the United States out of its dominant position in the world. In an editorial published Tuesday, Chinese central bank governor Zhou Xiaochuan spoke to one of the more popular financial conspiracy theories in this vein when he wrote that the time had come to establish a new scrip to replace the U.S. dollar as the global reserve currency. The issue is close to Beijing’s heart: The Chinese reserve fund is a significant holder of U.S. debt, with some $750 billion in U.S. T-bills.

China does not purchase U.S. debt out of choice, but out of a lack of choice. China is a state with serious social stability issues that are mitigated only by state intervention in the economic structure to maintain mass employment. Since there isn’t much internal demand for the goods these employed masses produce — due in part to a high savings rate and low incomes — China must peddle its goods abroad. The U.S. consumer market, with annual sales of approximately $10 trillion, is roughly equivalent in bulk to the next six consumer markets combined. Sales to the United States and other countries hardwired into the American supply chain — which includes the bulk of East Asia — are the only reasonable option. And so the Chinese yuan has a de facto peg to the U.S. dollar.

That is hardly the extent to which the Chinese are bound to the dollar, however. Because China lacks the financial and industrial infrastructure needed to metabolize the massive revenues generated by exports, the income must be stored in some sort of non-Chinese asset. Outstanding U.S. T-bills currently total $11 trillion, which — with the notable exception of Japanese government debt, which very few foreigners even touch — is greater than the next five government debt issues combined, by a ratio of two to one. U.S. debt outsizes combined euro-denominated government debt by more than three to one.

Corporate debt isn’t much of an option either, even though the combined global corporate debt market is sufficiently large to absorb China’s currency reserves. Whenever an investor holds a substantial portion of any company’s debt, market liquidity is constrained and trading dynamics are altered. The solution is a highly diversified — and therefore actively managed — portfolio. But the administrative cost of a trillion-dollar portfolio so diversified that it does not affect the value of any particular asset would be staggering. In contrast, U.S. government debt is a one-stop shop that requires — at most — minimal management.

That China’s income is primarily in either dollars or dollar-linked currencies only strengthens the rationale for pouring surplus income into American assets in general, and U.S. government debt in particular. Plainly put, China cannot put its income anywhere else because there is no other option available. There have been some mild attempts to diversify, but a dearth of options means that “mild” is about as dynamic as a diversification program for China can get.

As to a world beyond the dollar, the issue is that a reserve currency is not decided upon; it creates itself. Two things are needed to create a reserve currency. First, there must be sufficient liquidity to support a global system. That requires a central bank with an enormous amount of autonomy from a state government, and the U.S. Federal Reserve is unparalleled on this count. Not even the European Central Bank can compete. Second, the economy upon which the currency is based must be large enough to withstand fluctuations caused by other economies buying and selling its assets in massive amounts. Again, the United States is the only economy that potentially could qualify.

Part and parcel of any replacement of the U.S. dollar would be a large-scale abandonment of U.S. T-bills as the core of Chinese currency reserves, which — as the conventional wisdom holds — would force intractable economic problems upon the United States. But a closer look reveals that this is not the case. First, selling U.S. T-bills en masse simply is not possible. Every seller requires a buyer, and the volumes at hand cannot be exchanged quickly. Second, starting down that road would cause the value of the securities in question to plummet, destroying the savings the Chinese have been building up for years. The so-called “nuclear option” really is not an option at all.

So why are the Chinese bringing this up in the first place? Beijing clearly has done the math already and knows that this idea — even if it had broad support — is a nonstarter. There are two reasons. First, officials in Beijing know that any direct confrontation — whether military or financial — with the United States would end in disaster for Chinese national interests. Therefore, they want to foster anything they can that would create an international structure to restrain American power; failing that, something that just gets people thinking in that direction will have to do. Second, China is more severely affected by the ongoing financial crisis than it would like the world to register. The Chinese need sustained international demand to maintain their export industries and, consequently, their high employment levels. Espousing rhetoric that makes it appear that you have more options than you do, while redirecting attention toward a foreign power, always plays well at home.

Title: Re: China
Post by: G M on March 28, 2009, 08:33:15 AM

From The Times
March 28, 2009
One billion souls to save

Christianity in China is booming. With 100 million believers, far more than the 74 million-member communist party, Jesus is a force to be reckoned with in the People’s Republic. We talk to the new faithful who love China – but love God more
Jane Macartney
A murmur of “Amen” echoes softly down a corridor in a luxury Beijing hotel. Dozens of young Chinese are gathered in a beige-carpeted conference room to listen to the word of God. After helping themselves to hot water or tea at the back of the room, they find a seat and chatter with friends. They tuck Louis Vuitton and Prada handbags under their seats, switch their mobile phones to silent and turn to listen to a young woman who takes the microphone to ask for silence and recite a prayer.

A casually dressed, grey-haired Chinese man takes to the podium. “Let us begin with a look at the Gospel of Saint John.” There is a rustling of pages as converts and curious open their Bibles. Almost everyone in the room is scarcely a day over 30. Most look as if they are in their early twenties. They are fashionably dressed – girls with high-heeled boots, men sporting trendy knitted hats. This is Friday night Bible class in Beijing. And it is a weekend venue of choice for growing numbers of well-off middle-class city sophisticates.

The fact that this class is technically illegal, run by pastors lacking approval from the state-sanctioned Protestant church, is not the attraction. These are not young people seeking a frisson of excitement from some underground activity. They are at the forefront of a movement sweeping China – the search for spiritual satisfaction now that Marx is démodé.

No attempt is made to conceal what is, in effect, an underground religious gathering. A sign in Chinese outside the conference room reads: “Hill of Golgotha Church meeting”. A board outside the hotel lift directs visitors to Hall 5. There is not a nod towards secrecy or even discretion. There is no sense of anxiety, let alone fear, that officials could burst in to break up this illegal assembly even though police do still frequently raid house churches run by underground Protestant pastors.

A spectacular success

In fact, across China religion is undergoing a defiant and extraordinary revival. Millions of Chinese are turning to familiar traditional faiths such as Buddhism and Taoism – a mystical belief with about 400 million adherents that is China’s only indigenous creed. Taoist believers, like Buddhists, visit temples across the country to burn incense, present offerings and request readings from fortune tellers. Others are finding comfort in Confucius, but it is Christianity that is leading the battle for China’s 1.3 billion souls.

Many regard religion as a new force, unaware that missionaries – Protestant for the most part but also Roman Catholics – tried to spread Christianity across China in the 19th century and met with fierce opposition during the anti-Western Boxer Rebellion in the early 1900s. But it was former leader Deng Xiaoping, who effectively endorsed freedom of worship, and gave Christianity the chance to take hold, with his sweeping market reforms in 1978.

Today, two Christian faiths are allowed to operate within carefully prescribed limits: the Catholics, who must worship in churches run by the State’s Chinese Patriotic Catholic Association and number about six million, and the Protestants, who operate under the aegis of their government-sanctioned religious body, the Three-Self Patriotic Movement – standing for self-governing, self-teaching and self-supporting. Their numbers are estimated at 21 million – about the population of Australia. All other Christian associations are illegal.

Those who participate in non-sanctioned churches run the risk of police raids, a beating or even jail. The situation is more fraught for the underground Catholic churches than it is for the Protestant get-togethers. An unknown number of Catholic priests, and even bishops, languish in jail, serving lengthy prison terms for their temerity in preaching allegiance to Rome. Beijing’s Communist Party rulers are wary of an organisation that is so well organised and also headed by a leader – the Pope – who can command the loyalty of millions.

But that doesn’t seem to put off the growing congregations. Indeed, official numbers fall far short of the actual total. Recent surveys calculate the number of Christians worshipping independently of the State churches in China to be as high as 100 million. That means that almost one in every ten Chinese may now be a Christian, making Christianity bigger than the 74 million-member Communist Party.

Bring Christianity into the conversation and everyone seems to know someone who is a convert. I heard how many of the executive staff at one smallish Beijing hotel were keen Christians. A manager at an international bank mentioned that many of his employees shared a common faith.

Visiting an elderly woman who had been taken as a child to serve as a “comfort woman” to soldiers of the invading Japanese army in the Second World War, I was astonished to see a cross hanging on the wall of the simple home she shared with her son just across the road from the local Communist Party offices. Without embarrassment or fear, her son explained how each Sunday he attends services in a house church nearby. He proudly pulled out his hymnal and sang for me, while curious neighbours peered through the window.

I learnt of the Communist Party secretary of a village not far from Qufu, the home town of Confucius, who sleeps with a crucifix above his bed. His wife, he explained, was a Christian, as were his sons. Indeed, he went on, pretty much everyone in the village of about 3,000 was a believer. Almost all, it seems, belong to illegal house churches, small congregations that come together in private homes in cities, towns and villages across China.

Why Christianity has such a hold remains something of an enigma. Many Chinese are looking to fill the chasm left by the collapse in Marxist ideology’s credibility in the wake of the disastrous ultra-leftist 1966-76 Cultural Revolution and the Tiananmen Square crackdown. It’s also possible that a religion from the West holds a particular attraction for Chinese looking for a more modern faith to complement the stunning success of capitalist-style economic reforms. But the sense of belonging may be the best way to explain why Christianity has been such a spectacular success story in China in the past few years.

Finding a family far from home

Pastor Ezra Jin heads the Protestant Zion Church, based above a karaoke club in one of the thousands of faceless apartment blocks that populate the suburbs of Beijing.

He prefers not to see Zion as an illegal underground Church but rather as private and independent, and in the two years since its inception, the church has never suffered a police raid. “Our Church offers people a feeling of belonging to a family,” explains Pastor Jin. “There are more and more contradictions in our society as different interest groups emerge and gaps open up between regions and between social groups. Christianity can help by providing comfort and spiritual strength.”

Dressed in a sharply cut dark suit with a white shirt and gold silk tie, Pastor Jin could be just another successful executive. Instead he runs a house church so large he conducts at least three services every Sunday in a room brimming with 300 to 400 people. Toddlers play in a glassed-off crèche while their parents stand to sing hymns and to pray. A choir in hot-pink robes leads the singing and a little band with an electric organ and two guitar players keeps the congregation in tune.

Liu Huan has been playing the guitar in church for nine years. The slight computer engineer in his thirties beams with delight at being asked to explain why he attends a house church. Although in this case sprawling, neon-lit office might be more appropriate. Apart from the main hall, the Zion Church seems to occupy most of the floor of the building with smaller offices and store rooms. “My wife introduced me to God and coming here gives me strength.” He fits one of the models that Pastor Jin described: the out-of-town worker who has found a place in a new community far from home through Christianity.

With his spiky haircut and a single earring, Wang Ye cuts a dashing figure in the congregation. The 21-year-old is a student graduating in online business who hails from the northern coal-mining province of Shanxi. His mother, who had moved to Beijing in search of a better job and was lonely, found comfort when friends introduced her to the church. “She brought me as well. Many of us have family problems and we find warmth here.” He strolls over to join a group of friends gossiping about their plans to celebrate the Chinese New Year.

“The future of Christianity in China is very different from in the West,” believes Pastor Jin. “In the West, Christianity is in retreat, especially in Europe, but in China it is growing by leaps and bounds.” He cites the stability the church offers to a population buffeted by decades of wrenching political change as one of most appealing aspects of the faith.

The first hymn on a wintry Sunday at his Zion Church echoes that refrain. A lay preacher leads the congregation. Projected on a screen on the wall behind him the words scroll down against a background of plum blossoms. Voices are raised in song. “There are many things I don’t know in the future. But I know who will hold my hand and who will be in charge.”

As readings from the Bible and prayers follow more hymns, the atmosphere in the room is charged. A verse reaches a crescendo, women in the congregation one after another raise their arms above their heads and sway. One or two sob quietly. The lay preacher leads a prayer. Each time he mentions “Our Lord”, a chorus of “Amen” swells up from the crowd. Nothing is allowed to disturb their evangelical reverie and there is little sense among these worshippers that they risk arrest.

Pastor Jin believes the most difficult times for house churches such as his may soon be over. He recently took part in the first meeting between government officials and leaders of the banned underground Protestant faith.

It was the most significant step towards reconciliation in decades, and could mark a turning point in the Party’s attitudes.

“I wasn’t surprised,” he said. “It was clear to me that sooner or later God would bring us to this.” In addition, the size of the underground Protestant church has now reached such proportions that it is an increasing challenge for the authorities or the police to control. “China is a very big country so there will still be examples of persecution, but the overall direction is gradually changing.”

He says the talks could be a sign that the Communist authorities have come to recognise that the Protestant church at least can be a force for harmony – the watchword of the administration of President Hu Jintao, the current head of the Party. It was President Hu himself who told an unprecedented Politburo study session on religion in late 2007 that “the knowledge of religious people must be harnessed to build a prosperous society”.

“The Government is anxious to work out the way to go forward,” believes Pastor Jin. “They have understood that the Protestant Church is not an opposition force but a force for stability.”

A constant fugitive

But there are others who would disagree. Pastor Jin may operate in effect outside the law, but he is grudgingly tolerated. Arranging to meet him required little more than a couple of telephone calls. He chatted happily in public over a lunch of spicy Sichuan food in his local restaurant across an alley from the building housing his church.

Pastor Zhang Mingxuan falls into quite another category. Expelled from Beijing before the Olympic Games last August, he is persona non grata in the capital. He attracts police attention wherever he goes and his telephone is constantly tapped. On his first return visit to the capital since his eviction, he got off the overnight train from his home in central Henan province and met me behind a department store near the railway station.

A short, blockish man dressed in a shiny suit and with a tie embroidered with crosses, his first order of business was practical. “We’ve been on an overnight train and we’re hungry. Let’s have lunch.” No sooner had he sat down, intoned grace over the food and gulped down a glass of hot Coca-Cola to counter the bitter chill on one of the coldest days of the winter than he launched into an account of his confrontations with the police. Zhang, who describes himself as a lay pastor, heads what he calls the Chinese House Church Alliance, bringing together a number of diverse congregations. Any form of organisation is anathema to the ruling Communist Party, jealous of any rival power. Beyond the pale is a grouping of illegal underground churches that could challenge its supremacy.

It is small wonder then that he recounts a convoluted tale of eviction from his Beijing flat, from the homes of friends, suburban hotels, even from guesthouses in the province that abuts the capital. Everywhere he tries to lay his head, the police track him in their dozens, moving him out of their jurisdiction. Zhang is undeterred. “My head is here. Let them take it if they want it. But God is in Heaven and he won’t allow them to take my head.”

A poorly educated barber and the product of an atheist Communist system, he had little time for the Christianity in which his wife believed. Or at least that was until a business deal went wrong in 1986 and a failed court case left him deeply in debt. He heard his brother-in-law recite Psalm 38: “They also that seek after my life lay snares for me: and they that seek my hurt speak mischievous things, and imagine deceits all the day long.” The words cut to the heart. “I fell on my knees and in less than five minutes, I became a Christian.”

He was an enthusiastic convert. He does not hide his conviction that his mission now is to spread the word of God far and wide in China. His fervour contrasts with the measured tones of Pastor Jin. Leaping to his feet, he rolls up his trousers and points to scars on one leg. “Look! I was run over and I have two metal pins in my leg. But after 15 days I could walk again because of the Lord.” He spreads his arms wide and gestures to his stocky frame. “When they arrested me I fasted for 25 days. Nothing happened to me because God was with me.”

He does not bother to hide his contempt for the Communist Party. Fuelled with passion, his voice rises. “They hate me but I don’t hate them.” God, he says, is on his side and he will win. That passion must trigger anxiety among officials who for 30 years have guaranteed freedom of worship – but not worship conducted by unofficial ministers like Zhang.

The demolition three years ago of an illegally built Protestant church near the southern city of Hangzhou draws Zhang’s wrath. The building had been constructed on land intended for a commercial centre, and several hundred faithful in the town that is home to tens of thousands of Christians tried to stand in the way of the razing of the building. Secretly filmed video of the incident shows scuffles between worshippers defending their church and the police, with at least four people reportedly suffering broken bones as police wielding batons pushed back the crowd. Several were arrested and eight people were jailed for terms of up to three and a half years. For Zhang, such actions are evidence of the Communist Party’s fear.

“China is a land that has been chosen by God. If the government did not interfere then many more Chinese would become followers. Our hearts are thirsty.” Disturbed to learn that my Chinese colleague remains firmly atheist, Zhang leans forward across the table and tries to persuade her. “You should find faith as soon as possible so that we can all be brothers and sisters in God. God will save you. He makes so many miracles. He will protect you.” A day later, he was picked up by the Beijing police and shipped back to Henan province.

An understanding with the jailers Pastor Shen Quan was trained at an officially approved seminary – as was Pastor Jin – but he too left the government-sanctioned church in search of greater spiritual freedom. It has been more than two years since police last carried out a raid on one his services, during which members of his congregation were intimidated and warned not to attend, while he was taken away and questioned. He is not as optimistic as Pastor Jin that the recent inauguration of tentative talks between government and house church luminaries heralds an end to the persecution. “This is just not possible. As long as the house churches exist, the government must want to try to control them.”

But government raids on house churches have proved somewhat counterproductive. Underground Christians say that as soon as one house church is closed, its members split up and found their own small congregations, further multiplying the numbers.

One of the attractions of these churches is the personal care that a pastor gives to his flock, which is a world away from the more rigid approach of the state-sanctioned Three-Self Patriotic Church. One such – the Kuanjie Church – was full by 9am for a Saturday morning service. A far higher proportion of the congregation were middle-aged or elderly and one woman made it her duty to patrol the aisles making sure that everyone, including curious first-time visitors, fell to their knees on specially provided foam cushions during the lengthy prayers. Even in this church, the tone was evangelical. Two women with microphones on poles moved between the pews, ensuring worshippers had a chance to offer aloud their prayers and to share with the rest of the congregation their stories of individual communion with God.

But such official churches lack the personal touch found in the small house churches, and perhaps because of that are growing more slowly. The challenge now for the government is to determine how it will handle the breakneck spread of the underground churches.

Zhao Xiao is a prominent economist, a professor of the University of Science and Technology and a one-time Communist Party member. He is also a Christian and something of an optimist. He sees the recent groundbreaking talks between the two sides as inevitable. As the Christian population has grown, the Party has recognised that Protestants are making no attempt to form an alternative organisation and are not questioning the rule of the party, he says.

This may have given the leadership greater confidence to liaise with them. It is also common knowledge that huge numbers of the volunteers who raced to help with the aftermath of last year’s devastating earthquake in southwest China were Christians. Many are still there, helping the survivors and, sometimes, preaching.

Familiarity, Professor Zhao believes, is another important factor. “It has taken many years to reach this point. Many meetings have taken place over the years between imprisoned pastors and their police jailers and this has bred a closer understanding. Those changes in attitude meant this day could come.” He adds: “I think that one day the Communist Party will even allow Christians to become members.”
Title: Police State Status Quo
Post by: Body-by-Guinness on April 23, 2009, 06:06:04 AM
Police Swoop on Beijing University

Comments by a Beijing professor enrage petitioners, who descend on his office and prompt a police crackdown.

Courtesy of a petitioner.
Police in Beijing move in on petitioners in the capital in several locations during a sensitive anniversary year.
HONG KONG—Authorities in Beijing have begun moving to clear large numbers of people from the capital who have a grievance against the government as security tightens, with local residents and petitioners reporting detentions in several sensitive locations.
Hundreds of protesters have traveled from all over China to the capital's prestigious Beijing University following recently reported remarks about petitioners by a professor there.
A number of these were rounded up in recent days, and their details recorded by police after they staged a sit-in in protest at recent comments by university professor Sun Dong Dong, who was reported as saying that 99 percent of long-term petitioners—people who try to lodge complaints about alleged official wrongdoing through official channels—were mentally ill.
Sun has since said his comments, which have drawn widespread public anger and protests from China's thousands of long-term petitioners, were reported out of context by the media, while a health ministry official has said he was exercising his right to freedom of expression.
On Saturday and Sunday the police were detaining a lot of petitioners..."
Shenzhen petitioner
A Beijing-based petitioner surnamed Li said she saw 83 petitioners who had traveled from Shanghai to protest against Sun's reported comments.
"According to the records of the Haidian branch police station, five of them had come back a second time after being removed," Li said.
Detained outside university
Li said both she and petitioners Wang Shenfang and Zhu Jianping were detained for a total of seven days for causing a public disturbance."
"We were then taken out of Majialou [detention center] by our hometown representatives in Beijing, who wanted to know the exact circumstances of our coming to Beijing University, and particularly whether anyone had got in touch to organize the protest," she said.
"They didn't send us back to Shanghai until the evening on the second day."
Sun's comments are particularly sensitive for petitioners, who have been incarcerated in mental institutions and force-fed medication because they refuse to give up after decades of trying to win redress for official wrongdoing, which can include deaths in police custody, forced evictions, and alleged corruption.
Comments 'out of context'
In a telephone interview, Sun acknowledged his remarks but said media reports published his comments out of context.
"The original meaning of my comment was that, of the 'long-time' petitioners who came to me, the result [99 percent of them suffer from mental problems] was based on several tests. But when the comments came out, the media omitted the first part and only published the other part," Sun said.
"Of course I take responsibility for what I said. But the media deleted part of it and triggered this” response, he said.
"The petitioners’ emotions are running so high right now that it will only trigger more contradictions if I talk to them. I will explain [the situation] to them in due course," Sun said.
"I have dealt with great pressure from this incident. But from an objective point of view, it has caused us to learn and to care more about mental problems. This shows progress in society,” he said.
Government officials have indicated publicly that they accept that the majority of petitioners have legitimate complaints.
In practice, however, petitioners are routinely detained, beaten, and sent back to their hometowns if they try to present them in Beijing, especially during times of tightened security.
Elsewhere in the capital, three petitioners, including two pregnant women and a cancer patient, were detained after they handed out leaflets in and around the Beijing official residence of Chinese Premier Wen Jiabao on Monday, witnesses said.
Fliers at Premier's house
Li Chunxia and Zhao Chunhong, both pregnant, and cancer patient Li Shuzhen went to the Premier's house on Monday afternoon, and threw leaflets detailing their complaints against the government into the house, and into the alleyway outside it, according to a Beijing resident surnamed Chen, who saw them detained.
"This afternoon at about 3 p.m. three people were taken away in a police car," Chen said.
"They were throwing fliers at No. 17, Dongjiao Alley. Some of the fliers went into the courtyard, while others landed outside the walls."
"They were taken to the police station by police, national security police, and plainclothes officers. I didn't dare to shoot any video," Chen said.
Police have stepped up their presence in the southern part of the city in recent days, especially targeting areas in the south of the city near the railway station and bus station, petitioners said.
"There are a lot of police vehicles," a petitioner from Shenzhen surnamed Zhao said from the southern Beijing district of Fengtai, temporary home to a large number of people seeking to make complaints against officials in their hometown.

"On Saturday and Sunday the police were detaining a lot of petitioners and taking them straight to Majialou," she said, referring to a holding center where petitioners are detained to await escort back to their respective hometowns.
Raid on railway, bus stations
"I was asking around the southern railway station today, and they told me they probably detained a couple of hundred people," she added.
"There were about 20 people detained in the morning," a petitioner from eastern Anhui province surnamed Wang said, referring to petitioners sleeping in the corridors of the long-distance bus station, not far from the southern railway station.
"Down by the railway station, while I was watching they took away a whole busload of people. That's probably 50 or 60 people," he said.
A petitioner surnamed Li said the authorities were deliberating targeting petitioners who might try to travel to central Beijing to protest outside government buildings.
"I was detained at the police station for a day and night. They don't give you anything to eat," she said.
"If it's after 12 p.m. they take you to Majialou, but they deliberately delay things so that you get there after lunchtime and there is nothing to eat."
Authorities in Beijing are beginning to tighten security through the capital ahead of the 20th anniversary of massive pro-democracy protests, which ended in an armed crackdown on student-led protesters in and around Tiananmen Square.
Hundreds, perhaps thousands, are believed to have died, but the government has ignored repeatedly calls for a reappraisal and public discussion of the incident.
Original reporting in Mandarin by Qiao Long and Ding Xiao, and in Cantonese by Grace Kei Lai-see. Mandarin service director: Jennifer Chou. Cantonese service director: Shiny Li. Translated and written for the Web in English by Luisetta Mudie. Edited by Sarah Jackson-Han.
Title: Our CiC in action
Post by: Crafty_Dog on May 06, 2009, 12:46:30 PM;_ylt=AjLyfz0gzHuivv1xnyC693KWwvIE;_ylu=X3oDMTExdWh0MTF0BHBvcwMxNARzZWMDdG9vbHMtYm90dG9tBHNsawNwcmludA--

US plays down incident at sea with Chinese vessels

By PAULINE JELINEK, Associated Press Writer
Tue May 5, 1:09 pm ET

WASHINGTON – The Pentagon Tuesday played down a confrontation between Chinese vessels and one of its Navy surveillance ships, taking a decidedly more low-key tone than during similar incidents two months ago.
In what has become almost a routine cat-and-mouse game on the seas, there have been four incidents in the past month in which Chinese-flagged fishing vessels maneuvered too close to two unarmed ships crewed by civilians and used by the Pentagon to do underwater surveillance and submarine hunting missions, two defense officials said. They spoke on condition of anonymity to discuss some of the incidents and details that the Pentagon has not yet released, adding that they fear such maneuvers are not just dangerous in themselves but could lead to escalated incidents.
The Pentagon did release a brief statement on the latest confrontation in which two Chinese fishing vessels came dangerously close — to within 30 yards — of the USNS Victorious Friday as it was operating in the Yellow Sea.
The Victorious crew sounded its alarm and shot water from its fire hoses to try to deter the vessels in an hour-long incident, one official said. The vessels didn't leave until the Victorious radioed a nearby Chinese military vessel for help, said Defense Department spokesman Bryan Whitman.
After incidents in March that included similar though apparently more aggressive Chinese maneuvers, the Pentagon protested to Beijing officials and issued a strong public statement calling the Chinese actions harassment.
But on Tuesday, Whitman declined to characterize what the Chinese vessels were trying to do, saying only that their actions were "unsafe and dangerous."
Asked why the tone of the U.S. statement was muted this time, he said: "We will be developing a way forward to deal with this diplomatically."
"USNS Victorious was conducting routine operations on Friday, May 1, in international waters in the Yellow Sea in accordance with customary international law, when two Chinese fishing vessels closed in on and maneuvered in close proximity to the Victorious," the Pentagon said in its statement. "The intentions of the Chinese fishing vessels were not known."
It said the Victorious radioed the WAGOR 17 Chinese government ship, which came and shined a light on one of the fishing vessels. Both of the fishing vessels then moved away.
"WAGOR 17 took positive steps, pursuant to their obligation under Article 94 of the United Nations Convention of the Law of the Sea, to ensure their flagged vessels navigate safely," the statement said.
Friday's incident followed others on Thursday, April 7 and April 8 in which Chinese-flagged fishing vessels approached too close to the Victorious and the USNS Loyal as they operated variously some 140 nautical miles, 185 miles and 200 miles off the coast of China, a defense official said privately.
In the first week of March, the Chinese over several days maneuvered vessels near Navy surveillance ships and sent aircraft to fly over them. In a particularly aggressive incident March 8, the Pentagon said, several Chinese ships surrounded the USNS Impeccable, coming within 25 feet and strewing debris in its path.
Those cases took place in a disputed band of water far off the Chinese coastline but within what Beijing considers a 200-mile economic zone under its control. The zone, under international law, gives a state certain rights over the use of natural resources there. That clashes with one of the cardinal principles of America's doctrine of ocean navigation — the right to unrestricted passage in international waters as long as vessels are not encroaching on the economic interests of the country they pass.
Associated Press writer Anne Gearan contributed to this report.
Title: Stratfor
Post by: Crafty_Dog on May 07, 2009, 09:06:53 AM

China has chosen short-term responses to the global economic crisis. While these may buy Beijing time, they only delay — and possibly undermine — real structural change. And that could portend a bigger Chinese crisis in the coming years.

China registered 6.1 percent gross domestic product (GDP) growth for the first quarter of 2009, down from the 6.8 percent growth rate for the fourth quarter of 2008. While this may appear fairly robust compared to the 6.1 percent decline in GDP registered in the United States for the same quarter (a number that was a slight improvement over the 6.3 percent decline in the fourth quarter of 2008), comparing these numbers is not comparing apples to apples. The United States, along with many other countries, notes GDP changes from quarter to quarter (the Q1 number is in comparison to the preceding Q4), whereas China counts changes year on year (Q1 is in comparison to the previous Q1).

By some estimates, as measured comparable to the U.S. system of accounting, China’s economy sunk to zero growth in Q4 2008, or even went negative — and that decline continued into Q1 2009. But even looking just at the year-to-year numbers, Chinese economists have quietly admitted that at least 4 percentage points of their growth figure are attributable to government stimulus monies, and that economic growth was really in the 1 or 2 percent range, far below government targets. Other observers of Chinese statistics agree with the 4 or so percentage points attributable to stimulus, but also suggest that some 2 or 3 percentage points are also exaggerations reported up the chain from lower levels of the bureaucracy to avoid falling too short of central government expectations, meaning that growth again was at zero or negative in the first quarter.

Amid a global economic crisis, even zero percent growth is not all that bad. But it is a significant problem for the Chinese leadership, which has placed excessive importance on the specific growth numbers, in part due to concern that a flagging economy could stir social instability and in part due to Communist Party legitimacy being linked to economic growth these days.

Beijing’s response has been a reversion to the tried-and-true methods of:

supporting export industries,
encouraging, via rewards or threats, the maintenance of employment levels by companies (even if this is unprofitable, contributes to overproduction, and delays or avoids the weeding out of the weak and inefficient in the Chinese economy), and
large-scale state spending (directly from government coffers or indirectly through a loan surge from major state-backed banks) designed to boost infrastructure development and underwrite a rise in domestic consumption of large items like automobiles and major appliances.
These measures may give Beijing some control over China’s looming unemployment problem, which is something officials fear but are still far behind in addressing, with social security and health care initiatives still largely in the formative stages, rather than well developed in preparation for the combination of a sustained economic slowdown and an aging population. But Beijing largely has stalled or reversed initiatives from the past several years that were designed to reform the economy into a less redundant, more efficient and flexible system better able to adapt to global change. In short, China’s short-term solutions to the global economic crisis are buying time, but they are delaying, if not undermining, real structural change. And that could portend a bigger Chinese crisis in the coming years.

The Chinese Bank Spending Spree
In the first quarter of 2009, Chinese banks went on a massive state-mandated lending spree. The so-called big three — the Industrial and Commercial Bank of China (ICBC), the China Construction Bank (CCB) and the Bank of China (BOC) — issued some 4.58 trillion yuan ($670 billion) in new loans during that quarter. Much of this purportedly was issued for major infrastructure projects as part of the government’s $586 billion stimulus package, though anecdotal reports suggest much went to state-owned enterprises (SOEs). The SOEs may have used the loans for market speculation, paying off earlier loans or maintaining payroll during the economic downturn rather than spending capital improvements and efficiency programs.

The first-quarter loans accounted for more than 90 percent of the initial government yearly loan targets, prompting concerns that after the initial flood of loans, liquidity would dry up for the rest of the year. But Chinese officials have now said new loans will not stop at the 5 trillion yuan (about $732 billion) target, and it has been suggested that total lending may be closer to 8 trillion or 9 trillion yuan (about $1.1 trillion or $1.3 trillion) for the year, and initial estimates put April new lending at 400 billion to 600 billion yuan (about $58 billion to $87 billion).

While lending has helped Chinese companies maintain employment levels during the economic slowdown, it also brings about renewed risks to the Chinese banking sector and undermines earlier nascent moves to try to drive Chinese businesses to be more profitable and efficient rather than to rely on state bailouts and loans to stay afloat. As the big three were issuing record quantities of new loans in the first quarter, their net profits were falling; the CCB reported an 18.2 percent decline for the quarter, and the BOC reported a 14.1 percent decline. Only the ICBC reported a net growth in profits (of some 6.2 percent), but according to the bank, this was due to a significant hike in fees and a dip in operating costs.

For each of the big three, loan interest makes up by far the bulk of operating income (79.5 percent for the ICBC, 77.5 percent for the CCB and 73 percent for the BOC). And the banks are noting narrowing margins on loan interest as the cause for their net profit declines. It is also likely that hidden within these numbers is a growing problem of loan repayment, particularly given reports of thousands of companies that have been shutting their doors since the fourth quarter of 2008 or turning unprofitable in the current economic environment.

While the lending spree is designed to give the economy a boost and maintain a system flush with liquidity to avoid the U.S.-style economic crunch, it is also increasing the risks of nonperforming loans (NPLs). This risks weakening the banks, which already were bailed out more than a decade ago to the tune of some $325 billion in transfer of bad debt to asset management corporations, thus cleaning the banks’ balance sheets.

It also reduces the pressure on Chinese companies (particularly state-owned companies) to reform their business practices and become more efficient and profitable rather than rely on government loans and incentives to operate. In addition, with most loans targeting state firms, China’s private companies remain on the back burner. This is another reversal of earlier initiatives to push for a greater role for the private sector aimed at making the system more susceptible to market forces, and thus more likely to weed out inefficient and outdated companies.

Avoiding the Oversupply Issue
One issue the government keeps coming back to (and keeps running away from just as quickly) is the massive oversupply of production in certain sectors of the Chinese economy. Much of the Chinese economy is made up of redundant, small, inefficient production facilities, the remnants of the old Mao-era encouragement of self-sufficient provinces and cities. Many of these redundancies remain because while inefficient on a national scale, they still provide employment, tax revenues and economic output numbers for the provincial and local officials. Few are willing to see their local industries shuttered to satisfy a national need to become more streamlined and efficient for the long run.

The new pressures building on China’s banks could not come at a worse time. In the mid-1990s, the run-up of bad debt was beginning to cause significant problems for the Chinese financial sector, and a bailout program was launched in 1999. The government took mounds of bad loans from the Chinese state banks, transferring them to new firms called asset management corporations (AMCs). In exchange, the AMCs issued bonds worth the full face value of the NPLs back to the banks, despite the fact that the NPLs were worth — at most — one-third of that. In one wave of the accounting wand, the state banks went from being anchored down by dud assets to being flush with cash.

Those bonds provided a huge boost to the banks’ balance sheets, as they were backed by China’s central bank, the People’s Bank of China, and so were as good as cash when determining how healthy the institutions were. This made the Chinese banks rather attractive with their initial public offerings, gaining foreign investment and expertise and limiting competition in the Chinese banking sector as it opened due to World Trade Organization regulations.

But the NPLs were never disposed of. These AMCs were supposed to follow the model of previous “bad bank” programs, disposing of the bad debt by forcing indebted firms to pay up or — if push came to shove — liquidating the firms for whatever salvageable assets might be sold off to pay the debt. But closing firms down, obviously, would mean adding to the ranks of the unemployed. So the AMCs instead simply held the bad debt — for 10 years — while the state banks used their shiny new cash-equivalent bonds to issue even more loans.

As 2009 rolls on, this strategy is coming back to haunt the government. The NPL bonds are structured so that the AMCs only need to pay interest, not principle and interest as with normal bonds. With the bond rates at approximately 2 percent, this has been a barely manageable task. (Remember, the AMCs have been disposing of very few actual dud companies, so their income has been tiny, though supplemented by some good assets also transferred at the time of their creation.) But all of the bonds in question are 10-year bonds, with the entire value of the principle due around the end of the year. Because very few NPLs actually have been disposed of, and because NPLs generally are worth less than one-third of their face value, the only way these bonds could be redeemed would be if the Ministry of Finance doled out the cash itself. After all, the AMCs were designed to do little more than simply hold the loans, not actually rehabilitate them.

When the Chinese economy was growing at double-digit rates, the banks could stay ahead of the potential problem of NPLs. But with the economy effectively stalling at the same time banks are being asked to significantly increase the issuance of new loans, a major problem may be brewing. This means one of three things has to happen:

The banks will have to write off these bonds, seeing a massive drop in their balance sheets.
The Ministry of Finance will have to step in and recapitalize.
The bonds will be rolled over, pushing the problem further out in the hopes that it either simply goes away or that the Chinese economy will have grown enough by that time to simply absorb the losses.
With the latter choice the most likely, and with the addition of some 5 trillion - 9 trillion yuan in new loans this year (with questionable performance on much of it), the Chinese are heading toward another future banking crisis. And the flight of foreign investors from Chinese banks certainly will not help this crisis.

In short, like many others, the Chinese are using short-term measures to deal with the current economic downturn. But these measures not only are building in renewed risks (like the compounding NPL problems), they also are reversing the small steps toward economic reform necessary for more stable and continued Chinese economic development. The government was able to boost domestic consumption in the first quarter of 2009, but this was primarily through coupons and incentives focused mainly on rural purchases of large appliances and automobiles. These are not sustainable efforts. Many Chinese economists have criticized the moves as building new dangers as rural consumers spend their meager savings on big-ticket items, leaving them with a car and refrigerator but no job or health insurance.

A Missed Opportunity
The surge in bank lending to Chinese companies, both for infrastructure projects and to cover old loans and payroll, also is not sustainable, particularly as bank profits fall, margins thin and the risk of a new surge in bad loans rises. And the strength of the Chinese economy remains undermined by allowing weak companies to be kept alive through loans and government incentives. The debate in Beijing is whether the financial crisis has offered China the opportunity to fundamentally make its economic system more profitable, efficient and able to adapt to changes in market forces, or whether the crisis is another moment when the government needs to do what it can to shore up the old system.

Beijing has chosen the latter path, which it deems less socially destabilizing, and thus greater government involvement in the economy will be expected. But the pent-up pressures on the Chinese economy, and on the Chinese leadership, are likely to be worse in the long run. And with the economy unlikely to return to double-digit growth anytime soon (if at all), the day of reckoning may come sooner rather than later.
Title: Re: China
Post by: DougMacG on May 07, 2009, 10:30:16 AM
"China registered 6.1 percent gross domestic product (GDP) growth for the first quarter of 2009, down from the 6.8 percent growth rate for the fourth quarter of 2008."

That's a bit hard to believe for an export-based economy with falling exports.  Considering all the false economic statistics bandied around here in the U.S., makes me wonder how accurate theirs are.  Strat goes on to question those numbers as well.  Their analysis is excellent IMO. 

The Chinese economy is less that one third of the US, with more than 4 times as many people to support.  The people's acceptance of the government comes from a) coercion and b) a sense of security including economic.  Not exactly positioned for large downturns or turmoil.

If a Chinese citizen wants accurate economic data I suppose they could just 'Google' it?  No, Google works with the oppressive government to ensure consistent censorship.
Title: Re: China
Post by: G M on May 07, 2009, 01:22:15 PM
The economic numbers released by China are even less truthful than those from the Obama administration. If the scumbags in Beijing get desperate enough, the whole world will feel it.
Title: Riot at Chinese Hospital?
Post by: Body-by-Guinness on May 21, 2009, 09:53:52 AM
An interesting source documenting unrest in China. A list of recent incidents can be found here:

Some 10,000 people storm hospital, clash with police in China's Chongqing

618 ¦r
2009 ¦~ 5 ¤ë 17 ¤é 00:32
BBC Monitoring Asia Pacific
(c) 2009 The British Broadcasting Corporation. All Rights Reserved. No material may be reproduced except with the express permission of The British Broadcasting Corporation.
Text of report by Hong Kong Information Centre for Human Rights and Democracy on 14 May
[Report: "Some 10,000 People Stormed a PLA Hospital for Refusing To Save a Dying Person and Clashed With Police, Resulting in 10 People Injured"]

According to information obtained by this centre, yesterday a retired soldier who had participated in the 12 May rescue task accidentally fell down from the fifth story of a building. He was sent to the PLA's No 324 Hospital in Chongqing for emergency treatment. But the hospital refused to give him emergency treatment because his relative did not bring enough money to pay the required expense. As a result, the 23-year-old retired solider died. This matter aroused popular indignation.Yesterday, some 10,000 people stormed No 324 Hospital and clashed with the riot police. Ten people were injured when the police were beating the masses. To prevent more serious clashes, armed and riot police, numbering several hundreds, stayed in the vicinity of the hospital today to take precautions.

As this centre has learned, the retired soldier was doing cleaning work on the fifth floor of a building when he lost his footing and fell down. He was first sent to Chongqing's Nanqiaosi Hospital and then transferred to the No 324 Hospital for emergency treatment. At that time, because his relative did not bring enough money to pay the 20,000-yuan emergency treatment expense, the Emergency Centre of No 324 Hospital refused to give him emergency treatment. Despite repeated requests made by the relative, saying that the injured was a demobilized and retired soldier, the hospital still refused to do anything. Two hours later, when the relative came back with enough money, the 23-year-old lad had died. Extremely enraged, his family members came out in the afternoon to protest at the door of the hospital, holding a picture showing this young soldier in uniform. This news quickly spread in Chongqing, triggering indignation among the residents. By 6 pm, when people were going home from their workplaces, thousands of people had gathered in Jianxin East Road to stage a protest, blocking the traffic. By 8 pm the number of protestors had reached 10,000 and was still growing. They carried a banner bearing words that criticized the government and tried to break into the hospital. The riot police seized the pictures of the dead held by his family and the masses as well as the protesting banner, and a clash between the masses and police ensued. Ten people were injured when the police were beating the masses. At 10 pm the masses began to leave, while the family of the dead were taken away by several mini-buses. Even today they could not make contact with other people. Presumably, they are under house arrest. In response to our inquiry, the Guanyinqiao Police Station confirmed this incident. A worker of Boai Hospital, which faces No 324 Hospital across the street, confirmed that last night's protest involved more than 10,000 people. According to a doctor of that hospital, the family of the dead told the supporting masses that last year this retired soldier had rushed to rescue victims of the 12 May earthquake at the risk of his own life.

No 324 Hospital is a unit of the Chengdu Military Region. It is open to the public as a designated medical facility in Chongqing Municipality. It is also an emergency treatment centre in Chongqing's Jiangbei District.

14 May 2009, 2:30 pm

Source: Information Centre for Human Rights and Democracy, Hong Kong, in Chinese 14 May 09

Title: Phantom Earnings?
Post by: Body-by-Guinness on June 03, 2009, 04:00:32 PM
China's dubious earnings numbers

Red flags
May 28th 2009 | HONG KONG
From The Economist print edition

Investors appear to have little faith in company accounts
CHINA’S stockmarket has been one of the best performing in the world this year, and the country’s firms have so far steered through the global financial crisis better than many of their global peers. Partly they may have been buoyed by robust business conditions in China. But two recent studies, which raise serious questions about the credibility of China’s corporate earnings, suggest that companies may also have had an artificial boost.


The less damning of the two is issued under the auspices of the Hong Kong Monetary Authority and written by Giovanni Ferri, of Italy’s University of Bari, and Li-Gang Liu of BBVA, a bank. It argues that the profits of China’s large state-owned companies are entirely a product of subsidised financing by state banks, which lets them borrow much more cheaply than private or foreign firms (see chart).

To reach that conclusion the authors sifted through government data from 1999-2005. Mr Liu believes that such subsidies may have even increased since last summer, because the big state-owned enterprises have been the main beneficiaries of China’s economic stimulus. In the short term the subsidies will have boosted profits, not least compared with the firms’ credit-starved private peers. But in the longer term Mr Liu believes that the political component of the loans will mean capital is being allocated inefficiently, raising the prospect of future losses.

At least the academics are convinced that the profits are genuine, even if they are subsidised. But an exhaustive working paper by TJ Wong and Danqing Young, of the Chinese University of Hong Kong, and Xianjie He, of Shanghai University of Finance and Economics, reaches a more alarming conclusion. It suggests investors have little faith in the numbers.

To measure this they looked at Chinese firms before and after the country broke with its accounting traditions in 2007, adopting something akin to international accounting standards, which base valuations on market prices. They then dissected earnings in three ways. First, they compared how shifts in earnings correlated with shifts in share prices under the old accounting system and the new. An improvement in accounting practices should have meant a closer correlation between earnings and the performance of the share price. Not only did this not happen—there were some signs that things got worse.

Nor were there correlations between the share price and the shift in reported value of investment instruments, goodwill and the impairment of assets—all typically critical to an investor’s analysis. Lastly, the academics examined a nuance in the new standards that allowed Chinese firms to book profits by restructuring debt that was owed to affiliated companies. Before the change in accounting standards, this kind of debt restructuring was rare. Afterwards, it was common: more than 200 companies, or over 15% of those in the study, did it in 2007. This resulted in clear gains to earnings but no impact on share prices. So is there anything in the company reports that investors do consider to be meaningful? That, says Mr Wong, is the subject of the next study.
Title: China's Smoot Hawley Moment Nears?
Post by: Body-by-Guinness on June 28, 2009, 04:53:44 PM
China's banks are an accident waiting to happen to every one of us
Fitch Ratings has been warning for some time that China's lenders are wading into dangerous water
By Ambrose Evans-Pritchard
Published: 5:38PM BST 28 Jun 2009

China's banks are veering out of control. The half-reformed economy of the People's Republic cannot absorb the $1,000bn (£600bn) blitz of new lending issued since December.
Money is leaking instead into Shanghai's stock casino, or being used to keep bankrupt builders on life support. It is doing very little to help lift the world economy out of slump.
Fitch Ratings has been warning for some time that China's lenders are wading into dangerous waters, but its latest report is even grimmer than bears had suspected.
"With much of the world immersed in crisis, China appears to be one of the few countries where the financial system continues to function largely without a glitch, but Fitch is growing increasingly wary," it said.

"Future losses on stimulus could turn out to be larger than expected, and it is unclear what share the central and/or local governments ultimately will be willing or able to bear."
Note the phrase "able to bear". Fitch's "macro-prudential risk" indicator for China threatens to jump from category 1 (safe) to category 3 (Iceland, et al). This is a surprise to me but Michael Pettis from Beijing University says China's public debt may be as high as 50pc-70pc of GDP when "correctly counted".

The regime is so hellbent on meeting its growth target of 8pc that it has given banks an implicit guarantee for what Fitch calls a "massive lending spree".
Bank exposure to corporate debt has reached $4,200bn. It is rising at a 30pc rate, even as profits contract at a 35pc rate.

Fitch traces the 2009 bubble to the central bank's decision to cut interest on reserves to 0.72pc. Bankers responded to this "margin squeeze" by ramping up the volume of lending instead. Over half the new debt is short-term. Roll-over risk is rocketing. China's monetary stimulus since November is arguably more extreme than the post-Lehman printing of the US Federal Reserve, though less obvious to the untrained eye.

Under the Taylor Rule, US policy remains tight (for the US). China's policy is loose (for China). New loans doubled in May from a year earlier, almost entirely to companies.
China's Banking Regulatory Commission fired a warning shot last week. "The top priority at the moment is to stop explosive lending. Banks should carefully monitor the process of credit approval and allocation, and make sure that loans flow into the real economy," it said.

Unfortunately, 40pc of the "real economy" consists of exports, mostly to the US and Europe, the consequence of a mercantilist export model that has qcrashed and burned. Chinese exports were down 26pc in May.

World trade may be stabilizing at last after contracting at faster rate than during the early Great Depression. But it will not rebound fast in a world where the US savings rate has risen to a 15-year high of 6.9pc. A trade policy based on the assumption that debtors in the Anglosphere and Europe's Club Med can ruin themselves for ever is absurd.

Andy Xie, a Sino-bear and commentator for Caijing, said Western analysts are in for a rude shock if they think that China's surging demand for raw materials implies genuine recovery.
Commodity speculators have been using cheap credit to play the arbitrage spread between futures and spot on the oil markets. They have even found ways to trade lumber to iron ore by sheer scale of leverage. "They've made everything open to speculation," he said.

Mr Xie thinks the spring recovery is an inventory spike, to be followed a double-dip downturn into next year as stimulus wears off.

Reformers know what must be done to boost consumption. China needs a welfare revolution. But creating a social security net takes time, and right now Beijing is facing a social crisis as 20m jobless workers retreat to the rural hinterland.

So the regime is resorting to hazardous methods to keep excess factories humming: issuing a "Buy China" decree: using a plethora of export subsidies; holding down the price of coke, bauxite, zinc and other resources to lower production costs (prompting a complaint from America and Europe); and suppressing the yuan, again.

Protectionism is a risky game for a country that lives off global trade and runs a surplus near 10pc of GDP. Mr Pettis said he fears China is nearing its "Smoot-Hawley moment", repeating the US tariff blunder of 1930 that brought the world crashing down on Washington's head.

Two facts stand out about China's green shoots. While the Shanghai composite index is up 70pc since November, Chinese imports are down 25pc from a year ago. China is still draining real stimulus from the global economy.

If the world's biggest surplus state ($400bn) is too structurally deformed to help offset the demand shock as Western debtors retrench, we are trapped in a long deflation slump.
Title: Re: China
Post by: Admin on June 29, 2009, 04:45:44 PM
Posted for Guro Crafty.

 This house was nearly finished already and  - one morning it tipped over. An earthquake? No - "made in China", Shanghai.




Title: Re: China
Post by: G M on July 12, 2009, 03:02:40 PM

China could attack India before 2012, claims analyst

Press Trust of India, Sunday July 12, 2009, New Delhi

A leading defence expert has projected that China will attack India by 2012 to divert the attention of its own people from "unprecedented" internal dissent, growing unemployment and financial problems that are threatening the hold of Communists in that country.

"China will launch an attack on India before 2012. There are multiple reasons for a desperate Beijing to teach India the final lesson, thereby ensuring Chinese supremacy in Asia in this century," Bharat Verma, editor of the Indian Defence Review, has said.

Verma said the recession has "shut the Chinese exports shop", creating an "unprecedented internal social unrest" which in turn, was severely threatening the grip of the Communists over the society.

Among other reasons for this assessment were rising unemployment, flight of capital worth billions of dollars, depletion of its foreign exchange reserves and growing internal dissent, Verma said in an editorial in the forthcoming issue of the premier defence journal.

In addition to this, "The growing irrelevance of Pakistan, their right hand that operates against India on their behest, is increasing the Chinese nervousness," he said, adding that US President Barak Obama's Af-Pak policy was primarily Pak-Af policy that has "intelligently set the thief to catch the thief".

Verma said Beijing was "already rattled, with its proxy Pakistan now literally embroiled in a civil war, losing its sheen against India."

"Above all, it is worried over the growing alliance of India with the US and the West, because the alliance has the potential to create a technologically superior counterpoise.

"All these three concerns of Chinese Communists are best addressed by waging a war against pacifist India to achieve multiple strategic objectives," he said.

While China "covertly allowed" North Korea to test underground nuclear explosion and carry out missile trials, it was also "increasing its naval presence in South China Sea to coerce into submission those opposing its claim on the Sprately Islands," the defence expert said.

He said it would be "unwise" at this point of time for a recession-hit China to move against the Western interests, including Japan. "Therefore, the most attractive option is to attack a soft target like India and forcibly occupy its territory in the Northeast," Verma said.

But India is "least prepared" on ground to face the Chinese threat, he says and asks a series of questions on how will India respond to repulse the Chinese game plan or whether Indian leadership would be able to "take the heat of war".

"Is Indian military equipped to face the two-front wars by Beijing and Islamabad? Is the Indian civil administration geared to meet the internal security challenges that the external actors will sponsor simultaneously through their doctrine of unrestricted warfare?

"The answers are an unequivocal 'no'. Pacifist India is not ready by a long shot either on the internal or the external front," the defence journal editor says.

In view of the "imminent threat" posed by China, "the quickest way to swing out of pacifism to a state of assertion is by injecting military thinking in the civil administration to build the sinews. That will enormously increase the deliverables on ground -- from Lalgarh to Tawang," he says.
Title: Re: China
Post by: Crafty_Dog on July 12, 2009, 04:52:08 PM
Intriguing , , ,
Title: China v. India
Post by: Body-by-Guinness on July 13, 2009, 04:22:17 PM
Fear of influence
By James Lamont and Amy Kazmin
Published: July 12 2009 23:06 | Last updated: July 12 2009 23:06
Hambantota, in southern Sri Lanka, was a sleepy seaside village devastated by the 2004 tsunami. Famous for salt flats and a searing climate, it’s most celebrated building was a British-built watchtower, now home to a fisheries museum.

Gwadar, likewise, until seven years ago, was a fishing town in Baluchistan on Pakistan’s south-western shoreline. An enclave on the Arabian Sea given to Islamabad by the Aga Khan, it was not much thought of as a key staging point between central Asia and the Gulf.

Below: A military message from the new player on the block
Today these little-known towns are fast emerging on to a bigger political and economic map thanks to Chinese finance and engineering, which is upgrading their ports into world-class facilities. They are part of China’s so-called “string of pearls” – the ports, staging posts and hubs that analysts say describe expanding Chinese interests and diplomatic initiatives in south Asia. The outreach – or, to some, apparent encirclement – is underpinned by infrastructure projects, arms supplies, energy routes and diplomatic protection.

Nowhere is this development causing more disquiet than in India. As energy dumps and refineries, jetties and gantries emerge on neighbouring shores, New Delhi fears that Beijing is extending its power to control shipping lanes in the Indian Ocean and Arabian Sea – waves that it prefers to rule. The moves have the potential to intensify the competition – and scramble for resources – between the world’s fastest-growing big economies, both nuclear-armed powers.

China accused of ‘predatory pricing’ tactics - Jun-14
China blocks ADB India loan plan - Apr-10
India follows China’s path in Africa - Apr-08
Chinese dragon roars over Indian industry - Jan-16
Analysis: India and China’s taste for luxury - Jan-10
The right questions on India and China - Feb-06
Arundhati Ghose, India’s former ambassador to the UN, says Beijing’s manoeuvring in south Asia is “causing us a lot of disquiet”. China is “flexing its muscles,” she says. “What they want to do is say ‘We are the big boys here and Asia can only afford one power’ ... The message is that the power in Asia is China, and this is her periphery, and China is the one which will determine what is going to happen here.”

Beijing insists that its intentions are peaceful, aimed at development.

Relations between the two sides have never recovered since a short-lived border war almost half a century ago. In June 1962, Chinese forces overran mountain regions in a bitter, high-altitude conflict.

The episode brought an abrupt end to the vision of Jawaharlal Nehru, India’s first prime minister, of brotherhood between the two countries. It also deeply wounded India’s confidence that it could defend itself.

Today, the cool relationship across the Himalayas continues to do harm. Trade between Asia’s two most powerful emerging markets may have grown, yet distrust allows neither to drop its guard. The territorial dispute still rankles, emblematic of a broader, and potentially more dangerous stand-off stirred by economic dynamism and rising military might.

While the People’s Daily, the mouthpiece of Chinese Communist party, claims Indians view China’s accomplishments with “awe”, Manmohan Singh, India’s prime minister, and his country’s corporate leaders boast that India’s democracy has more staying power than China’s one-party rule.

Friction has risen recently with the two sides sparring over multilateral loans, India’s civil nuclear deal with the US, and trade.

One of the most striking disagreements is China’s holding up approval of the Asian Development Bank’s loan assistance plan to India, on the grounds that it involved finance to territory it claims in India’s north-east. The Chinese opposition to the $2.9bn (€2.1bn, £1.8bn) plan – which earmarked $60m for flood management in the disputed region – is unusual and has left bank officials aghast at the treatment of India, its largest borrower. The Chinese have expressed “strong dissatisfaction” with the ADB saying it had no chance of changing “immense territorial disputes.”

Similarly, China sought to block India’s access to the nuclear supplies as the US administration of former president George W. Bush pursued a civil nuclear deal with New Delhi. That deal brought India’s nuclear programme out of decades of international isolation and was a milestone in its coming of age as a big power.

New Delhi has found ways to hit back. One weapon is trade. India has imposed bans on Chinese-made toys and mobile telephones. Another is troop deployment. It has recently aggravated China by bolstering its forces on the Himalayan border.

But while India can stem the tide of goods, it can do little about what it sees as regional encroachment in newly triumphant Sri Lanka, military-ruled Burma and arch rival Pakistan, and even the former mountain kingdom of Nepal.

Indian defence officials eye China’s activities in Sri Lanka with particular concern. – not least as the island overlooks important shipping lanes that carry much of the world’s oil trade.

Special relationship: Chinese and Pakistani troops on a drill in Karachi. The two nations share a common regional rival in India
Chinese military ordnance was decisive in the final stages of Colombo’s war against the Tamil Tigers, defence experts say. Beijing has increased its aid to Sri Lanka fivefold to $1bn a year and stepped up supplies of sophisticated weapons such as Jian-7 fighter jets, anti-aircraft guns and air surveillance radar.

As well as an arms supplier, China also served as important diplomatic ally to Sri Lanka, helping to deflect western criticism at the United Nations of Colombo’s human rights record in defeating the Tamil Tigers, which cost thousands of civilian lives.

“On both counts – diplomacy and arms supply – China has rendered invaluable help to Sri Lanka in its war effort against the Tamil Tigers,” says R. Hariharan, a retired colonel turned political analyst. Sri Lanka’s president, Mahinda Rajapaksa, cemented relations in 2007 by awarding Chinese companies the contracts for developing the Hambantota port, in his home constituency. The port, deeper than the one at Colombo, the capital, would provide docking and refuelling facilities for, among others, Chinese merchant and naval ships.

Such efforts, says Col Hariharan, could see Sri Lanka emerge as “a friendly cockpit” from which to keep an eye on key shipping lanes – yet another concern for India, which sees the island is the southern vanguard of its strategic defence.

To India’s east, China has emerged as the closest ally and international protector of Burma’s isolated military junta, which is shunned by most western governments and subjected to sanctions. China is Burma’s largest trading partner, and was long rumoured to have a listening post in southern Burma on the Bay of Bengal.

“I don’t think there is some nefarious Chinese scheme on Burma, but with western sanctions, there has been a vacuum in Burma and China has been happy to fill that vacuum,” says Thant Myint-U, an authority on the relationship between Burma, China and India.

