US-China (& Japan, South China Sea-- Taiwan, Vietnam, Philippines, etc)

[ccp]

according to Economist's lead article:

http://www.economist.com/news/leaders/21569711-if-barack-obama-wants-be-remembered-great-president-he-should-focus-three-long-term

Brock they say has not met China's new guy for two months and he should have been there immediately.   I don't agree that begging and groveling is the way to go but that is their opinion.

[Crafty_Dog]

Between the election and the transition I think it fair enough to say the man is entitled to have been busy, not to mention the implicit kowtow of him going to them.

[Crafty_Dog]

http://www.nytimes.com/2013/01/21/world/asia/china-criticizes-clintons-remarks-about-dispute-with-japan-over-islands.html?nl=todaysheadlines&emc=edit_th_20130121&_r=0

[G M]

http://www.nytimes.com/2013/01/21/world/asia/china-criticizes-clintons-remarks-about-dispute-with-japan-over-islands.html?nl=todaysheadlines&emc=edit_th_20130121&_r=0

I thought all the foreign policy issues were solved by Buraq's bowing.

[Crafty_Dog]

In Dispute Over Islands, a Chance for Beijin.
January 21, 2013 | 1430 GMT

As Japan and China increase naval and air activity around the disputed Senkaku/Diaoyu islands in the East China Sea, the United States is steadily increasing its active involvement to reassure Tokyo and send a warning to Beijing. But Beijing may seek an opportunity to challenge U.S. primacy in what China considers its territorial waters.
 


Analysis
 
The United States is monitoring Chinese air activity from E-3 Sentry aircraft based at Kadena air base on Okinawa in response to increasing incidents of Chinese combat and surveillance aircraft shadowing U.S. P-3C and C-130 flights near the Ryukyu islands, according to Japanese and Korean media reports. Chinese pilots are more actively shadowing U.S. military aircraft flying through the airspace between China and Japan. Chinese aircraft have also reportedly violated Japanese airspace near the disputed Senkaku/Diaoyu islands several times since mid-December, prompting Japan to send its aircraft, including F-15Js, to monitor Chinese actions. 

 
The use of E-3s would bolster U.S. coordination and provide advance warning of possible encounters with Chinese aircraft, but its purpose may also be to offset some of Japan's weaknesses in the area. Japan's Defense Ministry wants to supplement its early warning capability -- its radar station on Miyako Island, near Okinawa, cannot detect Chinese aircraft flying over the sea at low altitudes. As the Japanese government continues to review its policies and capabilities for dealing with China's assertive stance on the disputed islands, Tokyo has identified several gaps in its ability to address Chinese actions. Japan will depend on the United States to fill these gaps as its military purchases new systems, shifts its existing forces and adjusts its rules of engagement.
 
 
 
Escalation
 
Until 2012, the dispute over the islands was only an occasional source of tension between China and Japan. The two sides had operated under a tacit agreement: China would not push its claims if Japan did not develop the islands. In April 2012, then-Tokyo Governor Shintaro Ishihara, in a speech at the Heritage Foundation, announced the city's plans to purchase the Senkaku Islands from their Japanese private owner. This action forced the Japanese central government to purchase the islands outright rather than continue to rent them from the private owners or allow Ishihara to buy the islands and possibly begin to build facilities on them.

 
 
 
What took place was effectively a change in the deeds to the islands, which in reality were already under Japanese control. Beijing, however, exploited the move to set in motion a nationalist campaign against Japanese businesses and products and to justify the new pace of Chinese maritime and air activity around the islands. China began sending more ships from its civilian maritime enforcement agencies to survey the waters around the islands and added aerial surveillance flights as part of a strategy to either force Japanese discussions over the islands or to demonstrate China's presence and authority. In the first case, Japan does not acknowledge China's claim to the islands, and thus it does not recognize a dispute, instead characterizing Beijing's moves as Chinese aggression. In the second instance, China sees its increased presence as a way to either cow the other claimant or to help China build a stronger case should the dispute ever go to international arbitration.
 
 
 
Japan has already recognized several shortcomings in its own defense capabilities to counter Chinese actions. Tokyo is reviving discussions about moving some of its F-15s from Naha on Okinawa to Shimoji-shima, which would place the aircraft just 190 kilometers (118 miles) from the Senkakus, rather than 420 kilometers away, thus halving the current 15-20 minute flight time required to scramble Japanese warplanes to the islands. Tokyo is also seeking to develop or purchase additional unmanned aircraft, including the U.S. Global Hawk, to maintain more active monitoring of the area around the disputed islands, as well as of the Chinese coast 330 kilometers away. The Japanese Coast Guard is also planning a 12-vessel special patrol unit to monitor the Senkaku/Diaoyu islands. But most Japanese plans are slated for implementation no sooner than 2015. This leaves Tokyo unable to effectively counter Chinese activity for two more years.
 
 
 
The United States' Pacific Presence
 
This is where the United States comes in. Tokyo and Washington are discussing a joint approach to the disputed area and to Chinese actions. Washington has said it does not recognize any sovereignty over the islands, but it does recognize Japanese administrative control, meaning that by default, Washington supports Japan. But the United States does not want a violent clash between Japan and China. By increasing its direct involvement, Washington can reassure Tokyo of its support, softening the pressure for Japan to take more aggressive action, and it can serve notice to China that more aggressive action would involve not only Japan but also the United States. 

 
 
 
But this approach assumes China is willing to step back. In China's view, the United States is trying to contain Beijing and encroach on its sphere of influence. Beijing sees the evidence of this in Washington's pivot to Asia, in the expansion of its political and defense relations with Southeast Asian states and in its strengthened military posture throughout the region, particularly in Australia and the Philippines. China's leaders see in some sense a Western attempt to prevent China, as a non-Western state, from taking its rightful place as a major regional power and international player. Chinese academics and officials raise the specter of a U.S. containment strategy similar to that used in the Cold War against the Soviets. Some also see a deeper U.S. and Western resistance to non-western power, an attitude they see going back to Western moves to block Japan's emergence as a modern imperial nation in the early 20th Century. 