Beijing, which has repeatedly shielded Burma in the UN Security Council, is being repaid with access to some of Burma’s rich trove of natural gas at “friendship” prices, according to some Burmese analysts. China is beginning the construction of a pipeline that will carry oil from Sittwe, on the Bay of Bengal, to China.

For Indian policymakers – some of whom still recall when Mandalay, Burma’s second city, was the eastern-most city in British India – Beijing’s close ties to the Burmese generals are a cause of deep concern.

“In Burma, the most atrocious and evil government is supported by China, and India has no choice but to do something about it so we are not totally zero there,” said one senior retired Indian diplomat, who asked not to be identified. “But we can’t be party to people [China] wounding and needling an animal in our forest and then leaving us to handle the wounded tiger.”

China is also allied to what many Indians consider their greatest threat: nuclear-armed Pakistan. Beijing provides financial and technical support to Islamabad and is described by some western diplomats as the Islamic republic’s most special relationship. Relations have deepened over the 40 years since Pakistan was slapped with US economic and military sanctions following its 1965 war with India.

“Pakistan considers China a well-trusted friend. There are virtually no issues between us,” says a Pakistani foreign ministry official.

The Gwadar port project, one of the highest-profile examples of Chinese assistance, envisages a naval anchor, and transport and energy transhipment links reaching all the way to Xinjiang province in China’s west.

China has also emerged as Pakistan’s largest supplier of defence hardware, and is helping renew the country’s jet fighter strike force.

Such links have prompted India’s more hawkish commentators, traditionally focused on the threat from Pakistan, to turn their attention to their more powerful neighbour. Some warn that China is an unstoppable results-driven business machine with little time for democratic niceties. “Each mayor and party secretary has objectives relating to investment, output and growth, which are aligned to national goals,” says Gurcharan Das, a Delhi-based political analyst and former chief executive of Procter & Gamble India.

Naresh Chandra, India’s former ambassador to the US and former cabinet secretary, says Beijing has little interest in partnering with New Delhi to develop a common regional approach.“They fail to recognise their own power to do good in Asia. Their entire thinking is based on the People’s Liberation Army” he says.

New Delhi’s anxieties have been exacerbated by growing deference to Beijing by western powers, particularly the US, who look to China’s economic dynamism to rescue the global economy from its current crisis.

“We are not in a position to take them on militarily, economically and now not even politically,” says Ms Ghose. “The only option we’ve got is diplomatic. At the moment, the US is of no help. ”

Many Indian officials prefer to be more bland in their comments about China, and its “string of pearls”. Kamal Nath, a senior cabinet minister and former trade negotiator, says India and China follow two different models but need not be antagonistic in pursuit of growth and power.

“It cannot be India versus China. It has to be India and China,” he says.

Additional reporting by Joe Leahy and Farhan Bokhari


After the return of the Chinese naval expedition to fight piracy off the Somalia coast in May, Rear Admiral Du Jingchen, the commander of the fleet, declared the mission accomplished. “It was safe, smooth and satisfactory,” he said.

In truth, for China and the countries clustered around the Indian Ocean, the mission was much more, writes Richard McGregor.This was the first time Beijing had used its navy to escort vessels sailing under its national flag at such a distance from its homeland. The fact that Chinese ships transited through the Indian Ocean, an area New Delhi regards as its backyard, gave the event an extra geopolitical edge.

“The Indian Ocean is very important – it gives [China] a broader space,” says Bud Cole, a professor at the National War College, and an expert on the Chinese navy.

Like most displays of Chinese power, the naval mission said more about the future of Beijing’s influence than its authority today. The navy has little capability to conduct sustained missions far from home. As Mr Cole points out, it has only a handful of supply ships essential to such missions, and is not rushing to build many more.

But there is little doubt Beijing harbours long-term ambitions to build a navy with a capability that matches both its ambitions to be a great power and its swelling global economic interests.

The People’s Liberation Army and its naval wing moved beyond a singular focus on Taiwan “several years ago”, according to Alex Huang, of the Center for Strategic and International Studies in Taipei. “They are sending a message that the Chinese navy is going places, and that they are the new player on the block.”

Rear Admiral Yin Dunping, the vice-commander of the anti-piracy expedition, said in an interview on the mission’s conclusion that China needed a strong navy to safeguard its national interest.

“It is important to accelerate and improve the navy’s abilities to cross the ocean [to] escort, rescue and evacuate Chinese nationals abroad, maintain peace, and a variety of other military tasks,” he told Xinhua, the state news agency.

It is not just India and its neighbours that are feeling the effects of China’s rise. The US and its allies in the Pacific, including Japan, Australia and the Philippines, have all been forced to adjust their strategic outlook to take account of Beijing’s ambitions.

But few regions have been so methodically mapped out by China as the Indian Ocean and its environs, where Beijing has built or financed ports from Burma to Pakistan to draw a line of influence – the so-called “string of pearls” – from south-east Asia all the way to the Middle East.

Every new display of the navy’s latest hardware is accompanied by a statement from the Beijing leadership reassuring neighbours about China’s desire for peace and co-operation.

But as military strategists have long known, China’s mere presence in the region is a statement in itself. Once it is accompanied by military hardware, the power of the message will only be redoubled.,Authorised=true.html?nclick_check=1
Title: Re: China
Post by: G M on July 13, 2009, 07:18:33 PM
"Enough shovels of earth -- a mountain. Enough pails of water -- a river."

"A journey of a thousand miles begins with a single step."

"With time and patience the mulberry leaf becomes a silk gown."

China has been positioning it's pieces for decades. America's current weakness and China's internal pressures may well force China's hand.
Title: China - A little power struggle goiing on at the top?
Post by: DougMacG on July 16, 2009, 10:45:14 AM
I found this report interesting.

 Hu Jintao Protege Li Keqiang's Two Secretaries Arrested, Cause of Hu Jintao's Emergency Return From G8
By (translation)
Jul 9, 2009 - 12:47:29 PM

Hu Jintao Protege Li Keqiang's Two Secretaries Arrested, Cause of Hu Jintao's Emergency Return From G8

Boxun reports that most people assumed Hu Jintao left the G8 meeting in Italy early to return home because of the ongoing violence in Xinjiang. In fact he rushed back because He Guoqiang--head of the Central Commission for Discipline Inspection--had taken the opportunity of Hu's absence to detain Li Keqiang's two secretaries on corruption charges. In fact Li's assistants have accepted bribes to the tune of tens of millions of dollars. But this is a common phenomenon.

He Guoqiang took advantage of Hu's absence to spring his trap, having Premier Wen Jiabao sign off on the incriminating evidence and arrest warrant. Hu used the excuse of the events in Xinjiang to rush home to attend to this threat to his desired heir to the Party leadership position.
Title: Re: China - Much ado
Post by: DougMacG on August 27, 2009, 09:21:54 PM
The world's second largest, fastest growing economy and most populated country, but the inevitability that it will soon overtake the US as we enter the 'Age of China' deserves a little skepticism.  I don't agree 100% with this author but appreciate his key points including the historical perspective and the conclusion that our focus should be on getting our own house in order and then competition with China will go just fine for the U.S.

Much ado about China

Overblown announcements heralding the supposed coming of the Age of China have become a staple of journalistic futurism in recent years. When Maclean's magazine banners across the top of its cover "When China Rules the World," as it did last month -- and it is not a Monty Python send-up of swarms of incomprehensible people in Mao suits -- I know it is time to raise a peep of dissent.

Does any of this sound familiar? It was not even 20 years ago that the same was being said about Japan, when U. S. president George H. W. Bush went to Tokyo and was patronized by the Japanese prime minister for being at the head of a declining power. At an official dinner, the president vomited and returned to his embassy in an ambulance (but explained privately that his indigestion was the consequence of eating plain fish while facing Chrysler chairman Lee Iacocca for two hours).

And it was only 15 years before -- during the Carter doldrums, following the Kennedy assassinations and the debacles of Vietnam and Watergate -- that the world was abuzz with predictions that the U. S. S. R. would surpass the United States.

In fact, the most serious threat came from the Nazis. The official borders of Germany at the end of 1940, including Austria, Bohemia (the Czechs), Moravia, most of Poland, Denmark, Norway, Benelux and the Atlantic coast of France, gave the Reich 130 million people, the same population as the United States, and almost equivalent industrial potential. This was why Roosevelt ran for a third term, determined to help keep Britain (and Canada) in the war, and to assist all who resisted the Nazification of Europe. The Nazi threat was so serious that it required the entire combat strength of the British Commonwealth, the U.S. and the U.S.S.R. to defeat it.

In the Cold War that followed, the Soviet challenge simply imploded, crumbled, after 40 years of containment by a U. S.-led alliance, in which no fire was exchanged between the major powers. As for Japan, it simply ran out of steam, lost a whole decade in financial stagnation while its stock market declined by 90% -- even though it continued, to this day, to be a brilliant manufacturer and marketer of automobiles and many sophisticated products from cameras to television equipment.

None of this means that China won't continue to rise, or that the U. S. won't again have to prove its staying power as a world force. But matter-of-fact assertions, complete with timetables, of an imminent Chinese assumption of world leadership, are rubbish.

The takeaway message on the failure of the brief era of U. S. unipolarity that followed the demise of the U. S. S. R. is not that the U. S. is finished as the world's leading country, but that multipolarity, not the hegemony of a sole superpower, will replace the bipolarized Cold War. There are about 40 reasonably important countries in the world (of a total of 192), and the major powers will compete to build relations within that group.

The theory of the inevitable rise of China is similar to the recent theory of the inevitable end of the U. S. as a mainly Caucasian country: It is based on the extrapolation of current statistics that will not continue, and that in the case of the Chinese economy, are a fiction anyway.

China has a centrally directed economy, and calculates growth rates as a function of production, not spending; and production is deemed to occur when it is commissioned by the state. Thus, all Chinese predictions of economic growth are self-fulfilling: The central economic leadership orders production of toasters or submarines and announces construction of roads and sports stadiums, and the anticipated costs are added to the GDP at once. (In western countries, by contrast, GDP is the sum of consumption, investment, government spending and exports.)

The government monitors the progress of state construction and inventory levels, but doesn't release these numbers. It regularly claims 15% annual retail sales increases, but that reflects shipments to retail outlets, not sales, and even less, sales revenue. Such a system preserves some aspects of the catastrophic Soviet-style command economy. There are reports of consumer goods being virtually given away at point of sale, i. e., at below their cost of production.

All outsiders can do to judge the progress of demand is to see what the central bank does with credit and the money supply. The country has had a 21% decline in exports this year, so to achieve its 8% economic growth for 2009, there will have to be a 15% to 17% increase in domestic economic activity. There has been a strenuous effort to increase domestic demand, and the much-ballyhooed US$586-billion Chinese stimulus plan was really an excuse for the relaxation of credit and the redesignation of categories of already approved expenses.

The money-supply increase for this year is a very audacious 34.5%, to stimulate domestic demand. The two Shanghai stock exchanges almost doubled (before a recent 20% downturn) and major city residential prices are up around 13% so far this year. So bubbles are clearly developing. The country's claimed savings rate of 50% is not real, because it includes provision for all health care, retirement benefits and other social spending that is provided by the state in most western countries.

China claims to be expanding health care and other social services, but has not allocated realistic amounts to accomplish this. The country also has no credible legal system, and is rife with corruption (as evidenced by the shoddily built schools -- used as shelters during the recent earthquakes -- which were built on the cheap with no structural steel, and then collapsed, killing thousands of people). It has one billion peasants who largely live as they did 3,000 years ago. Almost every great urban development attracts swarms of expropriated people throwing rocks at bulldozer drivers, and the Chinese navy regularly steals the catches of commercial fishermen. The one-child-per-couple policy is creating an ageing and male-unbalanced population. It is a rough country, oscillating between near chaos and Tiananmen-like exertions of authority.

The rise of China is impressive and an objectively good thing, and the United states is labouring. But the U. S. has a functioning, if conspicuously imperfect, political and legal system, formidable resources, an incomparably productive work force, nearly four times China's GDP, and a popular culture that dominates the world. It must put its house in order, which will be painful, but a trifle compared to the challenges facing China. The United States has seen off greater challenges than this.
Title: Re: China
Post by: G M on August 28, 2009, 06:39:56 AM
Despite the problems within China, as articulated above they are educating a lot of children to be at the cutting edge of technology while our schools are churning out illiterates with overinflated self images and a vague loathing of America.
Title: Re: China
Post by: DougMacG on September 07, 2009, 07:28:03 PM
A story linked below says China is nervous about the US printing money.  That, I assume, is a world class understatement - they hold $2 trillion already and must feel like they are in quite a box to have to keep buying to protect their previous investments.

As I read the article, the meaning quickly turned upside down for me.  The US is in a lousy position economically right now, but China it seems to me is in an even more precarious situation because their bubble has continue to inflate even further and has yet to burst or correct.

From the story: "Mr Cheng said the Fed's loose monetary policy was stoking an unstable asset boom in China. "If we raise interest rates, we will be flooded with hot money. We have to wait for them. If they raise, we raise.  Credit in China is too loose. We have a bubble in the housing market and in stocks so we have to be very careful, because this could fall down."
Title: Re: China
Post by: ccp on September 18, 2009, 11:40:09 AM
More China vs us - from Gertz.  They are going to beat us eventually.
Title: Biting the Hand the Bails your Dumb @$$ Out
Post by: Body-by-Guinness on September 25, 2009, 06:43:43 AM
Obama’s Great Chinese Bank Snobbery
The president foolishly disses America’s Chinese bankers.

By Deroy Murdock

In one of today’s richest ironies, America’s fiscal health — such as it is — hinges on the generosity of the Chinese Communist party. Annoying Beijing’s mandarins could prompt them to skip our Treasury auctions. If China stops lending the Treasury money to underwrite Uncle Sam’s spendaholism, the Federal Reserve will need to print even more dollars to nudge the day of reckoning back over the horizon.

The Chinese have urged Washington to stop spending and printing so much money, lest inflation turn China’s $800.5 billion in Treasuries into a giant misfortune cookie. Chinese officials have grown increasingly vocal — and decreasingly diplomatic — in asking the U.S. government to start practicing fiscal discipline.
“If they [the Fed] keep printing money to buy bonds, it will lead to inflation, and after a year or two the dollar will fall hard,” predicts Chen Siwei, former vice chairman of the Standing Committee of the Chinese National People’s Congress and now its green-energy guru. “Most of our foreign reserves are in U.S. bonds, and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies.” Ambrose Evans-Pritchard of London’s Daily Telegraph reported September 6 on Siwei’s remarks at the European House-Ambrosetti’s economic forum in Cernobbio, on Italy’s breathtaking Lake Como.

“Gold is definitely an alternative, but when we buy, the price goes up,” Siwei continued. “We have to do it carefully so as not to stimulate the markets.”

In other words, like a panda bear in a jewelry shop, China is tiptoeing away from the dollar and into gold, and doing so quietly enough not to rattle commodity and currency traders. This month, China also bought $50 billion in Special Drawing Rights, the International Monetary Fund’s brand-new Esperanto currency that blends euros, pounds, yen, and dollars.

“The U.S. spends tomorrow’s money today,” Siwei’s bluntly added. “We Chinese spend today’s money tomorrow. That’s why we have this financial crisis.”

Siwei is absolutely right. The Bush-Obama administration’s fiscal incontinence is staggering, unprecedented, and potentially lethal. Fiscal year 2010’s budget deficit likely will reach $1.4 trillion. Far worse, the Heritage Foundation’s Brian Riedl estimates, President Obama will generate $13 trillion in fresh deficits by 2019, swelling publicly held national debt to $20 trillion, or 99 percent of gross domestic product.


Obama should shift into reverse. He should use his formidable persuasive skills to secure an immediate spending moratorium, slash the budget across the board by, say, 20 percent, and set future expenditures at or below inflation. If he cannot do this, America will have little choice but to keep the Chinese Communists cheerful and eager to buy U.S. bonds.

But rather than pursue the fiscal conservatism counseled by Siwei and other sober Chinese — or just keep Beijing calm and cooperative — Obama did something supremely idiotic: On September 11, he launched a trade war with Beijing.

For the next three years, Chinese tires will face a 35 percent import duty. This is like slashing your banker’s steel radials just before handing him your home-mortgage application. Fiscal recklessness aside, this is dreadful trade policy.

First, no surprise, the target of protectionism retaliated. China immediately commenced anti-dumping actions against U.S. chickens and auto parts. Americans in those industries soon will suffer.

So, too, Cooper Tire and Goodyear. These U.S. companies manufacture tires in China and now will pay a 35 percent tariff on each one they ship home.

Finally, poor Americans will lose as low-cost Chinese tires, some 17 percent of the U.S. market, suddenly dwindle. “I think within the next 60 days, you’ll see some pretty significant price increases,” Del-Nat Tire Corporation president Jim Mayfield predicted in September 14’s Wall Street Journal. He believes “entry level” tire costs will zoom 20 to 30 percent.

In yet another irony, Obama promised to be the multilateral, consensus-building antidote to the venomous George W. Bush and his allegedly go-it-alone, my-way-or-the-highway diplomacy. Today, Barack Obama looks like quite the unilateralist.

— Deroy Murdock is a columnist with the Scripps Howard News Service and a media fellow with the Hoover Institution at Stanford University.

National Review Online -
Title: Re: China
Post by: DougMacG on October 09, 2009, 09:39:44 PM
Copied here for follow up.  "For China I think the situation is the opposite of Russia.  They are highly dependent on the US economy, the dollar and the value of their already sunken investment."

GM:"I disagree Doug. China has us by the short and curlies. They couldn't build a military that could defeat ours for the amount of money they used to buy our debt. Now, they are using their financial leverage to bend us to their will. Unrestricted warfare, financial edition."

That's good.  We haven"t had enough disagreement around here since the French supermarket uprising.  :-)

Based on the size of the Chinese investment in the dollar already and the importance that US purchases of Chinese goods plays in their economy and based on my personal conjecture that their economic growth is built partly on a house of cards...

I just have to believe they are more worried than we are about whether the economic scare of the past year could turn sharply further for the worse and whether their political system, with a hundred people ruling a billion, would survive the chaos of a severe and prolonged economic crisis.  jmho

That said, they are of course our competitor and arch-rival in every other market in the world and somewhere between annoyance and enemy on nearly all matters of geopolitics.

But they don't win by crushing us economically.  They win more like a parasite feeding off of us as I see it.
Title: Re: China
Post by: G M on October 10, 2009, 07:05:31 AM
I'd agree with your parasite metaphor. China doesn't want us dead, just subservient to them.

Does internal instability scare the politburo? Yes, but that's why they have a police state that has made clear since 1989 that they will kill as many Chinese citizens as needed to retain control. There is no alternate government waiting in the wings, and given the rise of China in the new era of American weakness, Hong Kong, and especially Taiwan have much to fear.
Title: Re: China
Post by: G M on October 10, 2009, 07:47:17 AM

Chinese dissidents let down by Obama Nobel
Oct 9 11:18 PM US/Eastern

China's dissidents are voicing unease about President Barack Obama's Nobel Peace Prize, saying that the award could have been effective in promoting human rights in their country.
Some in China's democracy movement are outraged at what they see as a weak stance on rights by Obama, who the same week as Friday's announcement avoided a meeting with Tibet's exiled Dalai Lama that would have upset Beijing.

Chinese activists had been tipped as Nobel contenders on this year of anniversaries, when China marked 60 years of communist rule, 50 years since the Dalai Lama's flight and 20 years since the crushing of the Tiananmen Square democracy uprising.

Potential laureates included Hu Jia, locked up since December 2007 after exposing government abuses and the plight of China's AIDS sufferers, and Wei Jingsheng, a onetime electrician who spent 18 years in prison after brazenly challenging former leader Deng Xiaoping to bring democracy.

Huang Ciping, an engineer turned activist who is executive director of Wei's Washington-based foundation, said that China "has come to such a turning point that the prize might have helped."

"The Nobel Peace Prize committee has the full right to decide to give coal to those who suffer and struggle or to present flowers to the powerful," she said.

But she said of the decision: "It is both a pity for the Chinese people and a danger to world peace."

Rebiya Kadeer, the exiled leader of China's Uighur minority, congratulated Obama but called on him to use the added prestige to put pressure on "dictatorships like China."

"I am very happy that he got it. Now he has to do something with the award. It raises expectations on him to stand up for oppressed nations," she told AFP.

Some 200 people died in July in clashes between Uighurs and China's majority Han in the country's worst ethnic bloodletting in decades.

Harry Wu, who spent nearly two decades toiling as a political prisoner and now tries to publicize the "laogai" prison camp system, said the Norwegian Nobel committee's decision was premature.

"Maybe at this moment, Obama's actions on peace and human rights do not seem too bad, but so far I do not think it is enough to prove that he is qualified as the Peace Prize winner," Wu said.

Obama nearly said as much in his humble statement on the award, in which he said: "To be honest, I do not feel I deserve to be in the company of so many of the transformative figures who have been honored by this prize."

But some exiled Chinese said the prize was not only premature but undeserved, pointing to the Obama administration's statements that human rights concerns will not hold back a growing relationship with China.

James B. Chen, a cancer researcher at the University of Arkansas, feared that the award could be seen as affirmation of focusing on economic ties with China or of Obama's decision to avoid the Dalai Lama.

"For nearly all of my friends, their first reaction was that they were very, very disappointed," Chen said. "They thought this is a major setback for human rights."

The White House has denied it snubbed the Dalai Lama, saying Obama will meet him after the president visits China next month.

The Dalai Lama is paying his first visit to Washington since 1991 that does not include a meeting with the president. But he said he had no hard feelings and sent a congratulatory letter to Obama.

The Tibetan monk, who won the Nobel Peace Prize in 1989 despite strong Chinese protests, told Obama that "the founding fathers of the United States have made this country the greatest democracy and a champion of freedom and liberty.

"It is, therefore, important for today's American leaders to adopt principled leadership based on these high ideals," he said.

"Such an approach will not only enhance the reputation of the United States, but also contribute tremendously to reducing tension in the world."
Title: Re: China
Post by: G M on October 10, 2009, 05:28:12 PM

Title: Re: China
Post by: Crafty_Dog on October 11, 2009, 04:46:24 AM
I note that Japan, which ran huge surpluses in the 1970 and 80s, similarly diversified off-shore-- and then it crashed and has not really recovered since then.

I'm not looking to be glib here, but I also think it important we not panic.  China's books are seriously cooked.  Due to its one child policy, it has a unique demographic profile where the old increasing outnumber the young-- and the disproportion between  male and female children is the highest in the world (due to abortions of girl babies because of the one child policy)-- if the TV piece I recently saw is true, the ratio is something like 13/10!
Title: Re: China
Post by: G M on October 11, 2009, 07:18:55 AM
1. Japan crashed because it tried massive "stimulus" spending rather than take a legitimate economic downturn as a natural part of the business cycle. God help any country that tries that.

2. Know what that 13/10 ratio means? A big army that will readily engage in attrition warfare without hesitation. I just hope it's pointed towards the 'stans rather than the pacific.

3. China could be managed if we had competent leadership. So much for that.....
Title: Re: China
Post by: Crafty_Dog on October 11, 2009, 08:43:41 AM
"1. Japan crashed because it tried massive "stimulus" spending rather than take a legitimate economic downturn as a natural part of the business cycle. God help any country that tries that."

Agreed.  Question:  Is China/Will China be doing that?

"2. Know what that 13/10 ratio means? A big army that will readily engage in attrition warfare without hesitation. I just hope it's pointed towards the 'stans rather than the Pacific."

A valid point to add to the mix-- but still, what are the implications of age demographics heavily weighted towards the old?

"3. China could be managed if we had competent leadership. So much for that....."   And there is the matter of wondering whose best interests BO and the people around him have at heart.
Title: Re: China
Post by: G M on October 11, 2009, 08:53:45 AM
China isn't just trying "cash for clunkers" vote buying like we are. They are positioning chess pieces on the global board. Our leadership is thinking "bread and circuses" to buy votes for 2010/2012. China is thinking generations ahead on their timeline.

Unlike us, the old don't have a vote in China. No need for the bastards in Beijing to appease them. China, above all will act to preserve stability, no matter the cost in lives.

BO and his ilk believe that their charisma and kumbayas will make the world a safe place. We will pay for this delusion in blood, possibly we will cease to exist as a result. Other countries most certainly will.

Title: Re: China
Post by: Crafty_Dog on October 16, 2009, 04:56:13 AM
I suppose I could put this in the Book Review thread, but I put it here:

It says something about the precarious state of the global economy that the world's most important economic relationship—between the U.S. and China—has been described by a leading economist as one of "codependency," akin, he has suggested, to that of a drug dealer and an addict.

According to this scenario, China (the dealer) exports low-priced goods to America (the addict), which can't stop consuming them. To keep the cycle going, China uses the dollars it accrues from its exports to buy billions of dollars in U.S. Treasurys. (As of September 2008, China became the largest holder of U.S. debt.) The infusion of foreign money helps to keep U.S. interest rates low, which in turn encourages more consumption. The arrangement worked for a while, but then (the scenario goes) the U.S. overdosed and suffered a breakdown. Now China is wondering about the wisdom of being a supplier. "We have lent a huge amount of money to the U.S.," said China's premier, Wen Jiabao, earlier this year. "Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried."

The relationship sounds rather dysfunctional, when put that way. But is it? In "Superfusion," Zachary Karabell notes certain tensions, but his focus is really on how the two economies became so intertwined and on why it is important to strengthen the bonds between them. Mr. Karabell rightly identifies this as "the crucial issue for the 21st century."

China and America are two of the world's three largest economies (alongside Japan). They traded $410 billion worth of goods in 2007, up from just $5 billion in 1980. Together they can sometimes account for more than half of the world's economic growth in a given year. An economic slowdown in either country can affect the entire global economy.

Yet the relationship—something each country should manage with extra care—is fraught with conflicts and misunderstandings and is threatened by domestic pressures. Mr. Karabell is critical of what he sees as the U.S. determination to "contest the rise of China every step of the way." He insightfully shows how fears of China's growing economic might are used as a battering ram against companies like Walmart—China's low labor costs are held to blame for the success of big-box stores, with their low-price goods. And of course China is a perfect villain for any lobbyist or politician who is eager to protect a U.S. manufacturer by curtailing trade.

In the past 18 months, however, the terms of the relationship have shifted dramatically. While the U.S. economy has been in recession, and the U.S. financial sector on the brink of collapse, China has managed to keep its own economy relatively stable. Its growth rate, though lower than usual, still came in at a robust 8% in the second quarter of 2009. And China's banking sector has experienced little of the turmoil of America's.

View Full Image
By Zachary Karabell
Simon & Schuster, 340 pages, $26
.So who is now the senior partner, so to speak? For years China has been on the receiving end of lectures from U.S. officials—its undervalued currency, inefficient banking system and high saving rate are perennial scolding points. But China is now the one doing the lecturing. Last year, the chairman of the country's banking regulatory commission asked in a speech: "Does money-making or doing business justify the regulators in ignoring their duty for prudential supervision and their job of preventing misbehavior?" Senior Chinese officials have also been chatting up the idea of displacing the dollar as the world's reserve currency. And China has been on a buying spree. Its acquisitions of foreign companies, or investments in them, totaled $56 billion last year. As recently as 2002, the annual total was just $140 million.

Alas, these developments get short shrift in "Superfusion." Instead, there are chapters rehashing how U.S. companies like Kentucky Fried Chicken, Avon and Federal Express made their inroads into China. There is an odd chapter on the shortcomings of Chinese data collection that only briefly touches on the U.S.-China relationship. Mr. Karabell gives China's banking sector a careful analysis, but he treats many other topics superficially. In a discussion of last year's U.S. market turmoil, he simply speculates about what was said in conversations between the U.S. Treasury secretary and China's premier. Most of the book's material seems to be drawn from secondary sources.

Still, the question at the heart of "Superfusion" is a pressing one: What will happen next? Mr. Karabell says that the U.S. must turn its thinking away from the military and security challenges of the 20th century and focus more on the economic challenges of the 21st. If it does so, one key "metric"—for the U.S. and the rest of the world—will be China's growth rate. Can it be sustained?

That depends. With a meager welfare state, Chinese consumers save and save. The consumption rate is only about 35% of gross domestic product—down from 49% in 1990—and the lowest of any major world economy (the U.S. rate is 70%). At some point China will have to consume more, if only to be less dependent on exports for its prosperity. Other changes are needed, too. A 2007 property-rights law may stimulate the economy, assuming that it is enforced, but China still needs to undo an array of obstacles that face foreign investors and domestic entrepreneurs. In the World Bank's most recent study on the ease of doing business in 183 countries, China scored only 89th—and 151st in the category of "launching a business."

But there is reason for optimism. On a visit to London earlier this year, Wen Jiabao, China's premier, claimed to have brought a copy of Adam Smith's "Theory of Moral Sentiments"—not quite "The Wealth of Nations" but still better than Mao's "Little Red Book."

Mr. Rees is the president of Geonomica, a speech-writing and consulting firm in McLean, Va., and has worked for the Office of the U.S. Trade Representative.
Title: Re: China
Post by: G M on November 07, 2009, 08:50:24 AM,1518,658977,00.html

Rare earth and intellectual capital forge the path to 21st. century dominance.
Title: Re: China
Post by: DougMacG on November 08, 2009, 08:01:42 AM
Rare earth and intellectual capital forge the path to 21st. century dominance."

Very interesting article, however I do not buy your conclusion.  As much as giving away precious metals didn't make sense, hoarding and keeping them from an already over-priced market does not maximize the return either IMHO.

I have looked at the quality of our economic competitors and believe the only thing stopping unimaginable prosperity in America this century is the enemy within.
Title: Re: China
Post by: G M on November 08, 2009, 12:48:03 PM
China is positioned to have a Saudi-like economic grasp on a vital natural resource. It will be another card in their deck to be played as needed.
Title: Re: China
Post by: Crafty_Dog on November 09, 2009, 08:29:40 PM
Related to GM's and Doug's posts?




(WTO) on Wednesday to establish a dispute settlement panel and investigate China's
restrictions on exports of nine key raw materials. The parties had sought formal
consultations during the summer, but with the U.S. Trade Representative spokesperson
saying that consultations have been unsatisfactory, they now are moving on to the
next level in their protests. The request for a settlement panel is the latest
evidence of rising trade tensions as governments strive to recover from the global
recession. And  more importantly, it draws attention to growing trade frictions
between the United States and China.

China claims the export restrictions are part of its pro-environmental resource
preservation policies. But the practice in question reveals something more integral
to China's economic system.

"A problem with this practice arises if one happens not to be China."

With a population of 1.3 billion people, China’s greatest fear is social
instability; therefore, the government goes to great lengths to keep employment
levels up. This requires maintaining production levels even in periods of low global
demand, rather than cutting back on excess capacity and creating hordes of
unemployed workers who might turn to protests. Hence, in the case of the raw
materials in the WTO situation, the central government directs industries to
stockpile massive amounts of raw materials for inputs and implements export
restrictions to ensure that the domestic supplies are high and domestic prices are
low. This cuts down on costs for producers, while subsidies are applied where needed
to make up for the lack of profits.

With a deluge of Chinese products pouring across the globe, competing manufacturers
are wiped out and China wins greater market share.

A problem with this practice arises if one happens not to be China. Prices for the
same raw materials are high because China is hoarding them, so manufacturers
elsewhere see costs rise and markets evaporate. This explains the unity in U.S., EU
and Mexican demands that China cease this practice. Export restrictions (not to
mention a variety of other charges against China) clearly violate WTO protocols --
and though Beijing did secure a list of exceptions when it joined the WTO, the
materials in this dispute are not included. According to WTO procedures, the four
countries will have 60 days to try to resolve the disputes through the consultation
process. It might be years before the trade body adjudicates a case like this. But
at present, it's the threat that counts.

Nevertheless, the timing of Washington's move seems counterintuitive. Next week,
U.S. President Barack Obama embarks on his first tour of Asia since taking office,
including a much-hyped three-day visit to China. Tensions are flaring on trade
issues ranging from tires, steel and chickens to intellectual property rights,
climate change policy, and broader economic matters like exchange rates and
deficits. Meanwhile, the Americans are concerned about China's stance on possible
U.S.-led sanctions against Iran, not to mention its expanding naval presence in the
South China Sea. At the meetings, both sides will seek to smooth out the ruffles:
Pledging cooperation despite differences and denouncing protectionism will be the
order of the day. So why would Washington want to escalate tensions now?

The answer lies in Obama's domestic situation. The president has come up against a
series of intractable problems that easily could spiral into crises for his
administration -- from the pending decision on U.S. strategy in Afghanistan, to the
showdown over Iran's nuclear program, to relations with Russia. Domestic woes, too,
have piled up, including unemployment and the debate over health care reform.

But there is one sure way that the Obama administration can unify its core
constituency -- from union workers to human rights activists -- and galvanize
support when needed. And that is to take aim at China.

Copyright 2009 Stratfor.

Title: Re: China
Post by: G M on November 11, 2009, 06:42:25 AM

If true, this will shake the world.
Title: Re: China
Post by: DougMacG on November 11, 2009, 09:36:44 AM
Between the China bulls and bears, I think the truth is somewhere in between.  There has been amazing growth but within that growth are numbers that wouldn't survive serious audit as well as a foundation built partly on a house of cards like bank loan portfolios etc.

Speaking of supply side, they actually lowered their corporate income tax rate in Jan. 2008 right while we were transitioning into Marxism.

It is actually good for the US economy to have the rest of the world strong economically.  In the case of China, my wish is for them to collapse to the point of breaking the regime, and then survive and grow as a free and strong economy that would challenge us to get our own economic house in order.  (Is that too much to ask?)
Title: Re: China
Post by: Crafty_Dog on November 12, 2009, 03:44:16 PM
How do you get 8% GDP?

Build cities where there are no residents.
Title: Re: China
Post by: G M on November 15, 2009, 08:15:11 AM

And now for a somewhat alternate take.
Title: WSJ
Post by: Crafty_Dog on January 09, 2010, 07:00:04 AM
Can we get confirmation on this?  :-o

President Obama did right by Taiwan this week, allowing the sale—over Beijing's loud protests—of sophisticated antimissile batteries to the island democracy. We'll take that as a sign that there's a limit to how far the Administration is willing to go to improve relations with China at the expense of America's democratic allies.

The Bush Administration originally proposed the sale of an advanced Patriot ballistic missile interceptor system, or PAC-3, in 2001, as part of a package that included helicopters, submarines and technology upgrades. But Taiwan was eventually only offered about half of the deal, thanks to political bickering in Washington and Taipei. The formal request to Congress for the sale was only submitted in October 2008.

Meantime, the People's Liberation Army has more than 1,000 missiles pointed at Taiwan's 23 million people, and the Pentagon says it is adding about 100 missiles every year. Then there are the over 60 submarines China has patrolling the waters, plus its development of cyberwarfare capabilities and other asymmetrical threats. Taiwan itself can't possibly win an all-out war against China, but with U.S. help it can make the costs of a Chinese attack too prohibitive to contemplate seriously.

The argument against U.S. arms sales is that it clouds prospects for better relations between Taiwan and the mainland. But as Taiwanese President Ma Ying-jeou—a vocal advocate for a rapprochement with Beijing—has argued, the arms sales help the Taiwan-China dialogue by allowing Taipei to negotiate from a position of strength. Washington's own relationship with Beijing has hardly suffered over the three decades in which the U.S. has been selling arms to Taipei under terms of the 1979 Taiwan Relations Act.

None of this has prevented China from denouncing the deal, as it has previous sales. A Chinese government spokeswoman said Thursday the PAC-3 sale would cause "serious harm." China is also worked up about Taiwan's request to buy 66 F-16s to bolster its aging air force. The latter is still outstanding, as is about $6 billion worth of items that the Bush Administration didn't put forward for sale, such as Black Hawk helicopters, minesweepers and diesel submarines.

President Obama would be wise to approve those sales. As he has learned in recent months, his overtures to China—including his refusal to meet with the Dalai Lama—haven't been reciprocated in better cooperation on North Korea, Iran and other vital U.S. interests. The sooner Beijing learns this Administration will stand up for its friends, the friendlier it will itself become.
Title: Re: China
Post by: G M on January 09, 2010, 07:41:18 AM

China again denounces U.S. arms sale to Taiwan
Fri Jan 8, 2010 11:32pm EST

Fri, Dec 4 2009
BEIJING (Reuters) - China on Saturday again denounced U.S. arms sales to Taiwan, saying they were an intrusion in Chinese internal affairs that risked undermining its relations with the United States.
Title: Re: China
Post by: G M on January 09, 2010, 07:43:41 AM
Nice to see Barry show a little spine. Of course the PRC will not let this go unaddressed.
Title: Re: China
Post by: Crafty_Dog on January 09, 2010, 07:58:48 PM

For those of you who haven't seen this yet:
Title: Google Quitting China?
Post by: Body-by-Guinness on January 13, 2010, 09:51:51 AM
What Google's Threat to Pull Out of China Really Means 28 comments
January 13, 2010 | about: GOOG / FXI / BIDU / YHOO   
Patrick Chovanec

An important news story is unfolding today in China. In the wee hours of this morning (Beijing time), David Drummond, Google’s (GOOG) Senior Vice President for Corporate Development and Chief Legal Officer, posted a statement on his blog. The gist of that statement is a business bombshell: Google, faced with what it sees as an intolerable level of censorship and harassment, has effectively decided to pull the plug on its China operations.

Drummond begins by describing the incident that immediately sparked this decision:

In mid-December, we detected a highly sophisticated and targeted attack on our corporate infrastructure originating from China that resulted in the theft of intellectual property from Google. However, it soon became clear that what at first appeared to be solely a security incident … was something quite different … we have evidence to suggest that a primary goal of the attackers was accessing the Gmail accounts of Chinese human rights activists.

Although Drummond does not explictly point the finger at the Chinese government as the perpetrator, it’s hard to read his words as implying anything else.

He goes on to note that when Google entered the Chinese market in 2006, it believed that the potential benefits outweighed some of the uncomfortable compromises it was forced to make. If this proved mistaken, the company pledged, it would reconsider its strategy. The recent cyberattacks, Drummond concludes, combined with China’s tightening controls over Internet access, have tipped the balance. As a result:

We have decided we are no longer willing to continue censoring our results on, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all. We recognize that this may well mean having to shut down, and potentially our offices in China.

I hear from reliable sources that, as of this morning, has unilaterally lifted all of its censorship blocks and is running unfiltered in China. (A more recent report says that the famous “tank man” photo can be accessed, a major no-no as far as Chinese censors are concerned).

Tellingly, Drummond notes that Google’s decision was made in the U.S. “without the knowledge or involvement of our employees in China” — an effort, no doubt, to shield them from retaliation. In light of China’s arrest of four Rio Tinto employees last year on espionage charges following a series of commercial disagreements, Google’s concern is certainly understandable.

Although its statement is couched in diplomatic and open-ended language, make no mistake: Google has crossed the Rubicon. In the U.S., a statement like this might be just a tough-talk negotiating tactic, to see if the other side will blink. But in China, nobody issues an ultimatum — especially not to the government — unless they are fully expecting a final and irreconcilable break. As long as you have some hope of a favorable outcome, you bite your tongue. That’s precisely why Facebook, YouTube, and Twitter have uttered not a word of complaint, even as a six-month ban on accessing those sites has left their Chinese market share in ruins. Google’s decision to publicly throw down the gauntlet — a move sure to be seen by the Chinese government as a virtual declaration of war — is a sign the company has already written off China and is ready to pack its bags.

Some observers wonder whether Google is just using “human rights” as an excuse to fold a failing business, noting that its main Chinese competitor, Baidu (BIDU), has built up a 75% market share, leaving Google with just 18%. It’s certainly true that striking such a pose would win the company kudos from Congress, which was sharply critical of Yahoo (YHOO) when it handed over information to Chinese police that resulted in the arrest of a journalist.

Still, a company with Google’s resources doesn’t just abandon a huge market like China — even if it ranks a distant #2 — without good reason. There’s widespread feeling among foreign companies in China that the issues Google is complaining about are real, and serious. A senior person with a leading global tech company here in Beijing who I talked to, described Google’s announcement as “unprecedented,” and said it will make everyone rethink the way they do business in China. A diplomatic contact told me that the privacy and security issues raised were so serious that “the U.S. government’s response, or lack of response, will send a profound message” not just to China, but the entire world. Already, U.S. Secretary of State Hillary Clinton is demanding an explanation from China for the alleged cyberattacks.

If it does leave, to my knowledge, Google will be the first major U.S. company to quit China explicitly for reasons of political interference — and that marks a very significant development. China has always operated on the assumption that, no matter how they might grumble, foreign investors will ultimately accept whatever strictures China dishes out because nobody, in the end, is willing to walk away from the Chinese market. Google’s decision seriously undermines that assumption. There is a breaking point.
Update: The latest news I'm hearing over Twitter is that

Google is alternatively denying that you can access "tank man" photos through its Chinese site, or saying you always could, while some are reporting it has turned its censoring filters back on again

China has had a remarkably cautious initial response, saying it needs "to study" the Google allegations. I can confirm that, at this moment, and are still accessible from China, which really surprises me.

These developments raise two possibilities I did not previously entertain. The first is that Google has the unique size, visibility, and prestige to really play hardball with China, and that turning its censorship filters off and on again was a way to send a message to China that it is willing to hit the "nuclear" button, but is open to talking. The second is that the Chinese government is not completely unified on this issue, that the elements that (allegedly) attacked Google have created an unwelcome mess for other elements concerned that China's business reputation would be damaged if Google picks up its toys and goes home. It is quite possible that both scenarios are true, or neither. The story unfolds ... and is well worth monitoring closely. How it plays out will shape business-government relations in China in significant ways.
Title: POTH: Google shows more b*lls than BO
Post by: Crafty_Dog on January 15, 2010, 06:31:45 AM
Published: January 14, 2010
SANTA CLARA, Calif. — Last month, when Google engineers at their sprawling campus in Silicon Valley began to suspect that Chinese intruders were breaking into private Gmail accounts, the company began a secret counteroffensive.

It managed to gain access to a computer in Taiwan that it suspected of being the source of the attacks. Peering inside that machine, company engineers actually saw evidence of the aftermath of the attacks, not only at Google, but also at at least 33 other companies, including Adobe Systems, Northrop Grumman and Juniper Networks, according to a government consultant who has spoken with the investigators.

Seeing the breadth of the problem, they alerted American intelligence and law enforcement officials and worked with them to assemble powerful evidence that the masterminds of the attacks were not in Taiwan, but on the Chinese mainland.

But while much of the evidence, including the sophistication of the attacks, strongly suggested an operation run by Chinese government agencies, or at least approved by them, company engineers could not definitively prove their case. Today that uncertainty, along with concerns about confronting the Chinese without strong evidence, has frozen the Obama administration’s response to the intrusion, one of the biggest cyberattacks of its kind, and to some extent the response of other targets, including some of the most prominent American companies.

President Obama, who has repeatedly warned of the country’s vulnerability to devastating cyberattacks, has said nothing in public about one of the biggest examples since he took office. And the White House, while repeating Mr. Obama’s calls for Internet freedom, has not publicly demanded a Chinese government investigation. Secretary of State Hillary Rodham Clinton, who had been the most senior U.S. official to talk of the seriousness of the breach, discussed it on Thursday with a Chinese diplomat in Washington, however, and a senior administration official said there would be a “démarche in coming days” — a diplomatic move.

On Thursday, China’s Foreign Ministry deflected questions about Google’s charges and dismissed its declaration that it would no longer “self-censor” searches conducted on, its Chinese search engine. A ministry spokeswoman said simply that online services in China must be conducted “in accordance with the law.”

In interviews in which they disclosed new details of their efforts to solve the mystery, Google engineers said they doubted that a nongovernmental actor could pull off something this broad and well organized, but they conceded that even their counterintelligence operation, taking over the Taiwan server, could not provide the kind of airtight evidence needed to prove the case.

The murkiness of the attacks is no surprise. For years the National Security Agency and other arms of the United States government have struggled with the question of “attribution” of an attack; what makes cyberwar so unlike conventional war is that it is often impossible, even in retrospect, to find where the attack began, or who was responsible.

The questions surrounding the Google attacks have companies doing business in China scrambling to confirm that they were victims. Symantec, Adobe and Juniper Networks acknowledged in interviews that they were investigating whether they had been attacked. Northrop and Yahoo, also described as subjects of the attacks, declined to comment.

Besides being unable to firmly establish the source of the attacks, Google investigators have been unable to determine the goal: to gain commercial advantage; insert spyware; break into the Gmail accounts of Chinese dissidents and American experts on China who frequently exchange e-mail messages with administration officials; or all three. In fact, at least one prominent Washington research organization with close ties to administration officials was among those hacked, according to one person familiar with the episode.

Even as the United States and companies doing business in China assess the impact, the attacks signal the arrival of a new kind of conflict between the world’s No. 1 economic superpower and the country that, by year’s end, will overtake Japan to become No. 2.

It makes the tensions of the past, over China’s territorial claims or even the collision of an American spy plane and Chinese fighter pilots nine years ago, seem as outdated as a grainy film clip of Mao reviewing the May Day parade. But it also lays bare the degree to which China and the United States are engaged in daily cyberbattles, a covert war of offense and defense on which America is already spending billions of dollars a year.

Computer experts who track the thousands of daily attacks on corporate and government computer sites report that the majority of sophisticated attacks seem to emanate from China. What they cannot say is whether the hackers are operating on behalf of the Chinese state or in a haven that the Chinese have encouraged.

The latest episode illuminates the ambiguities.

For example, the servers that carried out many of the attacks were based in Taiwan, though a Google executive said “it only took a few seconds to determine that the real origin was on the mainland.” And at Google’s headquarters in Mountain View, there is little doubt that Beijing was behind the attacks. Partly that is because while Mr. Obama was hailing a new era of cautious cooperation with China, Google was complaining of mounting confrontation, chiefly over Chinese pressure on it to make sure Chinese users could not directly link to the American-based “” site, to evade much of the censorship the company had reluctantly imposed on its main Chinese portal,

“Everything we are learning is that in this case the Chinese government got caught with its hand in the cookie jar,” said James A. Lewis, a senior fellow at the Center for Strategic and International Studies in Washington, who consulted for the White House on cybersecurity last spring. “Would it hold up in court? No. But China is the only government in the world obsessed about Tibet, and that issue goes right to the heart of their vision of political survival and putting down the separatists’ movements.”

Over the years, there have been private warnings issued to China, notably after an attack on the computer systems used by the office of the defense secretary two years ago. A senior military official said in December that that attack “raised a lot of alarm bells,” but the attacker could not be pinpointed. The administration cautioned Chinese officials that attacks seemingly aimed at the national security leadership would not be tolerated, according to one American who took part in delivering that message.

David E. Sanger reported from Santa Clara, and John Markoff from San Francisco. Mark Landler contributed reporting from Washington.
Title: China Mulls Overseas Bases
Post by: Body-by-Guinness on January 29, 2010, 04:01:24 PM
Chinese Security Scholar Calls for Overseas Basing to Counter U.S.

Posted by Justin Logan

Dr. Dingli Shen, a scholar of security studies and Chinese and U.S. foreign policies at Fudan University, had an interesting op-ed yesterday that merits attention.

Dr. Dingli Shen

According to Shen, China should consider developing “overseas military bases,” which he says people define in today’s context as “supply bases for the navy escorting the ships cruising in the Gulf of Aden and Somalia.”  Shen lists four main interests that justify overseas bases: “the protection of the people and fortunes overseas; the guarantee of smooth trading; the prevention of the overseas intervention which harms the unity of the country and the defense against foreign invasion.”

The lay reader should be clear that the United States does not look favorably on China’s developing the ability to guarantee its own smooth trading; we like having the leverage to determine, ultimately,whether we will allow foreign countries to trade.  The reader should also be aware that the third interest Shen lists is a diplomatic phrasing of “being able to prevent U.S. intervention in Taiwan,” perhaps in addition to some much smaller concerns about Tibet.  The Chinese do not need to do anything to pursue the fourth listed interest, preventing foreign invasion of China.  So what’s left is protecting Chinese people and money overseas; wresting control of China’s sea lines of communication from the United States; and preventing U.S. intervention in ways that would “harm the unity of the country.”

The piece really goes out of its way to make clear that this is all about countering American military power.

For instance, his first example justifying a greater role for China abroad is the Korean War.  According to Shen, “China had no option but to call up volunteer soldiers to fight against the overseas intervention in its northern neighbor.”  Later in the piece he makes clear that although he believes in each of the four interests above,

[t]he real threat to us is not posed by the pirates but by the countries which block our trade route.

The threats also include secessionism outside the Chinese mainland. The situation requires us be able to hit the vulnerable points of our potential opponents by restricting their international waterway.

In closing, he acknowledges three potential obstacles to successfully developing these overseas bases: “relations between base troops and the host countries,” “the relationship between the base troops and the countries neighboring to the host country,” and “the relationship between the big countries in the world.”  With respect to the latter, Shen notes,

It is inevitable for some countries to suspect our good intention in maintaining the world peace, but their suspicion shall not become an obstacle to our military base strategies. Currently, America, France and Britain own a majority of troop bases in the world. Yet China seldom felt being threatened by the military bases set up by Britain and France. Therefore, we have no reasons to feel that the military bases we set up will agitate other countries. (emphasis mine)

Note the shift from the three countries who have the majority of overseas bases at present to the two countries whose bases don’t concern China.

A few thoughts:

1) How did this debate start?  Shen refers to debates “online,” but presumably this issue has been taken up in greater detail recently in Chinese strategic studies journals.  I’d be interested to see the trajectory of this discussion both there and in public.

2) Why such an expressly anti-U.S.-hegemony tone?  This sort of thing is not exactly conducive to cloaking China’s growing military power in mystery.  The rhetoric about “peaceful rise,” remember, was viewed as too provocative because it included the word “rise,” so it got switched to “peaceful development,” which was viewed as sufficiently diplomatic.  But just coming out and saying “we need overseas bases to counter the U.S. military” like this is running, not walking, in the opposite direction.  This analysis sounds positively Mearsheimerian.  Why is this debate being carried out in this manner, in public and now in English?

3) How does this (or doesn’t it) tie in to prospective Chinese aircraft carrier capabilities?  As one recent article noted,

A PLAN carrier would have the effect of extending Chinese air capabilities without requiring overseas air bases. Nonetheless, while a nuclear carrier may be homeported in China, supplying it with jet fuel, food, ammunition, and other consumables becomes harder with distance. The U.S. Navy solves this problem with an extensive series of overseas logistics bases and large, fast replenishment ships that support the operations of carriers, themselves operating largely from the continental United States. Lacking such support mechanisms, a Chinese carrier is likely to stay closer to home, but it may still require a Chinese support presence overseas.

So then should we interpret such a call for overseas basing as reflecting a continuation of the “string of pearls” orientation of the PLAN, or as laying the groundwork for allowing carriers to operate farther away from Chinese ports?
Title: Strat's take on the same piece
Post by: Crafty_Dog on January 29, 2010, 09:44:42 PM
China's Planned Evolution of Naval Capabilities
THE CHINA INTERNET INFORMATION CENTER, an online outlet for news and information run by the Chinese central government, published a commentary on Thursday discussing China’s right to build overseas bases to support naval operations and protect Chinese interests abroad. The article, written by Fudan University’s Institute of International Studies executive dean Shen Dingli, is a response to debates inside China and abroad over whether Beijing should establish naval bases, supply depots and related facilities overseas to support China’s naval participation in anti-piracy operations off the coast of Somalia, and ultimately defend China’s broader maritime interests.

The article comes a day after Captain Chris Chambers, director of operations for the U.S.-led Combined Maritime Forces (CMF), which jointly heads the Shared Awareness and Deconfliction (SHADE) working group that helps coordinate multinational anti-piracy operations off of the Somali coast, told a conference in Singapore that China would soon be enhancing its participation in SHADE, and would take on the rotating leadership role in the working group in a few months. Currently SHADE leadership rotates between the CMF and European Union maritime forces and coordinates operations among these and other independent anti-piracy forces in the area.

China will be the first nation participating in the anti-piracy operations to take a leadership role in SHADE, and will expand its naval contribution above its current three-ship task force and take responsibility for patrolling an area with more active piracy. The expansion of China’s contributions and coordinating role are currently awaiting final approval in Beijing, and the extended mission is raising the discussion of a resupply base in the Indian Ocean basin to ease logistics for maintaining China’s fleet. China has kept an anti-piracy task force in the area since December 2008 and has not indicated it is leaving anytime soon. This makes a more local supply depot something that would ease the logistical burden of maintaining the small fleet so far from mainland China.

“The idea of Chinese bases abroad, particularly in the Indian Ocean, immediately raises concerns that China is growing more active and aggressive in its naval activities.”

Beijing has used the anti-piracy operations to demonstrate its growing participation in international operations and develop capabilities to deploy Chinese naval forces far from home for an extended period of time. A natural outgrowth of this is the discussion of establishing overseas naval bases, or at least arranging docking and resupply agreements at other countries’ ports to sustain Chinese maritime operations. But the idea of Chinese bases abroad, particularly in the Indian Ocean, immediately raises concerns in India and elsewhere that China is growing more active and aggressive in its naval activities.

In some sense, these perceptions are accurate, at least so far as China’s planned evolution of capabilities are concerned. China’s economic growth has led to a major shift in the country’s resource needs. China now imports large amounts of raw materials, including oil and minerals, from the Middle East and Africa. As China grows more dependent upon the steady flow of these supplies, it has also grown concerned about the security of its supply lines.

China has long been a land power and its forays into international waters have been few and far between, despite a series of explorations along the Indian and African coasts in the 15th century. Redesigning and training its navy to take a more active role in maritime security is now a major focus of its recent military reforms and a key area is the ability to protect one of its main supply arteries through the Indian Ocean. Beijing has been cautious in this task as it faces opposition from India and the United States, both of which have a much stronger and more secure presence in the region, and both of which have little interest in seeing China significantly expand its naval capabilities.

The anti-piracy operations have given Beijing the perfect opportunity to test and refine its capabilities in a non-threatening manner, and talk of resupply bases — and thus a more permanent Chinese naval presence — is something Beijing is considering carefully but seriously. China is years, if not decades, away from having the ability to sustain a true blue water naval capability and even further from being able to truly challenge U.S. maritime dominance, but each step Beijing takes gives it the skills and experience necessary to make the next move forward. Taking a leadership role in SHADE also gives China a valuable opportunity to observe and learn the protocols and operations of other nations’ fleets — lessons it can apply to its own operations.

Beijing may be far from floating a blue water navy in any sustainable way, but China has recognized the vulnerability of its dependence on overseas resources and is actively working to improve its ability to protect its own supply lines. But when these lines match those of others with equal or even more severe dependencies, like Japan, or pass through competitor’s areas of strategic interest, like India or the United States, even a defensive intent can be perceived as potentially aggressive preparation or action. It is this sort of perception of capabilities that can quickly escalate into competition or an arms race and keep tensions high. It also creates room for misunderstandings and accidents — as we have already seen in China’s more active operations in the South China Sea, and in the U.S. moves to temper Beijing’s advances.
Title: Re: China
Post by: prentice crawford on January 29, 2010, 10:10:30 PM
 With Guro craftydog's previous post in mind.

Title: Re: China
Post by: prentice crawford on January 30, 2010, 02:36:42 AM
China suspending military exchanges with the U.S. news services

Beijing - China will suspend mutual military exchanges with the U.S. over its arms sales to Taiwan, state news agency Xinhua said on Saturday.
 "Considering the severe harm and disgusting effect of U.S. arms sales to Taiwan, the Chinese side has decided to suspend planned mutual visits," Xinhua quoted the Defense Ministry as saying.

Earlier, China angrily warned the U.S. that the plan to sell 6.4 billion in arms to Taiwan would seriously harm already-strained ties. One Chinese expert said the sale would give Beijing a "fair and proper reason" to accelerate weapons testing.

The U.S. is "obstinately making the wrong decision," China's Foreign Ministry said in a statement on its Web site.


It said Vice Foreign Minister He Yafei warned the U.S. Embassy that the planned sale would "cause consequences that both sides are unwilling to see" and "seriously harm U.S.-Sino relations" He urged that it be immediately canceled, it said.

A spokeswoman for the U.S. Embassy, Susan Stevenson, confirmed that China expressed its views, and said the Embassy had no comment.

A notification of the planned sale posted Friday on a Pentagon Web site said it would include 60 UH-60M Black Hawk helicopters,114 Patriot Advanced Capability-3 missiles, mine hunting ships and information technology. U.S. lawmakers have 30 days to comment on the proposed sale; without objections, it would proceed.

Taiwan is the most sensitive issue in U.S.-China relations, with the potential to plunge into conflict two powers increasingly linked in security and economic issues. China claims the selfgoverning island as its own, while the U.S. is Taiwan's most important ally and largest arms supplier.

China vehemently opposes U.S. arms sales to Taiwan, and has threatened to invade should it ever formalize its de facto independence.

The U.S., which told China of the sale only hours before the announcement, acknowledged that Beijing may retaliate by temporarily cutting off military talks with Washington, which happened after the former Bush administration announced a multibillion-dollar arms sale to Taiwan in 2008.

No F-16 fighters

"Maybe the People's Liberation Army will accelerate weapons testing, because this time we have a fair and proper reason to do so," said Jin Canrong, a professor of international studies at China's Renmin University.

The package, however, dodges a thorny issue: the F16 fighter jets that Taiwan covets are not included.

The Pentagon's decision not to include the fighters and a design plan for diesel subs - two items Taiwan wants most - "shows that the Obama administration is deeply concerned about China's response," said Wang Kao-cheng, a defense expert at Taipei's Tamkang University.

China has more than 1,000 ballistic missiles aimed at Taiwan. The U.S. government is bound by law to ensure the island is able to respond to Chinese threats.

Title: Re: China
Post by: Rarick on January 30, 2010, 06:20:55 AM
With Guro craftydog's previous post in mind.


We could always take it back in something less than a couple days if we needed to, say in the case of this company wanting to do some sort of denial of service attack.   The ability of china to project power is still devweloping and they would not be able to do anything aside from a trade embargo and that would hurt them more than us.
Title: Re: China
Post by: Crafty_Dog on January 30, 2010, 07:19:10 AM
With our accumulating and seemingly accelerating economic, political, and military weakness there is going to be more and more of this.

My guess is that BO looks for an exit from Afpakia, he has already committed to an exit from Iraq, Iran will get the bomb, and Russia already retakes the Ukraine (and prepares Georgia) and the confidence of the Poles and the Czechs in our work is minimal.  Seeing this Turkey will not place much value on our friendship.

But I digress-- this thread is about China.  On our current path, China is preparing to retake Taiwan.
Title: Re: China
Post by: Body-by-Guinness on January 30, 2010, 07:29:40 AM
China thinks in terms of generations; we can barely think past the next election cycle. I fear what our shortsightedness will bring.
Title: Re: China
Post by: prentice crawford on January 30, 2010, 05:42:05 PM
 But isn't that the plan, knock the U.S. out of super power status, level the playing field to make globalisation of government possible? It doesn't seem to matter to these ideologically insane lunatics that this could lead to China and Russia reemerging as super powers and leaving us so weak that they will seek our end. We are screwed guys. Some Leftist have suffered an ideopsychotic break and actually think that their theories work in reality.
Title: China's new tone
Post by: Crafty_Dog on January 31, 2010, 05:30:36 PM
The meaning of the last sentence is not clear to me, but an interesting read nonetheless.

China's strident tone raises concerns among Western governments, analysts
By John Pomfret
Washington Post Staff Writer
Sunday, January 31, 2010;

China's indignant reaction to the announcement of U.S. plans to sell weapons to Taiwan appears to be in keeping with a new triumphalist attitude from Beijing that is worrying governments and analysts across the globe.

From the Copenhagen climate change conference to Internet freedom to China's border with India, China observers have noticed a tough tone emanating from its government, its representatives and influential analysts from its state-funded think tanks.

Calling in U.S. Ambassador Jon Huntsman on Saturday, Chinese Vice Foreign Minister He Yafei said the United States would be responsible for "serious repercussions" if it did not reverse the decision to sell Taiwan $6.4 billion worth of helicopters, Patriot Advanced Capability-3 missiles, minesweepers and communications gear. The reaction came even though China has known for months about the planned deal, U.S. officials said.

"There has been a change in China's attitude," said Kenneth G. Lieberthal, a former senior National Security Council official who is currently at the Brookings Institution. "The Chinese find with startling speed that people have come to view them as a major global player. And that has fed a sense of confidence."

Lieberthal said another factor in China's new tone is a sense that after two centuries of exploitation by the West, China is resuming its role as one of the great nations of the world.

This new posture has befuddled Western officials and analysts: Is it just China's tone that is changing or are its policies changing as well?

In a case in point, one senior U.S. official termed as unusual China's behavior at the December climate conference, during which China publicly reprimanded White House envoy Todd Stern, dispatched a Foreign Ministry functionary to an event for state leaders and fought strenuously against fixed targets for emission cuts in the developed world.

Another issue is Internet freedom and cybersecurity, highlighted by Google's recent threat to leave China unless the country stops its Web censorship. At China's request, that topic was left off the table at this year's World Economic Forum in Davos, Switzerland, Josef Ackermann, chief executive of Deutsche Bank and co-chairman of the event, told Bloomberg News. The forum ends Sunday.

China dismisses concerns

Analysts say a combination of hubris and insecurity appears to be driving China's mood. On one hand, Beijing thinks that the relative ease with which it skated over the global financial crisis underscores the superiority of its system and that China is not only rising but has arrived on the global stage -- much faster than anyone could have predicted. On the other, recent uprisings in the western regions of Tibet and Xinjiang have fed Chinese leaders' insecurity about their one-party state. As such, any perceived threat to their power is met with a backlash.

A spokesman for the Chinese Embassy in Washington said China's tone had not changed.

"China's positions on issues like arms sales to Taiwan and Tibet have been consistent and clear," Wang Baodong said, "as these issues bear on sovereignty and territorial integrity, which are closely related to Chinese core national interests."

The unease over China's new tone is shared by Europeans as well. "How Should Europe Respond to China's Strident Rise?" is the title of a new paper from the Center for European Reform. Just two years earlier, its author, institute director Charles Grant, had predicted that China and the European Union would shape the new world order.

"There is a real rethink going on about China in Europe," Grant said in an interview from Davos. "I don't think governments know what to do, but they know that their policies aren't working."

U.S. officials first began noticing the new Chinese attitude last year. Anecdotes range from the political to the personal.
At the World Economic Forum last year, Premier Wen Jiabao lambasted the United States for its economic mismanagement. A few weeks later, China's central bank questioned whether the dollar could continue to play its role as the international reserve currency.
And in another vignette, confirmed by several sources, a senior U.S. official involved in the economy hosted his Chinese counterpart, who then made a series of disparaging remarks about the bureau that the American ran. Later that night, the two were to dine at the American's house. The Chinese representatives called ahead, asking what was for dinner. They were informed that it was fish. "The director doesn't eat fish," one of them told his American interlocutor. "He wants steak. He says fish makes you weak." The menu was changed.

Tone with Europe, India

With Europe and India, China's strident tone has been even more apparent. In autumn 2008, China canceled a summit with the European Union after French President Nicolas Sarkozy met with the exiled Tibetan leader, the Dalai Lama. Before that, it had denounced German Chancellor Angela Merkel over her contacts with the Tibetan spiritual leader. And in recent weeks, it has engaged in a heated exchange with British officials over its moves to block a broader agreement at the climate conference.
At the Chinese Embassy, Wang differed on the climate issue. "China is strongly behind the idea of meeting the issue of climate change," he said, "but at the same time we think that there are some people who want to confuse the situation, and we feel the need to try to let the rest of the world know our position clearly."

China also suspended ties with Denmark after its prime minister met the Dalai Lama and resumed them only after the Danish government issued a statement in December saying it would oppose Tibetan independence and consider Beijing's reaction before inviting him again.

"The Europeans have competed to be China's favored friend," Grant said, "but then they get put in the doghouse one by one."
China's newfound toughness also played out in a renewed dispute with India over Beijing's claims to the Indian state of Arunachal Pradesh, which borders Tibet. Last summer, China blocked the Asian Development Bank from making a $60 million loan for infrastructure improvements in the state. India then moved to fund the projects itself, prompting China to send more troops to the border.

David Finkelstein, a former U.S. Army officer at the Defense Intelligence Agency who now runs the China program at the Center for Naval Analyses, said the new tone underscores a shift in China. "On the external front," he said, "we will likely see a China that is more willing than in the past to proactively shape the external environment and international order rather than passively react to it."
An example would be events that unfolded in December when 22 Chinese Muslims showed up in Cambodia and requested political asylum. China wanted to hold seven of them on suspicion of participating in anti-Chinese riots in the Xinjiang region in July.

Under intense pressure from Beijing, Cambodia sent the group home, despite protests from the United States. Two days after the group was repatriated, China signed 14 deals with Cambodia worth about $1 billion.

What the future holds

Whether this new bluster from Beijing presages tougher policies and actions in areas of direct concern to the United States is a key question, Lieberthal said. What China does after the United States sells Taiwan the weapons may provide some clues.
Even before the United States announced its plans Friday, at least six senior Chinese officials, including officers from the People's Liberation Army, had warned Washington against the sale.
Once the deal was announced, China's Defense Ministry said it was suspending a portion of the recently resumed military relations with the United States. China also announced that it would sanction the U.S. companies involved in the sale.
What happens next will be crucial. China quietly sanctioned several U.S. companies for participating in such weapons sales in the past. However, it would mark a major change if China makes the list public and includes, for example, Boeing, which sells billions of dollars worth of airplanes to China each year.

He, the vice foreign minister, warned that the sales would also affect China's cooperation with the United States on regional issues. Does that mean China will continue to block Western efforts to tighten sanctions on Iran? Bonnie S. Glaser, a China security analyst at the Center for Strategic and International Studies, said the answer will probably come soon.

France takes over the presidency of the U.N. Security Council on Monday and is expected to push for a rapid move in that direction.
Title: Stratfor: Unsustainable Model
Post by: Crafty_Dog on February 03, 2010, 09:12:00 PM
China's Unsustainable Economic Model
CHINA RELEASED THE BREAKDOWN of its economic growth statistics on Tuesday. Bottom line: falling exports weighed heavily on growth and nearly canceled out the GDP gains of domestic consumption. Investment — mostly in infrastructure and public services — comprised over 90 percent of growth.

These results capture the essence of everything STRATFOR has said about the Chinese economy over the past year. Like many countries affected by the recent economic crisis, China resorted to government stimulus to make up for the sudden loss in private demand. But unlike other states that use such measures in emergencies, China’s growth has always been fueled by massive infusions of government funds and credit from a state-controlled banking system. The endless stream of loans nourishes the businesses that employ China’s enormous population. Exports play an important role because they bring in new money to be redistributed by the banks as directed by the government.

Of course, the redistribution process creates divisions between the haves and the have-nots, but such divisions can be elided when times are good. It is only when exports slump that it becomes evident that China’s consumers are too poor to buy all the goods the country produces, and the weight of maintaining growth falls squarely upon the financial system. This setup is particularly problematic because a centrally controlled financial system that endlessly transfers wealth from efficient internationally-linked sectors to inefficient state sectors will eventually collapse under the weight of bad loans.

“Chinese leaders rarely have the coincidence of political and economic momentum necessary to launch major reforms more than once.”
Chinese leaders are well aware that this economic model is unsustainable and have periodically pushed for major restructuring. The primary goal is to increase domestic consumption, shifting reliance off exports, and transitioning into a consumer-driven economic model that is more capable of steady and long-term growth, albeit at a slower pace. Prominent leaders are now calling for such reforms. Knowing that the stimulus cannot last forever, Beijing is attempting to find ways to slightly moderate lending, lower provincial growth targets and cool down the real estate sector while reinvesting government funds in rural areas to boost consumption.

The problem is that the first steps are exceedingly painful, because they involve weaning state businesses from their addiction to cheap credit. A period of slower growth is the price for reforming an economy, and slower growth is exponentially more troublesome in a country with China’s regional differences, wealth disparities and large population. Such reforms are also always obstructed by the inertia in the system then cut short before the finish, usually due to the onset of a new emergency. Chinese President Hu Jintao initiated restructuring reforms in the mid-2000s, but the financial crisis erupted in late 2008, forcing him back into the time-tried solution of credit expansion.

Chinese leaders rarely have the coincidence of political and economic momentum necessary to launch major reforms more than once. With the Communist Party preparing for a leadership transition in 2012, Hu does not have time for another major reform push. No leader in his final years in power wants to mar his legacy with dramatic changes that could destabilize the system.

Moreover, China’s primary export markets have not recovered to the point that China can securely phase out its stimulus programs. Exports only showed positive signs in December 2009, and it is not yet clear where they will go in the coming months. Demand in Europe remains weak due to its own economic woes. The United States is seeing economic life return, but a weak labor market has ensured that households continue to save rather than spend. The United States has also begun pressuring Beijing on a host of disagreements and is brandishing a big stick when it comes to trade protections. In other words, exports are Beijing’s only short-term hope, and they are highly uncertain.

All of this leaves China with little option but to continue using the financial tools it has for as long as they will work, and recentralizing power where necessary to prevent instability. This may mean a China that is more sensitive to perceived external threats, and more reactive politically. It may also mean that foreigners will start thinking twice before doing business in China.
Title: Warning shot across our bow
Post by: Crafty_Dog on February 09, 2010, 03:45:02 PM
Title: Re: China
Post by: ccp on February 09, 2010, 05:13:47 PM
I really think its time to suggest we raise soc sec and all retirement ages to 70.
No one should get soc sec till then. No gov employee should be on pension till then.
We all work till then unless one is independently able to pay for their OWN retirement or they worked for a private company that can/will do that (and not forced by labor unions into it).
The dole must go.
We are flushing this country's future down the toilet.
The debt will never be paid off.

We can't tax and spend our way out of it like the ONE thinks.
We can't grow our way out of it with endless regulations and taxes.
We have to be free to work our asses off to get out of this mess.

Someone recently told me "f..k" future generations.  He has kids too!  This is a sad commentary of the thinking of some Americans.

It is so hard to be optimistic.

Title: Re: China
Post by: Crafty_Dog on February 18, 2010, 10:00:38 AM
Relations between the United States and China have come under increasing stress during the past year. While many of the issues at the root of the tensions have existed for some time, China’s resistance to the U.S. push for sanctions on Iran has become the most urgent and potentially disruptive dispute between the two countries. China believes sanctions could jeopardize its energy security, and that its accession to such a move could harm its international image. However, China will not be able to stop sanctions and will have few options to retaliate against the United States in a way that does not harm Beijing even more.


The United States has intensified its public courting of Beijing’s support for a potential sanctions regime against Iran in recent days. U.S. Secretary of State Hillary Clinton visited Saudi Arabia on Feb. 15-16 where she encouraged a deal in which the Saudis would increase oil exports to China to guarantee China’s oil supply amid the tensions with Iran. On Feb. 14, U.S. Vice President Joe Biden said he expected the Chinese to provide support for sanctions, while National Security Adviser Jim Jones said the same day that China has supported nuclear nonproliferation efforts against North Korea and that as a “responsible world power” it would also do so with Iran. This followed U.S. President Barack Obama’s statement the previous week saying that while the Russians have become “forward leaning” on the sanctions issue, China’s support remains a question.

Washington’s focus on China over the Iranian issue comes in the midst of a rocky patch in overall Sino-American relations. China has consistently resisted the push for sanctions, as they could put Beijing’s energy security at risk and curtail its growing bilateral relationship with Tehran. Ultimately, the Chinese do not have to make a final decision on sanctions until the U.N. Security Council (UNSC) takes a vote. But China has few tools to use against the United States to resist sanctions — and to do so would run the risk of provoking American reactions that China would rather avoid.

The Root of Sino-U.S. Tensions

The Chinese and American partnership has undergone several strains since American financial troubles became global financial troubles in late 2008. Inherent characteristics of the two economies, and their mutual dependence, made it inevitable that economic and trade tensions would arise. China’s single-largest customer is the United States, to which it exported $220.8 billion worth of goods and services in 2009, 18 percent of China’s total exports. By contrast China is the United States’ third-largest export market, importing $77.4 billion in total in 2009. In the process of running large trade surpluses, China has racked up $2.39 trillion in foreign exchange reserves and invested about one third of that into U.S. Treasury debt, thereby helping the U.S. Federal Reserve to maintain low interest rates that perpetuate U.S. consumption of Chinese goods.

U.S.-Chinese economic and financial interdependency has called attention to vulnerabilities and disagreements. The Obama administration slapped tariffs on Chinese-made tires in September 2009, and a host of other disputes have arisen at the World Trade Organization (WTO). While these disputes are mainly political efforts meant to release domestic social pressure, both states are aware that there is potential for protectionist tactics to spiral out of control, making the relationship inherently uneasy and suspicious.

Economic tensions are coupled with military ones. There is already lack of trust between China and the United States on the question of defense. Beijing’s military power has increased as its economic success has enabled greater reforms and better weaponry, and Beijing’s rising military profile has caused concern among states that doubt its intentions. Meanwhile the United States is the world’s leading military power by far, and not only dominates the oceans with naval power (implicitly threatening China’s vital supply lines) but also maintains strong alliances with states on the Chinese periphery, including Japan, South Korea and Taiwan, a territory Beijing claims as its own. Military-to-military talks were canceled in 2008 when the Bush administration agreed to a new arms package to Taiwan, and briefly restarted when China canceled them again in 2010 following the Obama administration’s approval of the deal.

These broader national security issues have become entangled with the trade spats. China has threatened sanctions on American arms manufacturers for making the weapons that Washington is selling to Taiwan in the most recent U.S. arms package. China’s threat to introduce retaliatory sanctions marks a harsher reaction to such arms deals than in the past. On a separate front, a conflict has erupted over China’s Internet control policies and American cybersecurity. China has also reacted sharply against American criticism of its policies in dealing with ethnic minorities and separatism in Xinjiang and Tibet, which has created another diplomatic row in light of President Obama’s plan to meet with the Dalai Lama on Feb. 18.

Resistance to Iranian Sanctions

While trade and defense tensions have long been present in the Sino-U.S. relationship, the controversy over the Iranian nuclear program — and the U.S. push for sanctions — have introduced a new, urgent and potentially destabilizing element into the dynamic. China has rejected the idea of new sanctions since the Obama administration launched negotiations in mid-2009, and the Chinese have shown increasing displeasure with the U.S. sanctions drive since late December 2009 by postponing and sending lower-level officials to negotiations with the P-5+1 group, which consists of the five permanent members of the UNSC (China, the United States, the United Kingdom, France, and Russia) plus Germany. China’s foreign ministry has continued its rejection of sanctions in 2010.

China’s position on Iran follows from its concerns for energy security. China imported about 51 percent of its oil in 2009, and Iran was the third-largest supplier, providing about 11.4 percent of its imports — after Saudi Arabia (20.5 percent) and Angola (15.8 percent). While the current batch of proposed sanctions do not target Iranian oil exports, they would escalate tensions in the Persian Gulf overall. China fears that a military conflict could erupt that would threaten supply lines from other Gulf providers, such as Saudi Arabia or Oman, since the Iranian retaliation might target the Strait of Hormuz through which roughly half of China’s total oil imports transit. Without a steady stream of Gulf oil, China’s ability to maintain economic growth would be threatened. And China is not willing to take such risks with its energy supply.

Moreover, China’s exports of gasoline and refined oil products to Iran have grown in recent months. Iran’s dysfunctional domestic energy situation forces it to import these goods, and China has excess refining capacity. This growing area of trade would specifically be targeted in international sanctions, as the Americans have long signaled that Iran’s dependency on external sources for gasoline is its Achilles’ heel. Sanctions against Iran would also interfere with China’s investments in Iran’s energy sector — including China National Petroleum Corp’s (CNPC) planned exploration of Iran’s massive South Pars natural gas field in March, as well as deals for oil production involving CNPC in Iran’s North Azadegan and Sinopec in the Yadavaran oil field. In other words, while China will not base its decisions solely on its exports to and investments in Iran, those considerations are substantial and will not be ignored.

China also has a reputation to uphold. Especially in recent years, China has positioned itself as a global leader, seeking to complement its economic power with rising military and political status. Beijing has made its voice heard at the United Nations, the G-20 and other global forums as a leader of the developing countries and a counterweight to the developed countries. Simultaneously, China has sought to play a more active role in international security operations, including peacekeeping and disaster relief, and has taken a leading role in the international anti-piracy efforts off the coast of Somalia, all with the intention of enhancing its prestige and developing powers outside the economic sphere. These efforts are also meant to present China as a potential alternative global leader to the United States, and to earn supporters and followers. A substantial amount of credibility thus rests on China’s defending of states like Iran that are antagonistic toward the United States — if China turns its back on Iran, then countries in Latin America, Africa and Southeast Asia that might have thought they could count on Beijing in a pinch will have to rethink their policies. On the contrary, if Beijing can prolong negotiations and delay serious action on Iran, it can extend the time in which the United States is bogged down in the Middle East, winning more room to maneuver toward meeting domestic and international objectives.

Limited Options

Beijing’s problem is that it has very few tools with which to influence the United States’ behavior in general, not to mention toward Iran. China’s only tools to pressure the United States are economic — specifically through trade disputes and purchases of U.S. debt — and they would backfire. Beijing is also not able to directly affect negotiations between the United States and Russia on sanctions. And if sanctions are proposed in the UNSC, China can veto them only if it is prepared for the blowback from the United States.

China’s chief weakness lies in the fact that it cannot escape economic troubles until its export sector revives, but the United States has the ability to put pressure on this sector. The Obama administration has shown a willingness to exercise Section 421, an American law that China admitted into its WTO accession agreement in 2001 that gives the United States the right to enact barriers when it perceives that a dramatic increase in Chinese imports into the American market could disrupt domestic producers. The significance of the September tire tariffs was primarily to warn China that Washington is willing to use this prerogative and there is little China can do about it. If Beijing should seek to retaliate through its own tariffs, it risks provoking a trade war with the United States that it could not win, since its economy is too fragile to sustain the shocks that could be caused by a more aggressive use of Section 421, or more drastic measures.

Even China’s great advantage of being the United States’ primary creditor does not provide as much leverage as one might think. At the latest tally (in December 2009), China held around $755 billion in U.S. Treasury debt, about 6 percent of total U.S. government debt. Slowing or stopping the purchase of U.S. Treasury bonds could have an effect on the U.S. economic recovery, were it feasible for China to do so. But selling off large chunks of American debt would not only require finding lots of very rich buyers, but would leave Beijing with nowhere to invest its surplus dollars month after month, since the other deep debt markets are unsafe (Japan), vulnerable to exchange rate risk (Europe) or too small (everyone else). Investing that much cash into commodities would both roil global debt markets and drive commodity prices sky high. Even if Beijing could successfully diversify away from U.S. debt, the move would cause interest rates to rise in the United States and disrupt U.S. consumption patterns crucial for China’s economy (and global economic stability).

A Russian Turn?

Recently, prominent Russian authorities have made statements implying that Moscow was becoming more willing to endorse sanctions. As long as Russia appears intransigent on the U.S. call for sanctions, it provides China with diplomatic cover. But if a Russian shift is in fact under way — and there is no hard evidence yet that the United States has offered the concessions necessary to win Russia over — then it will have an impact on China’s strategy.

Moscow is critical to the efficacy of any sanctions regime because it can circumvent sanctions by means of its communication and transportation routes through the Caucasus and Central Asia to Iran. Without Russia, international sanctions will not work. Unlike Russia, however, China is not capable of making or breaking sanctions covertly through its participation or lack thereof — its links to Iran go over sea routes, making them vulnerable to American naval power (while the land routes from China to Iran are logistically unfeasible and still hinge on Russian influence). Finally, the United States and European allies are not likely to bring sanctions to a vote at the UNSC unless they have already gained the assurances they need from Russia — and China has no ability to impact these negotiations.

If a resolution authorizing sanctions goes to the UNSC, China will have to determine whether to approve, abstain or to exercise its veto (and China has only vetoed sanctions once, sanctions against Zimbabwe in 2008). Voting for sanctions, China will be stuck with enforcing them (and all that enforcement entails) and managing the domestic and international blow to its reputation for caving to American demands despite its much-vaunted rising-power status. Still, this is a path that China has taken before, and is also likely to take in the event that sanctions are watered down. But even if China abstains from voting to register its displeasure, it will be bound by law to enforce the sanctions, or else it will be publicly exposed for undermining them and subject to a harsh reaction from the United States.

Alternately, if the Chinese were to veto a sanctions resolution, they would risk marginalizing the UNSC’s role in dealing with Iran. The United States has shown before that it is willing to act with an international coalition outside of the United Nations, and Iran presents just the type of scenario in which the United States can do so with broad international support, including all the leading European powers and possibly even Russia. Since the UNSC is a key arena for China in attempting to expand its global influence, Beijing would suffer the effects of both isolating itself from the American coalition and seeing the influence of its UNSC seat dwindle.

Looking Ahead

With little impact on the international negotiations, and limited ability to challenge the United States, Beijing can only attempt to play the diplomatic game and stall. The Russians have not yet signed onto sanctions, and as long as they remain in limbo, Beijing does not have to commit. Nevertheless, exposure to the United States is the reason that China’s Communist Party leadership has become consumed with furious internal debate over the country’s path forward. Beijing is fully aware that the United States plans to withdraw from the Middle East in a few years, which raises the frightful question of where the superpower will focus its attention next. China is afraid that it is the next target, and sees renewed U.S. attention to Southeast Asia as the beginning of a full-scale containment policy. The problem for China is that to decrease its vulnerability to foreign powers will require difficult reforms, and at a time when the Communist Party is approaching a leadership transition in 2012 and the course ahead is uncertain. With these considerations in mind, China must weigh whether it can afford to break with the United States now over Iran, or whether it could better spend its energies fortifying against what it sees as a likely onslaught of geopolitical competition from the United States in a few short years.
Title: Stratfor: China's challenge
Post by: Crafty_Dog on March 09, 2010, 04:49:03 AM
By Jennifer Richmond and Rodger Baker

China’s National People’s Congress (NPC) remains in session. As usual, the meeting has provided Beijing an opportunity to highlight the past year’s successes and lay out the problems that lie ahead. On the surface at least, China has shown remarkable resilience in the face of global economic crisis. It has posted enviable gross domestic product (GDP) growth rates while keeping factories running (if at a loss) and workers employed. But the economic crisis has exposed the inefficiencies of China’s export-dependent economic model, and the government has had to pump money into a major investment stimulus package to make up for the net drain the export sector currently is exacting on the economy.

Related Special Topic Page
China’s Economic Imbalance
For years, China’s leaders have recognized the risks of the current economic model. They have debated policy ideas to shift from the current model to one that is more sustainable in the long run and incorporates a more geographically equitable growth and a hefty rise in domestic consumption. While there is general agreement on the need for change, top leaders disagree on the timing and method of transition. This has stirred internal debates, which can lead to factionalization as varying interests align to promote their preferred policy proscription. Entrenched interests in urban areas and the export industry — along with constant fears of triggering major social upheaval — have left the government year after year making only slight changes around the margins. Often, Beijing has taken one step forward only to take two back when social instability and/or institutional resistance emerge.

And this debate becomes even more significant now, as China deals simultaneously with the aftermath of the global economic slowdown and preparations for a leadership transition in 2012.

The Hu Agenda
Chinese President Hu Jintao came into office eight years ago with the ambitious goal of closing a widening wealth gap by equalizing economic growth between the rural interior and coastal cities. Hu inherited the results of Deng Xiaoping’s opening and reform, which focused on the rapid development of the coastal areas, which were better geographically positioned for international trade. The vast interior took second billing, being kept in line with the promise that in time the rising tide of economic wealth would float all ships. Eventually it did, somewhat. But while the interior saw significant improvements over the early Mao period, the growth and rise in living standards and disposable income in the urban coastal areas far outstripped rural growth. Some coastal urban areas are now approaching Western standards of living, while much of the interior remains mired in Third World conditions. And the faster the coast grows, the more dependent China becomes on the money from that growth to facilitate employment and subsidize the rural population.

Hu’s predecessor, Jiang Zemin, also recognized these problems. To address them, he promoted a “Go West” economic policy designed to shift investment further inland. But Jiang faced the same entrenched interests that have opposed Hu’s efforts at significant change. While Jiang was able to begin reform of the bloated state-owned enterprises, he softened his Westward economic drive. Amid cyclical global economic downturns, China fell back on the subsidized export model to keep employment levels up and keep money flowing in. Concern over social instability held radical reform in check, and the closer Jiang got to the end of his term in power, the less likely he was to make significant changes that could undermine social cohesion. No Chinese leader wants to preside over a major economic policy that fails out of fear of being the Chinese Mikhail Gorbachev.

For those like Hu who have argued that rapid reform is worth the risk of potential short-term social dislocation, the global downturn was seen as validating their policies — and as confirming that the risks to China of not changing far outweigh the risks of changing now. The export industry’s drag on GDP has forced Beijing to enact a massive investment and loan program. By some accounts, fixed investments in 2009 accounted for more than 90 percent of GDP. Those arguing for faster reform have noted that the pace of investment growth is unsustainable in the long run, and that the flood of money into the system has created new inflationary pressures.

Much of this investment came in the form of bank loans that need to be serviced and repaid. But as the government tries to cool the economy, the risk of companies defaulting on their loans looms. Cooling the economy also threatens to burst China’s real estate bubble. This not only compounds problems in related industry sectors, it could also trigger massive social discord in the urban areas, where housing has taken the place of the stock market as the investment of choice.

Beijing’s Ongoing Dilemma
Chinese leaders face the constant dilemma of needing to allow the economy to maintain its three-decade long export-oriented growth pattern even though this builds in long-term weaknesses, but shifting the economy is not something that can be done without its own consequences. Social pressures are convincing the government of the need to raise the minimum wage to keep up with economic pressures. At the same time, misallocation of labor and new job formation incentives in the interior are causing shortages of labor in some sectors in major coastal export zones. If coastal factories increase wages to attract labor or appease workers, they run the risk of going under due to the already razor-thin margins. But if they don’t, the labor fueling these industries at best may riot and at worst might simply move back home, leaving exporters with little option but to close shop.

Looming demographic changes around the globe also impact the Chinese situation, and the government can no longer rely on an ever-increasing export market to drive the Chinese economy. Some international companies operating in China already are beginning to consider relocating manufacturing operations to places with cheaper labor or back to their home countries to save on transportation costs Chinese wages are no longer mitigating.

With its export markets unlikely to recover to pre-crisis levels any time soon, competition and protectionism are on the rise. The United States is growing bolder in its restrictions on Chinese exports, and China may no longer avoid having the U.S. government label it a currency manipulator. While this may be an extreme measure in 2010, the pressures for such a scenario are rising.

Amid its domestic and global challenges, Chinese leaders are engaged in economic policy debates. It appears that internal criticism is being directed against Hu as social tensions over issues like rising housing prices and inflation grow. In some ways, this is not unusual. National presidents often bear the brunt of dissatisfaction with economic downturns no matter whether their policies were to blame. In China, however, criticism against economic policy falls on the premier, who is responsible for setting the country’s economic direction. The focus on Hu reflects both the depth of the current crisis and the underlying political tensions over economic policy in a time of both global economic unpredictability and preparations for the end of Hu’s presidency in 2012.

To bridge the gulf between the urban coast and the rural interior, Hu and his supporters have pursued a multiphased plan. First, they sought to rein in some of the most independent of the coastal areas — Shanghai in particular, which served as a center of power and influence not only in promoting the continuation of unfettered coastal growth but also of Hu’s predecessor, Jiang. Second, a plan was put in motion to consolidate redundancies in China’s economy and to shift light- and low-skilled industry inland by increasing wages in the key coastal export manufacturing areas, reducing their cost competitiveness. And Beijing added an urbanization drive in traditionally rural and inland areas. Together, this represented a joint attempt to bring the jobs to the interior rather than continue the pattern of migrant workers moving to the coast.

The core of the Hu policies was an overall attempt to re-centralize economic control. This would allow the central government to begin weeding out redundancies left over from Mao’s era of provincial self-sufficiency, which the Deng and Jiang eras of uncoordinated and locally-directed economic growth often driven by corruption and nepotism exacerbated. In short, Hu planned to centralize the economy to consolidate industry, redistribute wealth and urbanize the interior to create a more balanced economy that emphasized domestic consumption over exports. However, Hu’s push, under the epithet “harmonious society,” has been anything but smooth and its successes have been limited at best.

Hu Meets Resistance
Institutional and local government resistance to re-centralization has hounded the policy from its inception, and resistance has grown with the economic crisis. Money is now pouring into the economy via massive government-mandated bank lending to stimulate growth through investments as exports wane. Consequently, housing prices and inflation fears now plague the government — two issues that could lead to increased social tensions and are already leading to louder questioning of Hu’s policies. With just two years to go in his administration, Hu already is looking to his legacy, weighing the risks and rewards between promoting long-term economic sustainability or short-term economic survival. The next two years will witness seemingly incongruent policy pronouncements as the two opposing directions and their proponents battle over China’s economic and political landscape.

Hu’s rise to the presidency was all but assured long before he took office. From a somewhat simplified perspective, the PRC has had only four leaders: Mao Zedong, Deng Xiaoping, Jiang Zemin and Hu Jintao. When Mao died, his appointed successor, Hua Guofeng (who was settled upon after several other candidates fell out of favor), lasted only a short time. Amid the political chaos of the post-Cultural Revolution era, Deng rose to the top. Both Mao and Deng were strong leaders who, although contending with rivals, could rule almost single-handedly when the need arose.

To avoid the confusion of the post-Mao transition, Deng created a long-term succession plan. He ultimately settled on Shanghai Mayor Jiang Zemin as his successor. But in an effort to preserve his vision and legacy, Deng also chose Jiang’s successor, Hu Jintao. Barring some terrible breach of office, Hu was more or less guaranteed the presidency a decade before he took office, and there was little Jiang could do to alter this outcome. Jiang, however, made sure that he left his mark by lining up Hu’s successor, Xi Jinping. Despite Jiang’s support, Xi has not risen through the ranks in the same manner as Hu did, raising speculation of internal disagreements on the succession plan.

Vice President Xi is considered one of the “princelings,” leaders whose parents were part of the revolutionary-era governments under Mao and Deng who mainly have cut their teeth through business ventures concentrated in the coastal regions. Hu, on the other hand, is considered among the “tuanpai” or “tuanxi,” leaders who come primarily from the ranks of the Communist Youth League and interior provinces. While these “groups” are not in and of themselves cohesive factions, and China’s political networks are complex, Hu’s and Xi’s backgrounds reflect their differing policy approaches. As such, the question of the next Chinese leader is shaped by opposing economic plans.

On one hand are those like Hu who support a more rapid and immediate refocusing on rural and interior economic growth, even at the cost of reduced coastal and urban power. On the other hand, those like Jiang and his protege Xi have an interest in maintaining the status quo of regionalized semi-independence in economic matters and continued strong coastal growth. They are proceeding on the assumption that a strong coastal-led economy will both provide more immediate rewards for themselves and strengthen China’s international position and its national defense.

It is important not to overstress the differences. Each has the same ultimate goal, namely, maintaining the CPC as the central authority and building a strong China; it is just their paths to these ends that differ. But the economic policy differences are now becoming key questions of Party survival and Chinese stability and strength. Factional struggles that in normal circumstances can be largely controlled, or at least would not get out of hand, are now shaping up in an environment where China’s three-decade economic growth spurt may be reaching its climax. Meanwhile, social pressures are rising amid uncertainties and instabilities in Chinese economic structures.

Beijing has emerged from the economic crisis bolder and more self-confident than ever. But this is driven more by a recognition of weakness than a false assessment of strength. China’s leadership is in crisis mode, and at this time of economic instability and uncertainty, the leadership must also manage a transition that is bringing competing economic policies into stark contrast. And this is the sort of pressure that can cause the gloves to come off and throw expectations of unity and smooth transitions out the window.

Everything may pass smoothly; two years is a long time, after all. But if there is one thing certain about the upcoming change of presidents, it is that nothing is certain.
Title: BO & China's Exchange Rate
Post by: Crafty_Dog on March 12, 2010, 09:49:29 AM

SAUL LOEB/AFP/Getty Images
U.S. President Barack Obama speaks during the the U.S. Export-Import Bank’s annual conference in Washington, D.C., on March 11Summary
U.S. President Barack Obama on March 11 called for China to institute a “more market-oriented” exchange rate. This statement will hit a nerve in Beijing, which already faces major economic challenges and is concerned about the possibility of a U.S. containment policy targeting China.

U.S. President Barack Obama spoke about the Chinese currency’s exchange rate while addressing the U.S. Export-Import Bank’s annual conference March 11. Among other things, Obama called for China to institute a “more market-oriented” exchange rate. Such talk will hit a raw nerve in China, where the leadership is already facing major economic challenges and is anxious about the prospect of increasing pressure from the Americans.

Obama’s speech, “Powering Jobs, Sales and Profits through Exports,” centered on his National Exports Initiative, the administration’s strategy to boost U.S.-made exports. With high unemployment a pressing problem as the U.S. administration attempts to manage an economic recovery during a year that includes mid-term congressional elections, Obama is promoting U.S. exports as a means of increasing job availability and making up for reduced consumption’s effects on growth. The U.S. Export-Import Bank is an agent of this strategy and has targeted Brazil, China, Mexico and India as countries with massive populations whose households and businesses could buy America’s high-value added goods, from specialized machinery, vehicles and equipment to entertainment products and Internet services. New free trade initiatives also are a component of this strategy, hence Obama’s call for the United States to press forward on free trade agreements with South Korea, Colombia and Panama that have been signed but not yet ratified.

In addressing ways to increase U.S. exports, Obama deliberately chose to enter into the intense debate over China’s currency policies, as they have long been a point of contention between the two states. Beijing uses a variety of internal controls to ensure currency only fluctuates within a narrow band in relation to a basket of foreign currencies, where the dollar is the most heavily weighted. The reason for fixing the exchange rate to the dollar is to provide favorable conditions for Chinese exporters when selling to the United States, the world’s largest consumer market and the destination for nearly 18 percent of China’s total exports.

Before 2005, the fixed exchange rate was a means by which China facilitated its export-driven economic growth and gained market share in the United States and several other markets. From 2005 to 2008 China allowed its currency to gradually appreciate by 20 percent against the U.S. dollar in an attempt to alleviate inflationary pressures, restructure the economy (by increasing domestic purchasing power and weeding out uncompetitive enterprises) and deflect foreign criticism that the currency was undervalued to give Chinese businesses an unfair advantage over foreign rivals. But since the global financial crisis in late 2008, China has essentially “re-pegged” its currency to the U.S. dollar to preserve the best possible conditions for its exporters during a time of trouble due to weak foreign demand.

From the U.S. and European point of view, however, China’s maintaining the de facto currency peg is an unfair advantage for Chinese exporters, and this — not to mention Beijing’s other subsidies and rebates for exporters — is especially problematic during an economic downturn. The United States and Europe claim China’s practices are aggravating problems for American and European manufacturers and hurting employment. They also point out that China’s economy is growing rapidly and exports have shown growth since December 2009. In February, exports grew by nearly 45.7 percent compared to February 2009, the trough of the global recession, and by 8.2 percent compared to February 2008.

Moreover, Obama’s campaign to boost American exports has specifically targeted China, with bilateral trade negotiations ongoing despite the rhetorical harping on trade disputes. Obama wants to reduce the U.S. trade deficit with China and open more of the 1.3 billion-person Chinese market. Chinese currency appreciation would not only ease competition against American manufacturers but also increase Chinese imports of American goods (since a stronger currency increases Chinese people’s purchasing power).

Even the Chinese themselves have emphasized repeatedly the need to promote domestic consumption, especially household consumption, as a means of restructuring the economy to reduce dependency on exports and develop more self-sustaining growth. However, the problem is complicated. A stronger currency will hurt export businesses and export-related employment — and the last thing China needs at the moment is slower growth and higher unemployment in the coastal manufacturing hubs that drive the rest of the economy (even though currency appreciation would benefit Chinese businesses that are reliant on imports or want to invest abroad). Though recent export growth has caused some in China to fear inflationary pressures and call for currency appreciation, Chinese leaders have stated repeatedly — most especially during the ongoing annual National People’s Congress session — that they intend to keep the exchange rate stable, lest they weaken the export sector, delete the government stimulus package and undercut economic recovery and growth. Hence the Chinese are moving very cautiously on the problem of currency appreciation.

For this reason, Obama’s comments will strike Chinese leaders as a direct attack. Not that it comes as a surprise. Beijing has been wary of the Obama administration’s stance on this issue — and other trade issues — since U.S. Treasury Secretary Timothy Geithner first said China was “manipulating” its currency (a phrase laden with legal ramifications) during his talk to the Senate before his approval as treasury secretary. Then, in September 2009, the Obama administration imposed tariffs on Chinese-made tires, invoking Section 421, a measure allowing U.S. protections against Chinese goods that China agreed to when it joined the World Trade Organization. With U.S. elections coming during a period of high unemployment, and trade disputes and deeper disagreements over economic policy already flaring, Beijing has begun to fear that Washington is planning to bring more pressure to bear, and is watching intently for the Treasury Department’s report on April 15 which could officially name China a “currency manipulator,” escalating tensions.

But Chinese anxieties have a still deeper source. Beijing fears the United States is making early movements to contain China’s economic power and prevent its military and political power from increasing. In particular, China has observed recent U.S. moves to expand relations with East Asian states on China’s periphery and sees this as the nascent period of a containment policy against China. Trade appears to be an important component of this strategy, for instance with the United States formally opening up avenues for investment with Cambodia and Laos, or initiating diplomatic contact with Myanmar, in 2009. More importantly, Obama is traveling to Australia in March to launch the Trans-Pacific Partnership — a trade zone that would include Australia, Brunei, Chile, New Zealand, Peru, Singapore and Vietnam and counter China’s trade agreements with the Association of Southeast Asian Nations. Obama is also traveling to Indonesia on the same trip, to strengthen bilateral ties.

From the Chinese point of view, U.S. pressure on its currency policy can be seen as only one aspect of what could be an overall assault on China’s rising economic power and influence. However, Beijing knows Washington is constrained in its foreign policy as long as it remains tied up in wars in the Middle East. It will therefore move quickly to prepare itself for more direct U.S. competition, diversify away from dependency on exports (especially exports to the United States), secure its lines of supply for critical goods and solidify its influence in its near abroad.
Title: Re: China
Post by: Rarick on March 13, 2010, 03:31:53 AM
China is to us what we were to Europe after WW2.   A new and potentially powerful nation coming into its own, when the older kids on the block were out of play due to serious injury or other "attention occupying issues".  Obama is trying to get China to give us a mini Marshall plan?  Won't work, China is way past that charity to fellow humans paradigm........(if they ever had it)

China is actually probably our next major military threat, they need resources just like we do, and they may be willing to take them by force of arms.  I think russia is feeling pretty nervous about Siberia, unless there is a treaty already in place..........

Economically, if you are in debt to the bank deeply enough, you own the bank in a weird codependancy way- not healthy.  I think China is sort of realizing this.
Title: China's potential shift on sanctions against Iran
Post by: Crafty_Dog on March 18, 2010, 05:08:27 AM
China's Potential Shift on Sanctions Against Iran
AHANDFUL OF EVENTS BROUGHT STRATFOR’S ATTENTION to China on Tuesday, suggesting that China may be contemplating a shift in its position on the United States’ effort to impose a new round of sanctions on Iran for its secretive nuclear program.

First, the Chinese foreign minister told his British counterpart, who was arguing on behalf of Iranian sanctions, that while sanctions are not a “fundamental solution,” China is growing “more concerned” about the current situation. While the statement was ambiguous, it differed in tone from previous remarks, and may suggest a greater willingness on the part of the Chinese to entertain the possibility of endorsing — or not actively obstructing — sanctions. Second, the Iranian Foreign Ministry called Western visits to convince China to join the sanctions coalition “ineffectual,” adding that China was “independent enough” to resist Western policies. Iran’s rhetoric — though it may be nothing but rhetoric — could also reveal that Iran is growing more worried about losing Chinese support. Third, former Secretary of State Henry Kissinger — a renowned figure who played an integral role in breaking the ice between the United States and China in the early 1970s, and who commands respect in China — visited China’s top foreign policymaker Dai Bingguo, presumably to discuss Sino-U.S. tensions and Iran. Taken together, these events not only reveal the ongoing concentrated effort by the West to win over Chinese support, but also the possibility that the Chinese are considering a shift.

While China has long held that Iran must adhere to the international nuclear non-proliferation scheme and not pursue nuclear weapons, it has also resisted attempts by the United States to gather international consensus behind a new round of sanctions to punish Iran, especially “crippling” sanctions called for by Israel. China receives about half of its oil imports from the Persian Gulf, and about 11 percent from Iran. It exports gasoline to Iran, its state energy companies invest in Iranian energy production projects, and Iran’s sizable population offers a market for Chinese goods. As such, Beijing has resisted any sanctions that could break off bilateral ties, or cause tensions to escalate or conflict to erupt in the region. Moreover, Iranian nuclear weapons do not in themselves threaten China’s security. And China is attempting to position itself as an independent power in global affairs and cultivate relationships with states based on its own interests rather than those of the United States. For these reasons, Beijing has flatly and repeatedly stated that sanctions are not the solution.

“China knows that its options are poor, and so has pushed for prolonged diplomacy as the sole solution to the nuclear question.”
Nevertheless, China is also aware that it is limited in its ability to counteract the U.S. drive for international sanctions. China’s first option would be to exercise a veto against a sanctions resolution at the U.N. Security Council, but it seldom uses its veto alone, and is aware that the United States and its allies can take action outside the United Nations, which would render China even less able to affect the course of events. Its second option would be to attempt to circumvent sanctions by assisting Iran. But unlike with Russia, this option is geographically difficult, and to do so would leave China open to opprobrium and reprisals from the U.S.-led coalition. China knows that its options are poor, and so has pushed for prolonged diplomacy as the sole solution to the nuclear question.

But China knows that far more important than Iran are its vulnerabilities and limitations in dealing with the United States. Washington and Beijing have seen relations grow sour since the global recession began, namely with a series of trade disputes. Recently, however, the disagreements have emerged from deeper differences over the two countries’ economic structures. In particular, the United States has ramped up criticism of China’s currency policy, which keeps the yuan pegged to the U.S. dollar at an undervalued exchange rate so as to make Chinese exports to the United States more attractive. This practice undercuts American producers in competition with China and has become a subject of increasing criticism as the United States is struggling to manage the economic recovery — and reduce unemployment — during a year that will see midterm elections in Congress. U.S. President Barack Obama recently called for China to shift to a more “market oriented” exchange rate, a call his spokesman reiterated Tuesday. Meanwhile, a bipartisan group in the U.S. Congress has been forming to demand that the Treasury Department officially accuse China of currency manipulation, which would help clear the way for Congress to levy tariffs — perhaps even a blanket tariff — on Chinese imports to force China to change policies.

For China, these circumstances are incredibly alarming. After all, Beijing’s paramount focus remains internal — namely, managing its rapidly expanding economy so as to prevent an overheating or slowdown that could cause social frustrations to erupt into unrest. A critical component of this strategy is China’s export sector after the shocks of 2008-2009. The United States remains China’s biggest single market — and its most promising going forward. Beijing’s means of deterring the United States are inadequate. The theoretical option of selling off American debt is not only inherently limited by the need to find enough buyers (which, incidentally, could always be the U.S. Federal Reserve), but also self-destructive because it would negatively affect American consumption and Chinese exports. China’s anxieties are all the greater because U.S. pressure on China is springing from domestic political logic in the United States, rather than purely economic matters. This means that even policy changes to address U.S. complaints could be unsuccessful in calming the United States.

Yet the United States is in need of help on sanctions. Its effort to gather momentum continues to be challenged not only by Chinese resistance, but also (and more critically) by Russia’s reluctance to join. This has led Washington to attempt to water down the sanctions to get support, as well as to downplay Iranian progress on obtaining nuclear weapons. These moves have created tensions with Israel — which has the most to lose in the advent of an Iranian bomb and the least patience for diplomacy — but have not yet won more support for sanctions.

Which means China may have something to gain by altering its stance. STRATFOR sources in Beijing indicate that China may be willing to support sanctions if the United States were to reciprocate, for instance, by not labeling China as a currency manipulator. In other words, rather than considering whether to defend their interests with Iran at a time when the United States is showing a more confrontational attitude, the Chinese may be searching for ways to trade away Iran to gain assurances from the United States that it will not push too hard on the economic front. While it cannot be confirmed that a U.S.-China deal is in the works, Beijing is aware of Washington’s changing mood and is planning its response carefully, keeping its priorities in mind.
Title: Crunch Time
Post by: Crafty_Dog on March 30, 2010, 03:12:35 PM
China: Crunch Time
March 30, 2010
By Peter Zeihan

The global system is undergoing profound change. Three powers — Germany, China and Iran — face challenges forcing them to refashion the way they interact with their regions and the world. We are exploring each of these three states in detail in three geopolitical weeklies, highlighting how STRATFOR’s assessments of these states are evolving. First we examined Germany. We now examine China.

U.S.-Chinese relations have become tenser in recent months, with the United States threatening to impose tariffs unless China agrees to revalue its currency and, ideally, allow it to become convertible like the yen or euro. China now follows Japan and Germany as one of the three major economies after the United States. Unlike the other two, it controls its currency’s value, allowing it to decrease the price of its exports and giving it an advantage not only over other exporters to the United States but also over domestic American manufacturers. The same is true in other regions that receive Chinese exports, such as Europe.

What Washington considered tolerable in a small developing economy is intolerable in one of the top five economies. The demand that Beijing raise the value of the yuan, however, poses dramatic challenges for the Chinese, as the ability to control their currency helps drive their exports. The issue is why China insists on controlling its currency, something embedded in the nature of the Chinese economy. A collision with the United States now seems inevitable. It is therefore important to understand the forces driving China, and it is time for STRATFOR to review its analysis of China.

An Inherently Unstable Economic System
China has had an extraordinary run since 1980. But like Japan and Southeast Asia before it, dramatic growth rates cannot maintain themselves in perpetuity. Japan and non-Chinese East Asia didn’t collapse and disappear, but the crises of the 1990s did change the way the region worked. The driving force behind both the 1990 Japanese Crisis and the 1997 East Asian Crisis was that the countries involved did not maintain free capital markets. Those states managed capital to keep costs artificially low, giving them tremendous advantages over countries where capital was rationally priced. Of course, one cannot maintain irrational capital prices in perpetuity (as the United States is learning after its financial crisis); doing so eventually catches up. And this is what is happening in China now.

STRATFOR thus sees the Chinese economic system as inherently unstable. The primary reason why China’s growth has been so impressive is that throughout the period of economic liberalization that has led to rising incomes, the Chinese government has maintained near-total savings capture of its households and businesses. It funnels these massive deposits via state-run banks to state-linked firms at below-market rates. It’s amazing the growth rate a country can achieve and the number of citizens it can employ with a vast supply of 0 percent, relatively consequence-free loans provided from the savings of nearly a billion workers.

It’s also amazing how unprofitable such a country can be. The Chinese system, like the Japanese system before it, works on bulk, churn, maximum employment and market share. The U.S. system of attempting to maximize return on investment through efficiency and profit stands in contrast. The American result is sufficient economic stability to be able to suffer through recessions and emerge stronger. The Chinese result is social stability that wobbles precipitously when exposed to economic hardship. The Chinese people rebel when work is not available and conditions reach extremes. It must be remembered that of China’s 1.3 billion people, more than 600 million urban citizens live on an average of about $7 a day, while 700 million rural people live on an average of $2 a day, and that is according to Beijing’s own well-scrubbed statistics.

Moreover, the Chinese system breeds a flock of other unintended side effects.

There is, of course, the issue of inefficient capital use: When you have an unlimited number of no-consequence loans, you tend to invest in a lot of no-consequence projects for political reasons or just to speculate. In addition to the overall inefficiency of the Chinese system, another result is a large number of property bubbles. Yes, China is a country with a massive need for housing for its citizens, but even so, local governments and property developers collude to build luxury dwellings instead of anything more affordable in urban areas. This puts China in the odd position of having both a glut and a shortage in housing, as well as an outright glut in commercial real estate, where vacancy rates are notoriously high.

There is also the issue of regional disparity. Most of this lending occurs in a handful of coastal regions, transforming them into global powerhouses, while most of the interior — and thereby most of the population — lives in abject poverty.

There is also the issue of consumption. Chinese statistics have always been dodgy, but according to Beijing’s own figures, China has a tiny consumer base. This base is not much larger than that of France, a country with roughly one twentieth China’s population and just over half its gross domestic product (GDP). China’s economic system is obviously geared toward exports, not expanding consumer credit.

Which brings us to the issue of dependence. Since China cannot absorb its own goods, it must export them to keep afloat. The strategy only works when there is endless demand for the goods it makes. For the most part, this demand comes from the United States. But the recent global recession cut Chinese exports by nearly one fifth, and there were no buyers elsewhere to pick up the slack. Meanwhile, to boost household consumption China provided subsidies to Chinese citizens who had little need for — and in some cases little ability to use — a number of big-ticket products. The Chinese now openly fear that exports will not make a sustainable return to previous levels until 2012. And that is a lot of production — and consumption — to subsidize in the meantime. Most countries have another word for this: waste.

This waste can be broken down into two main categories. First, the government roughly tripled the amount of cash it normally directs the state banks to lend to sustain economic activity during the recession. The new loans added up to roughly a third of GDP in a single year. Remember, with no-consequence loans, profitability or even selling goods is not an issue; one must merely continue employing people. Even if China boasted the best loan-quality programs in history, a dramatic increase in lending of that scale is sure to generate mountains of loans that will go bad. Second, not everyone taking out those loans even intends to invest prudently: Chinese estimates indicate that about one-fourth of this lending surge was used to play China’s stock and property markets.

It is not that the Chinese are foolish; that is hardly the case. Given their history and geographical constraints, we would be hard-pressed to come up with a better plan were we to be selected as Party general secretary for a day. Beijing is well aware of all these problems and more and is attempting to mitigate the damage and repair the system. For example, it is considering legalizing portions of what it calls the shadow-lending sector. Think of this as a sort of community bank or credit union that services small businesses. In the past, China wanted total savings capture and centralization to better direct economic efforts, but Beijing is realizing that these smaller entities are more efficient lenders — and that over time they may actually employ more people without subsidization.

But the bottom line is that this sort of repair work is experimental and at the margins, and it doesn’t address the core damage that the financial model continuously inflicts. The Chinese fear their economic strategy has taken them about as far as they can go. STRATFOR used to think that these sorts of internal weaknesses would eventually doom the Chinese system as it did the Japanese system (upon which it is modeled). Now, we’re not so sure.

Since its economic opening in 1978, China has taken advantage of a remarkably friendly economic and political environment. In the 1980s, Washington didn’t obsess overmuch about China, given its focus on the “Evil Empire.” In the 1990s, it was easy for China to pass inconspicuously in global markets, as China was still a relatively small player. Moreover, with all the commodities from the former Soviet Union hitting the global market, prices for everything from oil to copper neared historic lows. No one seemed to fight against China’s booming demand for commodities or rising exports. The 2000s looked like they would be more turbulent, and early in the administration of George W. Bush the EP-3 incident landed the Chinese in Washington’s crosshairs, but then the Sept. 11 attacks happened and U.S. efforts were redirected toward the Islamic world.

Believe it or not, the above are coincidental developments. In fact, there is a structural factor in the global economy that has protected the Chinese system for the past 30 years that is a core tenet of U.S. foreign policy: Bretton Woods.

Rethinking Bretton Woods
Bretton Woods is one of the most misunderstood landmarks in modern history. Most think of it as the formation of the World Bank and International Monetary Fund, and the beginning of the dominance of the U.S. dollar in the international system. It is that, but it is much, much more.

In the aftermath of World War II, Germany and Japan had been crushed, and nearly all of Western Europe lay destitute. Bretton Woods at its core was an agreement between the United States and the Western allies that the allies would be able to export at near-duty-free rates to the U.S. market in order to boost their economies. In exchange, the Americans would be granted wide latitude in determining the security and foreign policy stances of the rebuilding states. In essence, the Americans took what they saw as a minor economic hit in exchange for being able to rewrite first regional, and in time global, economic and military rules of engagement. For the Europeans, Bretton Woods provided the stability, financing and security backbone Europe used first to recover, and in time to thrive. For the Americans, it provided the ability to preserve much of the World War II alliance network into the next era in order to compete with the Soviet Union.

The strategy proved so successful with the Western allies that it was quickly extended to World War II foes Germany and Japan, and shortly thereafter to Korea, Taiwan, Singapore and others. Militarily and economically, it became the bedrock of the anti-Soviet containment strategy. The United States began with substantial trade surpluses with all of these states, simply because they had no productive capacity due to the devastation of war. After a generation of favorable trade practices, surpluses turned into deficits, but the net benefits were so favorable to the Americans that the policies were continued despite the increasing economic hits. The alliance continued to hold, and one result (of many) was the eventual economic destruction of the Soviet Union.

Applying this little history lesson to the question at hand, Bretton Woods is the ultimate reason why the Chinese have succeeded economically for the last generation. As part of Bretton Woods, the United States opens its markets, eschewing protectionist policies in general and mercantilist policies in particular. Eventually the United States extended this privilege to China to turn the tables on the Soviet Union. All China has to do is produce — it doesn’t matter how — and it will have a market to sell to.

But this may be changing. Under President Barack Obama, the United States is considering fundamental changes to the Bretton Woods arrangements. Ostensibly, this is to update the global financial system and reduce the chances of future financial crises. But out of what we have seen so far, the National Export Initiative (NEI) the White House is promulgating is much more mercantilist. It espouses doubling U.S. exports in five years, specifically by targeting additional sales to large developing states, with China at the top of the list.

STRATFOR finds that goal overoptimistic, and the NEI is maddeningly vague as to how it will achieve this goal. But this sort of rhetoric has not come out of the White House since pre-World War II days. Since then, international economic policy in Washington has served as a tool of political and military policy; it has not been a beast unto itself. In other words, the shift in tone in U.S. trade policy is itself enough to suggest big changes, beginning with the idea that the United States actually will compete with the rest of the world in exports.

If — and we must emphasize if — there will be force behind this policy shift, the Chinese are in serious trouble. As we noted before, the Chinese financial system is largely based on the Japanese model, and Japan is a wonderful case study for how this could go down. In the 1980s, the United States was unhappy with the level of Japanese imports. Washington found it quite easy to force the Japanese both to appreciate their currency and accept more exports. Opening the closed Japanese system to even limited foreign competition gutted Japanese banks’ international positions, starting a chain reaction that culminated in the 1990 collapse. Japan has not really recovered since, and as of 2010, total Japanese GDP is only marginally higher than it was 20 years ago.

China’s Limited Options
China, which unlike Japan is not a U.S. ally, would have an even harder time resisting should Washington pressure Beijing to buy more U.S. goods. Dependence upon a certain foreign market means that market can easily force changes in the exporter’s trade policies. Refusal to cooperate means losing access, shutting the exports down. To be sure, the U.S. export initiative does not explicitly call for creating more trade barriers to Chinese goods. But Washington is already brandishing this tool against China anyway, and it will certainly enter China’s calculations about whether to resist the U.S. export policy. Japan’s economy, in 1990 and now, only depended upon international trade for approximately 15 percent of its GDP. For China, that figure is 36 percent, and that is after suffering the hit to exports from the global recession. China’s only recourse would be to stop purchasing U.S. government debt (Beijing can’t simply dump the debt it already holds without taking a monumental loss, because for every seller there must be a buyer), but even this would be a hollow threat.