 
 
 
The involvement of the United States, then, may not suffice to alter China's actions around the disputed islands. Indeed, it may encourage China to more boldly test U.S. resolve and to assert its claim not only to the islands, but also to China's expanded sphere of influence. In 2001, after a collision between a Chinese Jian-8 and a U.S. EP-3E, China held the plane on Hainan Island and demanded a U.S. apology. But more than just seeking an apology or trying to pry secrets from the plane's airframe, China used the opportunity to try to show other Asian states that the United States and its military could be countered in Asia.
 
 
 
Beijing's ability to resist U.S. demands and Washington's unwillingness to intervene militarily were, for China, a victory. The 9/11 attacks on the United States shifted U.S. attention and the stresses of U.S.-China relations were quickly deprioritized. But those tensions are rising once again, and at a time when more military flights and ships are moving near the disputed area, Beijing may be on the lookout for another opportunity to reshape regional perceptions of Washington's military commitment to Asia. And with the United States engaged for more than a decade in a war in Afghanistan, Beijing is calculating that Washington will continue to seek to avoid new conflict in Asia, giving China a short window of opportunity to make its point..


Read more: In Dispute Over Islands, a Chance for Beijing | Stratfor

[Crafty_Dog]

Summary
 


STR/AFP/GettyImages
 
Chinese protesters march over the Senkaku/Diaoyu Islands dispute in September 2012 in Zhejiang province
 


As Japan and China increase naval and air activity around the disputed Senkaku/Diaoyu islands in the East China Sea, the United States is steadily increasing its active involvement to reassure Tokyo and send a warning to Beijing. But Beijing may seek an opportunity to challenge U.S. primacy in what China considers its territorial waters.
 


Analysis
 
The United States is monitoring Chinese air activity from E-3 Sentry aircraft based at Kadena air base on Okinawa in response to increasing incidents of Chinese combat and surveillance aircraft shadowing U.S. P-3C and C-130 flights near the Ryukyu islands, according to Japanese and Korean media reports. Chinese pilots are more actively shadowing U.S. military aircraft flying through the airspace between China and Japan. Chinese aircraft have also reportedly violated Japanese airspace near the disputed Senkaku/Diaoyu islands several times since mid-December, prompting Japan to send its aircraft, including F-15Js, to monitor Chinese actions. 

 
The use of E-3s would bolster U.S. coordination and provide advance warning of possible encounters with Chinese aircraft, but its purpose may also be to offset some of Japan's weaknesses in the area. Japan's Defense Ministry wants to supplement its early warning capability -- its radar station on Miyako Island, near Okinawa, cannot detect Chinese aircraft flying over the sea at low altitudes. As the Japanese government continues to review its policies and capabilities for dealing with China's assertive stance on the disputed islands, Tokyo has identified several gaps in its ability to address Chinese actions. Japan will depend on the United States to fill these gaps as its military purchases new systems, shifts its existing forces and adjusts its rules of engagement.
 
 
 
Escalation
 
Until 2012, the dispute over the islands was only an occasional source of tension between China and Japan. The two sides had operated under a tacit agreement: China would not push its claims if Japan did not develop the islands. In April 2012, then-Tokyo Governor Shintaro Ishihara, in a speech at the Heritage Foundation, announced the city's plans to purchase the Senkaku Islands from their Japanese private owner. This action forced the Japanese central government to purchase the islands outright rather than continue to rent them from the private owners or allow Ishihara to buy the islands and possibly begin to build facilities on them.

 
 
 
What took place was effectively a change in the deeds to the islands, which in reality were already under Japanese control. Beijing, however, exploited the move to set in motion a nationalist campaign against Japanese businesses and products and to justify the new pace of Chinese maritime and air activity around the islands. China began sending more ships from its civilian maritime enforcement agencies to survey the waters around the islands and added aerial surveillance flights as part of a strategy to either force Japanese discussions over the islands or to demonstrate China's presence and authority. In the first case, Japan does not acknowledge China's claim to the islands, and thus it does not recognize a dispute, instead characterizing Beijing's moves as Chinese aggression. In the second instance, China sees its increased presence as a way to either cow the other claimant or to help China build a stronger case should the dispute ever go to international arbitration.
 
 
 
Japan has already recognized several shortcomings in its own defense capabilities to counter Chinese actions. Tokyo is reviving discussions about moving some of its F-15s from Naha on Okinawa to Shimoji-shima, which would place the aircraft just 190 kilometers (118 miles) from the Senkakus, rather than 420 kilometers away, thus halving the current 15-20 minute flight time required to scramble Japanese warplanes to the islands. Tokyo is also seeking to develop or purchase additional unmanned aircraft, including the U.S. Global Hawk, to maintain more active monitoring of the area around the disputed islands, as well as of the Chinese coast 330 kilometers away. The Japanese Coast Guard is also planning a 12-vessel special patrol unit to monitor the Senkaku/Diaoyu islands. But most Japanese plans are slated for implementation no sooner than 2015. This leaves Tokyo unable to effectively counter Chinese activity for two more years.
 
 
 
The United States' Pacific Presence
 
This is where the United States comes in. Tokyo and Washington are discussing a joint approach to the disputed area and to Chinese actions. Washington has said it does not recognize any sovereignty over the islands, but it does recognize Japanese administrative control, meaning that by default, Washington supports Japan. But the United States does not want a violent clash between Japan and China. By increasing its direct involvement, Washington can reassure Tokyo of its support, softening the pressure for Japan to take more aggressive action, and it can serve notice to China that more aggressive action would involve not only Japan but also the United States. 