First, Chinese currency reserves exist because Beijing does not want to invest its income in China. Underdeveloped capital markets cannot absorb such an investment, and the reserves represent the government’s piggybank. Getting a 2 percent return on a rock-solid asset is good enough in China’s eyes. Second, those bond purchases largely fuel U.S. consumers’ ability to purchase Chinese goods. In the event the United States targets Chinese exports, the last thing China would want is to compound the damage. Third, a cold stop in bond purchases would encourage the U.S. administration — and the American economy overall — to balance its budgets. However painful such a transition may be, it would not be much as far as retaliation measures go: “forcing” a competitor to become economically efficient and financially responsible is not a winning strategy. Granted, interest rates would rise in the United States due to the reduction in available capital — the Chinese internal estimate is by 0.75 percentage points — and that could pinch a great many sectors, but that is nothing compared to the tsunami of pain that the Chinese would be feeling.

For Beijing, few alternatives exist to American consumption should Washington limit export access; the United States has more disposable income than all of China’s other markets combined. To dissuade the Americans, China could dangle the carrot of cooperation on sanctions against Iran before Washington, but the United States may already be moving beyond any use for that. Meanwhile, China would strengthen domestic security to protect against the ramifications of U.S. pressure. Beijing perceives the spat with Google and Obama’s meeting with the Dalai Lama as direct attacks by the United States, and it is already bracing for a rockier relationship. While such measures do not help the Chinese economy, they may be Beijing’s only options for preserving internal stability.

In China, fears of this coming storm are becoming palpable — and by no means limited to concerns over the proposed U.S. export strategy. With the Democratic Party in the United States (historically the more protectionist of the two mainstream U.S. political parties) both in charge and worried about major electoral losses, the Chinese fear that midterm U.S. elections will be all about targeting Chinese trade issues. Specifically, they are waiting for April 15, when the U.S. Treasury Department is expected to rule whether China is a currency manipulator — a ruling Beijing fears could unleash a torrent of protectionist moves by the U.S. Congress. Beijing already is deliberating on the extent to which it should seek to defuse American anger. But the Chinese probably are missing the point. If there has already been a decision in Washington to break with Bretton Woods, no number of token changes will make any difference. Such a shift in the U.S. trade posture will see the Americans going for China’s throat (no matter whether by design or unintentionally).

And the United States can do so with disturbing ease. The Americans don’t need a public works program or a job-training program or an export-boosting program. They don’t even have to make better — much less cheaper — goods. They just need to limit Chinese market access, something that can be done with the flick of a pen and manageable pain on the U.S. side.

STRATFOR sees a race on, but it isn’t a race between the Chinese and the Americans or even China and the world. It’s a race to see what will smash China first, its own internal imbalances or the U.S. decision to take a more mercantilist approach to international trade.
Title: Re: China
Post by: G M on March 30, 2010, 04:10:13 PM
**China and the NorKs are as close together as "teeth and gums". This is one tool they'll use to control Obama quite a bit, IMHO.**

Monday, March 29, 2010
What Happend to the Cheonan?

UPDATE/9:30 am EDT. In a rather dramatic about-face, South Korea is now pointing the finger of blame squarely at Pyongyang. The ROK Defense Minister now says a mine from North Korea may have caused the blast that sank the Cheonan. Additionally, President Lee Myung-bak has placed the South Korean military on alert, to respond to further "moves" by the DPRK.

As ROK Navy teams continue their rescue and salvage operations, a North Korean defector raised the possibility of a suicide attack. Chang Jin-seong, who worked for Pyongyang's spy agency before fleeing in 2004, said some DPRK naval units have trained for suicide missions.

But Washington is still downplaying the possibility of North Korean involvement. Monday, a senior State Department official said the U.S. still has no firm evidence that Pyongyang was behind the attack.

American reluctance to blame North Korea promises to create a potential rift between Washington and Seoul and set the stage for a possible crisis in the coming days. If South Korea determines that Pyongyang was behind the Cheonan disaster, there will be a demand for revenge, both publicly and officially. At that point, the Obama Administration will be forced to admit North Korean complicity, and attempt to dissuade South Korea from taking military action.

And, if you don't believe South Korea would take such steps, consider the hours following the Rangoon bombing in 1983. After learning of North Korea's attempt to kill the South Korean president (and his cabinet) in Burma, some ROK Army units began mobilizing for war. One U.S. officer, stationed in Korea at the time, reports that some mechanized and armored battalions actually left their garrisons and were heading towards the DMZ--without notifying the United States.

The military preparations received little attention in the west, but they were indicative of the shock and outrage that followed the assassination attempt. Needless to say, there were some tense days in Seoul and Washington, as U.S. officials cautioned their South Korean counterparts against any hasty action. Similar discussions will likely occur in the coming days, but it may be more difficult to deter Seoul this time around. South Korea is far more powerful --militarily, politically and economically--than it was in the early 1980s, and has every right to defend its interests. If Mr. Obama and his advisors believe the Cheonan affair will quickly blow over (with little diplomatic or military fallout), they are sadly mistaken.
Three days ago, it was dominating world headlines. But almost as quickly as it sank into the Yellow Sea, the South Korean naval vessel Cheonan has disappeared from the 24-hour news cycle.

And that's clearly by design.

The sudden loss of the Cheonan was stunning, to say the least. On patrol near the disputed Northern Limit Line with North Korea, the 1,200-ton corvette was suddenly struck by a mysterious explosion that ripped the vessel in half. Three hours later, the last section of the ship went down, leaving more than 40 sailors dead or missing.

It was South Korea's worst naval calamity in more than 30 years; as rescue operations began, suspicions were immediately cast on the DPRK--and with good reason. The two Koreas have fought a series of naval engagements in the area over the past decade (with North Korea taking the worst of it), and Pyongyang has been spoiling for payback.

But in the hours following the disaster, officials in Seoul (and, to a lesser extent, Washington) tried to refocus global attention on other scenarios. As naval and coast guard vessels were pulling sailors out of the water, sources at the South Korean defense ministry suggested the Cheonan was the victim of an internal mishap, caused (perhaps) by an ammunition or engine explosion.

At the U.S. State Department, spokesman P.J. Crowley was quick to point out that American officials "had no direct evidence" of North Korea involvement, and referred reporters to the ROK government for more "definitive" information.

Meanwhile, Pyongyang was quiet--a little too quiet. Normally, a scandal or blunder in South Korea becomes gist for the DPRK propaganda machine--an opportunity for Kim Jong il to tout the "superiority" of his regime. But this time, there was none of the usual bluster. In fact, North Korea seemed to go "out of its way" to avoid mentioning the maritime disaster.

Seoul and Washington also seemed reluctant to mention the tragedy, beyond the initial statements. Oddly enough, that strategy may have been the best approach, because few western observers were buying explanations of an internal explosion on the Cheonan, or U.S. claims that we "knew nothing" about possible North Korean activity in the area.

The internal failure theory was shredded almost as soon as surviving crew members reached land. They told of a routine night patrol, suddenly punctuated by a massive blast that tore the corvette in half. There were no reports of a weapons accident or engine mishap just prior to the explosion. In fact, survivor accounts--and descriptions of the damage--were consistent with a torpedo or mine attack.

As for U.S. surveillance of the area, that subject has received less attention. But Mr. Crowley's statement is little more than a carefully-worded, verbal two-step. The waters on either side of the NLL are some of the most closely-monitored on earth. The massive U.S. SIGINT complex at Osan AB, Korea (along with other sites in the Far East) monitors activity throughout North Korea, including naval traffic. U.S. and South Korea recce aircraft criss-cross the skies daily, and satellites keep close tabs on key military complexes, including those of the DPRK navy.

To be fair, the U.S. might have missed the deployment of a small number of mines, or a single torpedo shot from a North Korean submarine. But we almost certainly had a picture of naval activity along the NLL in the hours leading up to the Cheonan tragedy, and we have detailed knowledge as to how the DPRK conducts mine-laying, submarine and surface combatant operations. If North Korea recently engaged in mine-laying activity (or training), there's pretty good chance it was detected. How the information was handled is another matter, but readers will note that Mr. Crowley's response artfully dodged that type of context.

Which brings us back to the essential, unanswered questions: first, why would North Korea pull a stunt like this, and secondly, why are the U.S. and Seoul so reluctant to point the finger?

The first one is easy enough. North Korea has a long history of deadly provocations towards South Korea and the U.S. From the capture of the USS Pueblo in 1968 (and the subsequent downing of an EC-121 reconnaissance aircraft the following year), to the infamous "tree-chopping" incident in the DMZ, Pyongyang has killed dozens of American servicemen over the past 40 years.

During the same period, South Korea has suffered even greater casualties. A 1968 raid by DPRK commandos on the ROK presidential mansion in Seoul killed at least 68 South Korean soldiers, police officers and civilians. Fifteen years later, North Korea attempted a similar decapitation of ROK leadership, during the infamous Rangoon bombing (while several cabinet officials were killed the South Korean leader survived only because he was running behind schedule.

Four years later, DPRK agents (acting on the personal orders of Kim Jong-il) planted explosives on a Korean Airlines jet that blew up over the Andaman Sea, killing all 115 people on board.
It remains the worst terrorist act perpetuated against a South Korean target.

Beyond casualties--and North Korean involvement--these events have something else in common, a muted response from both Seoul and Washington. There were never any retaliatory attacks against the DPRK, fearing that an increase in military activity might lead to a renewed Korean conflict. The "official" responses to these deadly attacks have been a mixture of diplomatic protests, various forms of sanctions and (on rare occasions) a military demonstration.

Against that backdrop, is it any wonder that Pyongyang continues to thumb its nose at the international community and stage "incidents" when they serve the intended purpose. Even if South Korea and the U.S. determine that the Cheonan was sunk by an enemy mine or torpedo, North Korea has little to fear, in terms of possible consequences. Better yet, the DPRK has often used such incidents to pry concessions out of the U.S. and its allies in Seoul. We can almost hear the demand this time around: "Send us more food aid and we'll guarantee that your ships don't blow up along the NLL."

What else does the DPRK gain from this? A propaganda victory (should they decide to claim it), and a tactical advantage in future clashes along the NLL. With the Cheonan disaster fresh in everyone's mind, ROK Navy commanders will be less aggressive in responding to future maritime incidents, fearing the loss of more surface vessels. Additionally, South Korean fishermen may be reluctant to return to the crab beds of the Yellow Sea, worried about the possibility of more mines in local waters, and the ability of the ROK Navy to defend them from possible DPRK attack.

As a result, you'll probably see fewer South Korean boats (and ROKN escorts) along the southern edge of the NLL this summer. It's a move that will cost the ROK economy millions--and it will make a lot of fishermen angry--but officials Washington and Seoul clearly want to avoid a confrontation with Pyongyang. In their view, North Korea is a problem to be "managed" until the communist regime eventually implodes. That's why we may never know what happened to that South Korean corvette or if we do, the news will be dribbled out on a Friday night or a holiday, to minimize media coverage.

Then, when North Korea pulls a similar stunt in the future, the same "leaders" will offer the same, feigned outrage. Once the furor dies down, they'll cave again to Pyongyang's newest demands. And the cycle will only repeat itself.
Title: Re: China
Post by: Crafty_Dog on March 31, 2010, 05:52:42 AM
Any reactions to the Stratfor piece I posted yesterday.  Its hypothesis seems to me to be quite an eye-opener that turns things upside down.
Title: Re: China
Post by: G M on March 31, 2010, 06:32:56 AM
China wil use the NorKs and others to counterbalance any attempt by the US to become more advisarial in economic issues.
Title: Re: China
Post by: Rarick on March 31, 2010, 08:17:16 AM
Japan and South Korea can handle NorK without breaking a sweat.  They have the same tech that we do as far as anti ICBM and Japan has Aegis equipped ships for the other airborne threats.  A few runs by both Japanese and Korean airforces with the bombs we used to take out that republican guard brigade in Iraqi Freedom would turn that army Kim Jung Il has built into mulch.  NorK is getting treated/ ignored because they are impotent for the most part, a distraction at best.  Not big enough to be a legit. threat, but enough to be used as a strawman for the press.

China is only a threat on the asian continent right now, until they build some carriers/sea control ships, and an amphibious fleet their threats are to Russia and India.  Chinas only threat to us is "we will sell of your debt cheap to ruin the dollar as a world currency",  that doesn't kill people or take territory.  Heck, it may be the best thing to happen to us, we would be forced to regrow our manufacturing sector.  A pissed off America without the usual leashes to rein us in once we recover?
Title: Stratfor: Currency Debate
Post by: Crafty_Dog on April 01, 2010, 05:43:07 AM
China's Currency Debate
THE WAR OF WORDS BETWEEN CHINA and the United States on the subject of China’s currency, the yuan or renminbi, saw a momentary reprieve on Tuesday, when two out of three newly appointed members of the People’s Bank of China monetary policy committee entered the debate. Just one day after being appointed, Li Daokui said China should adjust its exchange rate on its “own initiative” before September, so that the currency does not get caught up in the politics of U.S. midterm elections. Xia Bin said China should resume its policy of permitting the yuan to gradually appreciate, as was done from 2005 to 2008. Separately, U.S. President Barack Obama met with China’s new ambassador to the United States and called for a “positive relationship” with China, only hinting at the underlying economic strains by saying the two should work together on sustainable and “balanced” global economic growth.

On the surface, Li’s statement was absurd. The question of China’s fixed exchange rate — its peg to the U.S. dollar, giving it an advantageous position in U.S. markets — has been thoroughly entangled in U.S. domestic politics since Treasury Secretary Timothy Geithner used the word “manipulation” during his confirmation hearings in early 2009, and has become more so in recent months. Although the U.S. economy has emerged from recession, unemployment remains lodged at nearly 10 percent, a fact that gnaws on the Democratic Party as it approaches already contentious elections in November. Not only are the Democrats historically linked to U.S. manufacturers and more inclined to use protectionist policies to defend them, but also they traditionally have fewer qualms about pushing back on America’s East Asian trade partners.

Congress has already leapt into action, proposing a bill that would force the U.S. Treasury Department to take a strict interpretation when it assesses whether to accuse China of formally “manipulating” its currency in a report due April 15. The bill would clear the way for punitive measures as well. Bottom line, few issues could be more politicized. Having passed a major domestic hurdle with health care, Obama has set his sights on a foreign policy victory. But sanctions on Iran have already been watered down, and the surge is only beginning in Afghanistan. In other words, playing hardball on China’s currency is one foreign policy issue where Obama can boost his party in elections. And joblessness — not Iran’s nuclear program — is the American public’s number one concern.

“Few today are willing to accept the idea that a country with a $4.9 trillion economy — a country that recently surpassed Germany as the world’s leading exporter and will soon surpass Japan as the second biggest economy overall — deserves to skirt international rules.”
The proper way to interpret Li’s remarks, then, is to focus on his emphasis on China not succumbing to U.S. pressure, but changing its currency policy on its “own initiative.” With the U.S. government bearing down, Li’s statement appears crafted to begin the process of saving face. Domestically, the Chinese government cannot be seen as caving in to American demands. But for months China has internally debated the merits and flaws of removing the currency peg. What Li is doing is reaffirming that currency appreciation would assist in China’s badly needed economic restructuring by boosting domestic purchasing power, weeding out inefficient industries and making others more competitive, and fighting inflation expectations. He is arguing that appreciation is not some foreign imposition, but rather a Chinese policy implemented for the good of the Chinese people.

China is thus signaling to the United States that there is no need to get overexcited or overaggressive. The currency will move. The only questions concern magnitude and timing. For the Chinese, it is critical to limit and prolong the currency’s appreciation, since they argue each percentage point increase in the yuan’s value will shave the already razor-thin profit margins of China’s all-important exporters. The last time Beijing allowed the yuan to strengthen, in 2005, it ascended about 20 percent over the course of three years. The situation now is more delicate as it does not come amid one of the biggest credit and consumption booms in history, but amid a period of recovery from global recession in which China’s major export markets have begun to increase savings and cut back on spending. In short, Beijing knows that if it allows the yuan to rise it will do so during a time of weaker external demand than before — not to mention the problem of creeping wage inflation on China’s coasts, which will also eat away at exporters’ profits.

What is surprising is the extent to which the debates over the exchange rate adopt China’s rationale. In governments and institutions, among academics and experts of every stripe, in the United States, Europe and Japan, an increasingly abstruse debate has circulated around the precise expectations, limits, measures and effects of each degree of yuan appreciation. Some say the currency is undervalued by 20 percent, others say 40 percent. Getting China to revalue the yuan by X amount would save Y jobs and reduce the trade deficit by Z.

But the flurry of discussion masks the central problem. China’s policies assume that the world will graciously allow it to break the norms of international trade by strictly controlling the value of its currency, as many developing countries do. They ask the developed world to patiently suffer the evisceration of its own manufacturing sector until such time as Beijing believes it can wean its industries off a weak currency, and push them out of the nest to try their wings. For decades this assumption was economically beneficial for almost everyone. But circumstances have changed. Few are willing to accept the idea that a country with a $4.9 trillion economy — a country that recently surpassed Germany as the world’s leading exporter and will soon surpass Japan as the second biggest economy overall — deserves to skirt international rules. Not to mention the elephant in the room: China’s apparent exemption from full currency convertibility.

The United States, for one, does not appear willing to grant these favors any longer, and sees this fundamental point — China’s deviation from set standards — as true regardless of midterm elections. Washington sees China’s position as ludicrous, and while it may not immediately demand full convertibility, it is showing every sign of attacking the yuan peg. Beijing sees the currency peg as anything but ludicrous, since strengthening the currency inherently threatens social instability. Which would explain why the Chinese are reaffirming their own reasons for gradually strengthening the yuan, negotiating to allay Washington’s agitation and rushing to prepare for the economic fallout at home.
Title: Re: Stratfor China - Crunch Time
Post by: DougMacG on April 02, 2010, 12:26:58 AM
I finally took the time to go through this. Thanks Crafty for posting. A synopsis and a few comments:

They see the Chinese economic system as "inherently unstable.", basically a house of cards. Economy held up by exports, but exports are down 20%.  Exports won't recover until 2012 (if then), held up by subsidies until then. 

The state tripled its infusion to banks for lending. A third of GDP is from propped up loans.  A fourth of that lending is for non-productive uses (most of the rest questionable too).

The US may 'force' China to both appreciate their currency and accept more exports which, in Japan, caused a collapse and long term stagnation.

They only wonder which will bring down China first, its own internal imbalances or the U.S. decision to take a more mercantilist approach (export orientation) to international trade."
The China economy as we know it hasn't had to survive a downturn.  Downturns have a good sides, easing bubbles and clearing out dead wood to make room for new, healthier growth.  Politically, China's ruling party hasn't gone through bad times.  Their 'legitimacy' comes from the security they bring, including economic.

Real numbers are probably worse / far worse than the ruling parties published data.

From a previous Strat, the (silly) tire issue with tariff imposed in Sept. was a warning shot from the Obama administration to the Chinese of what powers are at his disposal and what his willingness is to use them. 

The US, presumably in recovery, could instead dip downward again and further.  US consumers have more disposable income than all of China's other markets combined.  If our dip is long term, chances are China can't keep pretending things are fine and subsidize their way out of it.

If China quit buying our debt, it would force fiscal discipline in the US government.  If the US either tanks or heads into protectionism or both, China could collapse economically, leading also to a political crisis IMO.

OTOH, all previous reports of their demise have been premature.
Title: Re: China
Post by: Crafty_Dog on April 02, 2010, 04:12:00 AM
Sec'y of the Treasury Geithner has recently been talking a bit about how the Chinese should revalue the renimbi (sp?).  Coincidentally we now begin to hear that the Chinese may get on board for some lesser level of sanctions against Iran.

(Not that sanctions are really a meaningful strategy.  I agree with Stratfor that they are more a way to pretend to be doing something.  Basically I think we have already decided on some sort of containment strategy.  I suspect the ensuing nuclear arms race throughout the region and much of the world will cause us to deeply regret this.)
Title: Re: China
Post by: Crafty_Dog on April 02, 2010, 04:37:50 AM
Coincidentally enough, here's this from Pravda On The Hudson (POTH a.k.a. the NYT) so read between the lines:

WASHINGTON — Tensions between China and the United States have ebbed significantly in recent days, with the countries now working together to deter Iran’s nuclear ambitions and with the Obama administration backing off a politically charged clash over China’s currency.

The warming trend was evident in the Chinese government’s announcement on Thursday that President Hu Jintao will attend a nuclear security summit meeting in Washington later this month. American officials had feared that Mr. Hu would skip the talks to express China’s anger over recent diplomatic clashes, including a White House decision to sell arms to Taiwan and President Obama’s meeting with the Dalai Lama, the exiled Tibetan leader.

But this week, the drumbeat of bad news — and an underlying narrative of a rising China flexing its muscles against a debt-laden United States — has suddenly given way to talk of collaboration.

On Thursday night, President Obama spoke with Mr. Hu for about an hour by telephone, a chat that lasted so long that Air Force One had to be held for 10 minutes on the tarmac at Andrews Air Force Base after landing so that Mr. Obama could finish up the conversation. Chinese television reported that Mr. Hu expressed a desire for healthier ties, while stressing Beijing's sensitivity about Taiwan and Tibet.

For now, the United States is setting aside potentially the most divisive issue in the relationship, deferring a decision on whether to accuse China of manipulating its currency, the renminbi, until well after Mr. Hu’s visit, according to a senior administration official. That decision, the official said, reflects a judgment that threatening China is not the best way to persuade it to allow the renminbi to appreciate against the dollar.

Many economists expect China to act on its own to loosen the tight link of the renminbi to the dollar — a policy that keeps the currency’s value depressed and makes China’s exports more competitive in global markets.

Still, the administration’s decision not to force the currency issue now could carry political risks at home. Lawmakers on Capitol Hill have introduced legislation calling for trade sanctions against China if it does not change its currency policy. And unions and manufacturers cite the undervalued Chinese currency as a major culprit for lost jobs.

The White House would not comment on the currency issue, but an official said that if China did not take action on its own, the administration could raise the issue again at the Group of 20 summit meeting in June. The White House welcomed Mr. Hu’s visit as proof that its policy of engaging with China on strategic issues of common interest had paid off.

“We have an important relationship with China, one in which there are many issues of mutual concern that we work on together,” said a White House spokesman, Bill Burton. “But there also will be times where we disagree. I think this proves the point that despite those disagreements, we can work together on issues like nuclear proliferation.”

The relationship between the countries was also affected last week when Google, citing Chinese censorship, began redirecting users in China to its uncensored Hong Kong search engine.

On Wednesday, China appeared to throw its support behind new United Nations sanctions aimed at putting pressure on Iran over its nuclear program. The Security Council has been stymied by China’s insistence on diplomacy over sanctions.

American officials said they expected China to wrangle over the wording of a United Nations resolution, with a goal of watering down the measures against Tehran. Indeed, on Thursday, Iran’s nuclear negotiator, Saeed Jalili, arrived in Beijing for talks with China’s foreign minister, Yang Jiechi. The ministry appeared to steer clear from any commitment for sanctions.

Still, earlier this week, Mr. Obama expressed optimism that the major powers could unite this spring behind a resolution that would apply new pressure on Iran over its nuclear program.

The administration has engaged in intensive talks with Chinese officials to demonstrate to Beijing the destabilizing effect of a nuclear-armed Iran. A crucial advance, officials said, came in early March when an American delegation, led by Deputy Secretary of State James B. Steinberg and the National Security Council’s senior director for Asia, Jeffrey A. Bader, visited Beijing.

Mr. Hu’s visit will take place only two days before the Obama administration faces a deadline to decide whether to label China a “currency manipulator,” meaning that it intervenes in currency markets to gives its exporters an artificial advantage. Pressure in the United States has been building to take that step, which could initiate a Congressional process that would lead to slapping tariffs on Chinese imports.

But given the potential for embarrassing Mr. Hu — and for sending bilateral relations into another tailspin — the administration decided not to report on April 15, one of the deadlines set by Congress and the Treasury Department to issue a report on possible currency manipulation.

Nicholas R. Lardy, an economist at the Peterson Institute for International Economics in Washington, said the Treasury Department could delay the deadline for weeks. “As a practical matter, they’ve got a lot of wiggle room,” he said. Mr. Lardy added that he thought it was unlikely that China would have agreed to a visit by Mr. Hu unless there was at least an informal assurance by the Treasury that China would not immediately be named a currency manipulator.

Lawmakers signaled that they would not be easily mollified if the administration gave Beijing a pass on its currency.

“The most important issue in the Chinese-American relationship is currency,” said Senator Charles E. Schumer, Democrat of New York, who introduced a bill threatening China with trade sanctions. “It relates to American jobs, American wealth and the future of this country. This issue should not be traded for another.”

Relations between the countries began to fray in November, soon after Mr. Obama went to China on a state visit that was more circumscribed than American officials would have liked.

In the months that followed, tensions increased. American officials accused China of thwarting a climate change deal in Copenhagen and Chinese leaders threatened to punish the United States for a $6 billion weapons deal for Taiwan. In February, China’s Foreign Ministry called in the American ambassador for a scolding about Mr. Obama’s meeting with the Dalai Lama, whom China calls a separatist.

But then came a thaw. In recent days, public statements in Beijing and Washington hinted at fading tensions. Mr. Steinberg, the deputy secretary of state, declared that United States did not support independence for Taiwan and Tibet. And Mr. Obama, at an event on Monday for China’s new ambassador to Washington, offered generous praise for China.
Title: Re: China
Post by: Rarick on April 02, 2010, 06:57:58 AM
Incident created by N. Korea allows for facesaving kowtow in China propoganda, allowing Chinese .gov to make a magnanimous gesture to the big noses of the west.   Nothing new, that is the protocoll for years!  Behind the scenes tho' other issues are generating pressures too, like I mentioned in my other post.
Title: Re: China
Post by: DougMacG on April 04, 2010, 09:35:18 AM
"Sec'y of the Treasury Geithner has recently been talking a bit about how the Chinese should revalue the renminbi.  Coincidentally we now begin to hear that the Chinese may get on board for some lesser level of sanctions against Iran." 

The Geithner report trashing China over currency manipulation was supposed to come out Apr 15.  Hu visits the 12th. Geithner 'delays' the report trashing China.  China presumably will agree not to fully block watered down sanctions which we all agree are just symbolic, not effective.  This pressures Israel not to strike because the international 'community' is 'doing something'.  And then what? We all live happily ever after?

No one can say ever again that the Obama administration doesn't have experience with this type of negotiations, not after healtcare via the Louisiana purchase, the Cornhusker kickback, the federal hospital for Connecticut and the State Bank of North Dakota.  These guys know how to put a deal together!
 April 4 (Bloomberg) -- U.S. Treasury Secretary Timothy F. Geithner delayed a scheduled April 15 report to Congress on exchange-rate policies, sidestepping a decision on whether to accuse China of manipulating the value of the yuan.

Geithner in a statement yesterday urged China to move toward a more flexible currency and said a series of meetings over the next three months will be “critical” to bringing policy changes that lead to a stronger, “more balanced” global economy. The delay comes as Chinese President Hu Jintao is scheduled to visit Washington for a nuclear summit April 12-13.
Title: Re: China
Post by: Crafty_Dog on April 04, 2010, 01:43:04 PM
Well, if there is a quid pro quo then it seems not improper to me not to make it apparent to all the world to the embarassment of the Chinese.
Title: Re: China
Post by: G M on April 04, 2010, 04:11:54 PM
Keep in mind that causing the Chinese to "lose face" will create "blowback" at some point. Forgiveness is not a Chinese cultural trait.
Title: Hong Kong challenges the non-electoral dictates of Beijing
Post by: DougMacG on May 17, 2010, 09:45:52 PM
Hong Kong by-elections a test for democracy camp AFP
by Peter Brieger  – Sun May 16

HONG KONG (AFP) – Hong Kong on Sunday held by-elections triggered by pro-democracy lawmakers seeking to pressure Beijing into speeding up the pace of electoral reform in the territory.

The election, which has angered Beijing and divided the city's democracy movement, comes after five lawmakers from the Legislative Council quit in January in a bid to force a de facto referendum on reform.

Frustrated by what they say is China's intransigence, the lawmakers had hoped that the move -- which will likely see them all re-elected -- would send the strongest message yet to Beijing since Hong Kong returned to Chinese rule in 1997.

However, the outcome of the vote is seen as academic since all pro-Beijing political parties have boycotted the process.

Under the current electoral system, only half of Hong Kong's 60-seat legislature is directly elected while the rest is selected by the pro-China business elite. Campaigners want the entire parliament to be directly elected.

They also want voters to be able to choose the city's chief executive, who is currently appointed by a Beijing-friendly election committee.

Beijing has said that, at the earliest, Hong Kong's chief executive can be directly elected by 2017 and the legislature by 2020.

Chinese officials have openly denounced the "referendum", calling it a "blatant challenge" to Hong Kong's Basic Law, the city's mini-constitution that guarantees certain civil liberties for citizens of the former British colony.

Democracy figurehead Martin Lee condemned a decision by Donald Tsang, Hong Kong's chief executive, not to cast a ballot. "This is absolutely ridiculous," the founder of Hong Kong's Democratic Party told AFP on Sunday.

"It is a total act of kow-towing to Beijing. This is the problem -- Tsang is not elected by the people."

Tsang said his decision was "purely personal".

"In view of the unique nature of this by-election and after careful consideration, I have decided not to vote," he said in a statement.

"All members of my political team share this view and, of their own accord, have also decided not to vote."

In response, "Long Hair" Leung Kwok-hung, one of the five who resigned his seat, protested outside Tsang's residence on Sunday, calling on the city's leader to cast his ballot.

The radical political activist is famous for wearing Che Guevara T-shirts and throwing bananas at government officials during meetings.

Critics said the poll was unlikely to resolve a deadlock between the government and democrats over the pace of political reform, while surveys indicated turnout was only expected to be around 20 percent.

As of 0745 GMT, about 8.5 percent of Hong Kong's 3.7 million registered voters had cast a ballot, according to government statistics, with polling stations due to close at 1430 GMT.

The government introduced a reform proposal in April to increase the size of the election bodies for chief executive and the legislature in 2012. But opposition parties said they would not accept the proposal.

"It is very clear this government is not accountable to the people of Hong Kong," Tanya Chan, another of the five candidates, told AFP on Sunday.

"We hope the government will give a clear road map (on political reform)."
Title: Re: China
Post by: G M on May 19, 2010, 06:26:17 PM

If this demonstrates a shift from isolated loners attacking children to groups of "have nots" against the "haves", then this could be a "Archduke Ferdinand" moment that really will shake the world.
Title: The Barbarian Wrangler Speaks
Post by: Body-by-Guinness on June 08, 2010, 08:29:32 AM
In Chinese admiral's outburst, a lingering distrust of U.S.
By John Pomfret
Washington Post Staff Writer
Tuesday, June 8, 2010; A10


On May 24 in a vast meeting room inside the grounds of the state guesthouse at Diaoyutai in Beijing, Rear Adm. Guan Youfei of the People's Liberation Army rose to speak.

Known among U.S. officials as a senior "barbarian handler," which means that his job is to deal with foreigners, not lead troops, Guan faced about 65 American officials, part of the biggest delegation the U.S. government has ever sent to China.

Everything, Guan said, that is going right in U.S. relations with China is because of China. Everything, he continued, that is going wrong is the fault of the United States. Guan accused the United States of being a "hegemon" and of plotting to encircle China with strategic alliances. The official saved the bulk of his bile for U.S. arms sales to China's nemesis, Taiwan -- Guan said these prove that the United States views China as an enemy.

U.S. officials have since depicted Guan's three-minute jeremiad as an anomaly. A senior U.S. official traveling on Secretary of State Hillary Rodham Clinton's plane back to the United States dismissed it, saying it was "out of step" with the rest of the two-day Strategic and Economic Dialogue. And last week in Singapore, Defense Secretary Robert M. Gates sought to portray not just Guan, but the whole of the People's Liberation Army, as an outlier intent on blocking better ties with Washington while the rest of China's government moves ahead.

But interviews in China with a wide range of experts, Chinese officials and military officers indicate that Guan's rant -- for all its discomfiting bluster -- actually represents the mainstream views of the Chinese Communist Party, and that perhaps the real outliers might be those in China's government who want to side with the United States.

Guan's speech underscored that 31 years after the United States and China normalized relations, there remains a deep distrust in Beijing. That the United States is trying to keep China down is a central part of the party's catechism and a foundation of its claims to legitimacy.

More broadly, many Chinese security experts and officials view the Obama administration's policy of encouraging Chinese participation in solving the world's problems -- including climate change, the global financial crisis and the security challenges in Iran and North Korea -- not as attempts to elevate China into the ranks of global leadership but rather as a scheme to enmesh it in a paralyzing web of commitments.

"Admiral Guan was representing what all of us think about the United States in our hearts," a senior Chinese official, who deals with the United States regularly, said on the condition of anonymity because he was not authorized to speak with a reporter. "It may not have been politically correct, but it wasn't an accident."

"It's silly to talk about factions when it comes to relations with the United States," said a general in the PLA who also spoke on the condition of anonymity. "The army follows the party. Do you really think that Guan did this unilaterally?"

China's fear of the United States was very much on display this past weekend during the Shangri-La Dialogue, where Gates and his Chinese counterparts clashed repeatedly throughout the program.

Gates said it was unnecessary for the PLA to hold the military relationship hostage because U.S. arms sales to Taiwan are, "quite frankly, old news." The United States has provided military assistance to Taiwan since 1949, when the Nationalist government of China fled to the island after the Communist victory on the mainland; this assistance did not stop when Washington normalized relations with Beijing in 1979.

"You, the Americans, are taking China as the enemy," countered Maj. Gen. Zhu Chenghu. Zhu rose to prominence in China in 2005 after he warned that if the United States came to Taiwan's defense in a war with China, Beijing would abandon its "no first use" doctrine on nuclear weapons and attack the United States.

In January, Washington announced a $6.4 billion arms package for Taiwan, prompting China to downgrade its military ties with the United States. China's stance on the issue is part of a concerted campaign to change a foundation of U.S. policy in the region -- its security relationship with Taiwan. At the very least, Chinese officials said, they want the Obama administration to reiterate a commitment it made in a joint communique with China in 1982 to decrease arms sales to Taiwan.

The U.S. framing of Guan's speech and the entire PLA as being out of step with the times is significant, analysts said, because the Obama administration could fall into a trap of expecting more from China than it can deliver. On the plane back to the United States, for example, U.S. officials predicted that despite Guan's outburst, China would welcome Gates and that it would also begin to side with South Korea against North Korea following the release of a report in Seoul implicating the regime of Kim Jong Il in the deadly sinking of a South Korean warship on March 26. China did neither, and interviews with PLA officers indicate that the military is highly suspicious of the South Korean report.

U.S. officials have also expressed the hope that China would work harder to press Iran, for example, to engage in talks on its nuclear weapons program. The United States also wants China's cooperation on slapping new sanctions on Tehran. China has shown more flexibility on this issue, but it is still unclear whether it will ultimately support sanctions.

Chinese analysts say the Obama administration ignores what China calls its "core national interests" -- especially U.S. weapons sales to Taiwan -- at its peril.

"For years, China has opposed arms sales to Taiwan among other things, but we were never strong enough to do anything about it," said Cui Liru, the president of the China Institutes of Contemporary International Relations, a think tank run by the Ministry of State Security. "But our national strength has grown. And it is time that the United States pay attention."

"This is not just a talking point that can be dismissed by your government," he continued. "It is something that must be dealt with or it will seriously damage ties."
Title: Stratfor: Considering a failed transition for China
Post by: Crafty_Dog on June 10, 2010, 05:02:10 AM
Considering a Failed Transition for China
SOME TWO THOUSAND WORKERS CLASHED WITH POLICE in China on Tuesday during a staged walkout at a factory near Shanghai in Kunshan City, Jiangsu province. According to reports from Hong Kong, about 50 people were injured in the clash. It occurred amid a recent spate of labor incidents, including a series of worker suicides at the Foxconn electronics factory and strikes at Honda factories and several other factories in Guangdong province.

Recent labor problems have resulted in companies offering wage increases to appease workers. Foxconn has raised wages several times, most recently claiming to offer workers a 70 percent raise amid a public firestorm over the unsettling suicides at its plant that drew negative attention to major Western brands like Apple and Dell, who rely on Foxconn for parts. Honda raised wages only to see strikes emerge at one of its subsidiary’s factories. Elsewhere, failed negotiations over wages or unfulfilled promises of wage hikes have triggered walkouts. Most of the targeted companies have been foreign, mainly Taiwanese and Japanese, with one South Korea-affiliated factory. American company KFC agreed quietly during a round of negotiations to pay more to employees in China.

China is in the midst of an internal struggle to manage the rapid transformation of its economy and society. Few, when they look, can doubt that the struggle is one of consequence. The problem is that not many are looking. The recent labor issues raise serious questions about where China is going, and whether it will get there. The answers to these questions have a definite bearing on the global economy.

Beijing knows its lease has run out on rapid export-driven growth spurred by strong global demand. Across the world, stimulus programs are fading, and the debt hangover is setting in. Europe’s economies have become bogged down in unemployment, a weakening currency and painful attempts by many governments to correct their books. The inevitable result of this is less promise for the future consumption of Chinese goods. The United States’ prospects for growth are far better, but Americans’ consumer patterns have mellowed out, and Washington has fiscal problems of its own and is growing more mercantilist and more protectionist in the face of prolonged unemployment. None of these scenarios bode well for China’s manufacturing sector even if it had not spent almost 30 years experiencing unbridled expansion. The reality is that in the near term China will face lower external demand and slower growth rates, and not merely as a theoretical eventuality that can be noted and then blithely ignored.

The only hope for Beijing is to expedite the process of building its consumer base at home to generate new demand to keep Chinese workers busy and factories humming as foreign demand shrinks. One way to start restructuring a country as massive and diverse as China is to increase wages and household incomes, as Beijing has done by having local governments raise their required minimum wages. The more cash people have to spend and invest and boost the economy, the less likely they will be to take to the streets. Simple enough.

“Beijing knows its lease has run out on rapid export-driven growth spurred by strong global demand.”
Except that higher wages directly contravene the factor that made China an economic powerhouse in the first place: its massive pool of cheap labor. China’s manufacturers have already reached the point of saturating foreign markets and can no longer substantially increase their profits by increasing the bulk of production. In response they have pared down their costs, competing with each other to see who can run on thinner margins. This process too has nearly reached its end, with further margin-cutting starting to look fatal. If labor costs rise too high, a number of these companies will be forced to shed workers or shut down, and foreign investors may look elsewhere for cheap labor.

Nevertheless, this is the transition that China knows it must make. The survivors will be leaner and meaner and, ideally, the entire manufacturing sector will become more sophisticated and innovative. At the same time, new growth in other sectors will absorb the labor. The state will be there to catch those who fall through the cracks, economic restructuring will progress and China will shift away from export dependency and maintain growth at lower yet more sustainable rates.

Yet China’s ruling party fears it cannot handle the transition successfully, which explains its anxious attempts to manage the process as carefully and as gradually as possible. This entails using everything in its power to alleviate or suppress internal pressures and limit external interference and disturbances. The survival of the regime, not to mention the unity of the country, is at stake.

Needless to say, the rest of the world also fears a failed transition for China. China’s economy is currently the third largest in the world and much more deeply embedded into the global system than before, with a vast network of nations dependent on it in some way. While China could continue for a considerable period of time using fiscal spending and government direction to maintain its momentum and prop itself up (as it has done through the recent global crisis), a serious slowdown would have extremely negative consequences globally.

Reduced demand would send commodity prices falling and knock commodities producers off their feet in the Middle East, Africa, Latin America, Central and Southeast Asia and Australia. Supply chains linked into China’s manufacturing and assembly lines would collapse or be severely disrupted, harming China’s suppliers and leaving customers — from neighboring Japan and Korea to the United States and Europe — with shortages of goods integral to their own economies. Countries heavily invested in China would scramble to save what assets they could, and global financial markets would be in turmoil (not least because of American-Chinese financial interdependence). Opportunities would emerge for economic rivals to take advantage, developing countries would seek to fill the economic void and developed countries would try to take advantage of their various resources. China’s neighbors and the United States would see opportunities to strengthen their strategic position in China’s periphery.

In other words, trying to imagine what a failed transition would look like for the Chinese economy evokes memories of past failed attempts at social and economic transformation in China, all of which were catastrophic. The difference this time would be that the ramifications would extend further. The possibility alone, however far it may be from materializing in the near term (and STRATFOR suspects it is not as far off as conventional wisdom holds), has been enough to inject even more fear and uncertainty into the world economic system as China initiates new efforts to cool down its surging economy and reshape it for the future.
Title: exchange rate
Post by: Crafty_Dog on June 26, 2010, 12:09:12 AM


U.S. President Barack Obama spoke at length about U.S.-China relations on Thursday,
expressing approval of China's recent announcement that it would end its currency's
two-year de facto peg to the U.S. dollar and allow more flexibility in its exchange
rate going forward. Obama will meet with Chinese President Hu Jintao on the
sidelines of the G-20 summit, and spoke optimistically and conscientiously in
preparation for the talks. He said essentially that he approved of China's gesture
but now would like to see substantial action to support it.

The yuan's fixed rate has been a recurring source of tensions and threats, and the
prolonged unemployment problems following the recession have made U.S. leaders less
willing to tolerate China's taking exception to a range of international trade
norms. China's recent change to the policy was therefore welcome. But so far it is
merely symbolic, rising by barely two-hundredths of a yuan since a week ago. The
purpose of the tiny change was to give a sign, ahead of the G-20 summit in Canada,
that China is responsive to international demands for it to stop pushing the yuan
down to boost its manufacturers at the expense of others and begin playing a bigger
role in rebalancing the global economy. The other, more important purpose was to
reassure the United States.

In recent months, a long list of senators and representatives, as well as the
Treasury and Commerce departments, have brandished their weapons against China,
warning of the consequences of maintaining a currency that is undervalued by
anywhere from 20-40 percent. In the past few weeks the brandishing has gotten more
menacing. The chairmen of both the powerful Senate Finance Committee and the House
Ways and Means Committee have emphasized that if China does not act around the time
of the G-20 summit, and if the administration does not respond to this inaction,
then they will bring to a vote bills that would force the administration's hand.

From Beijing's point of view, there are good reasons to loosen the currency regime.
Allowing the yuan to rise would help in the process of transforming China's economy
into one that is of and for the consumer rather than one that is of and for the
producer. Chinese households and domestic-oriented businesses would see their buying
power enhanced, while exporters would lose some of their privileges. Investors would
respond to these trends and China would begin to genuinely shift away from
overdependence on exports as a means of growth. However, given the oft-observed
revolutionary effects of consumerism, Beijing is understandably insistent that the
process must be both gradual and carefully controlled. The Communist Party of
China's definition of a gradual pace of reform would elsewhere be interpreted as

"Given the oft-observed revolutionary effects of consumerism, Beijing is
understandably insistent that the process must be both gradual and carefully


For the United States, however, such timing is not fast enough. Midterm elections
are approaching in November and incumbents are in danger. While this is especially
important for congressmen whose states feel they have suffered the worst from cheap
Chinese imports, it is also important for Obama, whose domestic and foreign policy
woes are growing, and who could benefit from looking tough in dealing with China.

But the disagreement runs even deeper. As much as Obama may wish to avoid a
confrontation with China, he cannot afford to veto a bill against China once it sits
on his desk. The yuan is clearly artificially undervalued, and whatever the effect
on the U.S. economy, this is not beneficial. Not to mention the obvious question of
why China's currency is not freely traded like that of other countries, especially
given China's rapid growth, enormous economic size and the recovery of its exports
and trade surpluses.

Obama -- echoing the top lawmakers -- stressed the need to wait and observe the pace
and magnitude by which the yuan will rise in the coming weeks. Presumably, if China
is perceived to have made substantial improvement, the United States will call off
the dogs. Otherwise, the United States will begin meting out punishment for China's
currency "misalignment." The danger lies in where -- and whether -- U.S.
expectations intersect with China's capabilities given its fragile domestic
conditions. In the short term, Washington might be willing to be convinced to give
Beijing more leeway to reform at the pace it thinks it can handle. After all, a
deeper rift with China would not be beneficial for the United States given its other
economic and military preoccupations. (Though it would not be intolerable.) The
upcoming G-20 summit and Beijing's actions in the aftermath of those meetings will
determine whether such a rift can be avoided. Even so, any compromise will be
temporary, which spells trouble for U.S.-Chinese relations in the not-so-distant

Copyright 2010 Stratfor.

Title: China's Political Awakening?
Post by: DougMacG on July 26, 2010, 11:37:01 AM
Very interesting coverage and realistic analysis, IMO.

China’s Political Awakening?
July 14, 2010

The current labour unrest isn’t as apolitical as it looks. But don’t expect an early change in China’s autocratic leadership.

By Minxin Pei

The ongoing labour unrest in China is seen by many as a labour market response to uncompetitive wages offered by foreign companies. And, to a large extent, this is true. Changing demographics are reducing the supply of ultra-cheap young labourers from the countryside to coastal export-processing zones, giving labour more bargaining power.

But explaining China’s newly assertive workers purely on economic grounds misses the larger—and more interesting—political context. For labour activism is only one of the many signs of a broader political re-awakening in Chinese civil society.

For years, Western observers have been disheartened by the lack of political change in China. Modernization theory predicts that rapid economic progress should help liberalize the political system, but this hasn’t occurred in China since 1989. Until now.

In addition to migrant workers who have risked their jobs and personal safety in joining the strikes, China has seen other forms of civic activism and political assertiveness at the grassroots level.

What’s interesting about this new political reawakening is that on the surface it doesn’t look all that political. Instead of calling for democracy and freedom, participants in these activities focus on issues directly related to their economic interests, property rights and social justice. Examples include fighting off local governments’ attempts to build polluting factories, seize farmers’ land without compensation and evict urban residents from their homes. Criticism of government policy and performance in delivering public services and protecting social justice are routine in Chinese publications and on-line venues. And, of course, the ostensibly apolitical nature of such civic activism makes it much harder for the Communist Party to suppress it with brutal force.

Several forces have contributed to the reawakening. Clearly, the information revolution—a direct result of economic modernization—has helped change values and reduced the costs of organizing collective action. It has also magnified the political impact of such moves (even inspiring copycat action), while the rapidity with which the latest labour unrest has spread would have been inconceivable without the assistance of the Internet and cell phones.

Rising physical mobility of the population is another factor—as ordinary Chinese citizens have more opportunities to compare how conditions differ among China’s diverse localities, they acquire a greater awareness of the political and social injustice of their own surroundings and become less tolerant of such injustices.

In an important sense, the Communist Party’s own populist rhetoric has fuelled the expectations of Chinese society and, ironically, de-legitimized many of Beijing’s post-1989 policies that contributed to China’s rapid economic growth, such as courting foreign businesses, reducing social spending to boost investment and forcing tens of millions of ordinary Chinese to make enormous personal sacrifices (accepting low wages and losing their land and apartments for the sake of rapid economic growth). Now the Chinese government faces a dilemma: it has raised the people’s expectations, but meeting those expectations would be economically costly (more redistribution and social welfare) and politically risky (greater popular political participation).

The delayed political awakening of China’s civil society will have profound consequences. Economically, it will make it much harder for the government to continue to pursue its post-Tiananmen strategy of promoting economic growth at all cost. Politically, it may lead to greater disunity within the elites since some of them may be tempted to exploit rising populism for personal political advantage.

For a one-party regime for which elite unity is critical, any deep schisms within its top leadership could trigger a chain of de-stabilizing events. In addition, if the Chinese authorities fail to end the current labour unrest in foreign-invested firms, disgruntlement will likely spread to workers in other sectors (most likely in construction and mining, where working conditions are dangerous and pay extremely low).

Still, while the political awakening comes as a pleasant confirmation of the theory that economic progress will bring about political change, it can’t be assumed this emerging phenomenon will fundamentally change China’s autocratic political order. As a result of the post-Tiananmen repression, China’s civil society lacks independent centres of public morality, organizational networks and effective leadership. Most activities that challenge government authority are uncoordinated, disorganized and short-lived.

But if the Party thinks that it can continue to rule China in the same old way, it would be mistaken. If anything, the on-going labour unrest and the seismic shift in values in Chinese society show that the Party is governing a different country, where the old rules no longer apply.

Minxin Pei is an Adjunct Senior Associate at the Carnegie Endowment for International Peace and a Professor of Government at Claremont McKenna College
Title: Re: China
Post by: prentice crawford on August 06, 2010, 03:28:28 AM
 Now why in the world should we have all those bad old nuclear weapons on hand? :-P Obama is putting us at risk everytime he gives one of his "We are so sorry for being more powerful than everybody else.", speeches.

Title: China Climbing The Charts
Post by: prentice crawford on August 16, 2010, 03:37:06 AM
 Pop the cork! (

 Obama should be proud that his policies are going according to plan and China should send an envoy over to give him a big sloppy kiss. :-P
Title: Re: China
Post by: prentice crawford on August 16, 2010, 08:36:02 PM

 During the cold war, a term used to describe the tension between communist and capitalist countries that lasted from 1947 to 1991, one of the fears was a military conflict between Russia or China and the U.S.

 It didn't happen. The potential of a military war instead morphed into an economic war.

 The U.S. was winning hands down for a long time, but not so much anymore. It used to be that the U.S. was number one in pretty much everything; education, technology, standard of living, economic and military strength, admired world leadership. It was leading the rest of the world into the future with the demonstrative power of democracy and free markets, new technological breakthroughs in automation, computers, communications, energy, medicine, space travel, to name a few.

 In recent years, a number of countries have surpassed the U.S. in specific areas, including consumer incomes, standard of living, and health care. The true economic powerhouse, however, has been China. Some statistics, and the speed with which they have changed, have been startling.

 Over the last ten years China's economy has surged past those of Canada, Spain, Brazil, Italy, France, and Germany, and is expected to pass Japan this year, to become the second largest economy in the world, behind the U.S.

 Whether it's manufacturing efficiency, high-speed rail-line technology, nuclear power plant construction, clean air energy technology, education, China is making impressive global inroads, even in areas where the U.S. has significant dominance. Much of it has to do with China's massive population, about which the U.S. can do nothing about.

 For instance, while U.S. Internet companies dominate global headlines, China now has the world's largest internet market as measured by the number of users. Yet internet use has only penetrated 22 percent of the population versus 75% in the U.S. Meanwhile, U.S. Internet giants like Google, Yahoo, eBay, Amazon, Facebook and Expedia are experiencing problems trying to transport their dominance into the Chinese market. Part of it is obstacles placed in their way by China's government, in support of China's state-controlled corporations. The result is Chinese internet companies like Tencent, and Baidu, cannot help but become world leaders.

 Here's a statistic of more importance. U.S. universities will graduate 150,000 engineering students this year, while Chinese universities will graduate more than 500,000. I've had people tell me that's an unfair comparison since China's population is larger by approximately the same ratio. But that's not the issue. The issue is the degree to which China has moved higher education to the top of its priorities, and the fact that 500,000 new engineers a year will probably come up with more high-tech innovations than 150,000 can.

 China's great leap forward has been  going through the same phases the early U.S. experienced as it worked toward becoming the world's dominant economy.

 When we criticize China for the treatment of its underpaid and overworked labor force we sometimes forget that in the early years the U.S. also exploited its workers, even utilizing child labor in 14 hour days in garment, textile, and shoe factories, coal mines and crop fields, which gave the country its initial low-cost jump start economically.

 It appears China is beginning to exit that phase and enter the next, of treating its workers better. In the past year Chinese workers have been allowed to form unions and strike for higher wages and shorter hours at various auto and electronics plants.

 The west would probably like to think that is due to the pressure put on China to improve human rights. However, China has never shown any inclination to bow to pressure in any area. The fact is that the next phase of China's economic development must be, as it was in the U.S., to develop a strong domestic economy. To do so it needs to have a more prosperous population of consumers, rather than depending on low cost exports to other countries.

 Meanwhile, it can be said that China is eating America's lunch, never taking its eyes off the goal, while we squabble among ourselves, paying no attention.

 That's unfortunate. As Sam Houston said in the U.S. Senate in 1850, "A nation divided against itself cannot stand."

 Yet, for the last 15 years the U.S. has divided itself in increasingly bitter time and energy-consuming political arguments: the morals of Clinton, whether or not war should be waged to remove Saddam Hussein from power in Iraq, whether the country's current problems are due to the depth of the economic hole dug during the last administration, or ineptness of the current administration in pulling the economy out of the hole.

 Meanwhile, China has kept its eye on the goal. It not only is making economic strides, but on the financial side has become the world's largest creditor nation, even as the U.S. has become the world's largest debtor nation, with China holding much of its debt.

 The U.S. needs to interrupt its angry divisiveness and name-calling long enough to recognize the portent of what is going on. Unfortunately, in this particularly acrimonious mid-term election year, that is not going to happen.

 copyright 2010 Forbes (

Title: Re: China
Post by: lonelydog on August 17, 2010, 12:07:34 PM
Yes AND , , ,  IMHO a strong case can be made that China is a huge bubble.  Furthermore its unique demographic profile presents deep questions.
Title: Re: China
Post by: DougMacG on August 18, 2010, 09:37:46 PM
"a strong case can be made that China is a huge bubble.  Furthermore its unique demographic profile presents deep questions."

During the last expansion here, we had more GDP growth in part of a decade than they have in total GDP. China cut a corporate tax rate (Jan.2008) that was already below ours, right as our taxes were promised to get worse and right as our economy was starting to tank and needing the same type of real production stimulus.  Their economy is more dependent on ours than ours is on theirs, IMO.  If they outperform us going forward, the fault is all our own.  They have had phenomenal growth but as Crafty hints, there is plenty wrong in China.

A healthy Chinese economy and a growing world middle class is a healthy thing for the U.S. economy, assuming we also choose to engage and compete, except for the aspect and the extent to which they are military enemies of us.
Title: Re: China
Post by: prentice crawford on August 19, 2010, 12:48:11 AM

 We are just getting the wrong idea... (

Title: Re: China
Post by: G M on August 27, 2010, 02:56:50 PM

Title: Re: China
Post by: Crafty_Dog on August 27, 2010, 03:20:47 PM
Please save me the pain in the butt of registering for a free 30 days and receiving a lifetime of pestering spam emails and post the article here?
Title: Re: China
Post by: G M on August 27, 2010, 03:52:04 PM
Banks back switch to renminbi for trade

By Robert Cookson in Hong Kong

Published: August 26 2010 17:55 | Last updated: August 26 2010 17:55

A number of the world’s biggest banks have launched international roadshows promoting the use of the renminbi to corporate customers instead of the dollar for trade deals with China.

HSBC, which recently moved its chief executive from London to Hong Kong, and Standard Chartered, are offering discounted transaction fees and other financial incentives to companies that choose to settle trade in the Chinese currency.
Editorial Comment: Renminbi goes global - Aug-26
David Pilling: Long march to convertibility - Aug-25
Opinion: Great dangers of great powers - Aug-20
Lex: McDonald’s renminbi bonds - Aug-20
Beijing looks to broaden renminbi use - Aug-17
Opinion: Watch China’s coasts, not its currency - Aug-10

“We’re now capable of doing renminbi settlement in many parts of the world,” said Chris Lewis, HSBC’s head of trade for greater China. “All the other major international banks are frantically trying to do the same thing.”

HSBC and StanChart are among a slew of global banks – including Citigroup and JPMorgan – holding roadshows across Asia, Europe and the US to promote the renminbi to companies.

The move aligns the banks favourably with Beijing’s policy priorities and positions them to profit from what is expected to be a rapidly growing line of business in the future.

The phenomenon will accelerate Beijing’s drive to transform the renminbi from a domestic currency into a global medium of exchange like the dollar and euro.

Chinese central bank officials accompanied StanChart bankers on a roadshow to Korea and Japan in June. The bank held similar events in London, Frankfurt and Paris.

Lisa Robins, JPMorgan’s head of treasury and securities services for China, said there had been a “spike in interest” from international clients.

An increasing number of Chinese companies have been asking foreign trading partners to accept renminbi as payment, said Carmen Ling, Hong Kong head of global transaction services at Citi.

BBVA, Spain’s second-biggest bank, is also drawing up plans for a global marketing campaign that will focus on Latin American companies that export to China.

Banks started establishing renminbi trade settlement operations in mid-2009, when Beijing introduced a pilot scheme allowing companies to use the renminbi for trade outside China.

The scramble has intensified in recent months as Beijing has substantially expanded the scheme – from a handful of Asian countries to the whole world – and introduced other liberalisations to its currency regime.

Cross-border trade in renminbi totalled Rmb70.6bn ($10bn) in the first half of the year – about 20 times the Rmb3.6bn recorded in the second half of 2009.

But those figures remain tiny compared to the $2,800bn worth of goods and services that were traded across China’s borders last year, most of which was settled in dollars or euros.

With renminbi trade settlement volumes expected to increase rapidly, banks are under pressure to establish a foothold in the nascent market and demonstrate to Chinese officials that they are committed to the scheme.

China has taken several steps in recent months to boost the international use of its currency and to establish Hong Kong, the special administrative region, as the global centre for offshore renminbi business.

McDonald’s, the US burger chain and icon of globalisation, took advantage of the new rules this month when it became the first foreign multinational to issue renminbi-denominated bonds in Hong Kong.
Title: Re: China
Post by: G M on August 27, 2010, 06:08:58 PM
FWIW, I quote our esteemed vice president:

"This is a big fcuking deal".

I think history will show that this was an important benchmark. China is moving forward as we decline.
Title: Re: China
Post by: DougMacG on August 27, 2010, 11:31:01 PM
I have read that this is a good development and long overdue.  For one thing the Americans have been complaining for quite some time that the fixed exchange rate was artificially low.  If there is a market for their currency and a floating exchange rate, perhaps it will be right-sized.

"China is moving forward as we decline." 

At this moment, yes/maybe. Given that famous traffic jam, I would say not very fast and not without bumps in the road.  They are doing a couple of things right.  Underlying that you will also find crony capitalism, mis-allocated resources, bad loans, overvalued assets, an unprecedented demographic scheme, inability to take on immigrants and a structural inability to make political change.

If they are moving past us they will need their own currency.  But why did they not do it sooner?  Certainly they were not trading in dollars as a favor to us.  The dollar gave them something third world countries don't have - a stable currency.  If the pendulum of forward progress swings backward a couple of times, the currency could get pounded.  A floating and marketable currency will expose weakness.  I hope they don't have any.  :-)

"“We’re now capable of doing renminbi settlement in many parts of the world,”"

Maybe they can and maybe you can't.  But we don't have any yuan and we will be buying products from China in large quantities overnight, tomorrow morning and the next day.  Those transactions will happen in dollars.  If we must buy Yuan / Renminbi first, who do we buy them from?  The Chinese who print it.  What do we buy them with?  Dollars.  It's what we have.  Then they have dollars to spend elsewhere in the world, like on oil/energy. Or they can invest it back in our economy, our T-bills or dollar based investments - same as they do now.  They don't buy products from us for the most part so the trade / investment equation has to balance out somewhere.  Looks to me like change won't be easy for them.

We have had some heated exchanges here over monetary policy.  Second guessing the Fed from the armchair is easy and costs nothing.  Managing your own real currency in a major lopsided economy is not.  If I were the Fed advising the new currency board of the PRC my advice would be - don't try this at home.
Title: Re: China
Post by: Crafty_Dog on August 28, 2010, 01:05:42 AM
We currently are running about the same size deficit as a % of GDP as Greece.  The only difference is that we get to pay it with dollars we print.   When folks stop taking our dollars we will be in the same shape as Greece.  Folks have been taking our dollars for lack of alternative.  Now they begin to have one.  Should the trend continue, and we can no longer finance our deficits with the printing press, interest rates will shoot up-- quite possibly quite quickly as everyone heads for the exits at the same time. 

Working from memory IIRC at present interest payments currently run about $250B a year- a rather hefty sum considering how low interest rates are at present.  Even a moderate rise in interest rates could easily take this to over one Trillion dollars. 
Title: Re: China
Post by: JDN on August 28, 2010, 08:15:14 AM
We currently are running about the same size deficit as a % of GDP as Greece.

While I do think our deficit is way too large and growing, I couldn't find any source that verified that our current
deficit was "the same size deficit as a % of GDP as Greece."  Source?
Title: Re: China
Post by: G M on August 28, 2010, 08:39:39 AM

Title: Re: China
Post by: JDN on August 28, 2010, 09:03:57 AM
"United States is in danger of being in the same dire situation as Greece – national bankruptcy -- in seven to 10 years unless the federal government radically curtails spending."

I understand, however "projecting" if no changes are make that in "seven to 10 years" from now we will be in the dame dire situation as Greece is a lot different
than Crafty saying "we are "currently" are running about the same size deficit as a % of GDP as Greece"

I have little faith in 7-10 year economic projections.
Title: Re: China
Post by: G M on August 28, 2010, 09:08:32 AM
But for Reidl, who recently issued his own report on federal spending, seven to 10 years may be too optimistic.
“It’s very tough to predict when a financial crisis will hit, because much of it depends on bond market psychology,” Reidl said. “As soon as the bond market decides the U.S. may not be able to fully service its debts, they will respond with a flight from our currency. When the bond market makes that decision is really anybody’s guess. It could be two to three years from now, it could be 10 years from now.”

**It could be even sooner.**
Title: Re: China
Post by: Crafty_Dog on August 28, 2010, 09:09:52 AM
Which is why you should read the whole article:

"When Greece started to admit its debt problems last November, the government estimated its deficit last year was 12.7 percent of its GDP – a figure that Eurostat, the European Commission’s official statistics agency, said was too low and which it revised to upward 13.6 percent.  Meanwhile, the U.S. deficit is on track to become 10.3 percent of GDP in 2010 under President Obama’s budget.  
, , , Greece’s debt hovered above 110 percent of the GDP in November. Meanwhile, the estimated U.S. national debt was 52.9 percent of GDP in 2009 -- a significant jump from the 39.7 percent in the previous year, according to data from the CIA World Factbook."

Lets see 52.9 minus 39.7 equals 13.2.  Yes?   13.2 is greater than 12.7.  Yes?
Title: Re: China
Post by: JDN on August 28, 2010, 09:34:45 AM
Sorry, but I am confused.

"Greece's deficit is 13.6
US deficit is on track to become 10.3"

Doesn't that mean our current deficit as a percentage is 25% less than Greece's?


"Greece's debt hovered above 110% in November
US debt was 52.9% in 2009."

So our debt as a percentage is less than half of Greece's right?

52.9 - 39.7 does equal 13.2%, but this is the amount, as a percentage,
that our debt has increased from last year.  Not good.  IF this trend continues we are in
deep shit, but "currently" we are much better off than Greece.

Title: Re: China
Post by: G M on August 28, 2010, 09:47:25 AM

Sword of Damocles.
Title: Re: China
Post by: Crafty_Dog on August 28, 2010, 10:06:00 AM
JDN: Sorry, but I am confused.

Marc:  Agreed. :lol:

JDN: "Greece's deficit is 13.6
US deficit is on track to become 10.3"
Doesn't that mean our current deficit as a percentage is 25% less than Greece's?

Marc:  I suppose I could quibble that one is 2009 and one is projected 2010 and that as best as I can tell both my numbers were for 2009, , ,


JDN: "Greece's debt hovered above 110% in November
US debt was 52.9% in 2009."

So our debt as a percentage is less than half of Greece's right?

Marc:  Very good and , , , irrelevant. This is not the point in question.  The point in question is the current magnitude of deficit spending.

52.9 - 39.7 does equal 13.2%, but this is the amount, as a percentage,
that our debt has increased from last year.  Not good.  IF this trend continues we are in
deep shit, but "currently" we are much better off than Greece.

Marc:  Lets refresh our memory.  A few hours ago, you questioned thusly:

" I couldn't find any source that verified that our current deficit was "the same size deficit as a % of GDP as Greece."  

GM posted an article which contained information that included data which precisely answered your question.  You responded to other data in the article as if it were the data being offered in response to your question.  I then broke down the relevant data for you.  Apparently I have not yet succeeded in explaining it in terms you understand.

Allow me to try again.

The point of the 13.2% number is precisely that it IS 2009's deficit and that this is greater than Greece's 2009 deficit and that my original assertion, for which you sought data, is thus supported.   Yes?  Anyway, is all of this really the point?  The larger point is that we are running in the same neighborhood as Greece.   As GM points out in his post, Greenspan is catching up with our analysis  :lol:
Title: Re: China
Post by: JDN on August 28, 2010, 10:20:16 AM
Sorry, still confused....   :-)

13.2% is not our 2009 deficit; it is merely the increase percentage from 2008.  Admittedly a horrid trend,
but we are not "currently" as bad a Greece.  Look at the numbers.

But I do agree, if something is not done or as you pointed out, if interest rates shoot up, times could/will get much worse.

But let's move on...  I think we agree on the overall gloomy picture.
Title: Re: China
Post by: DougMacG on August 28, 2010, 10:48:13 AM
JDN: "I have little faith in 7-10 year economic projections."

True, they are based on some rosy scenario numbers such as that health care is net-free and that the economy will grow robustly while we continue to raise taxes during recession or stagnation.  Without policy corrections, these forecasts will be WAY off the mark and reality will be far worse IMHO.

When Greece imploded, some thought it would bring down the Euro, the EU, the world financial system etc.  It did not all come true but when the U.S. fails, only that one guy in the Amazon will be unaffected.

JDN, the original point was that we are loaded in debt and loading up more with no end in sight.  Current (deemed but not passed) budget is roughly $4T revenues, $2.5T revenues resulting in $1.5T in new debt or monetized deficit.  Totally irresponsible and was enabled but not caused by China.  Crafty is right that whatever that true debt burden is now we have not felt the main impact yet with interest rates artificially held close to zero.  When interest rates skyrocket beyond our control, we are screwed and so are our creditors.

Crafty's wrote:  "...we get to pay it (international debt) with dollars we print."

 - What that means to me is that unlike third world countries, we (unfortunately) can inflate our way part way out of that burden, creating other/worse burdens.

"When folks stop taking our dollars we will be in the same shape as Greece.  Folks have been taking our dollars for lack of alternative.  Now they begin to have one.  Should the trend continue, and we can no longer finance our deficits with the printing press, interest rates will shoot up-- quite possibly quite quickly as everyone heads for the exits at the same time."

 - China's economy is built largely on export sales and its trade imbalance with the US (and elsewhere).  If they sell to Americans who have only dollars while not buying our products they will have excess dollars.  World trade if you include the investment and financial side offsetting the imbalanced flow of goods and services is a closed system.  I don't see how they quit buying dollar based investments without first correcting the trade imbalance.  If they sell off their dollars or dollar based investments, then someone else is holding them. 

If the currency change is successful from the Chinese point of view, I think it would force both countries to behave more responsibly. (ex: Greek lawmakers approved sweeping pension reforms July 10 2010  China needs to allow domestic consumption and personal wealth to start catching up with its production side and America needs to stop punishing our own manufacturers with the myriad of increasing rules, mandates, prohibitions, taxes, and start moving our federal budget back toward balance.

More likely this currency experiment will fail IMO for the same reasons that they were unable to do it previously.

The good news is that deficits and GDP are inversely related, not proportional.  Most of current spending is not going to go away.  The boldest proposal out there only rolls it back to 2008 levels.  We can only grow revenues and thus shrink deficits by growing GDP so pro-growth policies if we could find some would improve both measures simultaneously.   If we grow the private economy, deficits will shrink IF we find sane people to watch over public spending while we do this. And if we continue to steal the resources of our economy for the public sector, the GDP will not grow. The burden of the accumulated debt shrinks during times of high growth as a percentage of the total economy, but again only if public spending is controlled and contained.

I remember one of the pundits lamenting last year that China was the last check or balance left on our irresponsibility once Peloi-Reid-Obama gained their 60th vote in the senate.  This news seems to illustrate that.
Title: Re: China
Post by: Crafty_Dog on August 28, 2010, 01:48:54 PM
IMHO an important strand of China's strategy is to use those dollars to buy assets, raw materials, etc world-wide.
Title: Re: China
Post by: G M on August 28, 2010, 05:34:23 PM
Yup, especially oil.

 China: To Invest $1 Billion In Iranian Petrochemical Projects
August 28, 2010

The National Iranian Petrochemical Company and a Chinese consortium are completing talks on an agreement under which China would funnel some $1 billion into petrochemical projects in Iran, Mehr News Agency reported Aug. 28. The construction of the petrochemical facilities requires a total of $43 billion in investment funds; contracts have already been signed to implement 28 of those projects.
Title: Re: China
Post by: DougMacG on August 28, 2010, 07:05:48 PM
"an important strand of China's strategy is to use those dollars to buy assets, raw materials, etc world-wide."

Yes.  So the 2 largest energy importers buy oil in dollars hence oil is sold in dollars, oil suppliers take in dollars, buy or invest back into what they need, all over the world - in dollars.  I'm not able to see how that cycle breaks in favor of the Chinese currency without a change in underlying fundamentals.
Title: Re: China
Post by: Crafty_Dog on August 28, 2010, 10:34:06 PM
" I'm not able to see how that cycle breaks in favor of the Chinese currency without a change in underlying fundamentals."

Flesh this out please?
Title: China trade and currency
Post by: DougMacG on August 29, 2010, 02:20:57 PM
[Flesh this out please]

Some underlying fundamentals in no particular order:

The US imports from China: $300-330 billion
China imports form US: $70 billion, less than 1/4th.
 = China is importing $230+ dollars.  Must spend or invest these US dollars somewhere.

(EU goods exports to China 2009: €81.7 billion
 EU goods imports from China 2009: €214.7 billion - similar situation)

We also have a trade deficit with Europe, peaked at about $140-150 billion/yr. which floods dollars, not Euros into the global market.

The total US trade deficit peaked at about $700-750 in the healthy economy of 2005-2008. (That number is down in this recession) We are running a trade deficit with the rest of the world outside of China and Europe of roughly $250 billion/yr. That is net of what they spend with us so they must buy elsewhere using dollars or invest/lend back to the US in dollars.

The US imports 66% of its oil, buys primarily in US$, $400 billion/yr,

The US restricts domestic oil production.  Those restrictions cause much of the import requirement which causes dollars to leave the US.

China for the most part does not need US manufactured goods (and steals our technology anyway).

China consumers use perhaps a few hundred billion dollars/yr worth of US software, music, movies, patent infringements, etc. that they don't pay for (which would otherwise create some balance in trade).

The US zones, restricts, regulates, taxes, creates work rules, has pending energy use legislation, health care mandates, etc. that make US goods largely non-competitive in an economically freer country like China (it hurts to say that).  US auto manufacturing pays more for healthcare than steel.

China imports oil at $150-200 billion /yr.

US budget deficit is currently at 1500-1600 billion.

Of our public debt, 25% is owned by foreign governments, 22% of that is owned by China.  Those percentages will need to be updated after we see who is buying all our new debt.  At those percentages that would be $88 Billion per year bought by the China.  In other words, a part of their trade surplus comes back in there and a part of those dollars go into the global economy via their oil suppliers.

These imbalances combine to make bidirectional and circular flows of funds that find a balance.  Each piece of the imbalance above either enables or causes something else to occur or exist, depending on how you look at it.  Floating or changing exchange rates also play a role in finding balance, as we see between the dollar and the Euro, but did not have with China.
Changing fundamentals:  

If China had a middle class demanding and purchasing goods from around the world up to near the amount of Chinese exports - it would not find itself holding dollars and using them for other purchases like oil and buying T-bills.

If the US produced all of its own oil that it could - fewer dollars would flood the world markets.

If the US moved toward rough balance in its federal budget - we would need fewer dollars to come back in to lend us our public debts.

If China enforced US/World copyright/patent/trademark laws - we would have some chance at approaching trade parity.  

If the US committed itself to being a competitive place to locate, manufacture, produce and export from instead of a place actively looking for ways to hinder production and punish profits - US goods would be more competitive, we would export more, employ more people in manufacturing and send fewer net dollars out.

As economies elsewhere develop, prosper, grow a middle class and their own industries, and develop legal systems to enforce global patents copyrights etc., they become viable markets for US export sales for technologies, intellectual property products, services, etc.  China has economic growth but does not seem to grow its middle class or bring its legal/political system up intot he 19th century or beyond.

Very true that we certainly don't want to be borrowing our excesses in foreign currency but also true that we shouldn't want to be borrowing our excesses from anyone.

If you leave these fundamentals in place, the current cycle is hard to break.  China needs to sell to America to get a significant part of its money and growth and that money is in dollars. Then China needs to spend or invest those dollars somewhere.  They can require foreign sales in Yuan (Renminbi) but the customer cannot pay with them if they don't have them and unless they are an oil exporter, China is not buying their products with any proportionality.

If you break any or all of these cycles and co-dependencies, you could break the global reliance on the US$.  But if that happens, such as China buying more from the US, putting the US budget more in balance, seeing foreign trade between other countries made in currencies other than US dollars, if developing markets increase purchasing power, or if US manufacturers gain competitiveness and increase exports - I fail to see how any of those developments would be harmful to us.
Title: Interesting coincidence
Post by: Crafty_Dog on August 30, 2010, 09:49:28 AM
China: Rumors of the Central Bank Chief's Defection
August 30, 2010 | 1406 GMT

LIU JIN/AFP/Getty Images
People’s Bank of China Gov. Zhou XiaochuanRumors have circulated in China that People’s Bank of China (PBC) Gov. Zhou Xiaochuan may have left the country. The rumors appear to have started following reports on Aug. 28 which cited Ming Pao, a Hong Kong-based news agency, saying that because of an approximately $430 billion loss on U.S. Treasury bonds, the Chinese government may punish some individuals within the PBC, including Zhou. Although Ming Pao on Aug. 30 published a report on its website indicating that the prior report was fabricated by a mainland news site that had attributed the false information to Ming Pao, rumors of Zhou’s defection have spread around China intensively, and Zhou’s name has been blocked from Internet search engines in China.

STRATFOR has received no confirmation of the rumor, and reports by state-run Chinese media appeared to send strong indications that Zhou is in no trouble at the moment. However, the release of this rumor and its dispersion throughout the public is significant, particularly as the Communist Party of China (CPC) is preparing for a leadership transition in 2012.

Chinese state-run media and official government websites have run several high-profile reports about Zhou, which should be seen as a move to refute the rumors. The PBC website published two articles on its homepage reporting on Zhou’s meeting with visiting Japanese Financial Services Minister Shozaburo Jimi during the third China-Japan high-level economic dialogue as well as a meeting with an Italian delegation. Xinhua news agency reported that Zhou told the PBC Party Committee Enlargement Meeting on Aug. 30 it should “continue to implement justice, and strengthen legislative work in the financial system.” Prior to this news, Zhou appeared at the 2nd annual conference of the heads of the Chinese, Japanese and Korean central banks held on Aug. 3, and his most recent public appearance was Aug. 10 for China’s Financial System Anti-corruption Construction Exhibition.

Zhou is known to have lofty political ambitions and is believed to be a close ally to former Chinese President Jiang Zemin, as well as a core figure for Jiang’s “Shanghai Gang.” There has been no shortage of rumors about Zhou’s possible dismissal in the past five years, as he is believed to be associated with several high-level financial scandals. For example, Zhou was rumored to be under “shuanggui,” a form of house arrest administered by the CPC, during the massive crackdown of Shanghai Party Secretary Chen Liangyu in 2006, which was perceived in the country as a crackdown of the Shanghai Gang and part of Hu’s effort to consolidate power ahead of the 2007 power transition. There was also a rumor that he might have been detained following the investigation and arrest of Wang Yi, the vice governor of the China Development Bank, along with several other officials in the financial circle. Currently, several financial scandals are still under investigation, and it is likely that Zhou, as PBC governor and one of the most powerful economic players in the country, could be associated with some cases. Therefore, whether or not the rumor is true at this time, the leaking of this news is very likely to be associated with a power struggle within the Communist Party’s economic hierarchy.

Title: China Bubble readying to burst?
Post by: Crafty_Dog on September 13, 2010, 09:10:39 PM

Pop go the weasels , , ,
Title: Re: China
Post by: prentice crawford on September 13, 2010, 10:45:23 PM
 And it is to be seen if their bubble, like our bubble, brings about another worldwide meltdown of the financial markets.
Title: Re: China
Post by: Crafty_Dog on September 14, 2010, 01:08:27 AM
EXACTLY SO :-o :-o :-o

By the way, did I hear correctly today that China is sending a rocket/satellite/manned landing to the moon in 2010?

Title: Stratfor: Succession
Post by: Crafty_Dog on September 14, 2010, 10:54:03 AM
second post of the day:

In 2012, the Communist Party of China’s (CPC) leaders will retire and a new generation — the so-called fifth generation — will take the helm. The transition will affect the CPC’s most powerful decision-making organs, determining the makeup of the 18th CPC Central Committee, the Political Bureau (Politburo) of the Central Committee, and most important, the nine-member Politburo Standing Committee that is the core of political power in China.

While there is considerable uncertainty over the handoff, given China’s lack of clear, institutionalized procedures for succession and the immense challenges facing the regime, there is little reason to anticipate a succession crisis. But the sweeping personnel change comes at a critical juncture in China’s modern history, with the economic model that has enabled decades of rapid growth having become unsustainable, social unrest rising, and international resistance to China’s policies increasing. At the same time, the characteristics of the fifth generation leaders suggest a cautious and balanced civilian leadership paired with an increasingly influential and nationalist military. This will lead to frictions over policy even as both groups remain firmly committed to perpetuating the regime.

The Chinese leadership that emerges from 2012 will likely be unwilling or unable to decisively carry out deep structural reforms, obsessively focused on maintaining internal stability, and more aggressive in pursuing the core strategic interests it sees as essential to this stability.

Just as China’s civilian leadership will change, China’s military will see a sweeping change in leadership in 2012. The military’s influence over China’s politics and policies has grown over the past decade, as the country has striven to professionalize and modernize its forces and expand its capabilities in response to deepening international involvement and challenges to its internal stability. The fifth generation military leaders are the first to have come out of the military modernization process, and to have had their careers shaped by the priorities of a China that has become a global economic power. They will take office at a time when the military’s budget, stature and influence over politics is growing, and when it has come to see its role as extending beyond that of a guarantor of national security to becoming a guide for the country as it moves forward and up the ranks of international power.

Civilian Leadership

Power transitions in the People’s Republic of China have always been fraught with uncertainty because the state does not have clear and fixed institutional procedures for the transfer of power between leaders and generations. The state’s founding leader, Mao Zedong, did not establish a formal process before he died, giving rise to a power struggle. Mao’s eventual successor, Deng Xiaoping, was also a strong leader whose personal power could override rules and institutions. But Deng’s retirement also failed to set a firm succession precedent. He saw two of his chosen successors lose out amid factional struggles, and Deng maintained extensive influence well after formally retiring and passing power to Jiang Zemin and naming Jiang’s successor, current President Hu Jintao.

Even though China does not have any fixed rules on power transfers, a series of precedents and informal rules have been observed. Recent years have seen a move toward the solidification of these rules. Deng set a pattern in motion that smoothed the 2002 presidential transition from Jiang to Hu despite behind-the-scenes factional tensions. As mentioned, Deng had also appointed Hu to be Jiang’s successor. This lent Hu some of Deng’s great authority, thus establishing an air of inevitability and deterring potential power grabs. This leap-frog pattern was reinforced when Jiang put Vice President Xi Jinping in line to succeed Hu in 2012. The coming transfer will test whether the trend toward stable power transitions can hold.

Characteristics of the Fifth Generation

While all countries experience leadership changes that can be described as generational in one sense or another, modern Chinese history has been so eventful as to have created generations that, as a group, share distinct characteristics and are markedly different from their forebearers in their historical, educational and career experiences. Deng created the concept of the “generational” framework by dubbing himself the core second-generation leader after Mao, and events and patterns in leadership promotion and retirement reinforced the framework. The most defining factor of a Chinese leadership generation is its historical background. The first generation defined itself by the formation of the Communist Party and the Long March of exile in the 1930s, the second generation in the war against the Japanese (World War II), and the third during civil war and the founding of the state in 1949. The fourth generation came of age during the Great Leap Forward in the late 1950s, Mao’s first attempt to transform the entire Chinese economy.

The fifth generation is the first group of leaders that cannot — or can only barely — remember a time before the foundation of the People’s Republic. These leaders’ formative experiences were shaped during the Cultural Revolution (1967-77), a period of deep social and political upheaval in which the Mao government empowered hard-liners to purge their political opponents in the bureaucracy and Communist Party. Schools and universities were closed in 1966 and youths were sent down to rural areas to do manual labor, including many fifth-generation leaders such as likely future President Xi Jinping. Some young people were able to return to college after 1970, where they could only study Marxism-Leninism and CPC ideology, while others sought formal education when schools were reopened after the Cultural Revolution. Very few trained abroad, so they did not become attuned to foreign attitudes and perceptions in their formative days (whereas the previous generation had sent some young leaders to study in the Soviet Union). Characteristically, given the fuller educational opportunities that arose in the late 1970s, the upcoming leaders have backgrounds in a wide range of studies. Many were trained as lawyers, economists and social scientists, as opposed to the engineers and natural scientists who have dominated the previous generations of leadership.

Politburo Standing Committee member Xi Jinping at the National People’s Congress meeting in MarchIn 2012, only Vice President Xi Jinping and Vice Premier Li Keqiang will remain on the Politburo Standing Committee, the core decision-making body in China. Seven new members will join, assuming the number of total members remains at nine, which has been the case since 2002. All seven will hail from the broader Politburo and were born after October 1944, in accordance with an unwritten rule established under Deng requiring Chinese leaders to retire at age 70 (it was lowered to 68 in 1997). The retiring leaders will make every effort to strike a deal preventing the balance of power within the Politburo and the Politburo Standing Committee from tipping against them and their faction.

At present, China’s leaders divide roughly into two factions broadly defined as the populists and the elitists.

The populists are associated with Hu Jintao and the China Communist Youth League (CCYL) and are more accurately referred to as the “league faction” (in Chinese, the “tuanpai”). In the 1980s Hu led the league, which comprises his political base. The CCYL is a massive organization that prepares future members of the CPC. It is structured with a central leadership and provincial and local branches based in the country’s schools, workplaces, and social organizations. In keeping with the CCYL’s rigid hierarchy and doctrinal training, the policies of Hu’s “CCYL clique” focus on centralizing and consolidating power, maintaining social stability, and seeking to redistribute wealth to alleviate income disparities, regional differences, and social ills. The clique has grown increasingly powerful under Hu’s patronage. He has promoted people from CCYL backgrounds, some of whom he worked with during his term as a high-level leader in the group in the early 1980s, and has increased the number of CCYL-affiliated leaders in China’s provincial governments. Several top candidates for the Politburo Standing Committee in 2012 are part of this group, including Li Keqiang and Li Yuanchao, followed by Liu Yandong, Zhang Baoshun, Yuan Chunqing, Liu Qibao and Wang Yang.

The elitists are leaders associated with former President Jiang Zemin and his Shanghai clique. Their policies aim to maintain China’s rapid economic growth, with the coastal provinces unabashedly leading the way. They also promote economic restructuring to improve China’s international competitiveness and reduce inefficiencies, even at the risk of painful changes for some regions or sectors of society. The infamous “princelings” — or the sons, grandsons and relatives of the CPC’s founding fathers and previous leaders who have risen up the ranks of China’s system through these familial connections — are often associated with the elitists. The princelings are criticized for benefiting from nepotism, and some have suffered from low support in internal party elections. Still, they have name recognition from their proud Communist family histories, the finest educations and career experiences and access to personal networks set up by their fathers. The Shanghai clique and princelings are joined by economic reformists of various stripes who come from different backgrounds, mostly in the state apparatus such as the central or provincial bureaucracy and ministries, who often are technocrats and specialists. Prominent members of this faction eligible for the 2012 Politburo Standing Committee include Wang Qishan, Zhang Dejiang, Bo Xilai, Yu Zhengsheng and Zhang Gaoli.

The struggle between the populist and elitist factions is a subset of the deeper struggle in Chinese history between centralist and regionalist impulses. Because of China’s vast and diverse geography, China historically has required a strong central government, usually located on the North China Plain, to maintain political unity. But this cyclical unity tends to break down over time as different regions pursue their own interests and form relationships with the outside world that become more vital to them than unity with the rest of China. The tension between centralist and regionalist tendencies has given rise to the ancient struggle between the north (Beijing) and the south (Shanghai), the difficulties that successive Chinese regimes have had in subordinating the far south (i.e. Guangdong and the Pearl River Delta), and modern Beijing’s anxiety over the perceived threat of separatism from Taiwan, Xinjiang and Tibet. In this context, the struggle between the two dominant political factions appears as the 21st century political manifestation of the irresolvable struggle between the political center in Beijing and the other regions, whose economic vibrancy leads them to pursue their own ends. While Hu Jintao and his allies emphasize central control and redistributing regional wealth to create a more unified China, the followers of Jiang tend to emphasize the need to let China’s most competitive regions grow and prosper, often in cooperation with international partners, without being restrained by the center or weighed down by the less dynamic regions.

Factional Balance

The politicians almost certain to join the Politburo Standing Committee in 2012 appear to represent a balance between factional tendencies. The top two, Xi Jinping and Li Keqiang, are the youngest members of the current Politburo Standing Committee and are all but certain to become president and premier, respectively. Xi is a princeling — son of Xi Zhongxun, an early Communist revolutionary and deputy prime minister — and his leadership in Fujian, Zhejiang and Shanghai exemplifies the ability of coastal manufacturing provinces to enhance an official’s career. But Xi is also popular with the public, widely admired for his hardships as a rural worker during the Cultural Revolution. He is the best example of bridging both major factions — promoting economic reforms but seen as having the people’s best interests at heart. Li was trained as an economist under a prestigious teacher at Beijing University, received a law degree, and is a former top secretary of the CCYL and stalwart of Hu’s faction. Economics is his specialty, not in itself but as a means to social harmony. For example, he is famous for promoting further revitalization of northeastern China’s industrial rust belt of factories that have fallen into disrepair. Li also has held leadership positions in provinces like Henan, an agricultural province, and Liaoning, a heavy-industrial province, affording him a view of starkly different aspects of the national economy.

After Xi and Li, the most likely contenders for seats on the Politburo Standing Committee are Li Yuanchao, director of the CPC’s powerful organization department (CCYL clique), Wang Yang (CCYL), member of the CPC’s Politburo, Liu Yunshan (CCYL), director of the CPC’s propaganda department, and Vice Premier Wang Qishan (princeling/Jiang’s Shanghai clique). The next most likely candidates include Vice Premier Zhang Dejiang (Jiang’s Shanghai clique), Chongqing Party Secretary Bo Xilai (princeling), Tianjin Party Secretary Zhang Gaoli (Jiang’s Shanghai clique) and CPC General Office Director Ling Jihua (secretary to Hu Jintao, CCYL clique). It is impossible to predict exactly who will be appointed to the Politburo Standing Committee. The lineup is the result of intense negotiation between the current committee members, with the retiring members (everyone except Xi Jinping and Li Keqiang) wielding the most influence. Currently, of the nine Politburo Standing Committee members, as many as six are Jiang Zemin proteges, and they will push for their followers to prevent Hu from taking control of the committee.

(click here to enlarge image)
It accordingly seems possible that the 2012 Politburo Standing Committee balance will lean slightly in favor of Jiang’s Shanghai clique and the princelings, given that Xi Jinping will hold the top seat, but that by numbers the factions will be evenly balanced. Like his predecessors, Xi will have to spend his early years as president attempting to consolidate power so he can put his followers in positions of influence and begin to shape the succeeding generation of leaders for the benefit of himself and his circle. An even balance, if it is reached, may not persist through the entire 10 years of the Xi and Li administration: the CCYL clique looks extremely well-situated for the 2017 reshuffle, at which point many of Jiang’s proteges will be too old to sit on the Politburo Standing Committee while a number of rising stars in the CCYL currently serving as provincial chiefs will be well-placed for promotion.

There is a remote possibility that the number of seats on the Politburo Standing Committee could be cut from nine to seven, the number of posts before 2002. This would likely result in a stricter enforcement of age limits in determining which leaders to promote, perhaps setting the cutoff age at 66 or 67 (instead of 68). Stricter age criteria could eliminate three contenders from Jiang’s Shanghai clique (Zhang Gaoli, Zhang Dejiang, and Shanghai Party Secretary Yu Zhengsheng) and one from Hu’s clique (Politburo member Liu Yandong). This would leave Bo Xilai (a highly popular princeling with unorthodox policies, but like Xi Jinping known to straddle the factional divide) and CPC General Office Director Ling Jihua (secretary to Hu Jintao, CCYL clique) as the most likely final additions to the Politburo Standing Committee. The overall balance in this scenario of slightly younger age requirements would then lean in favor of Hu’s clique.

Title: Succession-2
Post by: Crafty_Dog on September 14, 2010, 10:55:15 AM
Collective Rule

The factions are not so antagonistic that an intense power struggle is likely to rip them apart. Instead, they can be expected to exercise power by forging compromises. Leaders are chosen by their superiors through a process of careful negotiation to prevent an imbalance of one faction over another that could lead to purges or counterpurges. That balance looks as if it will roughly be maintained in the configuration of leaders in 2012. In terms of policymaking, powerful leaders will continue to debate deep policy disagreements behind closed doors. Through a process of intense negotiation, they will try to arrive at a party line and maintain it uniformly in public. Stark disagreements and fierce debates will echo through the statements of minor officials and academics, and in public discussions, newspaper editorials, and other venues, however. In extreme situations, these policy battles could lead to the ousting of officials who end up on the wrong side. But the highest party leaders will not contradict each other openly on matters of great significance unless a dire breakdown has occurred, as happened with fallen Shanghai Party Secretary Chen Liangyu.

That the fifth generation leadership appears in agreement on the state’s broadest economic and political goals, even if they differ on the means of achieving those goals, will be conducive to maintaining the factional balance. First, there is general agreement on the need to continue with China’s internationally oriented economic and structural reforms. These leaders spent the prime of their lives in the midst of China’s rapid economic transformation from a poor and isolated pariah state into an international industrial and commercial giant, and were the first to experience the benefits of this transformation. They also know that the CPC’s legitimacy has come to rest, in great part, on its ability to deliver greater economic opportunity and prosperity to the country — and that the greatest risk to the regime would likely come in the form of a shrinking or dislocated economy that causes massive unemployment. Therefore, for the most part they remain dedicated to continuing with market-oriented reform. They will do so gradually and carefully, however, and will not seek to intensify reformist efforts to the point of dramatically increasing the risk of social disruption. Needless to say, while the elitists can be energetic in their pursuit of economic liberalization, the populists tend to be more suspicious and more willing to re-centralize controls to avoid undesirable political side effects, even at the expense of long-term risks to the economy.

More fundamentally, all fifth generation leaders are committed to maintaining CPC rule. The chaos of the Cultural Revolution impressed upon the fifth generation a sense of the extreme dangers of China’s having allowed an autocratic ruler to dominate the decision-making process and intra-party struggle to run rampant. Subsequent events have reinforced the fear of internal divisions: the protest and military crackdown at Tiananmen Square in 1989, the threat of alternative movements exemplified by the Falun Gong protest in 1999, the general rise in social unrest throughout the economic boom of the 1990s and 2000s. More recent challenges have reinforced this, such as natural disasters like the Sichuan earthquake in 2008, ethnic violence and riots in Tibet in 2008 and Xinjiang in 2009, and the pressures of economic volatility since the global economic crisis of 2008. These events have underscored the need to maintain unity and stability in the Party ranks and in Chinese society, by force when necessary. So while the fifth generation is likely to agree on the need to continue with economic reform and perhaps even limited political reform, it will do so only insofar as it can without destabilizing socio-political order. It will delay, soften, undermine, or reverse reform to ensure stability. Once again, the difference between the factions lies in judging how best to preserve and bolster the regime.


Beyond the apparent balance of forces in the central party and government organs, there remains the tug-of-war between the central government in Beijing and the 33 provincial governments (not to mention Taiwan) — a reflection of the timeless struggle in China between center and periphery. If China is to be struck by deep destabilization under the watch of the fifth generation leaders (which is by no means impossible, especially given the economic troubles facing them), the odds are this would occur along regional lines. Stark differences have emerged, as China’s coastal manufacturing provinces have surged ahead while provinces in the interior, west and northeast have lagged. The CPC’s solution to this problem generally has been to redistribute wealth from the booming coast to the interior in hopes that subsidizing the less developed regions eventually will nurture economic development. In some instances, such as in Shaanxi or Sichuan provinces, urbanization and development have indeed accelerated in recent years. But overall, the interior remains weak and dependent on subsidies from Beijing.

The problem for China’s leadership is that the coastal provinces’ export-led model of growth that has worked well over the past three decades has begun to peak, and China’s annual double-digit growth rates are expected to slow due to weakening external demand, rising labor and material costs and other factors. The result will be louder demands from poor provinces and tighter fists in rich provinces — exposing and deepening competition, and in some cases leading to animosity between the regions.

More so than any previous generation, the fifth generation has extensive cross-regional career experience. This is because climbing to the top of Party and government has increasingly required that many of these leaders first serve in central organizations in Beijing and then do a stint (or more) as governor or Party secretary of one of the provinces (the more far-flung, the better), before returning to a higher central Party or government position in Beijing. Hu Jintao followed such a path, as have many of the aforementioned candidates for the Politburo Standing Committee. Moreover, it has become increasingly common to put officials in charge of a region other than the one from which they originally hailed to reduce regionalism and regional biases. This practice has precedent in China’s imperial history, when it was used to prevent the rise of mini-fiefdoms and the devolution of power. More of the likely members of the 2012 Politburo Standing Committee than ever before have experience as provincial chiefs. This means that when these leaders take over top national positions, they theoretically will have a better grasp of the realities facing the provinces they rule, and will be less likely to be beholden to a single regional constituency or support base. This could somewhat mitigate the central government’s difficulty in dealing with profound divergences of interest between the central and provincial governments.

But regional differences are grounded in fundamental, geographical and ethnic realities, and have become increasingly aggravated by the disproportionate benefits of China’s economic success. Temporary changes of position across the country have not prevented China’s leaders from forming lasting bonds with certain provinces to the neglect of others; and many politicians still have experience exclusively with the regional level of government, and none with the central. The patron-client system, by which Chinese officials give their loyalty to superiors in exchange for political perks or monetary rewards, remains ineradicable. Massive personal networks extend across party and government bureaus, from the center to the regions. Few central leaders remain impervious to the pull of these regional networks, and none can remain in power long if his or her regional power base or bases have been cut. The tension between the center and provinces will remain one of the greatest sources of stress on the central leadership as it negotiates national policy.

As with any novice political leadership, the fifth generation leaders will take office with little experience of what it means to be fully in charge of a nation. Provincial leadership experience has provided good preparation, but the individual members have yet to show signs of particularly strong national leadership capabilities. The public sees only a few of the upcoming members of the Politburo Standing Committee as successfully having taken charge during events of major importance (for instance, Xi Jinping’s response to Tropical Storm Bilis, Wang Qishan’s handling of the SARS epidemic and the Beijing Olympics); only one has military experience (Xi, and it is slight); and only a few of the others have shown independence or forcefulness in their leadership style (namely Wang Qishan and Bo Xilai). Because current Politburo Standing Committee members or previous leaders (like former President Jiang Zemin) will choose the future committee members after painstaking negotiations, this might preserve the balance of power between the cliques. It might also result in a “compromise” leadership — effectively one that would strive for a middle-of-the-road approach, even at the cost of achieving mediocre results. A collective leadership of these members, precariously balanced, runs the risk of falling into divisions when resolute and sustained effort is necessary, as is likely given the economic, social and foreign policy challenges that it will likely face during its tenure.

This by no means is to say the fifth generation is destined to be weak. Chinese leaders have a time-tested strategy of remaining reserved for as long as possible and not revealing their full strength until necessary. And China’s centralist political system generally entails quick implementation once the top leadership has made up its mind on a policy. Still, judging by available criteria, the fifth generation leaders are likely to be reactive, like the current administration. Where they are proactive, it will be on decisions pertaining to domestic security and social stability.

Military Leadership

The Rise of the People’s Liberation Army

Chinese soldiers at the World Expo 2010 in ShanghaiAfter Deng’s economic reforms, the Chinese military began to use its influence to get into industry and business. Over time, this evolved into a major role for the military on the local and provincial level. Military commands supplemented their government budget allocations with the proceeds from their business empires. Ultimately, the central government and Party leadership became concerned that the situation could degenerate into regional warlordism of the sort that has prevailed at various times in Chinese history — with military-political-business alliances developing more loyalty to their interests and foreign partners than to Beijing. Thus when Jiang launched full-scale reforms of the military in the 1990s, he called for restructuring and modernization (including cutting China’s bloated ground forces and boosting the other branches of service) and simultaneously ordered the military to stop dabbling in business. Though the commanders only begrudgingly complied at first, the military-controlled businesses eventually were liquidated and their assets sold (either at a bargain price to family members and cronies or at an inflated price to local governments). To replace this loss of revenue and redesign the military, the central government began increasing budgetary allocations focusing on acquiring new equipment, higher technology, and training and organization to promote professionalism. The modernization drive eventually gave the military a new sense of purpose and power and brought a greater role to the PLA Navy (PLAN), the PLA Air Force (PLAAF), and the Second Artillery Corps (the strategic missile corps).

The military’s influence appears highly likely to continue rising in the coming years for the following reasons:

Maintaining internal stability in China has resulted in several high-profile cases in which the armed forces played a critical role. Natural disasters such as massive flooding (1998, 2010) and earthquakes (especially in Sichuan in 2008) have required the military to provide relief and assistance, giving rise to more attention on military planning and thereby improving the military’s propaganda efforts and public image and prestige. Because China is prone to natural disasters and its environmental difficulties have worsened as its massive population and economy have put greater pressure on the landscape, the military is expected to continue playing a greater role in disaster relief, including by offering to help abroad. At the same time, the rising frequency of social unrest, including riots and ethnic violence in regions like Xinjiang and Tibet, has led to military involvement in such matters. As the trend of rising social unrest looks to continue in the coming years, so the military will be called upon to restore order, especially through the elite People’s Armed Police, which falls under the joint control of the Central Military Commission and State Council.
As China’s economy has become the second largest in the world, its international dependencies have increased. China depends on stable and secure supply lines to maintain imports of energy, raw materials, and components and exports of components and finished goods. Most of these commodities and merchandise are traded over sea, often through choke-points such as the straits of Hormuz and Malacca, making them vulnerable to interference from piracy, terrorism, conflicts between foreign states, or interdiction by navies hostile to China (i.e., the United States, India or Japan). Therefore it needs the PLAN to expand its capabilities and reach so as to secure these vital supplies — otherwise the economy would be exposed to potential shocks that could translate into social and political disturbances. This policy has also led the PLA to take a more active role in U.N. peacekeeping efforts and other international operations, expand integrated training and ties with foreign militaries, and build a hospital ship to begin military-led diplomacy.
Competition with foreign states is intensifying as China has become more powerful economically and internationally conspicuous. In addition to building capabilities to assert its sovereignty over Taiwan, China has become more aggressive in defending its sovereignty and territorial claims in its neighboring seas — especially in the South China Sea, which Beijing elevated in 2010 to a “core” national interest (along with sovereignty over Taiwan and Tibet) and also in the East China Sea. This assertiveness has led to rising tension with neighbors that have competing claims on potentially resource-rich territory in the seas, including Vietnam, the Philippines, Indonesia, Malaysia, Brunei and Japan. Moreover, Beijing’s newfound assertiveness has collided with U.S. moves to bulk up its alliances and partnerships in the region, which Beijing sees as a strategy aimed at constraining China’s rise.
China’s military modernization remains a primary national policy focus. Military modernization includes acquiring and developing advanced weaponry, improving information technology and communications, heightening capabilities on sea and in the air, and developing capabilities in new theaters such as cyberwarfare and outer space. It also entails improving Chinese forces’ mobility, rapid reaction, special operations forces and ability to conduct combined operations between different military services.
The PLA has become more vocal, making statements and issuing editorials in forums like the PLA Daily and, for the most part, receiving positive public responses. In many cases, military officers have voiced a nationalistic point of view shared by large portions of the public (though one prominent military officer, Liu Yazhou, a princeling and commissar at National Defense University, has used his standing to call for China to pursue Western-style democratic political reforms). Military officials can strike a more nationalist pose where politicians would have trouble due to consideration for foreign relations and the concern that nationalism is becoming an insuppressible force of its own.
Of course, a more influential military does not mean one that believes it is all-powerful. China will still try to avoid direct confrontation with the United States and its allies and maintain relations internationally given its national economic strategy and the fact that its military has not yet attained the same degree of sophistication and capability as its chief competitors. But the military’s growing influence is likely to encourage a more assertive China, especially in the face of heightened internal and external threats.

Title: Succession-3
Post by: Crafty_Dog on September 14, 2010, 10:56:34 AM
The Central Military Commission

The Central Military Commission (CMC) is the state’s most powerful military body, comprising the top ten military chiefs, and chaired by the country’s civilian leader. This means the CMC has unfettered access to the top Chinese leader, and can influence him through a more direct channel than through its small representation on the Politburo Standing Committee. Thus the CMC is not only the core decision-making body of the Chinese military, it is also the chief conduit through which the military can influence the civilian leadership.

(click here to enlarge image)
Promotions for China’s top military leaders are based on the officer’s age, his current official position — for instance, whether he sits on the CMC or in the CPC Central Committee — and his personal connections. Officers born after 1944 will be too old for promotion since they will be 68 in 2012, past the de facto cutoff age after which an officer is no longer eligible for promotion to the CMC. Those officers meeting the age requirement and holding positions on the CMC, the CPC Central Committee, or a command position in one of China’s military services or its seven regional military commands (or the parallel posts for political commissars) may be eligible for promotion.

China’s paramount leader serves simultaneously as the president of the state, the general-secretary of the Party, and the chairman of the military commission, as Hu does. The top leader does not always hold all three positions, however: Jiang held onto his chair on the CMC for two years after his term as president ended in 2002. Since Hu did not become CMC chairman until 2004, it is not unlikely that he will maintain his chair until 2014, two years after he gives up his presidency and leadership of the party. But this is a reasonable assumption, not a settled fact, and some doubt Hu’s strength in resolving such questions in his favor.

Interestingly, Hu has not yet appointed Vice President Xi Jinping to be his successor on the CMC, sparking rumors over the past year about whether Hu is reluctant to give Xi the vice chairmanship or whether Xi’s position could be at risk. But Hu will almost certainly dub Xi his successor as chairman of the CMC soon, probably in October. Given the possibility that Hu could retain his CMC chairmanship till 2014, Xi’s influence over the military could remain subordinate to Hu’s until then, raising uncertainties about how Hu and Xi will interact with each other and with the military during this time. Otherwise, Xi will be expected to take over the top military post along with the top Party and state posts in 2012.

Old and New Trends

Of the leading military figures, there are several observable trends. Regional favoritism in recruitment and promotion remains a powerful force, and regions that have had the greatest representation on the CMC in the past will retain their prominent place: Shandong, Hebei, Henan, Shaanxi and Liaoning provinces, respectively, appear likely to remain the top regions represented by the new leadership, according to research by Cheng Li, a prominent Chinese scholar. These provinces are core to the CPC’s support base. There is considerably less representation in the upper officer corps from Shanghai, Guangdong, Sichuan, or the western regions, all of which are known for regionalism and are more likely to stand at variance with Beijing. (This is not to say that other provinces, Sichuan for instance, do not produce a large number of soldiers.)

One group of leaders, the princelings, are likely to take a much greater role in the CMC in 2012 than in the current CMC, in great part because these are the children or relatives of Communist Party revolutionary heroes and elites and were born during the 1940s-50s. Examples include the current naval commander and CMC member Wu Shengli, political commissar of the Second Artillery Corps Zhang Haiyang, and two deputy chiefs of the general staff, Ma Xiaotian and Zhang Qinsheng. In politics, the princelings are not necessarily a coherent faction with agreed-upon policy leanings. Though princeling loyalties are reinforced by familial ties and inherited from fathers, grandfathers and other relatives, they share similar elite backgrounds, their careers have benefited from these privileges, and they are viewed and treated as a single group by everyone else. In the military, the princelings are more likely to form a unified group capable of a coherent viewpoint, since the military is more rigidly hierarchical and personal ties are based on staunch loyalty. The strong princeling presence could constitute an interest group within the military leadership capable of pressing more forcefully for its interests than it would otherwise be able to do.

A marked difference in the upcoming CMC is the rising role of the PLAN, PLAAF and Second Artillery Corps, as against the traditionally dominant army. This development was made possible by the enlargement of the CMC in 2004, elevating the commanders of each of these non-army services to the CMC, and it is expected to hold in 2012. The army will remain the most influential service across the entire fifth generation military leadership, with the navy, air force, and missile corps following close behind. But crucially, in the 2012 CMC the army’s representation could decline relative to the other branches of service, since of the three members of the current CMC eligible to stay only one comes from the army (General Armaments Department Director Chang Wangquan) and many of the next-highest candidates also hail from other services. After all, missile capabilities and sea and air power are increasingly important as China focuses on the ability to secure its international supply chains and prevent greater foreign powers (namely the United States) from approaching too closely areas of strategic concern. The greater standing of the PLAN, PLAAF, and Second Artillery Corps is already showing signs of solidifying, since officers from these services used not to be guaranteed representation on the CMC but now appear to have a permanent place.

MARK WILSON/Getty Images
Central Military Commission Vice Chairman Gen. Xu Caihou and a military delegation in WashingtonThere is also a slight possibility that the two individuals chosen to be the CMC vice chairmen could both come from a background in military operations. Typically the two vice chairmen — the most powerful military leaders — are divided between one officer centered on military operations and another centered on political affairs. This ensures a civilian check on military leadership, with the political commissar supervising the military in normal times, and the military commander having ultimate authority during times of war. However, given the candidates available for the position, the precedent could be broken and the positions filled with officers who both come from a military operational background. Such a configuration in the CMC could result in higher emphasis on the capability and effectiveness of military rather than political solutions to problems and a CMC prone to bridle under CPC orders. But having two military affairs specialists in the vice chairmen seats is a slim possibility, and personnel are available from political offices to fill one of the vice chairmanships, thus preserving the traditional balance and CPC guidance over military affairs.

Civilian Leadership Maintained

The rising current of military power in the Chinese system could manifest in any number of ways. Sources tell STRATFOR that military officers who retire sooner than civilian leaders may start to take up civilian positions in the ministries or elsewhere in the state bureaucracy. Nevertheless, the overall arc of recent Chinese history has reinforced the model of civilian leadership over the military. The Communist Party retains control of the CMC, the central and provincial bureaucracies, the state-owned corporations and banks, mass organizations, and most of the media. Moreover, there does not appear to be a single military strongman who could lead a significant challenge to civilian leadership. So while the military’s sway is undoubtedly rising, and the upcoming civilian leadership could get caught in stalemate over policy, the military is not in a position to seize power. Rather, it is maneuvering to gain more influence within the system, adding another element of intrigue to the already tense bargaining structure that defines elite politics in China. But despite possible military-civilian frictions, the PLA will seek to preserve the regime, and to manage or suppress internal or external forces that could jeopardize that goal.

Read more: Looking to 2012: China's Next Generation of Leaders | STRATFOR
Title: Re: China
Post by: G M on September 14, 2010, 11:11:33 AM

Up to this point, the scenario sounds incredibly similar to the run-up to the housing bust in the United States. But there are crucial differences. Let me describe a few.
No. 1: Chinese buyers aren't nearly as leveraged as US buyers were
Down payments in China were a high 30%; in the U.S., at the height of the frenzy, lenders were bundling two mortgages together so that a buyer could borrow the required (and much smaller) down payment as well. Homebuyers effectively were putting nothing down.

And Chinese homebuyers started off with a much larger base of savings. In 2009, the Chinese savings rate was about 40%. In the years just before the end of the U.S. boom, Americans' savings rate had actually turned negative.

As a result of those differences, I don't think a real-estate bust in China would set off the huge contraction of family balance sheets and consequent steep drop in consumer spending that have resulted from the bust in the United States.
Title: Booming China Lures Key Professors
Post by: G M on September 23, 2010, 03:27:57 PM

China has waited patiently for decades for some of its brightest and most accomplished scientists to return. Until recently, it could not offer high-quality research facilities, adequate funding or an attractive research environment.

But in the past few years, the government has invested heavily in infrastructure, constructing campuses and science parks to accommodate what it hopes will be a boom in homegrown technological advances, particularly in such fields as nanotechnology, computer science and pharmaceuticals. The government's goal is to turn new discoveries into products as quickly as possible.

Richard Appelbaum, a professor of sociology and global studies at UC Santa Barbara, said he recently visited a vast new research facility outside Shanghai.

"This is a science park the size of a city," he recounted. "It's all brand-spanking-new buildings that have been put up by the government of Suzhou. They are occupied by all these startup companies, working in biology and at the interface of nano and biology. It's all very impressive, at least to an outsider."

With the "Thousand Talents" program, China is not only luring "sea turtles," but also showing new flexibility by negotiating part-time deals with "sea gulls," who split their time between universities in China and the U.S.

One "sea gull" is UC San Francisco professor Chao Tang, who also is founder and director of the Center for Theoretical Biology at Peking University, where he teaches part of the year.

A leader in the field of quantitative biology, Tang said holding positions at the two universities gives him the best of both worlds: He can stay connected with experts in his field in the U.S. while still being part of the transformation of science in China.
Title: GM continues to make me money
Post by: Crafty_Dog on September 23, 2010, 07:23:44 PM
As predicted by GM:

China Blocks Export of Crucial Minerals to Japan as Dispute Escalates

Sharply raising the stakes in a dispute over Japan’s
detention of a Chinese fishing trawler captain, the Chinese
government has placed a trade embargo on all exports to Japan
of a crucial category of minerals used in products like
hybrid cars, wind turbines and guided missiles.

Chinese customs officials are halting all shipments to Japan
of so-called rare earth elements, industry experts said on
Thursday morning.

Read More:


GM is the one who got me looking into the Rare Earth Metals hypothesis (e.g. the Dines Newsletter) and I have positions in PALL (up roughly 20%, TIE up roughly 70%, MCP up roughly 65% in only a few weeks, and REE up 12% in three days.  Today's news probably caused the strong pops in REE and MCP and these pops will ratchet back as the situation with the Japanese presumably clarifies, but nonetheless the thesis that China will use its powerful leverage with these indispensable minerals seems now to be proven.
Title: Re: China
Post by: G M on September 23, 2010, 07:31:04 PM
Prediction: China will do a bit of a gut check with us soon (again) just to gauge our response. It may be financial, it may be military. It won't (probably) escalate, but they will bump us.
Title: Re: China
Post by: Crafty_Dog on September 23, 2010, 07:57:42 PM
China says 4 Japanese filmed military targets
From Associated Press
September 23, 2010 9:32 PM EDT

BEIJING (AP) — China is investigating four Japanese suspected of illegally filming military targets and entering a military zone without authorization, state media reported amid a tense diplomatic spat between Beijing and Tokyo over a fishing boat collision near disputed islands.

China's state-run Xinhua News Agency cited state security authorities in the northern city of Shijiazhuang as saying they had "taken measures" against the four Japanese "after receiving a report about their illegal activities." There was no elaboration.

The authorities accuse the Japanese of entering a military zone without authorization in Hebei province, the capital of which is Shijiazhuang.

The brief report late Thursday night did not say whether the four Japanese are in detention.

The four men are believed to be employees of Fujita Corp., a Tokyo-based construction and urban redevelopment company.

"We are pretty certain they are our employees," said Fujita spokesman Yoshiaki Onodera. "But we have not spoken with them, so we don't know how they came to be questioned."

Onodera said he could not confirm Japanese media reports saying that the men were preparing a bid on a project to dispose of abandoned chemical weapons from World War II.

The Japanese Foreign Ministry confirmed that it had received word from the Chinese government Thursday night about the incident. It did not have further details, including whether the men had been arrested or merely questioned.

The news could further sour relations that have deteriorated badly since earlier this month when Japan arrested a Chinese captain whose fishing boat collided with Japanese coast guard vessels near a string of islands in the East China Sea. Called Diaoyu or Diaoyutai in Chinese and Senkaku in Japanese, the islands are controlled by Japan, but are also claimed by China. They are surrounded by rich fishing grounds and are regularly occupied by nationalists from both sides.

Japan extended the detention of the Chinese captain Sunday, and Beijing reacted quickly, suspending high-level contacts with Tokyo and ruling out a meeting between Premier Wen Jiabao and Japanese Prime Minister Naoto Kan during U.N. meetings in New York this week.

On Tuesday, Wen threatened "further action" against Japan if it did not release the Chinese captain immediately.

Meanwhile, the United States on Thursday urged the two powers to quickly resolve the dispute and a military official said that Washington was committed to strongly supporting Japan, one of America's closest allies in the Pacific.

At a Pentagon news conference, Chairman of the Joint Chiefs of Staff Adm. Mike Mullen said the U.S. was tracking the situation closely and hoped that diplomatic efforts would ease tensions soon.

"And obviously we're very, very strongly in support of ... our ally in that region, Japan," Mullen told reporters.

Defense Secretary Robert Gates added "and we would fulfill our alliance responsibilities," without offering more specifics.

But besides hoping that tensions ease between China and Japan, Mullen said "we haven't seen anything that would, I guess, raise the alarm levels higher than that."

The dispute faces a test on Sept. 29, the deadline by which Japanese prosecutors must decide whether to charge the Chinese captain. Fourteen crew members and the boat have been returned.
Title: Re: China
Post by: G M on September 23, 2010, 08:22:19 PM

"It will be the last straw for Beijing if Japan insists on trying the Chinese captain for his fishing operation off the Diaoyu Islands, in the East China Sea," said the Global Times. "Although Japanese leaders hope the fishing boat issue will be seen as a stand-alone incident and will not hurt the two countries' normal relations, it is impossible for China's protest to remain verbal only."

After making it clear that "Japan's handling of the case is seen as a direct challenge of China's sovereignty over the contended islands", the Global Times issued this stern warning:

    Suspension of the East China Sea gas field talks, scheduled for mid-September, is the first move of China's counter strike. Given the decades of relationship building after WWII, China will probably not resort to force over this incident. But, if the protests from the Chinese government and public don't bring the Japanese back from the brink of a relations breakdown, Beijing has to consider stronger retaliatory measures.

Other obvious moves include the suspension of a high-level visit to Japan by a senior Chinese government official, and a series of awkward maneuvers southwest of Okinawa between Chinese maritime patrol ships and Japanese survey vessels which suggested that more confrontations could soon occur.

Chinese Foreign Ministry spokeswoman Jiang Yu said the Japanese actions as a whole in this instance violated the law of nations and were "ridiculous, illegal and invalid".

"Japan will reap as it has sown, if it continues to act recklessly," Jiang warned.

Is this more than an untimely error on the part of a Chinese fishing boat captain? After all, any attempt by China to fabricate an incident at sea involving a Chinese commercial or fishing vessel would not come as a surprise. While the focus previously has been primarily on the South China Sea, it is possible that China may also be preparing to make more aggressive moves in the East China Sea. [2]
Title: We won't win this one
Post by: G M on September 23, 2010, 08:45:47 PM

CHINESE officials like to lecture their American counterparts that, when it comes to loosening their tightly controlled currency, pressure is counterproductive. Tim Geithner, the treasury secretary, has resisted direct confrontation with China over the yuan’s value. Like his predecessors, he worries that overt pressure would undermine advocates of reform inside China, principally the People’s Bank of China, and erode co-operation on other issues such as Iran and North Korea.