 
 
 
But this approach assumes China is willing to step back. In China's view, the United States is trying to contain Beijing and encroach on its sphere of influence. Beijing sees the evidence of this in Washington's pivot to Asia, in the expansion of its political and defense relations with Southeast Asian states and in its strengthened military posture throughout the region, particularly in Australia and the Philippines. China's leaders see in some sense a Western attempt to prevent China, as a non-Western state, from taking its rightful place as a major regional power and international player. Chinese academics and officials raise the specter of a U.S. containment strategy similar to that used in the Cold War against the Soviets. Some also see a deeper U.S. and Western resistance to non-western power, an attitude they see going back to Western moves to block Japan's emergence as a modern imperial nation in the early 20th Century. 

 
 
 
The involvement of the United States, then, may not suffice to alter China's actions around the disputed islands. Indeed, it may encourage China to more boldly test U.S. resolve and to assert its claim not only to the islands, but also to China's expanded sphere of influence. In 2001, after a collision between a Chinese Jian-8 and a U.S. EP-3E, China held the plane on Hainan Island and demanded a U.S. apology. But more than just seeking an apology or trying to pry secrets from the plane's airframe, China used the opportunity to try to show other Asian states that the United States and its military could be countered in Asia.
 
 
 
Beijing's ability to resist U.S. demands and Washington's unwillingness to intervene militarily were, for China, a victory. The 9/11 attacks on the United States shifted U.S. attention and the stresses of U.S.-China relations were quickly deprioritized. But those tensions are rising once again, and at a time when more military flights and ships are moving near the disputed area, Beijing may be on the lookout for another opportunity to reshape regional perceptions of Washington's military commitment to Asia. And with the United States engaged for more than a decade in a war in Afghanistan, Beijing is calculating that Washington will continue to seek to avoid new conflict in Asia, giving China a short window of opportunity to make its point.


Read more: In Dispute Over Islands, a Chance for Beijing | Stratfor

[G M]

Beijing knows Buraq will koutou.

[Crafty_Dog]

Japan Accuses China of Aggressive Military Moves .
By YUKA HAYASHI in Tokyo and JEREMY PAGE in Beijing

Japan accused China's navy of locking weapons-guiding radar onto Japanese naval forces twice in the past three weeks—a serious escalation in the two countries' long-running territorial dispute that has heightened fears of a looming military conflict between the two Asian giants.

"These were cases that could have led to an extremely dangerous situation with just one wrong move," Japanese Defense Minister Itsunori Onodera told reporters in a hastily arranged news conference in Tokyo Tuesday evening.

Mr. Onadera said that Chinese frigate ships aimed fire-control radar at a Japanese naval destroyer on Jan. 30 and a navy helicopter on Jan. 19. While neither incident involved firing of shots—a step that can follow use of such radar—the minister described the incidents as "highly unusual behavior" that occurs "only in extreme situations."

"We intend to push China very hard to restrain from engaging in such dangerous act," Mr. Onadera said.

The worsening dispute has drawn particular concern in the U.S., which has 37,000 troops stationed in Japan, with a majority on the island of Okinawa, just 260 miles from the disputed area.

Maj. Cathy Wilkinson, a Pentagon spokeswoman, said Tuesday morning that the U.S.'s commitments toward the islands were "longstanding and have not changed." A 1960 bilateral security treaty between the two countries would commit the American military to help defend both Japanese territory and islands administered by Japan, including the East China Sea islands in dispute.

"We have seen and are concerned by the reports of this incident," Maj. Wilkinson said. "We have long encouraged all sides to avoid steps that raise tensions and increase the risk of miscalculations that could undermine peace and stability in the region. We encourage claimants to resolve this matter peacefully through dialogue."

U.S. officials have said privately they have no desire to enter a war over a few rocks with little in the way of economic value—and the Obama administration has made clear it is intent on winding down the wars the U.S. is involved in, not starting new ones. Any military action with China over the islands would devastate the world economy and serve little purpose, those officials have said.

The latest development throws cold water on the emerging hopes that Japan and China may be close to resuming diplomatic talks to ease the tensions that have strained the ties between Asia's two largest economies since this past fall. The long-standing dispute flared up in September after the Japanese government purchased some of the islands from a private owner, triggering Beijing's anger. Last week, a senior lawmaker from Japan's ruling coalition visited Beijing and personally handed a letter from Prime Minister Shinzo Abe to China leader Xi Jinping, raising expectations that the two leaders might be open to holding summit talks.

The Chinese government had no immediate public comment on the Japanese government's accusations.

Ni Lexiong, an expert on maritime and military issues at Shanghai University of Political Science and Law, said Japan's claims were likely overblown, and intended to put international pressure on China to scale back its maritime patrols in the area. "The Japanese side did not explain what happened before these incidents—what caused the action from the Chinese ships," he said. "If this was between navy ships on both sides, then it's normal activity. I think they're exaggerating the incidents."

Independent analysts portrayed the behavior as more provocative. Beijing's use of fire-control radar "is certainly regarded as an 'escalatory' act because it infers that someone could be about to start shooting at you," said Richard Scott, IHS Jane's naval consultant.

Tokyo on Tuesday lodged complaints with Beijing through two channels, the Chinese embassy in Tokyo and China's foreign ministry in Beijing. Mr. Onodera explained that the decision to complain and unveil the tussles came after Japan analyzed the record and data and determined that illuminator radar used to search targets was indeed used in these cases.

Japanese Foreign Minister Fumio Kishida told reporters that the Chinese government responded to the protests "that they would first like to confirm the facts."

The addition of warships is the latest new dimension added to the tussle, which recently spread to the air with the introduction of military jets. Until now, the confrontation mostly took the form of a cat-and-mouse chase between civilian patrol ships, with Japanese Coast Guard cutters trying to fend off boats from China's maritime and fishery patrol agencies from the territorial waters around the contested islands, known as Senkaku in Japan and Diaoyu in China.