When China said in June that the yuan would be allowed more flexibility, it looked like a victory for Mr Geithner. But as weeks elapsed and the yuan stayed put, the critics began to resurface. “We’re all coming to the conclusion that they don’t believe we’re serious,” Jack Reed, a Democratic senator, told Mr Geithner on September 16th. “And as a result, they will listen to you politely but they will not take any effective action.”

The administration increasingly appears to agree. On September 15th it brought two actions against China at the World Trade Organisation (WTO): one contesting Chinese duties on American exports of a special type of steel used in power generation, and another over discrimination against foreign providers of payment-card transactions.
Title: Re: China
Post by: G M on September 24, 2010, 11:17:15 AM
Look for things to flare up w/ the NorKs. That's one of China's favorite pressure points to use on US/Japan/SKorea.
Title: China-Pakistan reactor deal to open fresh US rift
Post by: G M on September 24, 2010, 11:35:15 AM
**Or Pakistan....**

At a time when Washington and Beijing are already sparring about exchange rates, North Korea and territorial disputes in the South China Sea, the nuclear deal could spark a fresh diplomatic argument. The Obama administration has already come out against the sale of the two reactors and has made nuclear proliferation one of its signature foreign policy issues.

“This sets up a potential conflict between China and the US,” said Mark Hibbs, an expert on nuclear ­politics at the Carnegie Endowment.

“A resolution will require a diplomatic discussion between the US and China about the future of the nuclear trade.”
Title: More on Rare Earth Minerals
Post by: Crafty_Dog on September 24, 2010, 12:58:31 PM

China increasing economic leverage by limiting 'rare earths' exports

, , ,that it will hold a Chinese fishing boat captain for another

By John Pomfret
Washington Post Staff Writer
Thursday, September 23, 2010; 10:36 PM

China's recent move to limit exports of minerals critical in the manufacture of a vast array of products such as missiles, car batteries, cellphones, lasers and computers is stoking alarm that its domination of the industry could give it enhanced leverage over the United States.

On Thursday, some traders of "rare earths," 17 minerals that are used in small portions in almost every advanced industrial product, reported that China, which controls 97 percent of the industry, had halted the export of anything that contained traces of the minerals to Japan. The Chinese government denied the allegation.

The purported export ban was linked to a dispute between the two countries over an island chain called the Senakus in Japanese and Diaoyu islands in Chinese. Japan has detained the captain of a Chinese fishing vessel over a collision at sea with a Japanese coast guard ship. On Thursday, Chinese Premier Wen Jiabao demanded that Japan release the boat captain immediately. China also announced that it had arrested four Japanese near a Chinese military installation.

Analysts and manufacturers said regardless of whether China has indeed blocked these exports to Japan, the incident underscored China's increasing economic leverage and its seeming willingness to try to translate that into political power.

This summer, China's Commerce Ministry said that total exports of rare earths would be capped at about 30,300 metric tons - a 40 percent drop compared with last year. Most of that tonnage has already been shipped.

"The most important issue here is that China is able to wield power like this," said Ed Richardson, the vice president of Thomas & Skinner, a magnet maker in Indianapolis. "Just the reports that they might have done something like this has sent a chill through the industry. Here you have an incident over a fishing boat and this topic comes up. It's startling."

Only in the past year has the issue begun to receive significant attention in Washington. In April, the Government Accountability Office reported that it could take as long as 15 years to rebuild the U.S. rare earth industry. The GAO report also found components in U.S. defense systems that use Chinese sources for rare earth materials. And it determined that the Defense Department had "not yet identified national security risks or taken departmentwide action to address rare earth material dependency." The Defense Department, however, is studying this issue, and a report is slated to be delivered this month.

On Thursday, the House Committee on Science and Technology approved legislation that would provide funds for research and development of rare earths technologies as a first legislative step to break China's monopoly.

"Rare earth materials are essential for our country's technological competitiveness and our national security, yet China is cornering the market and we are falling behind," said Rep. Kathy Dahlkemper (D-Pa.), who wrote the legislation.

For years, China has worked to dominate the rare earths industry. Starting in the late 1980s and early 1990s, China flooded the world with cheap rare earths. It sold neodymium and samarium, which form the basis of extraordinarily powerful magnets needed for precision-guided missile systems and the batteries used in hybrid or electric vehicles. It mined europium, which forms the basis of the high-efficiency lighting industry; lanthanum, without which it would be difficult to refine gas; and cerium, which is used to polish the glass on computer screens and cellphones.

China's prices were so low that it led the once-biggest mine in the world - Mountain Pass in California - to shut its operations in 2002 after allegations of environmental violations at the facility.

"In the Western world, people were happy to give the Chinese this job," said Jaakko Kooroshy, an analyst at The Hague Centre for Strategic Studies. "Mining rare earths is a dirty business. It is environmentally really dangerous. There's radioactivity involved."

From mining, China moved up to refining and advanced metallurgy. They drove rare earths refiners out of the market. They obtained patents for downstream work. They bought magnet makers around the world. They offered to massively overpay for three Japanese firms that dominate the production of magnets for computer hard drives. They made a run at Richardson's firm as well.

"We're an employee-owned operation," Richardson said, "so if they'd bought us up and shipped us to China . . . well, let's just say it wouldn't have sat well with the employees here."

Today, China dominates not just the mining but also the refining of rare earths, and the profits are enormous. Prices of several minerals have jumped 200 percent in the months since China announced it was limiting exports.

Western countries and firms have been slow to respond to the challenge that China posed to key industries from defense to energy to information technology, said Jon Hykawy, an analyst at Byron Capital.

In the 1990s, as China sold cheap rare earths around the world, the United States, which used to stockpile rare earths for its defense industry, sold off its stocks and watched as its industry dismantled what was once a complete supply chain. Europe never maintained a strategic stash. Only Japan understood the challenge and several years ago began setting aside significant quantities of the minerals.

"We never really acknowledged that the Chinese were in a race to dominate this industry even though they publicly stated it," Hykawy said.

China is already being sued at the World Trade Organization by the United States, the European Union and Mexico for export restrictions on raw materials, including some rare earth minerals. The U.S. trade representative is also considering filing a separate case purely on rare earths, U.S. officials said. And in industry, Molycorp Metals is working to reopen the California mine.

In June, the European Union issued its own report on rare earths that predicted that the minerals would become increasingly rare. While the United States has focused on China's increasing leverage over its national defense, the EU report reflected worries that China would control the core of green technology in the future.

"This is the first time that the Chinese openly used rare earths as a geopolitical bargaining chip," said Kooroshy in a telephone interview from The Hague. "They have built up a monopoly until now, but they have been very civil about it. They say things like, 'You don't need to be afraid. We're a reliable supplier.' But now the message is clear. It's: 'Look, guys, we're your most important economic partner, and we want you to change the way you deal with us.'"
Title: NYT/POTH Japan buckles (due to REM?)
Post by: Crafty_Dog on September 25, 2010, 01:35:29 AM
TOKYO — A diplomatic showdown between Japan and China  that began two weeks ago with the arrest of the captain of a Chinese trawler near disputed islands ended Friday when Tokyo accepted Beijing’s demands for his immediate release, a concession that appeared to mark a humiliating retreat in a Pacific test of wills.

Japan freed the captain, Zhan Qixiong, 41, who left Saturday on a chartered flight sent by the Chinese government to take him home. Mr. Zhan had been held by the Japanese authorities since his boat collided with Japanese patrol vessels on Sept. 7 near uninhabited islands in the East China Sea, and Japan had insisted that he would be prosecuted.

His release handed a significant victory to Chinese leaders, who have ratcheted up the pressure on Japan with verbal threats and economic sanctions.

“It certainly appears that Japan gave in,” said Hiroshi Nakanishi, a professor of international relations at Kyoto University. “This is going to raise questions about why Japan pushed the issue in the first place, if it couldn’t follow through with meeting China’s challenges.”

The climb down was the latest indicator of the shifting balance of power in Asia. China this year surpassed Japan as the world’s second largest economy and had already become Japan’s biggest export market. Japan, mired in extended political uncertainty and economic malaise, has had a succession of weak prime ministers who have struggled to assert its interests in a region focused mainly on a resurgent China.

China on Saturday restated its claims to the disputed islands and in a statement demanded an apology and compensation. “Such an act seriously infringed upon China’s territorial sovereignty and violated the human rights of Chinese citizens,” the statement said.

At the outset, Japan had made an uncharacteristic display of political backbone by detaining the captain, when in the past it had simply chased away Chinese vessels that approached too close to the islands, which are claimed by both countries but administered by Japan. Apparently angered by a rising number of incursions by Chinese fishing boats in recent years, Tokyo initially appeared determined to demonstrate to Beijing its control of the islands, analysts and diplomats said.

Instead, the move unleashed a furious diplomatic assault from China. Beijing cut off ministerial-level talks on issues like joint energy development, and curtailed visits to Japan by Chinese tourists. The fact that the detention took place on Sept. 8, the anniversary of Japan’s 1931 invasion of northeast China, spurred scattered street protests and calls by nationalistic Chinese bloggers to take a firm stand against Tokyo.

In recent days, China stepped up its intimidation. Chinese customs officials appeared to block crucial exports to Japan of rare earths, which are metals vital to Japan’s auto and electronics industries. Then on Thursday, four Japanese construction company employees were detained in the Chinese province of Hebei.

In the end, diplomats and analysts said Japan was forced to recognize that taking the next step of charging the captain and putting him on trial would result in a serious deterioration of ties with China, Japan’s biggest trading partner.

“At this point, Japan had only one choice,” said a Western diplomat in Beijing, who spoke on the usual diplomatic condition of anonymity. “It had to charge the captain, or it would have to climb down.”

It chose the latter. On Friday, prosecutors on the island of Ishigaki, where the captain was held, cited diplomatic considerations in their decision to let him go, and suspended their investigation into charges of obstructing officials on duty.

“Considering the effect on the people of our nation and on China-Japan relations, we decided that it was not appropriate to continue the investigation,” the prosecutors said in a statement.

Until Japan’s sudden reversal on Friday, the tussle had grown to dominate both nations’ diplomatic agendas, including during the United Nations development summit meeting this week in New York.

Prime Minister Wen Jiabao of China had refused to meet on the sidelines of the meeting with Japan’s prime minister, Naoto Kan, and instead threatened additional actions if Japan did not release the captain.

(Page 2 of 2)

The Japanese used the summit meeting to seek American support for its position. They seemed to get it when Secretary of State Hillary Rodham Clinton told Japan’s new foreign minister, Seiji Maehara, that America’s treaty obligations to defend Japan from foreign attack would include any moves against the islands where the Chinese captain had been arrested.

The islands, known as Senkaku in Japanese or Diaoyu in Chinese, are also claimed by Taiwan.

The fact that Japan seemed to back down after escalating the situation brought an outpouring of criticism of Mr. Kan, who was re-elected prime minister just two weeks ago. On Friday, members of his own governing Democratic Party joined opposition lawmakers in condemning the decision to release the captain.

“I’m flabbergasted that this was resolved with such a clear diplomatic defeat for Japan,” said Yoshimi Watanabe, leader of the opposition Your Party.

The setback appears likely to raise new concerns about the leadership of the Democrats, who took power in a landslide election victory last year with promises to improve ties within Asia and reduce Japan’s dependence on the United States.

However, the standoff underscored how sentiment in Japan had hardened against China, even in recent months. Ever more frequent movements by Chinese warships into Japanese waters have stirred fears here that fast-growing China will become more aggressive in pushing its territorial claims.

However, there were also growing calls in Japan for a quick resolution to the standoff, particularly by the business community, which has become increasingly reliant on China for trade and investment. On Friday, the president of the Tokyo Stock Exchange, Atsushi Saito, told reporters he welcomed the release.

“As a Japanese, I have mixed feelings about appearing so weak-kneed,” Mr. Saito said, “but realistically speaking, we had to put this problem behind us.”

In China, the captain’s release appeared to be a victory for the leadership, and particularly the prime minister, Mr. Wen. The Communist Party is keen to show itself as defending China’s territorial claims, which enjoy strong emotional support from the Chinese people. China also views itself as geopolitically hemmed in by Japan and other cold war-era American allies as it tries to take its place as a regional power.

Chinese analysts agreed that Japan had appeared to fold, but said Tokyo had no choice if it wanted to avoid a continued escalation with China.

“This was a move that Japan had to make or China would have taken further steps,” said Wang Xiangsui, a foreign policy analyst at the Beijing University of Aeronautics and Astronautics. “Now the two sides can discuss this more calmly.”

Mr. Zhan, the trawler captain, arrived in the Chinese coastal city of Fuzhou at 4 a.m. local time, according to the official Xinhua news agency. He was met at the airport by senior officials from the Foreign Ministry and the Agriculture Ministry, which had chartered a plane to pick him up after his release in Japan.

When the door of the plane opened, Mr. Zhan was carrying flowers and immediately was greeted with hugs by relatives waiting for him, Xinhua reported.

“Being able to return safely this time, I thank the party and government for their care,” Mr. Zhan said. “I also thank the Chinese people for their concern.”

Title: Re: China
Post by: G M on September 25, 2010, 06:44:01 AM
My money says Japan folded after the US told them that we don't have their back. This win by China will encourage more aggressive moves by them. Japan has a serious loss of face and has to re-examine it's entire national security structure as a result of this.
Title: Re: China
Post by: G M on September 25, 2010, 07:07:45 AM

The relentless pressure on both countries to expand their exports is threatening to create a trade war between the US and China.

Congressmen, feeling the populist pressure from voters back home, have approved a new bill that would place import duties on Chinese goods, if they don't revalue the yuan. The bill has yet to be passed by the House or Senate.

But if the U.S. government enters into a tit-for-tat trade war with China, it's likely the Chinese will respond. And that could hammer U.S. companies that export to China.

We've evaluated the states, using data from the U.S. China Business Council, that export the most to China, and companies that might get crushed in each if a trade war commences.

Read more:
Title: Re: China
Post by: JDN on September 25, 2010, 07:50:35 AM
My money says Japan folded after the US told them that we don't have their back. This win by China will encourage more aggressive moves by them. Japan has a serious loss of face and has to re-examine it's entire national security structure as a result of this.

I don't think the issue is whether we have their back or that they will re-examine their entire national security structure.  No one is going to war over these islands.

Rather it's all about the money.  China is a huge market for Japanese companies which need to export to survive.  Japan decided better to lose face than
risk economic retaliation.  China has leverage; Japan does not.  Plus Japan handled the situation poorly.

However as you point out in your most recent post, the same could happen to us.
Title: Re: China
Post by: G M on September 25, 2010, 08:44:58 AM

The captain's release came as a surprise to some Japan Coast Guard officials and sparked criticism that it could result in confusion over the handling of similar incidents in the future. At the same time, a Coast Guard official commented: "It must have been tough for public prosecutors to have to make an unnatural decision like that."

On Sept. 7, when the initial decision to arrest the skipper was made, two unofficial meetings were held by the Japan Coast Guard and related government bodies including the Ministry of Foreign Affairs and the Ministry of Justice. But on Sept. 24, when prosecutors decided to release the skipper, no meetings were staged and it was not until after 2 p.m. that the Japan Coast Guard was notified of the decision. Watching television broadcasts announcing the move, Coast Guard members were angered, with one commenting that Japan had "bowed to pressure." Another disappointed member added: "It made me want to resign from the civil service."

"The case for obstruction of official duties was formed under the direction of public prosecutors. This has set a bad precedent," one official Coast Guard official commenting on the release said. The official became calmer when hearing about public prosecutors taking Japan-China relations into consideration, and said, "The Japan Coast Guard investigation has been proven appropriate. I guess public prosecutors decided to take the responsibility by making a point of referring to Japan-China relations." Still, the official described the release as "a regrettable outcome."

Following the move to release the Chinese captain, the Japan Coast Guard received a flood of telephone complaints from people asking why the skipper had been released without punishment. By 7 p.m. on Sept. 24, some 60 calls had been fielded. One caller reportedly stated, "I've never complained to a public office before, but I can't let things go this time." However, when officials explained that the issue was in the hands of public prosecutors, many callers were reportedly understanding, and instead started praising the Coast Guard, saying they wanted it to continue to clamp down on offenders.

When questioned in a news conference shortly after 5 p.m. on Sept. 24 whether the issue had been dealt with "solemnly in accordance with laws," Land, Infrastructure, Transport and Tourism Minister Sumio Mabuchi stated he had "no particular thoughts" about the decision to release the captain.
Title: Re: China
Post by: G M on September 25, 2010, 08:55:35 AM

The Japanese are in fact the world’s largest consumers of rare-earth minerals.  But they have been stockpiling the minerals—and working on technologies to recycle them—to protect against supply disruptions.  Toyota, which depends on these minerals in the batteries for its hybrids, reportedly possesses a one-year supply.

The United States, however, has not been so careful, letting the Chinese using predatory pricing to make American mines uncompetitive.  As a result, there is almost no domestic production of rare earths in the United States.  So Beijing’s cut off of the minerals to Japan highlights America’s critical vulnerability.  Due to this almost-complete dependence on foreign sources, Molycorp is now looking to reopen its Mountain Pass mine in California and there is growing pressure on Congress to authorize the much-needed stockpiling of strategic minerals.

Yet there is a far more important lesson to be learned here.  The West had assumed that China could be integrated into the global system of commerce and, once so enmeshed, it would become benign.  Yet nine years after the accession to the World Trade Organization, Beijing appears not to have been constrained by its participation in global trade.

During this period, China has become economically powerful, and now, it is using that power to achieve geopolitical goals—in this case to demand from Japan territory over which it has exceedingly weak legal claims.  So whatever we may think about free trade or open borders, we have to remember that every economic advantage we extend to China gives its leaders one more tool to advance their geopolitical goals.

“Taking into account the impact on our citizens and Japan-China relations, our judgment was that it would have been excessive to prolong the investigation and his detention,” said Toru Suzuki, deputy public prosecutor at a press conference today.  Until now, Japanese authorities had insisted that the prosecutor would make a decision based only on the facts of Captain Zhan Qixiong’s conduct.

Beijing has—once again—learned intimidation works.  Who will be its next target?
Title: Re: China
Post by: G M on September 25, 2010, 09:07:21 AM

Japan has been deemed overwhelmingly the loser in the strange game of chicken that’s been escalating between Beijing and Tokyo over the past week — at least judging from a sampling of the immediate vitriolic reaction toward Tokyo in the virtual world.

In the seconds after Japan announced it would release the Chinese ship captain who has been in Japanese custody, Tokyo’s decision was lambasted as weak and the ruling Democratic Party of Japan as unable to govern.

“This nation really does not have foreign policy and has no ability…it’s a shame that [Japan] easily gave up their last cards. They [Chinese] are shaking us up badly,” moaned one person on Twitter. Another said more simply: “How do you say ‘cave’ in Chinese?” Yet another tweeted: “Due to the DPJ, democracy and the notion of a nation’s sovereignty are about to be lost. I’m amazed to see their inability to govern. They’re worse than the LDP which was in power before.”

Ever gentlemanly, an official from the Osaka prosecutors’ office said at a hastily called press conference Friday afternoon: “We decided it was inappropriate to continue the investigation while keeping the suspect in custody any further, considering the future of the Japan-China relationship,”

The government’s decision may be good for tourism and business ties between the two countries, but the jury’s still out on how it might knock the DPJ’s popularity rankings — and Prime Minister Naoto Kan’s.
Title: Re: China
Post by: G M on September 25, 2010, 09:20:23 AM

Beginning with the Japanese scene, this event is guaranteed to fuel the rage of the right, which will become even more intense in denouncing the "treason" of the DPJ.

Moreover, these angry sentiments are unlikely to be confined to the usual suspects, because many ordinary Japanese too will be left with a sour taste in their mouths over the government's handling of this matter. Many will feel that releasing the captain and citing the future of "Japan-China relations" smacks of pathetic weakness.

It certainly doesn't help that Prime Minister Naoto Kan and Foreign Minister Seiji Maehara have been overseas at this critical juncture, and so are unavailable to provide leadership or any convincing public explanations.

It would not be surprising if the next public opinion polls show a significant drop in support for the cabinet.

In fairness, the DPJ inherited a political posture from their predecessors which argued that "no territorial issues exist" in regard to the Senkaku Islands. With this as their starting point, Tokyo was poorly prepared to respond to Chinese (and Taiwanese) demands.
Title: China/Japan/US timeline
Post by: G M on September 25, 2010, 10:00:25 AM

While the United States hasn't taken an official position on the claims to the islands, they are considered part of Japan based on U.S.-Japan security treaties.

Defense Secretary Robert Gates told reporters Thursday the United States "would fulfill our alliance responsibility" if the conflict escalated.

Though analysts don't think the current tension will escalate and draw in the U.S. military treaty obligations, the agreements add murkiness to an already muddy territorial dispute.

It also puts the United States in the uncomfortable position of trying to stand by its closest ally in the region, Japan, while not irritating China, a growing power that the U.S. needs for a variety of political and economic issues.

"We're watching that tension very, very carefully," Navy Adm. Mike Mullen, chairman of the Joint Chiefs of Staff told reporters at the Pentagon ."Obviously we're very, very strongly in support of our ally in that region, Japan.

Both China and Japan have raised the issue with Secretary of State Hillary Clinton during meetings on the sidelines of the United Nations General Assembly. On Thursday, during talks with Japanese Foreign Minister Seiji Maehara, Clinton urged Japan to resolve the dispute through dialogue, State Department Spokesman P.J. Crowley said.

**So, on Thursday SecDef Gates and Adm. Mullen articulate to the global media the US defense treaty with Japan. Obama then meets with Japan's Prime Minister Kan in NYC on the China/Japan standoff.


**Suddenly, Japan reverses course and the local Japanese prosecutors drop the charges on orders from Tokyo**

Decision to release Chinese boat captain made in Tokyo: sources

The decision to release the captain of a Chinese fishing boat involved in a collision with Japan Coast Guard patrols boats was a political decision made by the Japanese government and not by the Naha District Public Prosecutors Office, as it has been publicly announced, according sources close to Prime Minister Naoto Kan.
Title: Re: China
Post by: Crafty_Dog on September 25, 2010, 12:00:56 PM
Excellent work here GM. 

In support of GM's analysis "My money says Japan folded after the US told them that we don't have their back"  while flying back to LA from Dulles/DC airport today this morning's Pravda on the Potomac (a.k.a. the WaPo) quoted some Under Secretary of State saying that Japan had done the right thing, that is was the sort of thing that "mature" nations did or something like that. 
Title: Remarks to the Press from UNGA
Post by: G M on September 25, 2010, 01:30:43 PM

Remarks to the Press from UNGA

Johnnie Carson
   Assistant Secretary, Bureau of African Affairs
Philip J. Crowley
   Assistant Secretary, Bureau of Public Affairs
New York City
September 24, 2010

QUESTION: P.J., EAP in Washington is telling us to ask you for any statement on the release of the Chinese captain by the Japanese. They keep deferring us back up here to you. They say, “P.J. will have something to say on it.”

MR. CROWLEY: Well, as we had stated yesterday, we were concerned that this was an issue that had the potential to escalate. I think Jeff Bader yesterday talked about the strong nationalist fervor that had been generated both on the Chinese side and the Japanese side, so we are gratified that the situation has been resolved. It was something that the Japanese Government assured us that would be done within accordance of their legal process and international law. This was a Japanese decision to make, and we’re just hopeful that with the release of the ship captain, tensions will recede and the countries in the region will get back to normal business.

QUESTION: Thank you.

QUESTION: Just one Japanese question. Is this – I mean, maybe that Prime Minister Kan’s – his new cabinet is criticized by the other side, opposite side of the party – I mean the – this compromise means that Japan lost diplomatic – diplomatically with the Chinese – I mean this kind of chicken game, people (inaudible) chicken game. Don’t you think that this kind of criticizing (inaudible)?

MR. CROWLEY: I mean, as we – we think this is a proper outcome. And we had discussed this with the Japanese. It came up, as we said, in the meeting that the Secretary had with Foreign Minister Maehara yesterday. We had some low-level – lower-level conversations with the Chinese as well, and we sensed that there was a desire on both sides to resolve this soon. We think this is the right decision. It’s how mature states resolve these things through diplomacy . And we think this is in the interest of the two countries and the interest of the region. Obviously, there are some underlying issues that have been triggered by this episode. The United States continues to support freedom of navigation in the region, and we will continue to emphasize that. Obviously, we have an important meeting that’ll be going on today involving the ASEAN countries and you’ll be seeing a communiqué that comes out of that meeting.

QUESTION: Regarding to the Clinton and Maehara discussion, was there any indication from the Japanese side of this possibility to release him?

MR. CROWLEY: This is a decision for – that Japan has made, and I’ll defer to the Japanese Government to explain its reasoning. But obviously, we believe that this will significantly reduce the existing tension. We think it was a proper decision for Japan to make.
Title: Re: China
Post by: Crafty_Dog on September 25, 2010, 04:46:56 PM
GM-- awesome google fu my man, that's what I was thinking of.
Title: Re: China
Post by: G M on September 25, 2010, 04:53:16 PM
Anyone here still think Obama didn't tell Japan that the US wouldn't back them? Anyone here think China won't continue to press their claim on the islands?
Title: An imbalance that will shake the world
Post by: G M on September 25, 2010, 05:19:09 PM

The town of Wuxue in southern China looks normal enough. Pedicabs ply its narrow streets; hawkers sell steaming bowls of rice noodles to passers-by.

But in Wuxue's primary school something is amiss.

In one classroom of white-washed walls and wooden desks a group of seven-year-olds learn to pipe on the bamboo Chinese flute. Of 40 students just nine are girls.

Next door, another class practice their calligraphy, copying down hieroglyphs in neat rows. Once again, most of the children grappling with their pencils are boys.

The little girls of Wuxue are not being denied an education. Rather, they simply don't exist. According to official statistics, for every 100 girls there are 197 boys.

It is the worst example of gender imbalance in China, but a similar pattern exists across the country. The cause is an unintended result of the one-child policy: sex selective abortions.
Title: Captain's Release Sparks Furor in Japan
Post by: G M on September 26, 2010, 05:47:21 AM

The sudden Friday release also touched off an unusually intense political firestorm in Japan, with the media and opposition politicians hammering Prime Minister Naoto Kan's government for handling the incident in a way that seemed to portray Japan as weak and succumbing to pressure from China.

The Chinese government demanded on Saturday that Japan apologize for the incident, suggesting that China's steady intensifying actions against Japan over the past two-and-a-half weeks—from curbing diplomatic exchanges to scaling back commercial activity—may not abate. "China of course has the right to demand Japan apologize and make compensation,'' Foreign Ministry spokeswoman Jiang Yu said in a Chinese-language statement.

Japan's foreign ministry issued its own sternly worded statement rejecting the plea. "The demand by the Chinese side for apology and compensation is completely groundless and is utterly unacceptable for Japan," that statement said.


Japanese government officials, including Mr. Kan, denied any political influence on the prosecutors' decision, but local media said there was no doubt that the issue was settled in a political decision with national-government input.

"To begin with, prosecutors are not authorized to determine what kind of 'future Japan-China ties' is desirable," the Nikkei Shimbun, Japan's leading business daily, said. The Mainichi Shimbun shared this view in its editorial, saying it was "odd" for the prosecutors to refer to "diplomatic considerations" in releasing the captain and that it contradicted the government stance that the issue would be handled in accordance with the law.

Meanwhile, the Asahi Shimbun said, "It must be a high-level political judgment by the Kan administration." The paper's editorial also said, "In the first place, did the Kan government forecast the possible reaction of China and how to conclude the issue when it decided to arrest the captain?"

"It cannot be helped if the weakness of the DPJ's diplomacy is pointed out," it said. "It should reflect on it seriously as a bitter lesson."

The Japanese papers' criticism was echoed by opposition-party members on NHK, the public broadcaster. "What message did Tokyo send to other Asian nations which have territorial disputes [with China]?" said Nobuteru Ishihara, secretary-general of the Liberal Democratic Party, the largest opposition bloc. He added that the decision would also confuse Japan's coastguards who are out in the sea on duty. "What should they do if China again illegally enters our territorial waters?"

Title: China pretty happy about it's control of rare-earth
Post by: G M on September 26, 2010, 05:57:57 AM

BEIJING, Sept. 26 (Xinhua) -- China's regulation of its rare-earth minerals industry protects the environment, prevents over exploitation of the its resource, and promotes the development of new energy industries across the globe, experts say.

Rare earths have become increasingly important in the manufacture of new energy products like electric-car batteries, wind turbines and other sophisticated products including flat-screen monitors, missiles and aerospace alloys.

The exhaustion of China's rare earths would be a major blow to the world's green energy industry, so China must regulate to curb excessive and disorderly mining of the non-renewable resource, the latest edition of the Xinhua News Agency's finance magazine - Economy & Nation Weekly - quoted Lin Donglu, secretary general of the Chinese Society of Rare Earths, as saying Sunday.

China's regulation of its rare earth industry includes reducing export quotas, cracking down on illegal mining and smuggling, no further issuing of mining licenses and the imposing of production caps.

The time is right to form an international competition mechanism for the rare earth industry to ensure sustainable development of new energy technologies, Lin said, noting that China's rare earth reserves accounted for one third of the world's total in 2009.

However, China's rare earths output hit 120,000 tonnes last year, 97 percent of the world's total, according to a report by Marc Humphries, an energy policy analyst at the United States Congressional Research Service.
Title: While U.S. is distracted, China develops sea power
Post by: G M on September 26, 2010, 06:47:20 AM

Whereas an island nation such as Britain goes to sea as a matter of course, a continental nation with long and contentious land borders, such as China, goes to sea as a luxury. The last time China went to sea in the manner that it is doing was in the early 15th century, when the Ming Dynasty explorer Zheng He sailed his fleets as far as the Horn of Africa. His journeys around the southern Eurasian rim ended when the Ming emperors became distracted by their land campaigns against the Mongols to the north. Despite occasional unrest among the Muslim Uighur Turks in western China, history is not likely to repeat itself. If anything, the forces of Chinese demography and corporate control are extending Chinese power beyond the country's dry-land frontiers -- into Russia, Mongolia and Central Asia.

China has the world's second-largest naval service, after only the United States. Rather than purchase warships across the board, it is developing niche capacities in sub-surface warfare and missile technology designed to hit moving targets at sea. At some point, the U.S. Navy is likely to be denied unimpeded access to the waters off East Asia. China's 66 submarines constitute roughly twice as many warships as the entire British Royal Navy. If China expands its submarine fleet to 78 by 2020 as planned, it would be on par with the U.S. Navy's undersea fleet in quantity, if not in quality. If our economy remains wobbly while China's continues to rise -- China's defense budget is growing nearly 10 percent annually -- this will have repercussions for each nation's sea power. And with 90 percent of commercial goods worldwide still transported by ship, sea control is critical.

The geographical heart of America's hard-power competition with China will be the South China Sea, through which passes a third of all commercial maritime traffic worldwide and half of the hydrocarbons destined for Japan, the Korean Peninsula and northeastern China. That sea grants Beijing access to the Indian Ocean via the Strait of Malacca, and thus to the entire arc of Islam, from East Africa to Southeast Asia. The United States and others consider the South China Sea an international waterway; China considers it a "core interest." Much like when the Panama Canal was being dug, and the United States sought domination of the Caribbean to be the preeminent power in the Western Hemisphere, China seeks domination of the South China Sea to be the dominant power in much of the Eastern Hemisphere.

We underestimate the importance of what is occurring between China and Taiwan, at the northern end of the South China Sea. With 270 flights per week between the countries, and hundreds of missiles on the mainland targeting the island, China is quietly incorporating Taiwan into its dominion. Once it becomes clear, a few years or a decade hence, that the United States cannot credibly defend Taiwan, China will be able to redirect its naval energies beyond the first island chain in the Pacific (from Japan south to Australia) to the second island chain (Guam and the Northern Mariana Islands) and in the opposite direction, to the Indian Ocean.

Title: Re: China
Post by: Crafty_Dog on September 26, 2010, 07:09:38 AM
Stratfor's George Friedman's book "The Next 100 Years" (which the author of this article may have read  :wink: ) really impressed me with the importance of naval power.  This article's analysis makes a lot of sense to me.
Title: Re: China
Post by: G M on September 26, 2010, 07:20:00 AM
Robert D. Kaplan is a smart guy. I like a lot of what he has to say on geopolitics.
Title: Re: China
Post by: JDN on September 26, 2010, 07:28:27 AM
Anyone here still think Obama didn't tell Japan that the US wouldn't back them? Anyone here think China won't continue to press their claim on the islands?

"Wouldn't back them" means what? 
On this issue?  As the State Department Official said, "I mean, as we – we think this is a proper outcome."

So?  I too think this was the proper outcome; Japan handled it poorly.
Why do we want to enter into this matter?  Or approve or back one party in an economic war over an island in dispute.
China had already begun to escalate. 

Further, Japan didn't capitulate because we agreed or didn't agree with them or told them we "wouldn't back them".
The issue is economics.  At this time, Japan needs China and it's market a lot more than China needs Japan.  Large Keiretsu, the trading
companies, and the Japan Business Association needs China.  Therefore so does Japan.   Mix this with the history
and you have problems. 

Sure China will continue to press their claim on the islands.  Taiwan too
is pressing a claim.  Russia and Japan are also disputing some islands. It happens.
Title: Re: China
Post by: G M on September 26, 2010, 08:51:38 AM

"Wouldn't back them" means what?

**That despite our treaty obligations, we would not provide military support to Japan in a conflict with China over the disputed islands.**

So?  I too think this was the proper outcome; Japan handled it poorly.

**Really? You think that the islands that have been recognized as belonging to Japan by us since WWII should be conquered by China because China is willing to assert their ownership?Should Japan police the lands in it's jurisdiction and arrest violators of it's laws or not?**
Title: China Hold on Metals Worries Washington
Post by: G M on September 26, 2010, 09:03:35 AM

In the newest issue of Joint Force Quarterly, a professional military journal published by National Defense University, Navy Reserve Lt. Cdr. Cindy Hurst, a research analyst in the Foreign Military Studies Office at Fort Leavenworth, Kan., wrote that "China appears to be holding an unlikely trump card" through its dominance in the rare-earth element industry.

"The country's grasp on the rare-earth element industry could one day give China a strong technological advantage and increase its military superiority," she wrote.

The Department of Defense is completing a study to identify the potential national security risks of rare-earth material dependency. Pentagon spokeswoman Cheryl Irwin said a full report drawing on input from a number of government agencies will be released next month.

"It is a highly charged topic," she said, adding the Pentagon is seeking to separate "fact from fiction to ensure we continue to protect the interests of both the warfighter and the taxpayer."

In parallel, U.S. lawmakers have begun probing the national-security implications of rare-earth supplies. The House Committee on Science and Technology's investigations panel held a hearing this year on the issue, and on Thursday, the committee began marking up a bill that would encourage the U.S. government to hedge against rare-earth shortages by collecting more data on potential supply and identifying alternative materials.

Rep. Bart Gordon (D., Tenn.), chairman of the committee, said he was concerned about the United States being "held hostage" when it came to access to raw materials for new technology.

Molycorp, Inc., the owner of a mine in Mountain Pass, Calif., that holds the largest, richest rare-earth deposit outside China, is currently looking to restart and expand production. Jim Sims, a spokesman for Molycorp, said the company was planning by mid-2012 to create a complete U.S.-based supply chain for some kinds of rare-earth magnets.
Title: China has an accurate view of Obama
Post by: G M on September 26, 2010, 09:35:01 AM

An independent survey of Chinese-language media for The Sunday Times has found army and navy officers predicting a military showdown and political leaders calling for China to sell more arms to America’s foes. The trigger for their fury was Obama’s decision to sell $6.4 billion (£4 billion) worth of weapons to Taiwan, the thriving democratic island that has ruled itself since 1949.

“We should retaliate with an eye for an eye and sell arms to Iran, North Korea, Syria, Cuba and Venezuela,” declared Liu Menxiong, a member of the Chinese people’s political consultative conference.

He added: “We have nothing to be afraid of. The North Koreans have stood up to America and has anything happened to them? No. Iran stands up to America and does disaster befall it? No.”

Officially, China has reacted by threatening sanctions against American companies selling arms to Taiwan and cancelling military visits.

But Chinese analysts think the leadership, riding a wave of patriotism as the year of the tiger dawns, may go further.

“This time China must punish the US,” said Major-General Yang Yi, a naval officer. “We must make them hurt.” A major-general in the People’s Liberation Army (PLA), Luo Yuan, told a television audience that more missiles would be deployed against Taiwan. And a PLA strategist, Colonel Meng Xianging, said China would “qualitatively upgrade” its military over the next 10 years to force a showdown “when we’re strong enough for a hand-to-hand fight with the US”.

Chinese indignation was compounded when the White House said Obama would meet the Dalai Lama, the exiled spiritual leader of Tibet, in the next few weeks.

“When someone spits on you, you have to get back,” said Huang Xiangyang, a commentator in the China Daily newspaper, usually seen as a showcase for moderate opinion.

An internal publication at the elite Qinghua University last week predicted the strains would get worse because “core interests” were at risk. It said battles over exports, technology transfer, copyright piracy and the value of China’s currency, the yuan, would be fierce.

As a crescendo of strident nationalistic rhetoric swirls through the Chinese media and blogosphere, American officials seem baffled by what has gone wrong and how fast it has happened.

During Obama’s visit, the US ambassador to China, Jon Huntsman, claimed relations were “really at an all-time high in terms of the bilateral atmosphere ... a cruising altitude that is higher than any other time in recent memory”, according to an official transcript.

The ambassador must have been the only person at his embassy to think so, said a diplomat close to the talks.

“The truth was that the atmosphere was cold and intransigent when the president went to Beijing yet his China team went on pretending that everything was fine,” the diplomat said.

In reality, Chinese officials argued over every item of protocol, rigged a town hall meeting with a pre-selected audience, censored the only interview Obama gave to a Chinese newspaper and forbade the Americans to use their own helicopters to fly him to the Great Wall.

President Hu Jintao refused to give an inch on Obama’s plea to raise the value of the Chinese currency, while his vague promises of co-operation on climate change led the Americans to blunder into a fiasco at the Copenhagen summit three weeks later.

Diplomats say they have been told that there was “frigid” personal chemistry between Obama and the Chinese president, with none of the superficial friendship struck up by previous leaders of the two nations.

Yet after their meeting Obama’s China adviser, Jeff Bader, said: “It’s been highly successful in setting out and accomplishing the objectives we set ourselves.”

Then came Copenhagen, where Obama virtually had to force his way with his bodyguards into a conference room where the urbane Chinese premier, Wen Jiabao, was trying to strike a deal behind his back.

The Americans were also livid at what they saw as deliberate Chinese attempts to humiliate the president by sending lower-level officials to deal with him.

“They thought Obama was weak and they were testing him,” said a European diplomat based in China.
Title: Re: China
Post by: G M on September 26, 2010, 12:40:42 PM
Prediction: China will do a bit of a gut check with us soon (again) just to gauge our response. It may be financial, it may be military. It won't (probably) escalate, but they will bump us.

China slaps anti-dumping duties on US chicken imports

Agence France-Presse
First Posted 17:01:00 09/26/2010

BEIJING – China will levy anti-dumping duties of up to 105 percent on imports of US chicken products, the government said Sunday, in a move likely to ratchet up trade tensions between the two nations.

"The US chicken industry has dumped broiler products into the Chinese market and caused substantial damage to the domestic industry," the commerce ministry said in a statement on its website.

The duties take effect on Monday, it said.

China will slap anti-dumping levies of over 50 percent on up to 35 US chicken broiler exporters including Tyson Foods Inc, Keystone Foods LLC, Pilgrim's Pride Corporation and Sanderson Farms Inc, the statement said.

Levies of over 105 percent will be placed on imported chicken broilers, a type of chicken raised specifically for meat production, from all other US producers, it said.

The measures will apply for five years and follow up preliminary tariffs on the same products issued by the ministry in February.
Title: Re: China
Post by: JDN on September 27, 2010, 08:38:32 AM
Prediction: China will do a bit of a gut check with us soon (again) just to gauge our response. It may be financial, it may be military. It won't (probably) escalate, but they will bump us.

China slaps anti-dumping duties on US chicken imports

Agence France-Presse
First Posted 17:01:00 09/26/2010

Old news; this was announced in February.

China responded to the US anti dumping duties....  Tit for tat; that seems to be the norm...

"Since this January, the US has decided to impose anti-dumping duties of as much as 289 and 175 percent respectively on imports of wire decking products and electric blankets, and the nation also announced recently it would launch an anti-dumping and anti-subsidy investigation into imports of drill pipe used for oil wells from China."

Regarding the islands there is a legitimate dispute; it has been going on for years.  It's a lot closer to Taiwan than Japan.
I'm not sure who is right or wrong.  I just don't want the matter to escalate into anything serious affecting America.

Regarding using our military support, I truly hope we would not! 
**That despite our treaty obligations, we would not provide military support to Japan in a conflict with China over the disputed islands.**

Maybe we should rattle the sabers?  Send our fleet to encircle the island?  I'm sure the average American would support millions/billions of dollars lost, possible lives lost, at minimum an economic war, just to "defend" a disputed island on behalf of Japan but claimed by Japan, China, and Taiwan.   :?

That being said, while most people fear Islam and the camel riders, I don't lose any sleep.  Not to denigrate the threat; it is very real, but I believe one day
China will pose a much greater and direct threat to America on multiple levels.  I'm old enough to remember hiding under my desk  :-)  for fear of the Russian attack.  I hope that will not happen again with China.

Title: Re: China
Post by: G M on September 27, 2010, 09:37:19 AM
**That despite our treaty obligations, we would not provide military support to Japan in a conflict with China over the disputed islands.**

Maybe we should rattle the sabers?  Send our fleet to encircle the island?  I'm sure the average American would support millions/billions of dollars lost, possible lives lost, at minimum an economic war, just to "defend" a disputed island on behalf of Japan but claimed by Japan, China, and Taiwan.   :?

China sees Obama as weak, and thus the US as weak. Should we continue to allow this perception? That stability in asia post-WWII has been based on American power in the pacific. Japan's de-militarization is based on our promise of them being under our defense umbrella. Do you think Japan rebuilding it's military will be better or worse for asia, the rest of the world and us, or not? If Japan finds it's on it's own, what of Taiwan? What of the rest of the asia-pacific nations? What of America's allies globally? What's the message? America will defend it's allies unless it gets expensive or there is the possibility of casualties. Right?
Title: Re: China
Post by: JDN on September 27, 2010, 09:58:06 AM
I understand your point, but I do think we need to pick our fights.  IF Japan (mainland)
was threatened I think we should offer unlimited support; whatever it takes.  Money or lives.

A disputed island off the coast of Taiwan claimed by China and Taiwan does not qualify.  Nor would a similar territorial dispute/example
for any of our allies justify American lives.

As for Japan rebuilding it's military, I don't know.  An interesting question.  However,
in my opinion, if I was Japan I would reconsider their Constitution and I would begin
rebuilding their military.  Will that be better or worse for Asia?  Us?  Again, I don't know. 
But as you have indirectly pointed out, if your big brother leaves home or seems busy, you better learn
to defend yourself from the local bullies.  Or one day you might get hurt.
Title: Re: China
Post by: G M on September 27, 2010, 10:06:29 AM
Do you understand the impact of a re-militarized Japan on the rest of asia? The end of Pax-Americana would be profoundly destabilizing to the region.
Title: Re: China
Post by: JDN on September 27, 2010, 10:13:48 AM
Yes, again I understand your point.  Memories of blood and conflict and oppression is long in Asia.

Yet, China seems to be like the new bully in town.  And is growing.  It might be nice to have friends
on the local scene able to defend themselves.
Title: Re: China
Post by: G M on September 27, 2010, 10:40:06 AM
The Japanese Self-Defense Force has quietly upgraded and improved it's military capacity for decades, but this has not spooked the other asian nations as US dominance and article 9 of the Japanese constitution remain in effect. A Japan that turns away from it's pacifist facade would send shockwaves through the region and actually empower Beijing's aggressiveness.
Title: Re: China
Post by: G M on September 27, 2010, 10:51:46 AM

Southeast Asian states, including the Philippines, have become worried by China's increasingly aggressive stance on the complex set of disputes in the South China Sea.

"We expect them to be responsible on what they do as we are. And I believe if we act in that way, there should be no issues," Captain Rudy Lupton, commander of the USS Blue Ridge, the command and control ship of the U.S. Navy's 7th Fleet based in Japan.

Last week, Chinese naval forces carried out drills in the disputed southern waters amid tension with Washington over security in the Korean peninsula and South China Sea.

Last year, there was a collision between sonar equipment being towed by a U.S. Navy warship and a Chinese submarine near Philippine waters.


China's growing might military might and rising defense spending have set alarm bells ringing around the region, particularly in Japan and Taiwan. It has repeatedly said its claims on the southern waters and island are indisputable.
Title: Re: China
Post by: JDN on September 27, 2010, 11:03:23 AM
The Japanese Self-Defense Force has quietly upgraded and improved it's military capacity for decades, but this has not spooked the other asian nations as US dominance and article 9 of the Japanese constitution remain in effect. A Japan that turns away from it's pacifist facade would send shockwaves through the region and actually empower Beijing's aggressiveness.

Yes, but so too is China upgrading and improving their military capacity as you have previously pointed out.
With offensive weapons.  I think this is what is spooking the other asian nations.  Not so much the possibility of Japan rearming. 

Title: Re: China
Post by: G M on September 27, 2010, 11:30:19 AM
As pointed out by various posters, China suffers from serious internal issues that threaten the power structure in Beijing. The chinese people do not believe in communism, they've seen it's failure firsthand. The communist party, in fact does not believe in communism either (Too bad our president and his cabinet do, but that's another thread). Slogans about a "worker's paradise" get nothing but scorn from the chinese masses. Beijing now uses the tragic chinese history of suffering at the hands of other nations to fuel a sense of grievance and nationalism. Japan, in paticular is a focus of this, especially given the real horrors inflicted on China by Japan not very long ago. Of course, the masses of dead chinese as the result of Mao have been sent to the memory hole.

Beijing is forced to run as fast as it can just to stay in place providing a degree of improved standard of living and economic mobility to a still growing population. A Japan that distances it's self from the US and re-militarizes would be very beneficial for Beijing in empowering it's hawks and refocusing domestic discontent on the still very hated japanese.

Every time Beijing toes over the line and feels like it won, the more it builds to taking the next step until we end up in a real confrontation.

You put out fires when they are small, you don't sit back and wait until the fire has gotten out of control because a small fire isn't worth the time and energy.
Title: Well, who could have seen this coming?
Post by: G M on September 27, 2010, 11:50:03 AM

2 Chinese patrol boats spotted off Senkaku

Japan's top cabinet spokesman has confirmed the presence of 2 Chinese fisheries patrol boats in waters near the Senkaku Islands since last Friday. He says Japan is demanding that the Chinese vessels leave the area.

Chief Cabinet Secretary Yoshito Sengoku told reporters that 2 Chinese surveillance ships against illegal fishing have been spotted near Japan's territorial waters in the East China Sea.
Title: Re: China
Post by: Body-by-Guinness on September 27, 2010, 11:54:48 AM
Ruh roh. Extra innings, I expect.
Title: Re: China
Post by: G M on September 27, 2010, 12:03:31 PM

China to up patrols near Senkaku isles

Satoshi Saeki / Yomiuri Shimbun Correspondent

BEIJING--The Chinese government has decided to regularly deploy its fisheries patrol boats near the Senkaku Islands in an apparent reaction to the arrest of a Chinese fishing boat captain near the Japanese islets early this month, it was learned Monday.

It was anticipated that the administration of President Hu Jintao would intensify such patrols as a retaliatory measure against the arrest and detention of the captain.

The Chinese Agriculture Ministry said in a Sept. 20 publication for the fisheries industry that the government hereafter would need to increase and make permanent the activities of its patrol boats near the islands in the East China Sea, Hong Kong's Ming Pao Daily News reported Monday. The official in charge emphasized in the ministry's fisheries news that the action was designed to protect the safety of the country's fishermen and their assets.

According to sources, fisheries patrol ships No. 201 and No. 204 are currently in operation around the Senkaku Islands, territorial rights over which are claimed by both China and Taiwan.

The Agriculture Ministry operates the fisheries patrol ships, some of which are decommissioned navy ships. Two patrol ships began regular patrols in the South China Sea in April "to protect" the country's fishing boats and control the "illegal operation" of foreign fishing vessels.

Meanwhile in Tokyo, the Japanese government has decided to demand that the Chinese government pay for the damage caused to two Japan Coast Guard vessels by the Chinese fishing boat, Chief Cabinet Secretary Yoshito Sengoku said Monday.

"This is an important issue for the government, separate from the issue over whether such a demand is made shortly or sometime after the two countries' relations 'have cooled down,'" the top government spokesman said.

He thus did not make it clear when Japan will make such a demand.

The collisions, which took place on Sept. 7 in the Japanese territorial waters, have led to one of the worst diplomatic rows in years between Japan and China. There are no signs of an easing of tensions, despite the release of the captain in what was effectively a concession by Japanese authorities.

After the arrest of the captain, China intensified pressure on Japan, through such means as restricting exports of rare earth minerals and suspending ministerial-level talks.

In New York last week, Chinese Premier Wen Jiabao said, "If Japan clings to its mistake, China will take 'further action' and the Japanese side shall bear all the consequences that arise."
(Sep. 28, 2010)
Title: Re: China
Post by: G M on September 27, 2010, 12:20:28 PM

What's the "mature" way to handle this new development?

Title: Re: China
Post by: G M on September 27, 2010, 01:09:49 PM

BEIJING — China has stepped up customs inspections of goods shipped to and from Japan, slowing trade, logistics companies said Monday, amid a spat over the detention of a Chinese fishing boat captain near disputed islands.

Customs officers who usually look at 2 percent to 10 percent of goods in shipments began checking up to 95 percent this weekend, said employees of cargo companies in Shanghai and Shenzhen, a major port near Hong Kong. Customs officials gave no explanation for the change, they said.

"Normally it takes one or two days but now it's going to be about a week," said Mary Deng, an administrator for Shenzhen Hyun Young International Transportation Co. The company handles shipments of Chinese-made furniture, clothing and other goods to Japan.

A customs agency spokesman denied that goods to and from Japan were targeted for increased inspections.

"China's customs agency monitors and inspects inbound and outbound products according to law," said the spokesman, who would give only his surname, Tao. "We have not increased the rate of inspections on Japan-related products."

**If you know China, you know this is their classic "fcuk you", done while shrugging their shoulders and smiling apologetically.**

Anti-Japan protesters hold war flags of the Japanese Imperial Army with "Japan get out" written on them during a demonstration near the Japanese Consulate in Hong Kong Sunday, Sept. 26, 2010. China has reiterated its demand for an apology from Japan over the detention of a Chinese fishing boat captain whose arrest plunged relations between the Asian neighbors to their lowest level in years.

**Cue the astroturfed protesters.**

Anti-Japan protesters hold war flags of the Japanese Imperial Army with "Japan get out" written on them during a demonstration near the Japanese Consulate in Hong Kong Sunday, Sept. 26, 2010. China has reiterated its demand for an apology from Japan over the detention of a Chinese fishing boat captain whose arrest plunged relations between the Asian neighbors to their lowest level in years.
Title: Shockwaves
Post by: G M on September 27, 2010, 01:22:22 PM

Korea more vulnerable to China threats than Japan

By Kim Tae-gyu

China’s recent diplomatic victory over Japan makes Korean bureaucrats and corporations sweat since the former’s lethal weapon of rare metals against the latter is expected to work on Korea as efficiently as on Japan.

Late last week Tokyo released the detained captain of a Chinese fishing trawler, who was detained by the Japanese coast guard early this month while operating in the waters around a group of uninhabited rocky outcroppings in the East China Sea.

Although Japan has shown a very stern attitude on issues involving disputed territory, the country easily surrendered this time around as China reportedly halted shipment of rare earth elements although Beijing denies such maneuver.

“What if China adopts the strategy of stopping shipment of the materials to Korea amid bilateral political or economic disputes? We would be at a loss on how to deal with it,” said a Seoul analyst who asked not to be named.

Rare-earth elements refer to a collection of 17 chemical elements in the periodic table. They are indispensable in producing high-tech products or eco-friendly technologies such as electric cars, wind turbines and liquid crystal displays (LCDs).

Korea, home to the world’s top LCD manufacturers, does not produce them at all and depends wholly on imports to procure them. Last year, all of its 2,600 tons of demand were met by shipments from China.

The state-run Korea Resources Corporation (KRC) has set up a target of maintaining its reserves for the rare-earth metals at more than 1,150 tons by 2016 but its present storage remains at a mere 3 tons.

In this climate, Korea seems to have no choice but to rely on China, around 95 percent of which produces all supplies. The communist state even imposed a global export quota on them.

Industry watchers point out that Asia’s fourth-largest economy needs to generate a long-term plan of grappling with the aforementioned problems.

“Many Koreans tend to presume that they would need us just as much as we need them. However, the reality check shows a different result as amply demonstrated by the past disputes,” the analyst said.

“Have a look at the garlic case a decade ago. We were already not in the position to commission a tit-for-tat strategy against China and now there are the rare-earth elements. We need to do something to level the playing field but the hitch is that nobody seemingly knows how to do so.”

Midway through 2000, the former Kim Dae-jung administration jacked up tariffs on Chinese garlic from 30 percent to as high as 315 percent by 2003 in order to protect Korean farmers from cheap Chinese imports.

A week later, the Chinese government countered the move by banning imports of Korean handsets. Seoul immediately backed off by cutting the tariffs after quick negotiations.

Korea’s dependency on China has shot up since then as the latter became the No. 1 trading partner of the former during the first decade of the new millennium, nudging past the United States.
Title: Re: China
Post by: JDN on September 27, 2010, 02:53:09 PM
Definitely "overtime".   :-)

I'm still not sure we should rattle the sabers if only economic tit for tats is the results.  Or even enter into the fray.
Japan and China are both big boys.

However, IF China threatens military action against Japan then America should make it very clear that we will
be there to defend Japan whatever it takes.  At this time, I cannot see it going anywhere close to that far.

Stayed tuned.  I doubt if this game is over.  Each country has it's own rabid nationalists to deal with.  And it's own business interests.
Title: Re: China
Post by: G M on September 27, 2010, 02:58:18 PM

Captain's release doesn't bring expected result / Tense exchanges between Japan, China continue; intrusions into waters near Senkaku likely to increase

Hideo Kamata and Toshimitsu Miyai / Yomiuri Shimbun Staff Writers

Prime Minister Naoto Kan's administration believed that releasing the Chinese fishing boat captain would end this country's confrontation with China, but that expectation proved to be wrong as Beijing instead escalated its hostile actions.

The Chinese government has demanded an apology and compensation for the arrest of the captain, whose boat collided Sept. 7 with Japan Coast Guard patrol vessels in Japanese territorial waters off the Senkaku Islands in Okinawa Prefecture.

After the Japanese government refused the demands, the Chinese government immediately released a counterstatement. The tense back-and-forth between Japan and China continues.

Internal Affairs and Communications Minister Yoshihiro Katayama said Saturday, "The Japanese side responded a little more maturely [than China]."

Katayama praised the decision to release the captain, who was arrested on suspicion of obstruction of the JCG's official duties. "It's not good for [Japan and China] to be locked in a dispute," he said.

However, the Japanese government was deeply shocked by China's unexpected demand for an apology and compensation.

"The Senkaku Islands are part of Japan's territory," a government source said. "What do they mean demanding an apology even though the arrest was in line with Japanese law?"

His remark reflects the optimistic view that spread through the Prime Minister's Office on Friday, when it was decided to release the Chinese captain. Officials thought the release would immediately lead to an improvement in Japan-China relations.

China's subsequent hard-line stance, however, revealed that Kan's diplomatic outlook was naive.

Government officials have voiced serious concern about future developments. One said, "After winning the release of the captain, China may try to further shake Japan, instead of stopping its attacks."

Intrusions by Chinese fishing boats into Japan's territorial waters around the Senkaku Islands are expected to escalate. JCG officials and other involved parties are concerned they will be unable to effectively patrol the area even if Chinese boats fish there illegally.

There is no sign China will stop its apparent retaliation over the arrest of the captain. For example, China has made moves indicating it will unilaterally drill in natural gas fields in the East China Sea.

In the gas field Japan calls Shirakaba and China calls Chunxiao, the Japanese government recently confirmed that what appeared to be an excavating drill was brought to the Chinese facility and turbid water was newly spotted around the gas field.

At a meeting Friday of the Liberal Democratic Party's Foreign Affairs Division, a senior official from the Natural Resources and Energy Agency said, "We continue to believe that drilling has likely been conducted."

The Foreign Ministry also China likely has begun drilling and has repeatedly asked China through diplomatic channels whether it is true.

In addition, four Fujita Corp. employees who were detained by Chinese authorities in Hebei Province have not yet been released, although officials of the Japanese Embassy in Beijing finally were allowed to meet with them Saturday.

Officials in the government and the Democratic Party of Japan are concerned about China's next steps.

"Now that we've given up the captain, who was our bargaining chip, we're afraid China will do anything it wants toward Japan," a source close to the DPJ said.

Kan said in New York on Friday: "Japan and China are important neighbors who have responsibilities in the international community. Both sides need to make cool-headed efforts to deepen their strategic bilateral relations."

But it seems his message has not reached China.
(Sep. 27, 2010)
Title: China-Japan: Carbon-Based Confrontation
Post by: G M on September 27, 2010, 03:17:24 PM

China’s claim to the “Diaoyu” islands is older – going back to the fifteenth century – and more urgent.  China’s economy and hell-for-leather military buildup makes it the fastest-growing consumer of carbon-based fuels.  Forget all the talk of China’s “green” economy: they are (at least) the world’s third-largest oil consumer, have for at least three years been opening coal-fueled power plants at the rate of about one every week, and one of the Chinese government’s principal goals is to expand their claims to oil and gas resources.  China was forced to shut down about 3% of their coal plants this year due to a coal shortage.  Energy demand continues to rise, unabated by environmental concerns.