While Chinese naval flotillas passed through Japan's Okinawa island chain at close distance in recent months, Japanese defense officials had stressed that Tokyo kept its naval ships at distance to avoid unintended clashes from escalating into military conflict.

Japan's defense ministry said in its Tuesday news release that the fire-control radar that targeted a Japanese naval destroyer—the 4,400-ton JS Yudachi based in the Sasebo port—was launched from the Jianwei II class missile frigate, a smaller ship. Targeting the helicopter that had taken off from the JS Onami, a 4,600-ton Yokosuka-based destroyer, was a Jianwei I class frigate.

Japan didn't disclose where exactly the incidents occurred in the East China Sea, and didn't say how close they were to the disputed islands.

"This was shocking behavior," said Sugio Takahashi, a senior fellow at Japan's National Institute for Defense Studies, a research arm of the defense ministry. "It was an intentional act aimed at escalating the situation or provoking Japan. I don't think there is a consensus within China that there is no place for the military in this dispute."

Some military analysts said it was hard to tell if this was a top-down strategy from China's military, or a dangerous improvisation on the high seas.

"What's unclear is whether the captain of the PLA Navy ship was acting of his own volition," said James Hardy, Asia-Pacific editor of IHS Jane's Defense Weekly. "It's a situation where the room for maneuver is narrowing—and acts like this don't help calm the waters."

The new tensions on the water follow worrisome exchanges that took place in the sky near the disputed islands. On Dec. 13, a Chinese maritime patrol plane flew into the airspace above the islands undetected by Japanese radar, prompting Japan to scramble eight F-15 fighters from Japan's air force. On Jan. 10, China scrambled its own military jets after Japanese fighters chased after a Chinese patrol flying near the disputed islands, Japanese officials say.

Within weeks of the Dec. 13 airspace intrusion, the first in decades by China, Prime Minister Abe unveiled the first increase in Japan's military spending in 11 years. In the budget was a new radar to replace the dated equipment near the islands that had missed the Chinese plane. A hangar at an Okinawa airbase to house radar-equipped reconnaissance planes was also added.

"We face continued provocations against our inherent land, waters, skies and sovereignty," Mr. Abe told troops this past on Saturday as he surveyed a military base in Okinawa. He pledged to "confront the clear and present danger."

As officials from the two nations stepped up their rhetoric against each other, Washington has grown increasingly worried.

Former Secretary of State Hillary Clinton and outgoing Defense Secretary Leon Panetta have dedicated significant time to try to diffuse the dispute. It has been a delicate balancing act for the U.S. as it refocuses its attention toward Asia, under the Obama administration's military plans.

Defense analysts have cautioned that if the U.S. forces Japan to back down in the island dispute it will weaken its strongest ally in Asia. And some U.S. officials want Japan to be taking a more prominent and multilateral role in Asian security affairs. Forcing Tokyo to back down over the East China Sea could make persuading Japan to cooperate on other security matters—like joint exercises with the South Koreans—more difficult.

More importantly, analysts have warned that forcing Japan to back down could potentially give China a boost in its territorial claims in the South China Sea, disputes in which U.S. officials believe China is overreaching.

—Julian E. Barnes in Washington contributed to this article.

[Crafty_Dog]

China's Risky Strategy in Maritime Disputes
February 7, 2013 | 1115 GMT

Summary
 
On the surface, China's claim that it was unaware of recent actions by its naval forces against the Japanese raises serious questions about the degree of political control over the military and the stability of the region. However, despite this rare and seemingly surprising public admission from the Foreign Ministry, Beijing is likely threatening that it may not be able to continue holding back its military as part of a strategy to convince neighboring countries to cede to its maritime claims.
 


Analysis
 
The Jan. 30 naval incident reportedly involved a Jiangwei II-class frigate (Type 053H3) from the North Sea Fleet and a Japan Maritime Self-Defense Force Murasame-class destroyer near the disputed Senkaku/Diaoyu Islands in the East China Sea. According to reports, the Chinese naval vessel locked its fire-control radar on the Japanese vessel.
 






.
A fire-control radar is used to provide the data necessary to calculate a firing solution, after which missiles or shells can be fired at the target. The Chinese move to paint and lock on the Japanese destroyer with a fire-control radar is a provocative move that could have elicited an aggressive Japanese response. The move followed another incident in late January in which a Chinese Jiangkai I-class frigate (Type 054) locked its radar on a Japanese navy helicopter. Both incidents were revealed by the Japanese days later. Particularly with the heightened tensions between China and Japan surrounding the disputed Senkaku/Diaoyu Islands, this sort of move could lead to serious miscalculations from both sides and even result in military actions, worsening the situation in the sea.
 
When asked about the incident at a Feb. 6 news conference, a Chinese Foreign Ministry spokesman said that the ministry did not know the specifics and that the action was made independently by the military. The spokesman's statement was a rare acknowledgement that the civilian government may not fully control the Chinese military, triggering speculation over a possible rift between the military and political leadership. It is quite well known that the Chinese military has been increasingly vocal over the years and that hawkish elements within the People's Liberation Army have pushed for a more assertive stance in China's maritime sphere.
 
However, Beijing's implication that it is out of touch with its military arm is at the very least misleading. First of all, it is hard to imagine that the Communist Party would reveal such a critical fissure to the public if it truly did exist. Moreover, the Party is deeply intertwined with the military at almost all command levels. A systematic arrangement exists to ensure the Party's control over the military, with a considerable role played by political commissars, who often act as de facto seconds-in-command. The Communist Party also has not admonished Chinese military generals after previous inflammatory incidents, leading to the suspicion that Beijing condoned those actions. Furthermore, the Party retains control over the money that continues to fuel rapid Chinese military modernization and growth.
 
In truth, along with the increasingly provocative military actions in the East China Sea, the newly inaugurated political leadership has not hidden its intention to safeguard its maritime periphery. There is thus an alternative explanation. By distancing itself from military actions, Beijing gives itself the option to continue to apply political and diplomatic pressure on neighboring countries, Japan included, over the disputed waters. In the meantime, by appearing as though it cannot rein in the military, China can warn its neighbors, as well as the United States, that if they do not meet Beijing's demands diplomatically, it could lead the Chinese military to take action that the Foreign Ministry cannot control.
 
A military solution in the Senkaku/Diaoyu Islands dispute is not the preferred option by either side. For one thing, the Japanese fleet's response to Chinese provocations has been relatively restrained. Beijing, despite its numerous provocations, has mostly relied on its civilian maritime agencies to push its territorial claims. Beijing had been quite successful over the years in enhancing its presence in the disputed waters in both the South and East China seas, taking advantage of its elaborate maritime surveillance agencies to assert its claims. The Chinese have also relied on enhanced exploration technology and measures that forced countries such as the Philippines, Vietnam and Japan to cooperate with China in the disputed waters.
 
However, Beijing has demonstrated in a number of cases that it is increasingly willing to engage in brinksmanship to aggressively push its claims. This may be in part due to a need to focus its populace on an external threat at a time when the Communist Party feels pressured on the domestic front. But Beijing's strategy remains a risky one. Even if a shooting incident does not escalate into a disastrous war, China's increasingly assertive stance has already pushed a number of its neighbors closer to Washington, a trend that ultimately works against Beijing's maritime strategy.
.

Read more: China's Risky Strategy in Maritime Disputes | Stratfor

[G M]

China is counting on Buraq koutouing. It's a safe bet.

[G M]

http://www.forbes.com/sites/gordonchang/2013/02/10/asian-currencies-tumble-yes-this-is-a-global-currency-war/
Asian Currencies Tumble. Yes, This Is A Global Currency War.


The renminbi fell slightly against the dollar in China on Friday.  The yuan, as the currency is informally known, began the day up over the greenback but weakened as trading progressed.

The reason for the afternoon decline?  Chinese enterprises entered the market and bought the American currency in large amounts late in the day.  “It just seems so odd that companies would choose this particular time to buy such big amounts of dollars,” an unnamed Shanghai trader in a local bank told the Wall Street Journal.
 

Market participants naturally suspect that the People’s Bank of China, the central bank, was behind the surprising accumulation of greenbacks.  Traders also believe that recent dollar purchases by China’s state banks are really on behalf of the central bank.

Since early December, the meddling of the People’s Bank in the currency market has been evident but not, in the words of Reuters, “overwhelming.”  Stephen Green, the well-known analyst from Standard Chartered, estimates that the intervention last quarter was “to the net tune of $34 billion.”

Central bank operations do not have to be large to be effective, however.  Traders, despite strong corporate demand for the renminbi, saw the signals from Beijing and have reined themselves in.

China’s dollar-buying is understandable in the context of the downward movement of the yen, which has fallen against every major currency in recent months.  It has, this year, lost 7.09% of its value against the dollar and fallen 8.57% against the euro.  Newly installed Prime Minister Shinzo Abe has made the depreciation of the currency one of the centerpieces of his controversial economic program, so there are expectations of aggressive tactics from the Bank of Japan, especially now that Masaaki Shirakawa announced on Tuesday his intention to step down early as its governor.

“I can’t recall a move in currencies that has been so deliberate and so linear without any apparent real change in fundamentals,” said ANZ’s Richard Yetsenga on CNBC Asia’s “Squawk Box.”  “The yen’s move has largely been on the basis of an apparent move in government policy and the market is front-running that.”

Of course, everyone has noticed Tokyo’s new currency policy.  Europe and South Korea in particular have complained, but China by and large has not.

Why complain when you can engineer the value of your currency?  Beijing has been manipulating the yuan downward, and Seoul has been fiddling with the won.  The South Korean currency is down 2.53% against the dollar since the end of December.  At the same time, the Taiwan dollar is off 2.37% against the greenback.  From all outward appearances, countries in Asia are now engaged in competitive devaluations.

So far, Beijing has escaped blame for starting the race to the bottom.  “Has China Quietly Joined the Currency War?” CNBC asked on Thursday.  That is not the right question because it is not possible for China to join the conflict.  China, unfortunately, started it, at least a decade ago in fact.

For years, policymakers thought it was not worth trying to get Beijing to stop manipulating the renminbi, yet that view was mistaken.  They ignored the fact that the Chinese were undermining the consensus that the market should determine currency values.

Now it seems it is too late to rescue the system of free-floating currencies.  Abe’s plan to cheapen the yen, otherwise inexcusable, is a defense against the fixed yuan and the falling greenback.  Ben Bernanke’s dollar-weakening moves, which hurt America, are in retaliation against Beijing.  Beijing will not relax its grip on the renminbi even though it claims the currency is “pretty much close to the equilibrium level.”  Of course the yuan is not, because the Chinese central bank is continuing to determine exchange rates.

We are, in fact, seeing the beginning of a currency war, which will not be confined to Asia.  Governments see short-term advantage in intervening in the market, but in the end everyone will be hurt.

[G M]

I can't find anything in english, but I'm told that Chinese state media is reporting that the NorKs snubbed China as far as Lunar New Year greetings. A real cooling in the relationship or creating visible distance to give the PRC greater "plausible deniability" when using the NorKs as a cat's paw?


http://www.ibtimes.com/china-snubs-north-koreas-kim-hinting-realignment-asia-799591

China Snubs North Korea's Kim, Hinting At Realignment In Asia


BY Jacey Fortin | October 03 2012 2:04 PM


In a quiet snub with big implications, North Korea’s young leader Kim Jong-un was refused an appointment in China this year.