China’s claim to the Senkaku/Diaoyu islands is serious, and not subject to compromise.  It is but one of several energy-based issues which could – and likely will – drive China to war.

My 2006 book, “Showdown: Why China Wants War with the US”  was unfortunately titled.  It should have been, “Why China Needs War with the US.” China must confront us in order to remove our protective barrier to its hegemony over its region.

China wants to avoid compromise because its aim in what it refers to as the “peripheral nations” is to assert hegemony: peacefully if possible, and through military confrontation if necessary.  With nations such as India, they can only bluff and bluster. With Japan and others, they can literally gain ground through intimidation if the U.S. remains supine.

China’s dispute with Japan meets two needs. If it can assert hegemony over the Senkakus, China can both expand its influence (and intimidate other regional nations) while gaining possession of badly-needed natural gas reserves. (The Senkakus, according to a report by  may have gas reserves sized at 1.6 trillion cubic feet and are expected to be a major source of production within ten years.)
Title: The new East Asia world order
Post by: G M on September 27, 2010, 03:41:34 PM

EDITORIAL : The new East Asia world order

Monday, Sep 27, 2010, Page 8
President Ma Ying-jeou (馬英九) was no doubt pleased last week when Chinese Premier Wen Jiabao (溫家寶) offered his reassurances concerning the missiles China has aimed at Taiwan. Ma has repeatedly called on Beijing to remove the missiles if the two sides of the Taiwan Strait are to begin political negotiations.

However, a closer look at Wen’s remarks indicate little to be pleased about. It was not a policy statement, but merely an indifferent response to questions from a Taiwanese reporter.

As Democratic Progressive Party (DPP) Chairperson Tsai Ing-wen (蔡英文) said, “will one day be removed” was so vague that it is meaningless.

Not that being more specific would have helped. Had Wen provided a date and timetable, removing the weapons would still be little more than a gesture. Analysts repeatedly point out that if the missiles are moved, they can easily be replaced if negotiations do not produce the desired results. And if China gets what it wants: It can deploy the missiles elsewhere, which makes Taiwan’s problem everyone’s problem since China has no shortage of territorial disputes.

Indeed, an incident last week reminds us of just this. Japan’s unsuccessful attempt to prosecute a Chinese fishing boat captain for colliding with two Japanese Coast Guard vessels in disputed waters off the Diaoyutai Islands (釣魚台) is disturbing for many reasons.

First is Tokyo’s sheer ineptitude in the affair. Having detained the captain and announced plans to try him, officials abruptly reversed course when an enraged China threatened to block exports to Japan of materials essential to high-tech manufacturing. Apparently surprised by the fury of China’s response, Tokyo’s lack of resolve to pursue the case angered many Japanese, who described the decision as foolish and humiliating.

Another reason for alarm is the Chinese response, which, to give the Japanese some credit, was stronger than expected given that such incidents are hardly unusual. For Ma and others who seek to calm concerns about future relations across the Taiwan Strait, China’s treatment of Japan signals not just its growing power, but its aggression. For all the talk of soft power and denials of regional hegemony, China seems willing to use force to achieve its goals.

Most troubling about Japan’s humiliation, however, is that the force China used was not military. For those determined to see Taiwan obtain F-16s and other US military hardware for cross-strait defense, it is worth noting that Japan has plenty of military equipment, and thousands of US troops to operate it.

Another thing analysts have long said is that China’s military threat will ultimately be matched by its economic clout. As Japan’s largest trading partner, China wields immense power over its neighbors. Neither missiles nor any other form of conventional armament could begin to match the damage that could be caused to Japan’s already struggling economy were China to follow through on its threat.

The obvious effect in Taiwan of Japan’s Diaoyutais debacle will be to dampen enthusiasm for the Economic Cooperation Framework Agreement, which the Chinese Nationalist Party (KMT) administration has pushed so strongly. Closer cross-strait economic ties will certainly make Taiwan more vulnerable to Chinese coercion, and warnings of this danger must be harder for the government to dismiss.

Yet the ultimate lesson may be for the DPP. Say what she wants about Wen’s remark, but Tsai too must be wary. China is increasingly the dominant force in the region and it must be dealt with. High seas bravura will not do. If the DPP is to be a viable political alternative, it must develop positions that will make a cross-strait relationship possible.
Title: POTH-China Imposes a Steep Tariff on U.S. Poultry
Post by: G M on September 27, 2010, 04:01:12 PM
Published: September 26, 2010

HONG KONG — Days after it flexed its economic muscle in a diplomatic dispute with Japan, China  continued to display a more assertive international economic policy on Sunday as it imposed steep tariffs on poultry imports from the United States.

China’s commerce ministry announced on its Web site that it would impose import tariffs on American poultry of up to 105.4 percent. It said the tariffs reflected the result of its own antidumping investigation, which looked at whether the United States was harming China’s poultry industry by exporting chicken parts for less than it cost to produce them.

The commerce ministry started the investigation less than two days after President Obama imposed steep tariffs on Chinese tires a year ago. Chinese officials have denied that the inquiry was in retaliation, but poultry is one of the few categories in which the United States runs a trade surplus with China, making it an ideal target for Chinese trade actions.

The tariffs are another example of China’s willingness to use its economic leverage when it feels it is being challenged. An official at one of Japan’s top traders in rare earth minerals said on Monday that there appeared to be no resumption in shipments to Japan, a result of a still-simmering dispute over Japan’s arrest of a Chinese fishing boat captain. The official, who spoke on condition of anonymity, said traders were watching closely to see whether Chinese customs would start letting shipments through again. “China’s rising assertiveness on the international economic stage reflects its growing economic might and the self-confidence of its leadership, but is tempered by the realization that it faces many challenges in terms of its own development,” said Eswar S. Prasad, an economics professor at Cornell.

Carol J. Guthrie, a spokeswoman for the United States trade representative, said, “We are disappointed that duties are to be imposed and will be examining the determination for consistency with applicable rules.”

Quarrels over products as diverse as chickens and rare earth minerals might seem like minor spats. But they come against the backdrop of China’s vigorous defense of its currency policy, and its stepped-up activity in the World Trade Organization.
Title: Re: China
Post by: JDN on September 27, 2010, 04:19:50 PM
As I had mentioned before; tit for tat...
chickens and tires, x vs y

I think you will see more "examples of China’s willingness to use its economic leverage when it feels it is being challenged".

As a growing economic and military might, it is not unexpected. 

I'm curious, in your opinion what should we do?  Rattle the sabers?  Send the fleet?
Start a trade war?  An economic war?  Escalate? 

It won't be pretty...

Title: Re: China
Post by: G M on September 27, 2010, 04:28:38 PM
As I said before, we can't afford a trade war. I would send the 7th fleet to escort Japanese Coast Guard ships as they resume their patrols of their territorial waters. This would rock Beijing and the Sinohawks/PLA elements out of favor just as China's next generation of leadership sorts it's self out.

That can turn this win into a painful defeat for them that will moderate their aggressive behavior.

If this move were to turn this into a shooting war, now is better than later. Later, we will be weaker, later, they will be stronger.
Title: Re: China
Post by: JDN on September 27, 2010, 07:00:04 PM
"We can't afford a trade war" yet I bet, at least for this round that is how China will fight. Between trade, dollars and bonds held by China it won't be pleasant for America.  The word ugly comes to mind.  Of course they will respond. And then what do we do?  Send black ships into Hong Kong?

For the moment it seems more prudent to let Japan and China resolve their differences between themselves.
Title: Re: China
Post by: Crafty_Dog on September 27, 2010, 07:12:17 PM
Prudent?  Yeah that's what was said with Alsace-Lorraine, Sudentland (sp?) and Austria too.

Hell, maybe we could crank up the printing press and pay off all the bonds they hold.  Of course then no one would lend us money any more , , , which could be a good thing.  :lol:
Title: Re: China
Post by: G M on September 27, 2010, 07:34:45 PM

You did note that the other asian nations are watching this closely and don't seem real happy with how things are looking, right? Without us, what exactly will Japan do?

Send black ships into Hong Kong?

No, as I said before, we move the 7th fleet, which just happens to be patrolling the western pacific right now, to escort the Japanese Coast Guard as it patrols it's legally recognized territory. Then we see what moves China does or does not make.
Title: Re: China
Post by: G M on September 27, 2010, 07:57:27 PM
Here are basic principles that apply across time and culture:

There is NEVER a power vacuum in human affairs. There are those on top, those on the bottom and those in motion in either direction.

In this case, China sees a weakened America with a weak, inexperienced leader who at the worst will send letters harshly condemning China's actions. Sadly, their perceptions are spot on. There is an old chinese saying that says "Kill the chicken to scare the monkey". Make a public display of your power, make an example of a chosen victim to get others to recognize that they could be next. Japan is the chicken today, and the rest of asia, us and the rest of the world are to get the message of who is dominant in eastern asia these days.

Those who neglect history are doomed to repeat it.

As Crafty already pointed out, remember another country with a chip on it's should for past grievances, a wave of nationalist fever in it's population and a growing military looking to expand it's territory? Remember those who thought appeasement would bring them "peace in our time"?
Title: Re: China
Post by: Crafty_Dog on September 27, 2010, 09:36:15 PM
As someone pointed out, the current trajectory seems to lead to us being run off of our alliance with Taiwan; perhaps in the aftermath of our , , , departure from Iraq and Afghanistan.   
Title: China blames US for dispute with Japan
Post by: G M on September 28, 2010, 08:18:04 AM

September 28, 2010
China blames US for dispute with Japan
William R. Hawkins
Though the Chinese fishing boat captain detained by Japan after ramming two coast guard boats returned home over the weekend, tensions remain high between Beijing and Tokyo. The underlying dispute over the islands called Diaoyu by China and Senkaku by Japan continues. Both countries claim ownership from ancient times, but Japan has made the stronger enforcement effort. China claims it will step up its patrols around the islands, so future clashes are likely. The islands are 240 nautical miles southwest of Okinawa. At stake is control of the surrounding East China Sea, its oil and mineral resources and trade routes.

The day after the Chinese captain was released, the Chinese Communist Party newspaper Global Times editorialized that "Coolness Towards Japan Should Remain." It stated

    Japan needs to be given a clear message that irresponsible policies have consequences. The Japanese public also needs to be clear that China should not be trifled with. China's 1.3 billion people have no intention of overwhelming the Japanese public in sentiment, but 100 million Japanese certainly should not try to overwhelm the Chinese people.

A Global Times "editor's choice" commentary by two Chinese scholars September 27 blamed the United States for the crisis because Washington gave a weak Tokyo the courage to confront Beijing. Liu Jiangyong, deputy director of the Institute of International Studies at Tsinghua University, wrote,

    The incident cannot be seen as an isolated dispute between Japan and China. The American shadow is obvious. It is the US military support that drives the hard-line stand of Japan against China.

    Even though the US transferred control [of the islands] to Japan [after World War II] , that doesn't mean the islands are the Japanese territory. So there is no legal foundation to support the [US-Japan Security] treaty's application to the Diaoyu Islands. It is the US that has made the Diaoyu disputes more complicated and caused it to become an obstacle to a healthy Sino-Japanese relationship

Ni Lexiong, a professor at the Shanghai University of Political Science and Law, went further in his argument,

    The background to the incident is that the US has been provoking China and taking advantage of conflicts between China and its neighbors to contain China recently.

    The Diaoyu Islands incident could be seen as a direct result of the recent series of Sino-US confrontations, from US-South Korea joint military drills to the US challenging China's core interests in South China Sea. Facing these provocations, China has to respond in defence, which inspires surrounding countries such as Vietnam, India and Japan to challenge China

    Logically Japan should intensify political and military cooperation with China; unfortunately, it turns to the US politically and militarily.

Direct talks between President Barack Obama and Chinese Premier Wen Jaibao at the United Nations last week fell flat. China seems confident that it can bully both the U.S. and Japan. Washington needs to demonstrate to Beijing very quickly that the balance of power has not shifted away from the democratic alliance in Asia if future confrontations are to be deterred.
Title: Re: China
Post by: Crafty_Dog on September 28, 2010, 12:34:06 PM
So, what is the legal background to our giving the islands to Japan?  How did we acquire dominion over them?
Title: Re: China
Post by: G M on September 28, 2010, 12:53:25 PM
WWII. We returned control of them to Japan in 1971.
Title: Re: China
Post by: JDN on September 28, 2010, 02:18:45 PM
GM is correct; in 1971 as part of Okinawa we returned the islands to Japan.  However a little history is important.  There are two sides to this story.

In 1874, Japan took Liu Chiu Islands (Okinawa) from China by force when Chinese Ching Dynasty was involved in several wars with other foreign countries. However, the Diaoyu Islands still remained under the administration of Taiwan, a part of China. After being defeated by Japan in the Sino-Japan War, China ceded Taiwan to Japan under the Shimonoseki Treaty. As a part of Taiwan, the Diaoyutai Islands belonged to Japan at that time.

Taiwan was returned to China at the end of World War II in 1945 based upon the 1943 agreement of the Cairo and Potsdam Declarations. The Japanese government accepted the terms that stated in these documents"...that all the territories Japan has stolen from the Chinese, such as Manchuria, Formosa, the Pescadores, shall be restored to the Republic of China.

In 1951 Article 2 of the Treaty of Peace with Japan signed by Japan and the Allied Powers (excluding both the ROC and the PRC) stated that, "Japan renounces all right, title and claim to Formosa and the Paracels". Article Four of the separate peace treaty signed between Japan and the ROC in 1952 declared that all agreements between Japan and China before 1941 were null and void. [2] As stated above, it is reasonable to take the mean that Diaoyu Islands should be returned to China because the Diaoyu Islands are one part of Taiwan. However, Japanese have maintained that the islands should not be included in these treaties. This issue remain quiet through the 1950s and 1960s probably because the these small uninhabited islands held little interests for the three countries.
Title: Re: China
Post by: Crafty_Dog on September 28, 2010, 06:05:50 PM
That is very interesting JDN, from what you say, China seems to have a plausible claim at least.  Should I want to cite a source, what source would that be?

Title: Weishe Works
Post by: Body-by-Guinness on September 28, 2010, 07:02:35 PM
Heritage's take:

East China Sea Flare-Up: Learning the Wrong Lessons in Beijing
Published on September 27, 2010 by Dean Cheng WEBMEMO #3027

Japanese prosecutors have reportedly decided to release the captain of the Chinese fishing boat whom they arrested after he apparently rammed two Japanese coast guard vessels in the waters around the Senkakus. The decision, a Japanese deputy public prosecutor said, was made “taking into account the impact on our citizens and Japan–China relations, [so] our judgment was that it would have been excessive to prolong the investigation and his detention.”[1]

The Japanese government’s comments make it even clearer that this decision was made due to the impact of the case on Sino–Japanese relations. Japanese Chief Cabinet Secretary Yoshito Sengoku stated explicitly, “It is a fact that there was the possibility that Japan–China relations might worsen or that there were signs of that happening.”[2]
While this decision may resolve the immediate issue of Captain Zhan Qixiong, it is likely to generate far more problems in the future.

Sending the Wrong Message
The situation first erupted on September 7, when Japanese coast guard vessels intercepted Zhan’s fishing boat in the waters around the disputed Senkaku/Diaoyutai islets. The captain tried to flee and apparently collided with two of the coast guard vessels (with little damage and no loss of life), for which he was arrested.

In the immediate aftermath of the incident, Beijing demanded that the Japanese government “immediately and unconditionally” release the captain. Such an aggressive response was unusual, given that the situation was far from critical. Of even greater concern, however, was the fact that Beijing escalated both the rhetoric and its responses over the following two weeks, to the point of Chinese Premier Wen Jiabao publicly snubbing Japanese Prime Minister Naoto Kan last week at the United Nations and China suspending the sale of rare earth minerals (essential for the production of electronics) to Japanese customers. For Tokyo to decide to release the Chinese captain in the face of such overreaction only teaches Beijing that its policies worked.

This is an extremely dangerous precedent not only for Japan but for the larger East Asia region and, ultimately, even for the United States.

It was Beijing, not Tokyo, that decided that this relatively minor incident should escalate. Some recent reports even suggest that the People’s Liberation Army (PLA) was responsible for the harder line pursued by the Chinese in this crisis.[3] Regardless of whether it was ultimately the military that pushed this position or simply hardliners writ large, they have now been handed a victory by Tokyo. Chinese demands for immediate and unconditional release have been met.

Weishe Works
More to the point, from Beijing’s perspective, the combination of diplomatic paroxysm and economic blackmail have led to a desired outcome. This would suggest the successful application of weishe.

While commonly translated as “deterrence,” the Chinese phrase weishe embodies not only dissuasion (commonly associated with the term deterrence) but also coercion. That is, whereas Western concepts of deterrence tend to focus on persuading a rival not to do something they would otherwise do, the Chinese concept of deterrence also includes persuading a rival to do something they would otherwise not do.

It would therefore be logical for the PRC to pursue a similar approach over future territorial disputes—use weishe to coerce neighbors into make concessions. And there are many such disputes looming if not already underway, including with Japan and most of Southeast Asia, as well as India. Consequently, the Japanese decision makes it more likely that there will be increasing confrontations all along China’s disputed periphery.

What will Japan do the next time a Chinese fishing boat is found around the Senkaku/Diaoyutai? Or if Chinese vessels challenge Japanese survey operations in disputed waters?
Worse, this incident is also likely to persuade Chinese officials that their current approach to crises is a successful one. A review of recent crises—such as the 2001 EP-3 incident and the 2007 shooting down of a Chinese satellite, as well as the case of Captain Zhan—reveals that Chinese responses are consistently delayed and fragmented—and initially nearly incoherent. Yet there are few downsides for the Chinese aside from a demarche or two.

A Dangerous Situation: The U.S.’s Two-Pronged Response
For the U.S., which is often allied or friends with parties that have territorial disputes with the PRC, this situation will become ever more dangerous. Chinese miscalculations (which are essentially being encouraged) will inevitably draw in the U.S. if the situation starts to spiral out of control. Washington needs to engage in a two-pronged approach.

First, the U.S. needs to make clear to its allies that their policy of preemptive concession and non-response to Chinese irascibility is ultimately self-defeating. Not only does it encourage the Chinese to be more belligerent and less conciliatory, but it is also more likely to escalate future crises. And Washington has no intention to help those who will not help themselves.
Simultaneously, the U.S., in its own policies, needs to be more coherent and coordinated. China resorting so promptly to the economic threat of curtailing rare earth exports, for example, should be a clear signal to American decision-makers that it is time to reexamine its decisions influencing domestic exploration and exploitation of said materials. Similarly, Chinese efforts to exclude the U.S. Navy from operating in the Yellow Sea and East China Sea should be met with a recommitment of the U.S. to uphold its treaty and legal obligations to allies and friends in the Pacific.

America: “Returning” to Asia
If the U.S. is going to argue that it is “returning” to Asia, it needs to make clear that, this time, it is here to stay. Such a commitment requires not only maintaining a strong military presence but deepening its diplomatic and trade ties to the region. The American presence has always been multifaceted, and its “return” should reflect all those aspects.

Dean Cheng is Research Fellow in Chinese Political and Security Affairs in the Asian Studies Center at The Heritage Foundation.
Title: Re: China
Post by: JDN on September 29, 2010, 08:37:48 AM
It seems tensions are easing. 

Japan Times   9.29.10
China's rare earth exports back on track
BEIJING (Kyodo) China has resumed procedures to export rare earth metals to Japan after the bilateral dispute over the Senkaku Islands reportedly halted shipments of the critical materials, trading house sources said Wednesday.
A Chinese mining company has restarted applications for exports and Chinese customs authorities have confirmed that cargo will be shipped once the procedures are completed, the sources said.

Separately, Chief Cabinet Secretary Yoshito Sengoku said that China may have started trying to repair ties with Japan, but more must be done to reduce the bilateral tension.

"Currently, we are not in a win-win relationship. It is probably obvious to everyone," the government's top spokesman said at a news conference. "However, I presume that (China) has started making efforts to bring the situation back to zero (from negative)."

He also said China has to do more before organizing high-level talks.

"I have been saying that the ball is already in China's court," he said. "If high-level talks are necessary, China must first return the ball" to convince the Japanese public that Beijing has changed its recent hardline attitude.

Sengoku also said the government has no concrete information on new developments regarding exports of rare earth metals and has asked China to provide a real picture of the situation.

China denied banning exports in retaliation for the arrest of a Chinese fishermen near the disputed isles, but various companies have reportedly said they were pressured to halt shipments.

Japanese traders, for example, said last week that shipments of rare earth metals, which are used to make hybrid cars, mobile phones and other high-tech products, had been stopped, although the Chinese Foreign Ministry said Saturday there had been no order to suspend shipments.

On Sept. 22, trading sources in Beijing said exports of the materials had grown "stagnant," and The New York Times reported that China had introduced a ban to pressure Japan to free the captain of the Chinese fishing vessel, who was detained following collisions with Japanese Coast Guard cutters Sept. 7 off the Senkaku Islands in the East China Sea.
Title: Re: China
Post by: G M on September 29, 2010, 06:58:11 PM

Sunday, September 26, 2010
Today's Reading Assignment

..from Robert Kaplan, the national security correspondent for The Atlantic, and a fellow at the Center for a New American Security. Writing in today's Washington Post, he notes that China is using our "distraction" in the Middle East to become a great naval power. From his op-ed:

China has the world's second-largest naval service, after only the United States. Rather than purchase warships across the board, it is developing niche capacities in sub-surface warfare and missile technology designed to hit moving targets at sea. At some point, the U.S. Navy is likely to be denied unimpeded access to the waters off East Asia. China's 66 submarines constitute roughly twice as many warships as the entire British Royal Navy. If China expands its submarine fleet to 78 by 2020 as planned, it would be on par with the U.S. Navy's undersea fleet in quantity, if not in quality. If our economy remains wobbly while China's continues to rise -- China's defense budget is growing nearly 10 percent annually -- this will have repercussions for each nation's sea power. And with 90 percent of commercial goods worldwide still transported by ship, sea control is critical.

The geographical heart of America's hard-power competition with China will be the South China Sea, through which passes a third of all commercial maritime traffic worldwide and half of the hydrocarbons destined for Japan, the Korean Peninsula and northeastern China. That sea grants Beijing access to the Indian Ocean via the Strait of Malacca, and thus to the entire arc of Islam, from East Africa to Southeast Asia. The United States and others consider the South China Sea an international waterway; China considers it a "core interest." Much like when the Panama Canal was being dug, and the United States sought domination of the Caribbean to be the preeminent power in the Western Hemisphere, China seeks domination of the South China Sea to be the dominant power in much of the Eastern Hemisphere.

While Kaplan's central thesis is clearly correct, there are a few faults in his analysis. First, the "niche" capabilities he describes are useful for (potentially) limiting American naval forces in China's desired spheres of influence, but they do not add up to a true, global maritime power. To achieve that status, Beijing needs a blue water navy, built around carrier battle groups and other force-projection assets. True, China will have carriers by the end of this decade, but it will take even longer to develop the trained pilot cadre and ISR support needed to support their naval power thousands of miles from home.

However, Beijing's initial focus is the South China Sea and adjacent waters, stretching from Australia to Japan. In that region, China's growing naval power is already a menace, and the U.S. seems to have no credible response, beyond attempts at engagement. More disturbingly, the size of our Navy continues to shrink while more ships and subs join the Chinese fleet. That development alone gives Beijing a powerful incentive to pursue an aggressive maritime strategy, fueled by 10% annual increases in defense spending.

Not long ago, Defense Secretary Robert Gates argued that the U.S. could afford to retire some of its aircraft carriers, claiming that we were "over-matched" against potential adversaries. Obviously, that analysis is a bit short-sighted when it comes to China. Before he retires in a few months, someone might ask Dr. Gates about his over-matched theory regarding the PLAN and its expansion program.
Title: Re: China
Post by: G M on September 29, 2010, 08:33:01 PM
**Note: Bill Gertz is well known for having lots of sources within the pentagon and other national security entities.**

Inside the Ring

By Bill Gertz


The Washington Times

6:38 p.m., Wednesday, September 29, 2010

Japan-China standoff

Tensions between China and Japan continue to rise even though Japan on Saturday released a Chinese fishing boat captain who was held for ramming his vessel into two Japanese coast guard ships near the Senkaku Islands in the East China Sea.

China recently deployed two armed patrol boats to waters near what it calls the Diaoyu Islands, and a Chinese Foreign Ministry spokeswoman said on Tuesday that the "law-enforcement boats" were sent "to maintain fishing order and protect safety of life and property of Chinese fishermen."

"We hope Japan stop* tracking and disrupting Chinese fishery law-enforcement boats," spokeswoman Jiang Yu said.

Japan has made four diplomatic appeals to call off the patrols and has deployed six coast guard ships in the waters in the region.

The uninhabited islands are located south of Okinawa, which has administered the islands since the 1800s, not including the period when the U.S. military occupied Okinawa at the end of World War II.

China has demanded an apology from Japan for the detention of the fishing boat captain, and Tokyo has asked China to pay for repairs to the one coast guard ship that was damaged.

Beijing has claimed the incident that began Sept. 7 violates its sovereignty and asserted that Japan cannot enforce its laws near the Senkakus because the island chain belongs to China.

U.S. intelligence agencies have stepped up surveillance of the Senkakus and are closely monitoring the rising tensions over the dispute.

The strike group led by aircraft carrier USS George Washington is currently under way in waters close to the disputed islands and could move closer if shooting breaks out.
Title: Don't kowtow to the Chinese
Post by: G M on September 29, 2010, 09:08:37 PM

Don't kowtow to the Chinese

    * Greg Sheridan, Foreign editor
    * From: The Australian
    * September 30, 2010 12:00AM

THE international community needs to engage Beijing in a web of rules and customs.

IS this the year that China's leadership lets us all know that it is determined not to abide by routine international norms but will use raw power to take whatever it wants?

That is too strong a conclusion just yet, but it has certainly been a year of rugged behaviour from Beijing, behaviour that we should study closely.

Consider, first, the contrasting cases of Stern Hu and Zan Qixiong.

Hu, you'll recall, is the Australian former No 2 for giant miner Rio Tinto. In July last year he was arrested, initially on charges of espionage. Later he was convicted of bribery and corruption charges. At the start the Chinese government wouldn't communicate with the Australian government over the matter. Later it barely conformed to the minimum requirements of the consular agreement between the two nations.

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We will never know if Hu was remotely guilty of anything. We do know that corruption is rife in China and Hu was the only foreign executive singled out by the Chinese authorities this way.

We also know the context. The Chinese were annoyed by the prices they were paying for Australian minerals and deeply furious that their bid for a big equity stake in Rio Tinto had failed.

Within Australia the reliable pro-China gang, centred on the Australian National University, but well represented in business as well, told us in effect to keep quiet and not protest against Hu's punishment. We were to protect the Chinese legal system, as though that were not among the most corrupt and politicised legal systems in the world.

Now consider Zan's case. Zan is a Chinese fishing boat captain. He was plying his trade in the Senkaku Islands in the East China Sea. Japan considers these islands to be part of Japan and exercises normal control over them. China also claims the islands, as it does much of the maritime domain of northeast and Southeast Asia.

Zan's boat was approached by the Japanese navy. Now, all over the world, what does an illegal fisherman do if approached by a national coastguard? Universally, the fisherman runs away.

But in Zan's case, according to the Japanese navy, he rammed the Japanese vessel. That is akin to piracy and is certainly equivalent to criminal damage.

Zan was taken into Japanese custody. He was not charged with being in Japanese waters illegally but with offences arising out of ramming the Japanese ship. Many analysts believe the fisherman's actions were directed by the Chinese government as a deliberate way of testing the Japanese.

The Chinese reaction could not have been more different from the Australian response to Hu. There were no significant voices within China urging that Japanese legal processes be allowed to unfold.

Instead, the Chinese reaction was brutal and effective. Beijing cancelled high-level meetings with Japanese officials, including with the Japanese Prime Minister. Groups of Chinese tourists were prevented from visiting Japan. Four Japanese in China were suddenly arrested in what looked like preposterous charges of photographing Chinese military establishments. A high-level torrent of abuse was directed at Japan from Chinese government and media sources.

It was alleged that China banned temporarily the export of rare earth metals -- vital in much hi-tech gadgetry -- to Japan, though this was later denied.

Eventually the Japanese gave in and let Zan go, at which point the Chinese demanded apologies and compensation. Outraged public opinion finally forced Tokyo to reject this.

The Zan episode needs to be seen in the context of three other episodes this year where the Chinese have flouted well-established international norms.

One was the sinking of South Korean naval ship the Cheonan by North Korea, with dozens killed.

No serious analyst in the world doubts that the North Koreans torpedoed the Cheonan. Yet the Chinese refused, at the UN or anywhere else, to acknowledge Pyongyang's responsibility for the attack. Beijing's continued political investment in the Stalinist regime remains strong.

The second incident arose from the Cheonan sinking. The US and South Korea planned to hold joint naval exercises involving a US aircraft carrier off the coast of South Korea in the Yellow Sea. The Chinese demanded that these be moved, claiming, absurdly, that there would be a danger of US ships colliding with Chinese ships.

The implication is that Beijing can decide where international ships can sail, even if they are in indisputably international waters. The Americans, not wanting to take the focus off North Korea, moved the exercises to the east side of the Korean peninsula, away from China. But the Americans also promised they would be back in the Yellow Sea later this year.

Finally, there is the South China Sea. Beijing claims sovereignty over virtually all of the South China Sea. Various Southeast Asian nations claim the parts close to them. I urge you to look at a map to see just how preposterous Beijing's claim is, how far the South China Sea is from China.

At an ASEAN meeting this year, China's Foreign Minister Yang Jiechi furiously told the ASEANs that they were small nations while China was a big nation, and they should do as theywere told.

All this doesn't prove that China will behave with consistent aggression in the years ahead, but it sure doesn't prove the opposite, either.

Three prudent responses are obvious. One is to engage China in multilateral institutions so it is enveloped in a web of rules and customs. Another is for nations to have a clear idea of their individual bottom lines, beyond which they will not retreat.

And the third is for everyone to attend to their armed forces, so that a stable balance of power and deterrence are maintained.

Then the risk of fateful Chinese miscalculation is diminished. Pre-emptive capitulation, as some are now counselling, would be the worst policy for everyone.
Title: POTB/LATimes: Children left behind
Post by: Crafty_Dog on September 30, 2010, 08:38:42 AM
Not looking to disrupt the flow here, but a moment for another in my random reminders that China has some very weak links in its chain.,0,4655427.story

Title: We already know the answer to this one
Post by: G M on October 01, 2010, 08:03:55 PM

Obama’s national security strategy, however, is to primarily focus on rebuilding the US. Indeed, in September, when China protested about a planned military exercise in the Yellow Sea with a US aircraft carrier, the US backed down rather than risk Chinese anger. And Obama didn’t do much to persuade Beijing that its ally, North Korea, was guilty of sinking a South Korean naval ship last March, killing 46 sailors.

In July, Secretary of State Hillary Rodham Clinton did take a legal stand against China’s bold claims to a set of disputed islands in the South China Sea, saying the claims must be resolved with multilateral diplomacy. But the US hasn’t done much about that since then.

President Clinton was tested by China in 1996 after it lobbed missiles near Taiwan. He sent two aircraft carriers into the area in a show of defense for the island nation, which China claims as its own.

But these days China sees the US as weak. The American economy is stagnant. Many of the top Obama officials, such as Chief of Staff Rahm Emanuel and Defense Secretary Robert Gates, are leaving the administration. The president wants major cuts in the Pentagon. US forces began to leave Iraq this year, and Obama plans to start a US retreat from Afghanistan next year.

Since 2009, China has become more assertive in Asia. It recently told its neighbors that they are “small countries” while China is a “large country” – and that they should not expect an equal relationship.

This bluntness only raised fears of confrontation, especially as China expands it naval reach. Japan now wonders if it can count on the US in a crisis. It is considering a boost in its military spending. Over the past decade, Japan’s defense budget has declined about 5 percent – while China’s spending on its forces has soared
Title: China: Is Obama ready for a staredown?
Post by: DougMacG on October 01, 2010, 09:50:14 PM
One peaceful way to say he is ready for a staredown with China would be for this Nobel prize winning peace artist to sponsor the nation of Taiwan to join the United Nations and to quietly with no fanfare put our own membership and financial support for the organization on hold until it is accomplished. 

(The answer is no, I don't think he is ready.)
Title: Re: China
Post by: Crafty_Dog on October 01, 2010, 10:56:44 PM
Although I emotionally resonate to the idea, IIRC we have a signed treaty with China which recognizes that Taiwan ultimately is a part of China, or something like that.

I'm guessing our man GM has the precise facts at hand  :-D
Title: Re: China
Post by: G M on October 02, 2010, 04:46:44 AM

How has the TRA affected Taiwan and China?

In the last 30 years, Taiwan has evolved culturally, commercially, intellectually, politically and economically from a one-party dictatorship under martial law to a very vibrant democracy with a truly active and engaged press. Yet, I think it has been psychologically difficult for Taiwan to be gradually shunted aside. Despite this, whether it is due to the U.S. presence or the TRA itself, there has been a huge shift in how the Taiwanese think about their country and their relationship to China. Some people are more comfortable with Taiwan’s progress of cultural awakening, while some of Taiwan’s older generation will never give up the dream of a unified China.

Of course with the dramatic economic growth in China, Taiwan is now in a weaker economic position than ever before. There are hundreds of thousands of Taiwanese businessmen living in China, and there is very active cross-strait investment mostly from Taiwan to the mainland.

From China’s perspective, I think the country would have preferred if the United States had viewed Taiwan as a Chinese domestic issue. While, realistically, China can treat Taiwan in whatever way it sees fit, the country must take the United States into consideration due to the provisions established in the TRA. Despite some saber rattling in 1996 and an overall escalation in military tensions then, I think China has found a more reasonable counterpart in the Ma Ying-jeou Nationalist government in Taiwan.

Can the TRA continue to play a role for the indefinite future? What challenges do you foresee to the TRA as it relates to globalization and the economy?

In our recent Taiwan Conference, Ambassador Stapleton Roy stated, “Don’t touch the TRA unless you really know what you are doing, and if you really know what you are doing, you wouldn’t touch it.” I agree with his statement and while there are some issues with the TRA, I think it can serve to support conversations on a lengthy list of cross-border challenges. From the environment and human rights to international relations and terrorism, these issues require more cooperation among the United States, China and Taiwan than ever before, and the TRA will not stand in the way of that.

At the same time, I think the TRA does require the United States to do a bit more internal soul searching to better clarify its interests in relation to Taiwan and China. I think preserving peace in the Western Pacific should remain core to U.S. interests, and all other pieces of these important diplomatic relationships can be worked out within the context of that overriding concern.
Title: Re: China
Post by: G M on October 02, 2010, 04:58:02 AM


    * § 3301. Congressional findings and declaration of policy
    * § 3302. Implementation of United States policy with regard to Taiwan
    * § 3303. Application to Taiwan of laws and international agreements
    * § 3304. Overseas Private Investment Corporation
    * § 3305. The American Institute in Taiwan
    * § 3306. Services to United States citizens on Taiwan
    * § 3307. Exemption from taxation
    * § 3308. Activities of United States Government agencies
    * § 3309. Taiwan instrumentality
    * § 3310. Employment of United States Government agency personnel
    * § 3310a. Commercial personnel at American Institute of Taiwan
    * § 3311. Reporting requirements
    * § 3312. Rules and regulations
    * § 3313. Congressional oversight
    * § 3314. Definitions
    * § 3315. Authorization of appropriations
    * § 3316. Severability

§ 3301. Congressional findings and declaration of policy

(a) Findings
The President having terminated governmental relations between the United States and the governing authorities on Taiwan recognized by the United States as the Republic of China prior to January 1, 1979, the Congress finds that the enactment of this chapter is necessary—
(1) to help maintain peace, security, and stability in the Western Pacific; and
(2) to promote the foreign policy of the United States by authorizing the continuation of commercial, cultural, and other relations between the people of the United States and the people on Taiwan.
(b) Policy
It is the policy of the United States—
(1) to preserve and promote extensive, close, and friendly commercial, cultural, and other relations between the people of the United States and the people on Taiwan, as well as the people on the China mainland and all other peoples of the Western Pacific area;
(2) to declare that peace and stability in the area are in the political, security, and economic interests of the United States, and are matters of international concern;
(3) to make clear that the United States decision to establish diplomatic relations with the People’s Republic of China rests upon the expectation that the future of Taiwan will be determined by peaceful means;
(4) to consider any effort to determine the future of Taiwan by other than peaceful means, including by boycotts or embargoes, a threat to the peace and security of the Western Pacific area and of grave concern to the United States;
(5) to provide Taiwan with arms of a defensive character; and
(6) to maintain the capacity of the United States to resist any resort to force or other forms of coercion that would jeopardize the security, or the social or economic system, of the people on Taiwan.
(c) Human rights
Nothing contained in this chapter shall contravene the interest of the United States in human rights, especially with respect to the human rights of all the approximately eighteen million inhabitants of Taiwan. The preservation and enhancement of the human rights of all the people on Taiwan are hereby reaffirmed as objectives of the United States.
Title: Re: China
Post by: G M on October 02, 2010, 05:15:55 AM

'Smiling' China keeps bargaining chip / Recent actions have been conciliatory, but Beijing still holds 1 Japanese citizen

Seima Oki / Yomiuri Shimbun Correspondent

BEIJING--One Japanese citizen remains under lock and key in China, a diplomatic bargaining chip for the country, and in contrast to its release Thursday of three other Fujita Corp. employees and other recent conciliatory moves.

China's art of diplomacy, which stresses strategy, is quintessentially tough.

Some see the continued detention as a blatant retaliation against Tokyo. After the release of the three was reported, a Japanese source said, "When the collisions with the Chinese trawler happened near the Senkaku Islands, Japan held the captain [and released the crew]. China's trying to create a similar situation."

Chinese authorities said the three, who had been held on suspicion of trespassing in a military zone in Shijiazhuang, Hebei Province, were released after they wrote letters apologizing for their illegal actions. The country seems to be saying that if Japan accepts what it says, bilateral relations can begin to improve.

China's security bureau can detain suspects for up to six months. The decision to release the three on the 11th day of their detention and hold on to one is based on a delicate balance. While sending signals it wants to mend ties with Japan by releasing the three, China has kept firm hold of something it can use for leverage.

"China's gained a new bargaining chip ahead of the Asia-Europe Meeting in Belgium this month," a source familiar with Japan-China relations said. For China, accepting Prime Minister Naoto Kan's request to meet in Belgium and the release of the remaining Japanese citizen are cards it can play to win more concessions on issues concerning the Senkaku Islands.

With its recent actions, China has tried to show it has softened its hard-line stance over the incident involving the Chinese fishing boat. Immediately after Japanese authorities decided to extend the detention of the Chinese captain, China restricted exports of rare earths to Japan in an apparent retaliation. But by Tuesday, Beijing seemed to have partially lifted the restriction. Furthermore, demands by China's Foreign Ministry that Japan apologize and pay compensation over the Senkaku incident have decreased. The release of the three was in line with these conciliatory actions.

A diplomatic source said, "In the game of diplomacy, Beijing always tries to destroy its opponents' unity, to divide their power to create circumstances favorable to China."

In fact, politicians and the public in Japan are divided over whether the country should take a firm or conciliatory attitude toward China. Similarly, the Japan-U.S. alliance has been shaken under the Democratic Party of Japan-led government.

For China, the current situation in Japan is an easy one to shake up. The country's current "smile" is merely a show to prevent Japan from taking strong action and to encourage a conciliatory attitude. The softening of Beijing's position also aims to cool international opinion that China is a threat.

ASEM is an especially important event. The Chinese Communist Party seems to think Prime Minister Wen Jiabao should not face criticism at the meeting.

In Beijing, a source familiar with Japan-China relations said, "None of the exchange programs that the Chinese canceled have been revived. I wouldn't say China has softened its stance."

Indeed, China has not made any compromises about the core issue--its claim to the Senkaku Islands. While wearing a smile, Chinese fishery patrol ships have been stationed off the Senkaku Islands, and Beijing has moved steadily to settle and expand its claims in the East China Sea.

The Chinese Communist Party will open the fifth meeting of its 17th Central Committee on Oct. 15 to draw up the blueprint for the government after President Hu Jintao steps down in 2012. At such a time, the party wants to prioritize stability, and most diplomatic sources say Beijing will not make any compromises with Japan, as such actions could infuriate the Chinese public.
(Oct. 2, 2010)
Title: Re: China and Taiwan
Post by: DougMacG on October 02, 2010, 09:27:30 AM
Looks to me like the Taiwan Relations Act was an act of congress (signed by Jimmy Carter) rather than a treaty. Since I believe the UN is worthless, I am not saying start a war over this issue, but it is a card that any serious President should be ready to consider.  Especially when it always seems that China holds all the cards, like the game playing they do with NK and this latest spat with Japan.

The one-China concept is simply de facto false today.  Taiwan will never rule China, and Taiwan will never peacefully accept PRC rule.  They can reunite later after China is free like East and West Germany did, but right now they are 2 countries.  Taiwan is as worthy of international acceptance as any nation or territory I can think of.
Title: Re: China
Post by: G M on October 02, 2010, 09:46:57 AM

Taiwan formally declaring independence would absolutely trigger a war with China. The Taiwanese don't want a formal declaration. Our best strategy is to move to contain Chinese expansionism, show we are firmly supporting our allies like Japan, S. Korea and Taiwan and build closer military relationships with India and other nations not willing to live under "pax sinica".
Title: Re: China
Post by: Crafty_Dog on October 02, 2010, 12:31:00 PM
Thank you GM.  Apparently the TRA was what I was thinking of, but what have the Chinese and we signed with each other?
Title: Re: China
Post by: G M on October 02, 2010, 12:41:30 PM
Joint Communique of the United States of America and the People's Republic of China

January 1, 1979

(The communique was released on December 15, 1978, in Washington and Beijing.)

   1. The United States of America and the People's Republic of China have agreed to recognize each other and to establish diplomatic relations as of January 1, 1979.
   2. The United States of America recognizes the Government of the People's Republic of China as the sole legal Government of China. Within this context, the people of the United States will maintain cultural, commercial, and other unofficial relations with the people of Taiwan.
   3. The United States of America and the People's Republic of China reaffirm the principles agreed on by the two sides in the Shanghai Communique and emphasize once again that:
   4. Both wish to reduce the danger of international military conflict.
   5. Neither should seek hegemony in the Asia-Pacific region or in any other region of the world and each is opposed to efforts by any other country or group of countries to establish such hegemony.
   6. Neither is prepared to negotiate on behalf of any third party or to enter into agreements or understandings with the other directed at other states.
   7. The Government of the United States of America acknowledges the Chinese position that there is but one China and Taiwan is part of China.
   8. Both believe that normalization of Sino-American relations is not only in the interest of the Chinese and American peoples but also contributes to the cause of peace in Asia and the world.

    The United States of America and the People's Republic of China will exchange Ambassadors and establish Embassies on March 1, 1979.
Title: Re: China
Post by: G M on October 02, 2010, 08:09:44 PM

   5. Neither should seek hegemony in the Asia-Pacific region or in any other region of the world and each is opposed to efforts by any other country or group of countries to establish such hegemony.

**The PRC often refers to the US as "The hegemon".**
Title: Re: China
Post by: G M on October 02, 2010, 08:12:49 PM

China seeks to neutralize Japan-U.S. security treaty




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photoA Chinese navy Kilo-class submarine cruises in waters near the Okinawa main island. (THE DEFENSE MINISTRY)

A rapid buildup of nuclear weapons by China and its apparent determination to restrict United States forces' access to the western Pacific is threatening to transform the balance of power in East Asia.

Tensions in the region were demonstrated at a meeting of the foreign ministers of Japan, China and and South Korea in Gyeongju in South Korea on May 15.

Though the main topic of the meeting was the sinking of the South Korean corvette Cheonan, a testy exchange between the foreign ministers of Japan and China showed strategic concerns simmering below the surface.

Japanese Foreign Minister Katsuya Okada told the Chinese representative, "Among the countries that possess nuclear weapons, only China is increasing its nuclear weapons."

This angered Chinese Foreign Minister Yang Jiechi. Without turning on his microphone, he said, "There is nothing to justify being told such a thing by Japan, which is protected by the U.S. nuclear umbrella." He then started to leave his seat.

Wednesday will mark the 50th anniversary of the beginning of the revised Japan-U.S. Security Treaty, but China's increasing military assertiveness is raising questions about the continuing efficacy of Japan's defense strategy.

China is estimated to have about 400 nuclear warheads, a fraction of the more than 5,000 warheads held by the United States. China has declared that it will not use its nuclear weapons for preemptive strikes.

"We continue to maintain the minimum-level nuclear capabilities that are required for the safety of our country," said Ma Zhaoxu, director-general of the Information Department of the Chinese Foreign Ministry.

But, despite the soothing words, China is quietly transforming its long range nuclear capabilities. New missiles include the Dong Feng 31A, an intercontinental ballistic missile with a range of 14,000 kilometers.

The shorter range Dong Feng 21C missile has Japan well within its range and a new type of anti-ship ballistic missile can pursue vessels at supersonic speeds.

China is also constructing underground bases for nuclear missiles in mountainous areas in Henan and Shanxi provinces, aimed at protecting them from preemptive strikes.

The missile development is a vital part of an emerging "anti-access" theme in Chinese military strategy aimed at preventing U.S. aircraft carriers from advancing into sea areas near China in the case of a stand-off between the two countries over Taiwan.

"If we place U.S. aircraft carriers and U.S. bases in Japan within the range of our missiles, the U.S. fleets will not be able to enter the western Pacific freely. As a result, we will make the Japan-U.S. Security Treaty ineffective," said a source close to China's military.

Submarines are another important pillar of the anti-access strategy. In recent years, China has developed state-of-the-art Song-class and Kilo-class submarines with quiet propulsion technologies that make them difficult to detect.

The new technology has allowed much more aggressive deployment. The Chinese military has told U.S. military officials that two Chinese submarines are permanently stationed in waters near the United States.

In October 2006, a Chinese Song-class submarine surfaced about eight kilometers from the U.S. aircraft carrier Kitty Hawk near Okinawa Prefecture.

The U.S. ship had been unaware of the Chinese submarine's presence and was within the range of the Chinese submarine's torpedoes.

The Chinese navy flexed its muscles again in April this year, when a fleet of 10 vessels, including two Kilo-class submarines, passed between the main Okinawa island and Miyakojima island.

A Chinese helicopter came within about 90 meters of a Japanese Maritime Self-Defense Force's escort warship during the incident.

The Chinese Defense Minister Liang Guanglie told a delegation of Japanese Self-Defense Forces' officers in Beijing on June 11 that the passage was part of a training exercise and was not a violation of international law.

"Though the Self-Defense Forces' reconnaissance planes frequently come to (air space over) the Yellow Sea (between China and the Korean Peninsula), the Chinese military forces are not obstructing them. We hope that the Japanese side do not watch us too closely either," Liang said.

However, a military source in Beijing said the maneuver had a more profound motivation: "The passage was made to demonstrate to Japan and the United States the improvement in China's anti-access capabilities in the East China Sea."

According to the Japanese Defense Ministry, Chinese destroyers have been detected near Miyakojima island and Okinotorishima island five times since 2008.

One of the Japanese officers present at the meeting with Liang said, "We felt that China has established superiority and that Chinese naval power is already greater than Japan's."

Chinese military officers say that China's military buildup is focused on Taiwan.

The primary target of its increasing strategic assertiveness is not Japan but the United States, which has been selling weapons to Taiwan. But China recognizes that accidental clashes with Japan in the East China Sea may be a side effect of the policy.

When Chinese Premier Wen Jiabao met with then Japanese Prime Minister Yukio Hatoyama in Japan in late May, he proposed re-establishing a hotline between the leaders. The hotline had not yet been set up and the Chinese side appeared to have gone cold on the idea.

At the same meeting, the two leaders agreed to improve other crisis management mechanisms to deal with confrontations at sea.

Meanwhile, the sinking of the South Korean corvette Cheonan in late March raised questions about Japanese and South Korean security cooperation. The Japanese government was slow in responding to the incident and did not ask to participate in the investigation into the causes of the incident.

The Cheonan's sinking, which the international investigation blamed on Pyongyang, was a stark reminder of the military power of North Korea. The reclusive country has up to 180,000 special military troops, weapons of mass-destruction, ballistic missiles, and submarine capabilities, all of which threaten both South Korea and Japan's security.

Japanese officials are pushing for greater cooperation with South Korea on security issues but the response from the South Korean side has often been unenthusiastic.

There is a strong resistance in South Korea to establishing a military alliance with Japan because of the friction resulting from Japan's occupation of the Korean Peninsula. There is also concern about China's opposition to such an alliance.

Nevertheless, there is an understanding among some in the South Korean military of the two country's common interests.

A South Korean officer said, "An (military) alliance (between South Korea and Japan) may be impossible. But both countries always need to maintain high-level friendly relations."
Title: Re: China
Post by: G M on October 02, 2010, 09:22:13 PM

Finding the Achilles' heel of China
Posted by Sri Lanka Guardian B.Raman, China, worldview 8:33:00 AM

Visiting Chinese Premier Wen Jiabao addresses reporters during a news conference in Athens October 2, 2010. China offered on Saturday to buy Greek government bonds in a show of support for the country whose debt burden triggered a crisis for the euro zone and required an international bailout. (-Reuters Photo )
by B.Raman

(October 03, Chennai, Sri Lanka Guardian) The war of nerves and words between China and Japan over the ownership of the Senkaku Islands (the Chinese call it the Diayou Islands) in the East China Sea continues despite the Japanese release of the Captain of a Chinese fishing trawler whom they had arrested on September 8,2010, for criminal trespass into the Japanese territorial waters around the Japanese-administered islands.

2.The Chinese are yet to release one of the four Japanese employees of a construction company whom they had arrested apparently in retaliation for the Japanese arrest of the fishing trawler's Captain. The abrupt Japanese release of the Captain after having initially given evidence of its intention to prosecute him followed the Chinese arrest of the four Japanese employees.

3.Rightly or wrongly, this has given rise to a perception in Japan that its Prime Minister Naoto Kan has let himself be bullied by China. The whole incident as it has been handled by the Kan Government has been seen by sections of the media and public in Japan as a humiliation of Japan by China.As if this perceived humiliation is not enough, Bejing is insisting that before the relations between the two countries could be normalised, Japan should apologise for the "illegal" arrest of the Captain and for his "wrongful" detention.If Mr.Kan concedes this demand, it would amount to his admitting indirectly that the group of islands is Chinese and not Japanese territory.

4.There is disappointment in Japan over the failure of the Barack Obama Administration to come out strongly in support of Japan in this war of nerves with China. The US recognises the Senkaku as Japanese-administered since 1972, but has not recognised Japanese claims of sovereignty over the Islands. At the same time, there is no denial of the interpretation that the protective provisions of the US-Japan security treaty cover the Senkaku islands too.

5. The Japanese were hoping that the US would come out as strongly against Chinese machinations in respect of the East China Sea islands as Mrs.Hillary Clinton, the Secretary of State, did in respect of the South China Sea islands during her intervention at a meeting of the ASEAN Regional Forum (ARF) in Hanoi earlier this year. Surprisingly and inexplicably, the US has contented itself with statements merely calling for a peaceful resolution of the Sino-Japanese differences.

6. Attention has not been drawn by analysts to the blatant double standards in Chinese diplomacy as seen from its policy towards India on the Kashmir issue and its policy towards Japan on the Senkaku issue. The Chinese have been saying that the recent changes in favour of Pakistan in their stance on Kashmir is an individual issue which should not be allowed to have an impact on the over-all relations between India and China. But, they have refused to treat the arrest of the Chinese Captain by the Japanese as an individual issue which should not affect the over-all Sino-Japanese relations.

7. They have made the entire Sino-Japanese relations a hostage to this single issue. They have allegedly stopped the export of rare earth elements to Japan on which the Japanese high-tech industries are dependent. They have suspended high-level contacts between the two countries. Prime Minister Wen Jiabao declined to meet the Japanese Prime Minister when the two were in New York last week for the UN General Assembly session. Beijing has discouraged its tourists from visiting Japan. It has cancelled the visit of Japanese delegations to the Shanghai Expo.

8. The only factors that have acted as a check on the Chinese bullying of Japan are Beijing's uncertainty over the implications of the US-Japan security treaty in so far as the Senkaku group is concerned and fears that if Beijing continued to over-react it might provide fresh oxygen to Japanese militarists.

9. In a statement before the Japanese Parliament on October 1, Prime Minister Kan said: "The rise of China has been remarkable in recent years,but we are concerned about its strengthening defence capabilities without transparency and accelerating maritime activities spanning from the Indian Ocean to the East China Sea. The Senkaku islands are an integral part of our country, historically and under international law.Good relations with China - Japan's largest trading partner - are vital to both countries, but China must act as a responsible member of the international community. Japan needed to adopt more active foreign and defence policies to deal with uncertainty and instability that exist in areas surrounding our country."

10. His statement followed remarks by China's Foreign Ministry spokesman the previous day urging Japan to "stop making irresponsible remarks and safeguard the larger interests of bilateral relations with concrete actions". The spokesman, Jiang Yu, said: "We are willing to resolve our disputes through friendly negotiations but the Chinese Government's and people's will and resolve are unswerving on issues involving China's territorial integrity and sovereignty."

11. The regional "uncertainty and instability" consequent upon China's over-assertiveness in matters relating to territorial disputes should be of concern not only to Japan, but also to India, Vietnam and the Philippines. India's concerns over its long-pending border dispute with China and over the stepped-up Chinese support to Pakistan in the nuclear field and in the construction of road and rail infrastructure in Pakistan-occupied Gilgit-Baltistan are legitimate. So are the concerns of Vietnam and the Philippines regarding the Chinese intentions and capabilities in the South China Sea.

12. The perceptions and concerns of India, Japan, Vietnam and the Philippines relating to China should bring them together to discuss among themselves as to how to counter the over-assertiveness of China without creating a confrontational situation and without damaging the positive dimensions of their respective bilateral relations with China. Their discussions among themselves should cover the strong as well as the weak points of China--- the strong points against which they should protect themselves and the weak points which they could exploit.

13. An editorial carried by the Chinese Communist Party controlled "Global Times" on September 21 under the title "Finding the Achilles' Heel of Japan" (annexed below) said: "Provoking China comes with a heavy price tag. Finding Japan's soft spot will help end its hostile policies against China during its rise."

14. There is a need for India, Japan, Vietnam and the Philippines to find the soft spots of China. Pakistan could turn out to be one such soft spot. India knows Gilgit-Baltistan and the Chinese-controlled Xinjiang better than the Chinese. North Korea, where a new leadership is emerging, could be another. The Japanese know North Korea as well as the Chinese do. India, Japan, Vietnam and the Philippines should make overtures to the new, emerging leadership in North Korea and help it to free North Korea of its linkages with China and develop its prosperity. This is the time for India to seriously consider establishing contacts with the new North Korean leadership and invite Kim Jong-Un, the heir-apparent to Kim Jong-il, to India.

15. New Delhi's Look East policy as it has evolved till now has over-focussed on our relations with the ASEAN. The relations with the ASEAN countries continue to be important. It is time to give an East Asia dimension too to our Look East policy.

( The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. E-mail: )
Title: Re: China
Post by: Crafty_Dog on October 02, 2010, 11:48:51 PM
Reading the Indian perspective is usually a worthy investment of time.  Interesting find GM.
Title: NorKs, China and Obama's weakness
Post by: G M on October 03, 2010, 05:08:17 AM

World Vision has calculated that in the 1990s the regime's Marxist agricultural policies killed two million North Koreans, with fresh graves being raided for flesh by starving people. Concentration camps have killed another 1.5 million. Women prisoners are tortured and sold as sex slaves; babies are either forcibly aborted or delivered and then smothered, or have their throats cut. These details will probably be familiar to you, because you will have seen them denounced on the many demonstrations against the regime organised by the professional protesters of the British left - will you not?

Any interpretation of the inner workings of the Pyongyang regime is necessarily largely speculative. The armed forces could field 5.8 million men if they invaded South Korea, bolstered by the largest stocks of chemical and biological weapons on the planet. In 2006 North Korea carried out a successful nuclear test and has continued to develop its nuclear capacity. In April 2009, much Western derision was directed against North Korea because of the supposed "failure" of its Taepodong-2 missile test. That mockery was misdirected: the missile's 2,000-mile flight was twice as long as any preceding effort and it impressed Pyongyang's ballistic missile customers in Iran, Syria and elsewhere.

The feebleness of Barack Obama's response both to that incident and the sinking of a South Korean naval vessel signalled the lack of Western political will to confront this aggressor regime. The West took refuge in the belief that China could rein in this errant Communist state. That is questionable. Mao's dictum that the relationship between China and North Korea was as close as "lips and teeth" no longer holds. China is wary of confronting Pyongyang, for fear of being publicly defied and losing face. The maverick regime continues to threaten South Korea, Japan, Singapore and US carrier groups in adjacent waters. Next month's G20 summit in Seoul could well provoke an act of aggression from Pyongyang, encouraged by proven Western impotence and eager to assert its reinvigoration by the newly secured succession of the third generation of what is now an undisguised hereditary monarchy.
Title: Re: China
Post by: DougMacG on October 03, 2010, 10:14:09 AM
"Taiwan formally declaring independence would absolutely trigger a war with China. The Taiwanese don't want a formal declaration."