 (Photo: Reuters)
North Korean leader Kim Jong-un was reportedly refused a visit to China this year, which could have big implications for Beijing's policies in a changing region.

 
The incident might have flown under the radar but for a Reuters report on Wednesday, wherein an anonymous source with close ties to both Pyongyang and Beijing confirmed that Kim Jong-un had requested a visit. It would have been his first official trip to China.
 
“There were too many things going on. [China] could not host Kim Jong-un,” said the source.





It could be that China is simply busy. This fall, it will undergo a major leadership change, with members of the elite Politburo Standing Committee handing power to newcomers. The process has been plagued by internal drama -- mysterious sackings, a salacious murder trial, car crashes and health problems -- as well as a countrywide economic slowdown.
 
Still, it’s odd that Beijing could not accommodate the leader of one of China’s closest allies, especially since Kim Jong-un’s father, the despotic and eccentric Kim Jong-il, made six visits to the mainland in the eight years before he died in December.
 
It is more likely that China’s refusal to host the Dear Leader is a calculated move, fitting a recent pattern of small-scale rifts between Beijing and Pyongyang. The shift could indicate a subtle change in policy for Beijing as China struggles to adapt to changing realities in the region.
 
Too Many Tiffs
 
China has plenty to be miffed about. Most memorably, Kim Jong-un ran afoul of Beijing when he decided to go ahead with a missile test in April. Pyongyang claimed it was a satellite launch, but international observers suspected it was a missile test. The rocket malfunctioned shortly after take-off, and the United Nations Security Council, including China, condemned the embarrassing experiment.
 
Furthermore, North Korea has been improving its relationship with Japan, China’s regional rival. In a sign that Kim Jong-un’s leadership may herald a new diplomatic direction for North Korea, officials from Pyongyang and Tokyo met in Beijing this August for their first direct talks in four years. Such a bond with Tokyo could potentially lessen North Korea’s decades-old dependence on China.
 
And then there are economic disputes. North Korea has a reputation as a shady business partner, but China tends not to publicize its neighbor’s weaknesses. That changed last month, when a Chinese corporation called Liaoning Xiyang Group allegedly lost more than $50 million in its dealings with a North Korean company Ryongbong Corporation. Xiyang’s complaints were covered in Chinese state media -- a rare disclosure -- while North Korean media rushed to downplay talk of a rift.
 
Most importantly, China is keen to prevent North Korea from stirring unnecessary controversy with its nuclear testing program. Pyongyang announced the completion of two successful nuclear weapons tests in 2006 and 2009, and the international community is determined to prevent another. China warned its neighbor not to conduct a third test amid rumors earlier this year that it was preparing to do so.
 
All of these rifts could explain China’s apparent iciness toward Kim Jong-un, but the fact remains that the historical bond between Beijing and Pyongyang is not so easily broken.
 
A Dependent Relationship
 
There is no question that North Korea needs China. The small communist nation relies on its giant neighbor, the second-largest economy on Earth, as its principal source of much-needed assistance.
 
Diplomatic isolation, economic sanctions, widespread poverty and ongoing food crises plague this country of more than 24 million people. The U.S. has been a prominent food aid donor to North Korea in the past, but that ended in early 2009 following a round of nuclear weapons testing provocation from Kim Jong-il.
 
China has stepped in to fill that gap, and not just in terms of aid. According to a report this year from the Council on Foreign Relations, Pyongyang-Beijing trade jumped to $5.63 billion in 2011, from $3.46 billion in 2010 -- a 62.5 percent increase. Meanwhile, trade with other significant partners, including South Korea, has been on the decline.
 
And Beijing has long turned a blind eye to North Korea’s deplorable human rights record. The people of North Korea live with an unrepresentative political system, strict censorship of the media and a skewed justice system that currently has up to 200,000 citizens detained in brutal gulags, where the prisoners perform forced labor for committing ill-defined "crimes against the state."
 
Without China, North Korea would have nowhere to turn for the support it so desperately needs.
 
Cuts Both Ways
 
China needs North Korea, too.
 
The People’s Republic has long-term plans for hegemony in the region, and the Korean Peninsula is integral to its efforts. By bolstering Pyongyang, Beijing hopes to play a leading role in the developing relationship between North Korea and South Korea. The two countries have been technically at war ever since a 1950-1953 battle between them ended in an armistice rather than a treaty.
 
A full reunion is still far off considering the high costs of such an endeavor, not to mention the two countries’ tense relationship. But South Korean President Lee Myung-Bak said just this month that reunification is “inevitable.” For China, any long-term geopolitical calculations must allow for that possibility.
 
South Korea is allied to the United States and Japan, both of whom rival China’s hegemony in the region. It is in Beijing’s interest, then, to keep its foot in the door in North Korea -- otherwise, it risks a loss of influence in the entire peninsula should a reunification come to pass.
 
For now, stability is Beijing’s goal for its communist neighbor. But the more Pyongyang irks the West through nuclear belligerence and inadequate development, the harder it will be for China to quell a diplomatic conflict that could upset the balance of power.
 
A Welcome Realignment
 
In that context, Chinese snubs -- refusing a visit from Kim Jong-un and publicizing the Xiyang spat -- are calculated admonishments rather than serious dismissals.
 
It is in Beijing’s best interests for Pyongyang to avoid stirring the pot over its nuclear ambitions, which would incur the ire of the West at an inopportune time. Not only is Beijing is in the middle of a fraught leadership change; it is also dealing with the U.S. administration’s recent “pivot” to the East in an effort to gain more influence in Asia, as well as a looming confrontation with Japan over island territories in the East China Sea.
 
So if Kim Jong-un wants a slot on the Politburo’s busy agenda, he may have to adhere to certain guidelines.
 
“Kim Jong-un wanted to come, but it was not a convenient time," said another anonymous source with insights into China's foreign policy to Reuters.
 
"From China's perspective, he has to come with something positive," added the source, suggesting that the Dear Leader must agree to dial back North Korea’s nuclear plans.
 
In other words, Beijing may now be using its overwhelming power over Pyongyang to effect a policy shift in North Korea -- more stability, less provocation. And even if China is acting out of pure self-interest, such a shift would be a welcome development for the West as well as the East.

[G M]

http://blogs.the-american-interest.com/wrm/2013/02/22/chinese-admiral-says-goal-would-be-a-quick-win/

February 22, 2013


Chinese Admiral Expects “Quick” Win in Japan War



 
China’s armchair generals and active military officials alike are fully confident of a quick, decisive, and overwhelming victory against Japan if territorial disputes ever escalated into war. Time has the story:
 

“The real fight would be very short. It is very possible the war would end in a couple of days or even in a few hours,” said PLA Navy Rear Admiral Yin Zhou, a former director of the Navy Institute of Strategic Studies, in a recent primetime special on Beijing TV. . . .
 
“The keys to winning the war are quick actions, and good planning. . . . First, the troops that go into the battle must be well-trained, elite troops. Second, the troops must have precision strike capabilities. Once surface targets or air targets are chosen, the troops must be able to hit those targets immediately and precisely. Good planning also refers to accurately grasping the enemy’s situation, especially its operational (troop and ship) dispositions. We have to be very clear which disposition is the key and then plan our operations accordingly.”
 
When land powers like China attack sea powers like Japan, the initial results are often very dramatic. But the impact of even a short and “successful” campaign over the disputed islands would cause lasting economic damage to China. Would Japan’s navy interfere with China’s imports from overseas? Would war conditions halt China’s international trade, throwing tens of millions of Chinese factory workers out of their jobs?
 
War between China and Japan could be ruinous for both sides, as well as for countries caught or drawn into the middle. The world economy would take a huge dive.
 
Let’s hope China’s decision makers have cooler heads than some military leaders and nationalist bloggers.
 
(H/T to the tireless Daniel Lippman)

[Crafty_Dog]

Stratfor
 
By Rodger Baker
Vice President of East Asia Analysis
 
Japanese Prime Minister Shinzo Abe has warned Beijing that Tokyo is losing patience with China's assertive maritime behavior in the East and South China seas, suggesting China consider the economic and military consequences of its actions. His warning followed similar statements from Washington that its patience with China is wearing thin, in this case over continued Chinese cyberespionage and the likelihood that Beijing is developing and testing cybersabotage and cyberwarfare capabilities. Together, the warnings are meant to signal to China that the thus-far relatively passive response to China's military actions may be nearing an end.
 
In an interview The Washington Post published just prior to Abe's meeting with U.S. President Barack Obama in Washington, Abe said China's actions around the disputed Senkaku/Diaoyu islands and its overall increasing military assertiveness have already resulted in a major increase in funding for the Japan Self-Defense Forces and coast guard. He also reiterated the centrality of the Japan-U.S. alliance for Asian security and warned that China could lose Japanese and other foreign investment if it continued to use "coercion or intimidation" toward its neighbors along the East and South China seas.
 
Abe's interview came amid warnings on Chinese cyberactivity from Washington. Though not mentioning China by name in his 2013 State of the Union address, Obama said, "We know foreign countries and companies swipe our corporate secrets. Now our enemies are also seeking the ability to sabotage our power grid, our financial institutions, our air traffic control systems." Obama's comments, and the subsequent release of a new strategy on mitigating cybertheft of trade secrets, coincided with a series of reports highlighting China's People's Liberation Army backing for hacking activities in the United States, including a report by Mandiant that traced the activities to a specific People's Liberation Army unit and facility. The timing of the private sector reports and Obama's announcement were not coincidental.
 
Although Washington has taken a slightly more restrained stance on the Senkaku/Diaoyu dispute, reportedly urging Tokyo not to release proof that a Chinese ship locked its fire-control radar on a Japanese naval vessel, clearly Washington and Tokyo hold the common view that China's actions are nearing the limits of tolerance. Given its proximity to China, Japan is focusing on Chinese maritime activity, which has accelerated in the past two to three years around the disputed islands, in the South China Sea and in the Western Pacific east of Japan. The United States in turn is highlighting cyberespionage and the potential for cyberwarfare. Both are drawing attention to well-known Chinese behavior and warning that it is nearing a point where it can no longer be tolerated. The message is clear: China can alter its behavior or begin to face the consequences from the United States and Japan.

 
Abe drew a sharp response from Beijing, though less from his interview than from another Washington Post article based on the interview that interpreted Abe as saying, "China has a 'deeply ingrained' need to spar with Japan and other Asian neighbors over territory, because the ruling Communist Party uses the disputes to maintain strong domestic support." Tokyo responded to China's complaints by saying the second Post article was misleading but that the transcript of Abe's interview was accurate.
 
Although the Japanese government did not elaborate on this point, by "ingrained" Abe did not mean Chinese behavior per se, but rather the anti-Japanese undercurrents of China's education system and the use of anti-Japanese sentiment as the basis of Chinese patriotism. 
In addition to being Beijing's standard knee-jerk reaction to any less-than-flattering comments by a foreign leader, the Chinese government and media response represented an attempt to shift attention from Chinese actions toward the "hawkish" Abe as the source of rising tensions in East Asia. A follow-up Xinhua article published after the Abe-Obama meeting cautioned the United States to be "vigilant against the rightist tendency in Tokyo" and said the first- and second-largest economies, the United States and China, should work together "to safeguard the peace and prosperity of the Asia-Pacific region and contribute to global development." Other Chinese media reports suggested that Abe failed to gain support from Obama during the visit for his Senkaku/Diaoyu policies or for a unified stance against China. The undertones of China's response, however, reflect less confidence.