GM, thank you.  My thought was purely hypothetical.  We have no leadership to stand up to China on anything.
Title: Re: China
Post by: G M on October 03, 2010, 11:32:07 AM
Nope. It's tragic that lots of future horrors will happen because too many people were stupid enough to vote Obama into office. I just hope Taiwan, Israel and the US can survive.
Title: POTH: Harsh tone a "
Post by: Crafty_Dog on October 12, 2010, 08:49:30 AM
BEIJING — Defense Secretary Robert M. Gates met his Chinese counterpart, Liang Guanglie, in Vietnam on Monday for the first time since the two militaries suspended talks with each other last winter, calling for the two countries to prevent “mistrust, miscalculations and mistakes.”

His message seemed directed mainly at officers like Lt. Cmdr. Tony Cao of the Chinese Navy.
Days before Mr. Gates arrived in Asia, Commander Cao was aboard a frigate in the Yellow Sea, conducting China’s first war games with the Australian Navy, exercises to which, he noted pointedly, the Americans were not invited.

Nor are they likely to be, he told Australian journalists in slightly bent English, until “the United States stops selling the weapons to Taiwan and stopping spying us with the air or the surface.”

The Pentagon is worried that its increasingly tense relationship with the Chinese military owes itself in part to the rising leaders of Commander Cao’s generation, who, much more than the country’s military elders, view the United States as the enemy. Older Chinese officers remember a time, before the Tiananmen Square protests in 1989 set relations back, when American and Chinese forces made common cause against the Soviet Union.

The younger officers have known only an anti-American ideology, which casts the United States as bent on thwarting China’s rise.

“All militaries need a straw man, a perceived enemy, for solidarity,” said Huang Jing, a scholar of China’s military and leadership at the National University of Singapore. “And as a young officer or soldier, you always take the strongest of straw men to maximize the effect. Chinese military men, from the soldiers and platoon captains all the way up to the army commanders, were always taught that America would be their enemy.”

The stakes have increased as China’s armed forces, once a fairly ragtag group, have become more capable and have taken on bigger tasks. The navy, the centerpiece of China’s military expansion, has added dozens of surface ships and submarines, and is widely reported to be building its first aircraft carrier. Last month’s Yellow Sea maneuvers with the Australian Navy are but the most recent in a series of Chinese military excursions to places as diverse as New Zealand, Britain and Spain.

China is also reported to be building an antiship ballistic missile base in southern China’s Guangdong Province, with missiles capable of reaching the Philippines and Vietnam. The base is regarded as an effort to enforce China’s territorial claims to vast areas of the South China Sea claimed by other nations, and to confront American aircraft carriers that now patrol the area unmolested.

Even improved Chinese forces do not have capacity or, analysts say, the intention, to fight a more able United States military. But their increasing range and ability, and the certainty that they will only become stronger, have prompted China to assert itself regionally and challenge American dominance in the Pacific.

That makes it crucial to help lower-level Chinese officers become more familiar with the Americans, experts say, before a chance encounter blossoms into a crisis.

“The P.L.A. combines an odd combination of deep admiration for the U.S. armed forces as a military, but equally harbors a deep suspicion of U.S. military deployments and intentions towards China,” David Shambaugh, a leading expert on the Chinese military at George Washington University, said in an e-mail exchange, referring to the People’s Liberation Army.

“Unfortunately, the two militaries are locked in a classic security dilemma, whereby each side’s supposedly defensive measures are taken as aggressive action by the other, triggering similar countermeasures in an inexorable cycle,” he wrote. “This is very dangerous, and unnecessary.”

From the Chinese military’s view, this year has offered ample evidence of American ill will.

The Chinese effectively suspended official military relations early this year after President Obama met with the Dalai Lama, the Tibetan religious leader, and approved a $6.7 billion arms sale to Taiwan, which China regards as its territory.

Since then, the Chinese military has bristled as the State Department has offered to mediate disputes between China and its neighbors over ownership of Pacific islands and valuable seabed mineral rights. And when the American Navy conducted war games with South Korea last month in the Yellow Sea, less than 400 miles from Beijing, younger Chinese officers detected an encroaching threat.


Page 2 of 2)

The United States “is engaging in an increasingly tight encirclement of China and constantly challenging China’s core interests,” Rear Adm. Yang Yi, former head of strategic studies at the Chinese Army’s National Defense University, wrote in August in the People’s Liberation Army Daily, the military newspaper. “Washington will inevitably pay a costly price for its muddled decision.”

In truth, little in the American actions is new. Mr. Obama’s predecessors also hosted the Dalai Lama. American arms sales to Taiwan were mandated by Congress in 1979, and have occurred regularly since then. American warships regularly ply the waters off China’s coast and practice with South Korean ships.

But Chinese military leaders seem less inclined to tolerate such old practices now that they have the resources and the confidence to say no.

“Why do you sell arms to Taiwan? We don’t sell arms to Hawaii,” said Col. Liu Mingfu, a China National Defense University professor and author of “The China Dream,” a nationalistic call to succeed the United States as the world’s leading power.

That official military relations are resuming despite the sharp language from Chinese Army officials is most likely a function of international diplomacy. President Hu Jintao is scheduled to visit Washington soon, and American experts had predicted that China would resume military ties as part of an effort to smooth over rough spots before the state visit.

Some experts see increased contact as critical. A leading Chinese expert on international security, Zhu Feng of Peking University, says that the Chinese military’s hostility toward the United States is not new, just more open. And that, he says, is not only the result of China’s new assertiveness, but its military’s inexperience on the world stage.

“Chinese officers’ international exposure remains very limited,” Mr. Zhu said. “Over time, things will improve very, very significantly. Unfortunately, right now they are less skillful.”

Greater international exposure is precisely what American officials would like to see. Americans hope renewed cooperation will lead to more exchanges of young officers and joint exercises.

“It’s time for both militaries to reconsider their tactics and strategy to boost their friendship,” Mr. Zhu said. “The P.L.A. is increasing its exposure internationally. So what sort of new rule of law can we figure out to fit the P.L.A. to such new exposure? It’s a challenge not just for China, but also for the U.S.
Title: Re: China
Post by: G M on October 12, 2010, 09:04:03 AM,8599,2024090,00.html

On Sept. 29, the House of Representatives passed a bill with overwhelming support from both Democrats and Republicans. It would punish China for keeping its currency undervalued by slapping tariffs on Chinese goods. Everyone seems to agree that it's about time. But it isn't. The bill is at best pointless posturing and at worst dangerous demagoguery. It won't solve the problem it seeks to fix. More worrying, it is part of growing anti-Chinese sentiment in the U.S. that misses the real challenge of China's next phase of development. (See "Geithner: We Need to Toughen Up with China.")

There's no doubt that China keeps the renminbi, its currency, undervalued so it can help its manufacturers sell their toys, sweaters and electronics cheaply in foreign markets, especially the U.S. and Europe. But this is only one of a series of factors that have made China the key manufacturing base of the world. (The others include low wages, superb infrastructure, hospitality to business, compliant unions and a hard-working labor force.) A simple appreciation of the renminbi will not magically change all this. (See pictures of China's infrastructure boom.)

Chinese companies make many goods for less than 25% of what they would cost to manufacture in the U.S. Making those goods 20% more expensive (because it's reasonable to suppose that without government intervention, China's currency would increase in value against the dollar by about 20%) won't make American factories competitive. The most likely outcome is that it would help other low-wage economies like Vietnam, India and Bangladesh, which make many of the same goods as China. So Walmart would still stock goods at the lowest possible price, only more of them would come from Vietnam and Bangladesh. Moreover, these other countries, and many more in Asia, keep their currencies undervalued as well. As Helmut Reisen, head of research for the Development Center at the Organisation for Economic Co-operation and Development, wrote recently in an essay, "There are more than two currencies in the world."

We've seen this movie before. From July 2005 to July 2008, under pressure from the U.S. government, Beijing allowed its currency to rise against the dollar by 21%. Despite that hefty increase, China's exports to the U.S. continued to grow mightily. Of course, once the recession hit, China's exports slowed, but not as much as those of countries that had not let their currencies rise. So even with relatively pricier goods, China did better than other exporting nations. (See pictures of the making of modern China.)

Look elsewhere in the past and you come to the same conclusion. In 1985 the U.S. browbeat Japan at the Plaza Accord meetings into letting the yen rise. But the subsequent 50% increase did little to make American goods more competitive. Yale University's Stephen Roach points out that since 2002, the U.S. dollar has fallen in value by 23% against all our trading partners, and yet American exports are not booming. The U.S. imports more than it exports from 90 countries around the world. Is this because of currency manipulation by those countries, or is it more likely a result of fundamental choices we have made as a country to favor consumption over investment and manufacturing? (Comment on this story.)

Coming: The New China
The real challenge we face from China is not that it will keep flooding us with cheap goods. It's actually the opposite: China is moving up the value chain, and this could constitute the most significant new competition to the U.S. economy in the future. (See "Five Things the U.S. Can Learn from China.")

For much of the past three decades, China focused its efforts on building up its physical infrastructure. It didn't need to invest in its people; the country was aiming to produce mainly low-wage, low-margin goods. As long as its workers were cheap and worked hard, that was good enough. But the factories needed to be modern, the roads world-class, the ports vast and the airports efficient. All these were built with a speed and on a scale never before seen in human history.

Now China wants to get into higher-quality goods and services. That means the next phase of its economic development, clearly identified by government officials, requires it to invest in human capital with the same determination it used to build highways. Since 1998, Beijing has undertaken a massive expansion of education, nearly tripling the share of GDP devoted to it. In the decade since, the number of colleges in China has doubled and the number of students quintupled, going from 1 million in 1997 to 5.5 million in 2007. China has identified its nine top universities and singled them out as its version of the Ivy League. At a time when universities in Europe and state universities in the U.S. are crumbling from the impact of massive budget cuts, China is moving in exactly the opposite direction. In a speech earlier this year, Yale president Richard Levin pointed out, "This expansion in capacity is without precedent. China has built the largest higher-education sector in the world in merely a decade's time. In fact, the increase in China's postsecondary enrollment since the turn of the millennium exceeds the total postsecondary enrollment in the United States."

The Benefits of Brainpower
What does this unprecedented investment in education mean for China — and for the U.S.? Nobel Prize–winning economist Robert Fogel of the University of Chicago has estimated the economic impact of well-trained workers. In the U.S., a high school-educated worker is 1.8 times as productive, and a college graduate three times as productive, as someone with a ninth-grade education. China is massively expanding its supply of high school and college graduates. And though China is still lagging far behind India in the services sector, as its students learn better English and train in technology — both of which are happening — Chinese firms will enter this vast market as well. Fogel believes that the increase in high-skilled workers will substantially boost the country's annual growth rate for a generation, taking its GDP to an eye-popping $123 trillion by 2040. (Yes, by his estimates, in 2040 China would be the largest economy in the world by far.) (See portraits of Chinese workers.)

Whether or not that unimaginable number is correct — and my guess is that Fogel is much too optimistic about China's growth — what is apparent is that China is beginning a move up the value chain into industries and jobs that were until recently considered the prerogative of the Western world. This is the real China challenge. It is not being produced by Beijing's currency manipulation or hidden subsidies but by strategic investment and hard work. The best and most effective response to it is not threats and tariffs but deep, structural reforms and major new investments to make the U.S. economy dynamic and its workers competitive.

Read more:,8599,2024090,00.html#ixzz12A35Rai4
Title: Strat" REE part one
Post by: Crafty_Dog on October 12, 2010, 09:40:48 AM
second post of the morning:

China and the Future of Rare Earth Elements
October 12, 2010 | 1213 GMT
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A recent diplomatic spat between China and Japan has heightened territorial tensions and called attention to China’s growing forcefulness with foreign powers. One of the more intriguing aspects of this development was China’s suspension of the export of “rare earth” elements (REE) to Japan. REE comprise 17 metallic elements with a variety of modern industrial and commercial applications ranging from petroleum refining to laptop computers to green energy applications to radar. China produces roughly 95 percent of the global supply of REE and Japan is the largest importer. China’s disruption of REE shipments to Japan has caused alarm among other importer countries, bringing new urgency to the search for new supplies and substitutes.

The China Factor

Chinese control of the base of the REE supply chain has increasingly made China the go-to location for the intermediate goods made from REE. In time, China hopes to extend production into the final products as well. As new REE supplies cannot be brought online overnight, the Chinese will enjoy a powerful position in the short term. The Chinese Ministry of Commerce reports that China has ratcheted down REE export quotas by an average of 12 percent per year over the past five years, further leveraging this position. Reflecting that and the current China-Japan spat, the average price for REE has tripled in the year to date.

Rare earth elements are not as rare as their name suggests, however. Before the Chinese began a dedicated effort to mass-produce REE in 1979, there were several major suppliers. Pre-China, the United States was the largest producer. Appreciable amounts of REE were also produced in Australia, Brazil, India, Malaysia and Russia. Any sort of real monopoly on REE, therefore, is not sustainable in the long-run. But before one can understand the future of the REE industry, one must first understand the past.

The story of REE is not the story of cheap Chinese labor driving the global textile industry into the ground. Instead, it is a much more familiar story (from STRATFOR’s view) of the Chinese financial system having a global impact.

Unlike Western financial systems, where banks grant loans based on the likelihood that the loans will be repaid, the primary goal of loans in China is promoting social stability through full employment. As such, the REE industry — like many other heavy or extractive industries — was targeted with massive levels of subsidized loans in the mid-1980s. At the same time, local governments obtained more flexibility in encouraging growth. The result was a proliferation of small mining operations specializing in REE. Production rates increased by an annual average of 40 percent in the 1980s. They doubled in the first half of the 1990s, and then doubled again with a big increase in output just as the world tipped into recession in 2000. Prices predictably plunged, by an average of 95 percent compared to their pre-China averages.

Most of these Chinese firms rarely turned a profit. Some industry analysts maintain that for a good portion of the 2000s, most of them never even recovered their operating costs. At the same time, an illegal REE mining industry ran rampant, earning meager profits by disregarding worker safety and the environment and ruthlessly undercutting competing prices. With an endless supply of below-market loans, it did not matter if the legitimate mining concerns were financially viable. It was in the environment of continued Chinese production despite massive losses that nearly every other REE producer in the world closed down — and that the information technology revolution took root.

In fact, if not for China’s massive overproduction, the technological revolution of the past 15 years would not have looked the same. In all likelihood, it would have been slowed considerably.

Before 1995, the primary uses for REE were in the manufacture of cathode ray tubes (primarily used in television sets before the onset of plasma and LCD screens) and as catalysts in the refining industry and in catalytic converters (a device used in cars to limit exhaust pollution). Their unique properties have since made them the components of choice for wind turbines, hybrid cars, laptop computers, cameras, cellular phones and a host of other items synonymous with modern life. Chinese overproduction in the 2000s — and the price collapses that accompanied that overproduction until just this year — allowed such devices to go mainstream.

With numerous large REE deposits outside China, the long-term sustainability of a monopoly is questionable at best. This does not mean China will not create some destabilizing effects in the medium term as it attempts to leverage the current imbalance to its benefit, however. That its prolific, financially profitless and environmentally destructive production of REE has largely benefited foreign economies is not lost on China, so it is pushing a number of measures to alter this dynamic. On the supply side, China continues to curb output from small unregulated mining outfits and to consolidate production into large state-controlled enterprises, all while ratcheting down export quotas. On the demand side, Chinese industry’s gradual movement up the supply chain toward more value-added goods means more demand will be sequestered in the domestic economy. In fact, in the years just before the financial crisis and accompanying recession, global demand outpaced China’s ability (or willingness) to supply the market, resulting in bouts of price volatility. As the economic recovery proceeds, it is no stretch to envision outright gaps in exports from China within two to five years, even without the kinds of political complications the REE market has suffered in recent days.

Many states already have REE-specific facilities in place able to restart mining in response to this year’s price surge.

The premier Australian REE facility at Mount Weld plans to ramp up to 19,000 metric tons of rare earth oxides by the end of 2011. The top American site — Mountain Pass in California — aims to produce a similar amount by the end of 2012. Those two sites will then collectively be producing 25-30 percent of global demand.

Before China burst on the scene, most REE production was not from REE-specific mines. REE are often found co-mingled not simply with each other, but in the ores extracted for the production of aluminum, titanium, uranium and thorium. As China drove prices down, however, most of these facilities ceased extracting the difficult-to-separate REE. There is nothing other than economics stopping these facilities from re-engaging in REE production, although it will take at least a couple of years for such sites to hit their stride. Such locations include sites in Kazakhstan, Russia, Mongolia, India and South Africa as well as promising undeveloped sites in Vietnam, Canada (Thor Lake) and Greenland (Kvanefjeld). And while few have been exploring for new deposits since the 1970s given the lack of an economic incentive, higher prices will spark a burst of exploration.

Getting from here to there is harder than it sounds, however. Capital to fuel development will certainly be available as prices continue to rise, but opening a new mine requires overcoming some significant hurdles. Regardless of jurisdiction, a company needs to secure the lease (usually from the central government) and obtain a considerable variety of permits, not the least of which is for handling and storing the toxic — and in the case of REE, radioactive — waste from the mine. Even if the governments involved want to streamline things, vested interests such as the environmental lobby and indigenous groups appear at every stage of permitting to fight, lobby and sue to delay work. And depending on the local government, successfully mining a deposit could involve a considerable amount of political uncertainty, bribe paying or harassment. Only after clearing these hurdles can the real work of building infrastructure, sourcing inputs like electricity and water, and actually digging up rocks begin — itself a herculean task.

To add more complication, many of the best prospects are in jurisdictions undergoing significant changes. In the United States, activists are working to reform the federal mining law dating to 1872, which has ensured that U.S. jurisdictions remain among the most attractive mining destinations in the world. Initiatives like the Hardrock Mining and Reclamation Act of 2007 would drastically constrain mineral companies and increase project costs across the board. In Australia, ongoing negotiations over the implementation of a so-called “super tax” has dampened enthusiasm in one of the world’s premier mining jurisdictions and home to Lynas Corporation’s Mount Weld project. The tax, which sought to impose a 40 percent tax on mining profits, has since been watered down, but the debacle has left a discernable mark on the country’s resource extraction industry. And for an industry that is positively allergic to uncertainty, events like the BP oil spill in the Gulf of Mexico and the Chilean mine collapse only portend tighter regulation worldwide.

Re-opening an existing mine is somewhat easier since some infrastructure remains in place, and the local community is accustomed to having a mine. Old equipment may need to be brought up to spec, and the regulatory questions will still affect how miners and bankers view the project’s profitability, but the figuring margins are simpler when the basic geology and engineering already have been done.

Unfortunately, there is more to building a new REE supply chain than simply obtaining new sources of ore. A complex procedure known as beneficiation must be used to separate the chemically similar rare earth metals from the rest of the ore it was mined with. Beneficiation proceeds through a physical and then chemical route. The latter differs greatly from site to site, as the composition of the ore is deposit-specific and factors into the choice of what must be very precise reaction conditions such as temperature, pH and reagents used. The specificity and complexity of the process make it expensive, while the radioactivity of some ores and the common use of chemicals such as hydrochloric and sulfuric acid invariably leave an environmental footprint. (One reason the Chinese produced so much so fast is that they did not mind a very large environmental footprint.) The chemical similarity among the REE that was useful to this point now becomes a nuisance, as the following purification stage — the details of which we will leave out to avoid a painfully long chemistry lecture — requires the isolation of individual REE. This stage is characterized by extraordinary complexity and cost as well.

At this point, one still does not have the REE metal, but instead an oxide compound. The oxide must now be converted into the REE’s metallic form. Although some pure metals are created in Japan, China dominates this part of the supply chain as well.

In any other industry, this refining/purification process would be a concern that investors and researchers would constantly be tackling, but there has been no need, as Chinese overproduction removed all economic incentive from REE production research for the past 20 years (and concentrated all of the pollution in remote parts of China). So any new producer/refiner beginning operations today is in essence using technology that has not experienced the degree of technological advances that other commodities industries have in the past 25-30 years. It is this refining/purification process rather than the mining itself that is likely to be the biggest single bottleneck in re-establishing the global REE supply chain. It is also the one step in the process where the Chinese hold a very clear competitive advantage. Since the final tooling for intermediate parts has such a high value added, and since most intermediate components must be custom-made for the final product, whoever controls the actual purification of the metals themselves forms the base of that particular chain of production. Should the Chinese choose to hold that knowledge as part of a means of capturing a larger portion of the global supply chain, they certainly have the power to do so. And this means that short of some significant breakthroughs, the Chinese will certainly hold the core of the REE industry for at least the next two to three — and probably four to five — years.

Luckily, at this point the picture brightens somewhat for those in need of rare earths. Once the REE have been separated from the ore and from each other and refined into metallic form, they still need to be fashioned into components and incorporated into intermediate products. Here, global industry is far more independent. Such fashioning industries require the most skill and capital, so as one might expect, these facilities were the last stage of the REE supply chain to feel competitive pressure from China. While some have closed or relocated with their talent to China, many component fabrication facilities still exist, most in Japan, many in the United States, and others scattered around Europe.

All told, a complete regeneration of the non-Chinese REE system will probably take the better part of the decade. And because most REE are found co-mingled, there is not much industry can do to fast-track any particular mineral that might be needed in higher volumes. And this means many industries are in a race against time to see if alternative REE supplies can be established before too much economic damage occurs.
Title: REE 2
Post by: Crafty_Dog on October 12, 2010, 09:41:30 AM

Affected Industries

Everyone who uses REE — which is to say, pretty much everyone — is going to feel a pinch as REE rapidly rise in value back toward their pre-Chinese prices. But some industries are bound to feel less a pinch than a death grip. REE applications broadly fall into six different categories, with the first being the least impacted by price increases and the sixth being the most impacted.

The first category consists of cerium users. Cerium is the most common REE and the most critical for refining and catalytic converters. As the average global crude oil gets heavier, cerium is needed more and more to “crack” the oil to make usable products. As clean air requirements tighten globally, automobile manufacturers need more cerium to ensure cars run as cleanly as possible. Cerium thus remains in high demand.

Luckily for cerium users, the steady phasing-out of cathode ray tubes means that supplies rapidly are being freed up for other applications. Between the sudden demand drop and ongoing REE production in China, there are actually substantial cerium stockpiles globally. This means that cerium users are not likely to face serious price increases even though their REE has the most inelastic demand. Petroleum and automotive companies use the most cerium, which also is used for polishing agents for glass and semiconductor chips, UV-proof glass, self-cleaning ovens, and some steel alloys.

The second category comprises non-cerium goods with inelastic demand. This includes items that will be built regardless of cost, either because they are irreplaceable or because they are luxury items. This list includes satellites, which use yttrium in their communications systems; europium, used in LED screens in TVs; lanthanum, used for fish-eye lenses in iPhones; scandium, used for lighting systems in movie studios; and neodymium and gadolinium, indispensable for MRIs. These are all items that people — in particular Americans — would not stop purchasing without a large increase in prices. Luckily, while REE are critical to these devices, they make up a rather small proportion of their total cost. So while the world will certainly see REE price increases, those price increases are unlikely to affect the luxury market.

The third category comprises defense goods. Somewhat similar to luxury goods in terms of how REE demand and prices will affect them, demand for defense goods is extremely unlikely to shift due to something as minor as a simple price increase. Military technology that uses REE — ranging from the samarium in the guidance module in joint-direct attack munition kits to the yttrium used in the “magic lantern” that locates subsea mines — is going to be in demand regardless of price. Demand for urgently needed military technology is quite inelastic regardless of price in the short run, and militaries — in particular the American military — have robust budgets that dwarf the additional costs of components whose contribution to the final cost is negligible. The only reason STRATFOR places defense uses as likely to suffer a greater impact than luxury goods is that China itself is aiming to be a producer of luxury goods, so such products will most likely have a Chinese supply chain. By contrast, few militaries in the world with the high-end capabilities likely to be impacted by REE prices are interested in purchasing military technologies from China, so there will be a large constituency pushing for alternative production of REE as well as a large market for alternative products. This could turn out to be a boon for the American industry: Anyone seeking to increase REE production is going to find a friend in the Pentagon, and no one can lobby Congress quite like the military.

The fourth category comprises goods in which REE are a critical component and a significant price impact but that are made by industries with a long habit of adapting to adverse price shifts. The poster child for this is the Japanese auto industry. There is a long list of vehicle systems that the Japanese have adapted over the years as the price of various inputs has skyrocketed. In 2000, the Russian government banded together the country’s disparate platinum group metals (such as palladium and platinum, critical in the manufacture of catalytic converters) exports into a single government-controlled cartel. Platinum group metal prices subsequently skyrocketed. By March 2001, Honda had announced a new advance that reduced the need for palladium by roughly half. Platinum group metal prices subsequently plummeted.

In anticipation of this type of disruption, the Japanese have been developing substitutes to REE. Presently, the Toyota Prius uses roughly one kilogram of neodymium. At pre-2010 spike prices, that neodymium used in one Prius cost $20, a marginal impact on the Prius’ sticker price. Should prices rebound to pre-China levels, however, the average Prius buyer would notice a roughly $450-price hike due to magnetic components alone. One week into the China-Japan REE spat, government-funded researchers announced a magnet system design that can completely replace the neodymium used in the Prius.

This hardly solves the problem overnight; it will take months to years to retool Toyota’s factories for the new technology. Still, consumers of REE are going to find ways of lessening their use of REE. The information technology revolution has proceeded unabated since 2000 in part because REE have been one-tenth to one-twentieth of their previous prices. Absent any serious price pressures, industries have had no need to invest in finding means of cutting inputs or finding substitutes. (REE are so abundant that in China they are used in fertilizers and road building materials.)

The shift in prices could well give a much-needed boost to non-REE dependent technologies hampered by relatively inexpensive REEs. For example, the REE lanthanum is a leading component in the Prius’ nickel metal-hydride battery system. (The Prius uses ten kilograms of lanthanum). Toyota has been edging toward replacing the nickel-hydride system with REE-free lithium-ion batteries, but has demurred due to the low price of lanthanum. Increase that cost by a factor of 20, of the factor of three of recent months — and add in the threat of a full cutoff — and Toyota’s board is likely to come to a different conclusion.

Computer hard drives may fall into a similar category. A major cause of the increased demand for REE has been the demand for neodymium in particular and a specific intermediate product made from it, the neodymium-iron-boron magnet (which also uses some dysprosium). The magnets are a critical component in hard drives, particularly for laptops. But like lithium-ion batteries, a new technology is gaining market share: solid-state hard drives. Currently, the consumer’s cost difference between the two is a factor of four, but sustained price hikes in the cost of neodymium and NdFeB magnets could cause demand to plummet.

The fifth category comprises goods where the laws of supply and demand are likely to reshape the industries in question. These are goods where price is most certainly an issue, and where consumers will simply balk should the bottom line change too much. Compact fluorescent light bulbs that use phosphors heavy in terbium, LED display screens that use europium and various medical techniques that use erbium lasers all fall into this category. None of these industries will disappear, but they are extremely likely to see far lower sales as none of these products are economically indispensable and all have various product substitutes.

The sixth category comprises goods for which there are very low ore and metal stockpiles for which demand is both high and rising rapidly, and for which it will take the longest to set up an alternate supply chain. The vast majority of these industries depend on the same type of neodymium magnets used in hard drives, but do not have a replacement technology waiting in the wings. These magnets are a critical component in the miniaturization (and convergence) of electronic devices such as cellular phones, MP3 players, computers and cameras. They are also central to the power exchange relays for electricity-generating wind turbines used in today’s wind farms.

But even within this category, not all products will be impacted similarly. Many of the miniaturized electronic consumer goods manufacturers will face growing pains as they find their supply chain increasingly concentrated in China. But cheaper production costs could offset rising materials costs, and technological innovation will also help lessen the impact. Alternative energy is not likely to be as lucky. Neodymium magnets are critical to windmill turbines, one of the specific areas the Chinese hope to dominate. Each 1-megawatt windmill uses roughly a metric ton of NdFeB magnets.

For green energy enthusiasts, this is a double bind. First, green power must compete economically with fossil fuels — meaning rather small cost increases in capital outlays could be a deal breaker. Second, the only way to get around the price problem is to advocate greater neodymium production. And that means either tolerating the high-pollution techniques used in China, or encouraging the development of a not-particularly-green mining industry in the West.

Read more: China and the Future of Rare Earth Elements | STRATFOR
Title: Appeasement
Post by: G M on October 12, 2010, 09:54:25 AM

Title: Re: China
Post by: Crafty_Dog on October 12, 2010, 11:36:46 AM
Kow tow?  Or Manchurian candidate?
Title: OMG-- Krugman?
Post by: Crafty_Dog on October 18, 2010, 05:31:58 AM
Rare and Foolish
Published: October 17, 2010
comments (17)
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CloseLinkedinDiggMixxMySpaceYahoo! BuzzPermalink Last month a Chinese trawler operating in Japanese-controlled waters collided with two vessels of Japan’s Coast Guard. Japan detained the trawler’s captain; China responded by cutting off Japan’s access to crucial raw materials.

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Paul Krugman

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And there was nowhere else to turn: China accounts for 97 percent of the world’s supply of rare earths, minerals that play an essential role in many high-technology products, including military equipment. Sure enough, Japan soon let the captain go.

I don’t know about you, but I find this story deeply disturbing, both for what it says about China and what it says about us. On one side, the affair highlights the fecklessness of U.S. policy makers, who did nothing while an unreliable regime acquired a stranglehold on key materials. On the other side, the incident shows a Chinese government that is dangerously trigger-happy, willing to wage economic warfare on the slightest provocation.

Some background: The rare earths are elements whose unique properties play a crucial role in applications ranging from hybrid motors to fiber optics. Until the mid-1980s the United States dominated production, but then China moved in.

“There is oil in the Middle East; there is rare earth in China,” declared Deng Xiaoping, the architect of China’s economic transformation, in 1992. Indeed, China has about a third of the world’s rare earth deposits. This relative abundance, combined with low extraction and processing costs — reflecting both low wages and weak environmental standards — allowed China’s producers to undercut the U.S. industry.

You really have to wonder why nobody raised an alarm while this was happening, if only on national security grounds. But policy makers simply stood by as the U.S. rare earth industry shut down. In at least one case, in 2003 — a time when, if you believed the Bush administration, considerations of national security governed every aspect of U.S. policy — the Chinese literally packed up all the equipment in a U.S. production facility and shipped it to China.

The result was a monopoly position exceeding the wildest dreams of Middle Eastern oil-fueled tyrants. And even before the trawler incident, China showed itself willing to exploit that monopoly to the fullest. The United Steelworkers recently filed a complaint against Chinese trade practices, stepping in where U.S. businesses fear to tread because they fear Chinese retaliation. The union put China’s imposition of export restrictions and taxes on rare earths — restrictions that give Chinese production in a number of industries an important competitive advantage — at the top of the list.

Then came the trawler event. Chinese restrictions on rare earth exports were already in violation of agreements China made before joining the World Trade Organization. But the embargo on rare earth exports to Japan was an even more blatant violation of international trade law.

Oh, and Chinese officials have not improved matters by insulting our intelligence, claiming that there was no official embargo. All of China’s rare earth exporters, they say — some of them foreign-owned — simultaneously decided to halt shipments because of their personal feelings toward Japan. Right.

So what are the lessons of the rare earth fracas?

First, and most obviously, the world needs to develop non-Chinese sources of these materials. There are extensive rare earth deposits in the United States and elsewhere. However, developing these deposits and the facilities to process the raw materials will take both time and financial support. So will a prominent alternative: “urban mining,” a k a recycling of rare earths and other materials from used electronic devices.

Second, China’s response to the trawler incident is, I’m sorry to say, further evidence that the world’s newest economic superpower isn’t prepared to assume the responsibilities that go with that status.

Major economic powers, realizing that they have an important stake in the international system, are normally very hesitant about resorting to economic warfare, even in the face of severe provocation — witness the way U.S. policy makers have agonized and temporized over what to do about China’s grossly protectionist exchange-rate policy. China, however, showed no hesitation at all about using its trade muscle to get its way in a political dispute, in clear — if denied — violation of international trade law.

Couple the rare earth story with China’s behavior on other fronts — the state subsidies that help firms gain key contracts, the pressure on foreign companies to move production to China and, above all, that exchange-rate policy — and what you have is a portrait of a rogue economic superpower, unwilling to play by the rules. And the question is what the rest of us are going to do about it.
Title: Re: China - Krugman
Post by: DougMacG on October 18, 2010, 08:08:36 AM
Did I just read a Krugman column where the whole thing almost made sense and the facts were  accurate?  Our environmental standards caused the surrender of a crucial market to China.

I especially like the part where Krugman is shocked and disappointed that a murderous, tyrannical, totalitarian, dictatorial regime hasn't yet risen to the responsibilities of their superpower status.  Who knew?

"China accounts for 97 percent of the world’s supply of rare earths, minerals that play an essential role in many high-technology products, including military equipment."

This Idaho editorial says that we closed our last rare earth mine for environmental risks that must not scare the Chinese:

"Fifteen years ago, the United States was the world’s largest producer of rare earth minerals. But the last major rare earth mine in the U.S. was closed in 2002. Last year China produced more than 97 percent of the world’s rare earth minerals even though it has only 36 percent of the world’s reserves."

A global production chart at Wikipedia shows that the US had the lion's share of the production as recent as the mid-1980s.

Small point of learning here.  When we think of passing a law to ban production of something here to save the earth but we know it will just be done by our competitors and enemies anyway, ask what is gained?  Production of wind turbines and hybrid cars according to our EPA pose unacceptable environmental risks (because of the mining of rare earth elements).  Once again, who knew that banning production here, buying it elsewhere and then subsidizing those purchases would cause a market imbalance threatening our leadership in technology and manufacturing.

I should add that I support 'urban mining' but the recycling of old computers and electronics as a primary strategy for developing new technologies sounds very much like a guarantee of never again being the leader in anything.

Decline is a choice.
Title: Re: China
Post by: G M on October 18, 2010, 08:58:59 AM
Recycling electronics is expensive and creates serious environmental impacts. Most of our e-waste is sent to China for processing.
Title: Re: China
Post by: G M on October 19, 2010, 08:10:38 AM

The Electronic Wasteland

November 18, 2008 9:04 AM

Where do the millions of computer monitors, cell phones and other electronic refuse our society generates end up? Scott Pelley reports.
Title: Re: China- Electronic waste
Post by: DougMacG on October 19, 2010, 09:36:39 AM
Seems to me that like nuclear 'waste', e-waste could be condensed and stored safely as a future resource until the technology to safely mine it for resources catches up.  The original point remains, we pass production restriction laws here and then consume the same product produced elsewhere.  That saves the earth nothing, eliminates a US business, costs the consumer and enriches our competitor/ enemy.  In this case - China.

What bugs me most about ordinary recycling is that we think we save energy and the earth by requiring huge diesel trucks to drive regularly down all our streets, and charge us for it.
Title: Unrestricted economic warfare
Post by: G M on October 19, 2010, 06:53:19 PM
October 19, 2010
China to Halt Some Exports to U.S.

HONG KONG — China, which has been blocking shipments of crucial minerals to Japan for the last month, has now quietly halted shipments of those materials to the United States and Europe, three industry officials said on Tuesday.

The Chinese action, involving rare earth minerals that are crucial to manufacturing many advanced products, seems certain to further intensify already rising trade and currency tensions with the West. Until recently, China typically sought quick and quiet accommodations on trade issues. But the interruption in rare earth supplies is the latest sign from Beijing that Chinese leaders are willing to use their growing economic muscle.

“The embargo is expanding” beyond Japan, said one of the three rare earth industry officials, all of whom insisted on anonymity for fear of business retaliation by Chinese authorities.

They said Chinese customs officials imposed the broader restrictions on Monday morning, hours after a top Chinese official summoned international news media Sunday night to denounce United States trade actions.

China mines 95 percent of the world’s rare earth elements, which have broad commercial and military applications, and are vital to the manufacture of products as diverse as cellphones, large wind turbines and guided missiles. Any curtailment of Chinese supplies of rare earths is likely to be greeted with alarm in Western capitals, particularly because Western companies are believed to keep much smaller stockpiles of rare earths than Japanese companies.
Title: Re: China
Post by: JDN on October 19, 2010, 07:32:23 PM
Tit for tat.
Everyone plays the cards they hold.

What do you suggest America should do?
In the short run?

In the long run, as Doug seemed to imply exceptions should be made.
I'm all for clean air, but national defense comes first.
Title: Re: China
Post by: JDN on October 19, 2010, 07:44:41 PM
Maybe it's time to make some changes....

And article back in March, 2008 had a good point....

Lifton has also suggested that many U.S. companies have not jumped into the market because China's state-owned mines keep rare earth prices artificially low. But if U.S. companies do not begin mining American rare earth deposits soon, they may be left scrambling if China does one day stop exporting rare earths.

But Cowle, the CEO of U.S. Rare Earths, seems hopeful that momentum has already begun building for the U.S. government to encourage development of its own rare earth deposits.

"From what I see, security of supply is going to be more important than the prices," Cowle said.
Title: Re: China
Post by: G M on October 19, 2010, 07:50:38 PM
Playing protectionist games with China will hurt us far worse than it will them. I cringe to think how this will play out with the cokehead in chief doing the decision making.
Title: Re: China
Post by: Crafty_Dog on October 20, 2010, 10:06:46 AM
Trade wars are very bad things and tend to have consequences far beyond those originally envisioned.

That said, we must consider the possibility that China is starting one with us whether we like it or not.  In case such is the case, then we need a clear-headed assessment of who "wins" (i.e. loses less).

GM, you've been a serious observer of China for some time now.  Why do you say they win a trade war with us?
Title: Re: China
Post by: G M on October 20, 2010, 11:40:29 AM
China sells to the world. China buys our debt, and Chinese consumers are increasingly buying US made products. The cheaper yuan means the American consumer's dollar goes farther at Walmart. Obama's pandering to his union goons will not end up creating jobs, just making consumer goods more expensive.

The Smoot–Hawley Tariff Act supporters though it was going to bring jobs back in the great depression, instead it like much of what was done by the dems lengthened and worsened it. China believes it can take the pain, and if needed, it will let the PLA party like it's 1989 should the street protests get out of hand.

We, on the other hand can tolerate much less pain as a society. China calculates that we will blink first, and China is correct in that assessment. So all this financial saber rattling will accomplish is to place China in a better position than when we started.
Title: Re: China
Post by: Crafty_Dog on October 20, 2010, 11:47:59 AM
Perhaps I read too much into what you say, but I am not seeing a point at which you would draw a line.
Title: Re: China
Post by: G M on October 20, 2010, 12:03:48 PM
We are in no position to get into a trade war with anyone, much less China. We need free trade and we need them to ignore how they are throwing money away continuing to fund our irresponsible spending habits. Like I said before, the low yuan actually helps US consumers. A 40% increase in Chinese made goods would cause tangible pain for us and would not result in comparable increase in employment domestically.
Title: Re: China
Post by: DougMacG on October 20, 2010, 12:24:12 PM
Again I agree.  People forget how low prices from a consumer point of view raise our standard of living.  The benefit of freedom to trade goes both ways.  We would lose the low price and wide availability of widgets and happy meal toys. They would lose their second largest customer, cash flow they depend on and have widespread factory shutdowns and layoffs with a regime that derives its consent only from the security and continuous economic growth it can provide.  The damage of ending that relationship economically goes both ways. I think we could withstand the disruption and resulting economic depression better than they could, but not by much and not with any certainty.
Title: Re: China
Post by: Crafty_Dog on October 22, 2010, 12:51:24 PM
"we need them to ignore how they are throwing money away continuing to fund our irresponsible spending habits"

GM, I am going to nit pick a bit on this one.  NO we do NOT need to fund our irresponsible spending habits.  Rather we need to spend responsibly.  We can get along quite nicely without the plastic knicknacks and poison laced products (including children's toys! :x) and we can get along quite nicely without further increasing their leverage over us.
Title: Re: China
Post by: G M on October 22, 2010, 01:19:58 PM
Believe me, I in no way want us to continue our destructive spending habits. We MUST address it immediately. However, until we get our feces coagulated, we had better not make things worse with a neo-Smoot-Hawley act.
Title: Re: China
Post by: Crafty_Dog on October 22, 2010, 03:03:34 PM
To quote myself:

"That said, we must consider the possibility that China is starting one with us whether we like it or not.  In case such is the case, then we need a clear-headed assessment of who "wins" (i.e. loses less)."

In other words, I am not advocating Smoot Hawley, I am asking what to do if China starts it up.

Title: Re: China
Post by: G M on October 22, 2010, 03:22:18 PM
Our salvation, no matter what China does or does not do, is to get back into a free market, innovation based economy. Cut corporate taxes and watch foreign investment flood in. It is an utter shame that right now, it's easier to start up a cutting edge tech company in China rather than here. If we do not reverse this and other trends, our best option in the future will be as a tourism destination for wealthy asians.
Title: Re: China
Post by: JDN on October 23, 2010, 08:16:50 AM
That is very interesting JDN, from what you say, China seems to have a plausible claim at least.  Should I want to cite a source, what source would that be?

Last weekend, angry young protesters in China and Japan took to the streets to demonstrate to the international community their countries' claims over what Tokyo calls the Senkaku Islands and Beijing refers to as the Diaoyu.

One of the sides must be wrong, historically. But which side? Each government, of course, says it has the better claim.
Title: Re: China
Post by: ccp on October 23, 2010, 09:58:32 AM
From the recent Economist:

China's succession
The next emperor
A crown prince is anointed in a vast kingdom facing vaster stresses. China is in a fragile state
Oct 21st 2010

“WITH you in charge, I am at ease,” Mao Zedong is supposed to have told his successor, Hua Guofeng. It proved a disastrous choice. Mr Hua lasted a couple of years before being toppled in 1978. A decade later succession plans once again unravelled spectacularly, against a backdrop of pro-democracy unrest. Only once, eight years ago, has China’s Communist Party managed a smooth transfer of power—to Hu Jintao. Now a new transition is under way. The world should be nervous about it for two reasons: the unknown character of China’s next leader; and the brittle nature of a regime that is far less monolithic and assured than many foreigners assume.

The man ordained to take over Mr Hu’s twin roles as party chief in 2012 and president the following year is hardly a household name. On October 18th Vice-President Xi Jinping was given a new job as vice-chairman of China’s Central Military Commission, which Mr Hu heads. This is a position for leaders-in-waiting. The portly son of one of Communist China’s founders, little known to the outside world until a few years ago, Mr Xi is preparing to take the helm of a country with the world’s second-biggest economy and its biggest armed forces—and which is in the midst of wrenching social change.

Quite how he has risen so high in a party that, for all its growing engagement with the world, remains deeply secretive, is unclear. Mr Xi’s appointment was eerily similar to the recent anointing of Kim Jong Un in North Korea: he too was made vice-chairman of a military commission after a closed-door party conclave, without public explanation. China’s leaders at least offered a sentence on Mr Xi’s appointment, albeit at the end of an arid 4,600-character communiqué after the fifth party congress (see article).

Related items
China's economy: A new epic
Oct 21st 2010
China's next leader: Xi who must be obeyed
Oct 21st 2010On the positive side, Mr Xi has held some big posts in the most economically dynamic and globally integrated parts of the country: the coastal provinces of Fujian and Zhejiang as well as, briefly, Shanghai. He is a relatively cosmopolitan figure. His wife is a popular singer. But it is impossible to assess how well qualified he is to run the country or how assured his succession is. On the face of it, one engineer whose father was denounced during the Cultural Revolution is handing over to another. But Mr Xi is a relative newcomer to the inner circle; he has not served as long as Mr Hu had in 2002. There are plenty in the party who resent the rise to power of well-connected “princelings” like Mr Xi. A two-year transition will be a test.

All this one day will be yours

All the same, it is the immensity of the task, not the obscurity of the man, that should make the world nervous. For all their outward expressions of unity, there are signs of disagreement among Chinese leaders over what the country’s priorities should be—both on the economy and on political reform.

The economy is sprinting along by Western standards, but China faces a hard adjustment to wean itself off excessive investment and exports in favour of more reliance on consumption. The communiqué unveiled guidelines for a new five-year economic plan (see article). This calls for a more sustainable pace of growth, with wage-earners getting a bigger share of the national income. This would be good for China and the world, helping to narrow the trade surplus that annoys America so much. But the change will not be painless. Exporters fear business will suffer if wages soar or the yuan rises fast. Powerful state-owned enterprises, used to cheap credit, land and energy, will resist threats to these privileges.

As for political reform, Chinese leaders have talked about democracy for the past 30 years, but done little. Rapid growth and the spread of the internet and mobile phones have enabled Chinese citizens to communicate, vent their grievances and pursue their dreams more freely than before, so long as they do not attack the party. But some are now demanding more say in how the country is run. In the past few weeks China’s more liberal newspapers have enthused about calls by the prime minister, Wen Jiabao, for “political reform”. Conservative newspapers have censored them.

There is next to no chance of the cautious Mr Hu bringing in big reforms before he steps down. This week’s communiqué hailed the “political advantages of China’s socialist system” and mentioned political reform only briefly, saying—as Chinese leaders so often do—that it will require “vigorous yet steady” effort. Even Mr Wen, who will step down at the same time as Mr Hu, has wanted to move at glacial speed.

Expect paranoia and you may be pleasantly surprised

Might Mr Xi speed things up? There is no shortage of conservatives arguing for caution, but there is also a pragmatic argument for change: China’s economic gains could be jeopardised by a failure to loosen the party’s hold. Explosions of public discontent, fuelled by resentment of government callousness towards ordinary citizens, are becoming increasingly common in villages, towns and cities across the country. The (admittedly patchy) official data show a more than tenfold increase in the annual number of large protests and disturbances since 1993, with more than 90,000 cases reported in each of the past four years. In the past China’s leaders have relied on growth to secure social stability. If and when a more serious slowdown strikes, popular grumbles could increase.

The right path for Mr Xi should be clear: relax the party’s grip on dissent, lift its shroud of secrecy and make vital economic reforms. But the rest of the world would be unwise to assume that reason will prevail. In times of uncertainty, the regime is wont to appeal to nationalist sentiment. Large anti-Japanese protests erupted during the latest party meeting. America and the West have also been subjected to tongue-lashings. The party meeting called on officials to strengthen “the country’s comprehensive national power”.

Too many Westerners, including those urging trade sanctions over the yuan, assume that they are dealing with a self-confident, rational power that has come of age. Think instead of a paranoid, introspective imperial court, already struggling to keep up with its subjects and now embarking on a slightly awkward succession—and you may be less disappointed.

Title: Re: China
Post by: G M on October 23, 2010, 10:22:15 AM
Good thing we'd never put someone lacking experience and ability in a national leadership position.
Title: I guess we know who calls the shots in asia now
Post by: G M on October 24, 2010, 07:49:54 PM

South Korean media reported Sunday that Seoul and Washington have called off plans to hold a major joint naval exercise in the Yellow Sea this month.

Yonhap news agency quoted government sources as saying the exercise involving a U.S. nuclear-powered aircraft carrier has been postponed to avoid tensions on the Korean peninsula during the upcoming G20 summit in Seoul.

There was no official confirmation of the reports.

The Chinese government has fiercely opposed the deployment of the U.S. aircraft carrier George Washington in the regional waters.

The U.S. and South Korea have been holding a series of joint military exercises as a warning to North Korea after the sinking of a South Korean warship.

An international investigation concluded that the March 26 sinking of the Cheonan was caused by a torpedo launched from a North Korean ship. Pyongyang has called the report a fabrication.
Title: China: Yes we can!
Post by: G M on October 24, 2010, 08:57:02 PM

This situation was further complicated when a North Korean midget submarine sank a South Korean corvette on March 26, 2010, killing 46 sailors. In the aftermath, Washington and Seoul announced a series of naval exercises to demonstrate resolve in the face of North Korean aggression while China refused to condemn the attack. It was initially reported, on June 1st, that those exercises would take place in the Yellow Sea, which separates China and South Korea, and would involve the USS George Washington, the most advanced aircraft carrier in the US Navy. However, as China repeatedly announced its “resolute opposition” to any carrier-led exercises in Yellow Sea, the military drills were repeatedly delayed. The George Washington had traversed the Yellow Sea as late as October 2009 with no protest from Beijing, but suddenly Communist Party of China mouthpieces were filled with op-eds from hawkish PLA generals warning Washington about drilling in the Yellow Sea.

Weeks passed and the standoff became a diplomatic game of chicken: would President Barack Obama send the George Washington into the Yellow Sea, or would he give Beijing a veto over US freedom of action in the Pacific?

First, Mr. Obama tried to split the difference, hosting exercises led by the George Washington in the less contentious Sea of Japan, off Korea’s eastern coast. However, the move was interpreted by allies and enemies alike as a cessation of American authority in Asia and an embarrassment to South Korea, which had gone on record insisting the George Washington would stand by its side in the Yellow Sea.

The message carried particular salience in the capitals of Southeast Asia, where tensions with China are fast on the rise.  After years of an effective Chinese charm offensive, many East and Southeast Asian nations have become alienated by hardening Chinese territorial claims in the Pacific. The South China Sea, where island chains such as the Spratlys and Paracels are disputed by China and Vietnam, Malaysia, Brunei, the Phillipines and Taiwan, has become a particular flashpoint.

China has arrested hundreds of Vietnamese fishermen in recent years. It has elevated its claim in the South China Sea to a “core issue” on par with Taiwan, Xinjiang and Tibet. Wary capitals in the region have been snapping up military hardware and drawing nearer to Washington. Even regional heavyweight Indonesia, which has stayed above the fray and does not claim any islands in the South China Sea, recently took up the defense of its ASEAN allies at the United Nations, stating China’s claim “clearly lacks international legal basis.” Secretary Hillary Clinton did the same on July 23 at the ASEAN Regional Forum, insisting “freedom of navigation, open access to Asia’s maritime commons and respect for international law in the South China Sea” were in America’s “national interest.” Beijing is still outraged that the U.S. has waded into the South China Sea imbroglio.

But Mrs Clinton’s stand risks being undermined by Mr Obama’s provocative weakness in the Yellow Sea. After weeks of coyness, Pentagon spokesman Geoff Morrell announced in August that the George Washington would take part in scheduled military exercises in the Yellow Sea in the coming months. James Steinberg, deputy secretary of state, told China it had no one to blame but itself: "China is suffering the indignity of exercises close to its shores, and though they are not directed at China, the exercises are a direct result of China's support for North Korea and unwillingness to denounce their aggression."  However, the administration again changed course on August 20th, when a military spokesman announced the George Washington would not participate in September’s exercises, adding only that it “would operate in the waters off the Korean peninsula in future exercises.”

From the first sign of hesitation, Mr Obama signalled to China that US policy is subject to intimidation. Each subsequent reversal has only emboldened Beijing. Much of the political leadership of China still seems to prefer co-operation over confrontation with the United States, and ties between the two countries have grown remarkably broad if not particularly deep. But hardliners in the Communist Party, and particularly in the PLA, clearly resent America’s influence in Asia and are growing more assertive by the year in their attempts to roll that influence back. Damage has been done to US credibility by this whole episode, but the Obama administration must stand by its initial pledge to send the George Washington to the Yellow Sea.  With tensions between Japan and China fast on the rise after the arrest of the Chinese trawler captain, there is no better time to send a message to America’s allies that US influence in Asia will not be compromised by China’s rise. 
Title: A re-militarized Japan?
Post by: G M on October 24, 2010, 09:20:16 PM

Security situation around Japan getting more severe: Kan
Prime Minister Naoto Kan delivers a speech as he attends the inspection parade of the Ground Self-Defense Force at Asaka base on Oct. 24. (Mainichi)

TOKYO (Kyodo) -- Prime Minister Naoto Kan said Sunday the security situation around Japan has become more severe, given North Korea's missile and nuclear developments, as well as China intensifying its marine activities.

While attending the inspection parade of Ground Self-Defense Force at Asaka base in Tokyo and referring to China's military enhancement, Kan said, "We need to keep a posture that enables us to cope with various situations effectively."

"In order to build a truly effective defense capability, we will compile an outline of a new defense program by the end of the year that will meet future needs," he said.

He also showed willingness to enhance the Japan-U.S. alliance and promote activities to improve international security.

(Mainichi Japan) October 24, 2010
Title: POTH: Reality hits BO over head with baseball bat
Post by: Crafty_Dog on October 26, 2010, 09:53:27 AM
Taking Harder Stance Toward China, Obama Lines Up Allies
Published: October 25, 2010WASHINGTON — The Obama administration, facing a confrontational relationship with China on exchange rates, trade and security issues, is stiffening its approach toward Beijing, seeking allies to confront a newly assertive power that officials now say has little intention of working with the United States.

In a shift from its assiduous one-on-one courtship of Beijing, the administration is trying to line up coalitions — among China’s next-door neighbors and far-flung trading partners — to present Chinese leaders with a unified front on thorny issues like the currency and their country’s territorial claims in the South China Sea.

The advantages and limitations of this new approach were on display over the weekend at a meeting of the world’s largest economies in South Korea. The United States won support for a concrete pledge to reduce trade imbalances, which will put more pressure on China to allow its currency to rise in value.

But Germany, Italy and Russia balked at an American proposal to place numerical limits on these imbalances, a step that would have further isolated Beijing. That left the Treasury secretary, Timothy F. Geithner, to make an unscheduled stop in China on his way home from South Korea to discuss the deepening tensions over exchange rates with a top Chinese finance official.

Administration officials speak of an alarming loss of trust and confidence between China and the United States over the past two years, forcing them to scale back hopes of working with the Chinese on major challenges like climate change, nuclear nonproliferation and a new global economic order.

The latest source of tension is over reports that China is withholding shipments of rare-earth minerals, which the United States uses to make advanced equipment like guided missiles. Administration officials, clearly worried, said they did not know whether Beijing’s motivation was strategic or economic.

“This administration came in with one dominant idea: make China a global partner in facing global challenges,” said David Shambaugh, director of the China policy program at George Washington University. “China failed to step up and play that role. Now, they realize they’re dealing with an increasingly narrow-minded, self-interested, truculent, hyper-nationalist and powerful country.”

To counter what some officials view as a surge of Chinese triumphalism, the United States is reinvigorating cold war alliances with Japan and South Korea, and shoring up its presence elsewhere in Asia. This week, Secretary of State Hillary Rodham Clinton will visit Vietnam for the second time in four months, to attend an East Asian summit meeting likely to be dominated by the China questions.

Next month, President Obama plans to tour four major Asian democracies — Japan, Indonesia, India and South Korea — while bypassing China. The itinerary is not meant as a snub: Mr. Obama has already been to Beijing once, and his visit to Indonesia has long been delayed. But the symbolism is not lost on administration officials.

Jeffrey A. Bader, a major China policy adviser in the White House, said China’s muscle-flexing became especially noticeable after the 2008 economic crisis, in part because Beijing’s faster rebound led to a “widespread judgment that the U.S. was a declining power and that China was a rising power.”

But the administration, he said, is determined “to effectively counteract that impression by renewing American leadership.”

Political factors at home have contributed to the administration’s tougher posture. With the economy sputtering and unemployment high, Beijing has become an all-purpose target. In this Congressional election season, candidates in at least 30 races are demonizing China as a threat to American jobs.

At a time of partisan paralysis in Congress, anger over China’s currency has been one of the few areas of bipartisan agreement, culminating in the House’s overwhelming vote in September to threaten China with tariffs on its exports if Beijing did not let its currency, the renminbi, appreciate.

The trouble is that China’s own domestic forces may cause it to dig in its heels. With the Communist Party embarking on a transfer of leadership from President Hu Jintao to his anointed successor, Xi Jinping, the leadership is wary of changes that could hobble China’s growth.

There are also increasingly sharp divisions between China’s civilian leaders and elements of the People’s Liberation Army. Many Chinese military officers are openly hostile toward the United States, convinced that its recent naval exercises in the Yellow Sea amount to a policy of encircling China.

Even the administration’s efforts to collaborate with China on climate change and nonproliferation are viewed with suspicion by some in Beijing.

Mr. Obama’s aides, many of them veterans of the Clinton years, understand that especially on economic issues, there are elements of brinkmanship in the relationship, which can imply more acrimony than actually exists.

But the White House was concerned enough that last month it sent a high-level delegation to Beijing that included Mr. Bader; Lawrence H. Summers, the departing director of the National Economic Council; and Thomas E. Donilon, who has since been named national security adviser.

“We were struck by the seriousness with which they shared our commitment to managing differences and recognizing that our two countries were going to have a very large effect on the global economy,” Mr. Summers said.

Just before the meeting, China began allowing the renminbi to rise at a somewhat faster rate, though its total appreciation, since Beijing announced in June that it would loosen exchange-rate controls, still amounts to less than 3 percent. Economists estimate that the currency is undervalued by at least 20 percent.

Meanwhile, trade tensions between the two sides are flaring anew. The administration recently agreed to investigate charges by the United Steelworkers that China was violating trade laws with its state support of clean-energy technologies. That prompted China’s top energy official, Zhang Guobao, to accuse the administration of trying to win votes — a barb that angered White House officials.

Of the halt in shipments of rare-earth minerals, Mr. Summers said, “There are serious questions, both in the economic and in the strategy realm, that are going to require close study within our government.”

Beijing had earlier withheld these shipments to Japan, after a spat over a Chinese fishing vessel that collided with Japanese patrol boats near disputed islands. It was one of several recent provocative moves by Beijing toward its neighbors — including one that prompted the administration to enter the fray.

In Hanoi in July, Mrs. Clinton said the United States would help facilitate talks between Beijing and its neighbors over disputed islands in the South China Sea. Chinese officials were livid when it became clear that the United States had lined up 12 countries behind the American position.

With President Hu set to visit Washington early next year, administration officials said Mrs. Clinton would strike a more harmonious note in Asia this week. For now, they said, the United States feels it has made its point.

“The signal to Beijing ought to be clear,” Mr. Shambaugh said. “The U.S. has other closer, deeper friends in the region.”

Title: Re: China
Post by: G M on October 26, 2010, 11:59:38 AM

On the eve of the G20 summit in London, "Unhappy China" has stirred debate about whether China should have a greater role on the world stage. Although the country will soon overtake Japan as the world's second-largest economy, China is not incl