 
The Economic Threat
 
What Abe said in his interview apart from the Chinese media spin is instructive. According to Abe, relations between China and Japan have been suffering due to unintended consequences of moves by the Communist Party of China to retain its legitimacy. China's economic opening led to unequal prosperity, eliminating the Party's main pillar of support, equality. To counter that, the Chinese government pursued a two-prong strategy of economic growth and patriotism. Economic growth required Beijing to expand its sourcing of commodities, moving China naturally onto the sea. Meanwhile, patriotism, tinged with anti-Japanese teaching, has come to pervade the educational system and society.


 
Abe argued that China is pursuing a path of coercion or intimidation, particularly in the East and South China seas, as part of its resource-acquisition strategy. Anti-Japanese undercurrents in Chinese society due to the inculcation of patriotism have won domestic support for the assertive Chinese actions. But this has strained Japanese-Chinese economic relations, thus undercutting China's own rapid economic growth. And without continued economic growth, Abe cautioned, China's single-party leadership would be unable to control its population of 1.3 billion.
 
Within this context, Abe cautioned that it is important to make Beijing realize it cannot take another country's territory or territorial water or change the rules of international engagement. He raised the defense budget and emphasized that the Japanese-U.S. alliance is critical for regional security, as is a continued U.S. presence in the region. He also warned that China's assertive behavior would have economic consequences and that although Japanese companies profit in China, they are responsible for 10 million Chinese jobs. If the risk of doing business in China rises, then "Japanese investments will start to drop sharply," he added.
 
Abe's warnings were designed to strike at the core Chinese government fears of economic and social instability and military encroachment by the United States and a reinvigorated Japan. On the economic front, Japan is one of the top sources of actual foreign direct investment in China and a major trading partner. Although it is difficult to verify Abe's claims of 10 million Chinese employed due to Japanese investments, the implications of Chinese actions on bilateral economic cooperation are more easily observable. In 2012, a year when tensions ran high due to Japan's decision regarding what it called the "purchase" of some of the disputed Senkaku/Diaoyu islands from a private Japanese citizen, anti-Japanese protests flared in China, as did unofficial boycotts of Japanese goods. Total trade between China and Japan fell 3.9 percent year on year, the first drop since the major financial crisis of 2009, with exports falling more than 10 percent. Japanese foreign direct investment, although rising slightly for the year, saw a major falloff in the summer when tensions between the two countries ran high.
 
Other factors played a role in the decline of trade and investment, including reduced overall Japanese demand and shifts in suppliers for certain key resources (and adjustments in Japan's export markets). And Japan itself would suffer from a major break in trade relations, though Tokyo may be taking steps to cushion against fallout from economic disputes with China. Japanese firms in fact already are beginning to show an interest is shifting some of their manufacturing bases out of China even without the added incentive of anti-Japanese sentiment-driven protests and boycotts. In 2012, the gap between China and the United States as the top destination for Japanese exports narrowed further to just 0.6 percent. Abe also hinted strongly that Japan has finally decided to pursue talks with the United States over the Trans-Pacific Partnership, a trading bloc (unofficially) designed to exclude China.
 
Although Japanese companies are unlikely to flee China en masse, the threat of a slow reorientation toward stronger trade ties with the United States and softening investment in China strikes at one of the Communist Party's major concerns, namely maintaining social stability through employment. Like that of Japan, exports and growth have driven China's economy. This does not necessarily mean profits or efficiency; on the contrary, Beijing has harnessed the constant growth to maintain employment and provide loans to keep businesses operating, even when they operate with razor-thin profit margins or at a loss.
 
Employment represents China's preferred tool to maintain social stability, and the Party sees stability as paramount to retaining its legitimacy as the unchallengeable and unopposable leader of China. Both the Chinese government and Abe know this, and now Abe is threatening to target Chinese growth, upending the whole system of stability. The Japanese may not really be able to effect or afford any drastic change in economic relations with China, but with the activation of the Trans-Pacific Partnership and with a possible Japanese government emphasis on investment to Southeast Asia and Africa (with private investment likely to follow), the economic pressure on China could slowly build.
 
The Military Warning
 
The military warning is therefore more immediately troubling to Beijing. Both Tokyo and Washington are reaching their limits for tolerating aggressive Chinese behavior. The United States is pivoting toward Asia, seen by China as a constraining action. Japan is strengthening ties with Russia, Australia, India and Southeast Asia, something China regards as containment. China's emergence as a big power has not been entirely smooth. Any time a nation seeks to alter the status quo between other powers, disruption and resistance are inevitable. China's maritime expansion and its cyberespionage and emerging cyberwar capabilities are closely linked to its economic and social policies. The former is a more obvious concrete action, but one that raises the risk of creating the appearance of being ready for peer competition long before China actually is. The latter at least offers some opportunities for plausible deniability (though Washington is now removing that already-translucent veil) and reflects an attempt to exploit an area where China's overall vulnerabilities are less of a liability; it is the weak taking its best available action against the strong.
 
For Japan, maritime activity around the disputed islands is manageable so long as it remains in the civilian realm, but the use of fire control radar on Japanese ships and overflights by Chinese aircraft are unacceptable. (Japanese aircraft are shadowing Chinese overflights. In a recently reported case, a Chinese Y-8 surveillance aircraft and the Japanese F-15 interceptor came within 5 meters, or 16 feet, of one another, creating the potential for a collision like the one between a U.S. and Chinese aircraft in 2001.) And while the United States may have tolerated the occasional case of cybertheft and cyberespionage, as Obama noted, such activities become unacceptable in scale and when it shifts to targeting U.S. infrastructure, where it has the potential to disrupt electricity grids, communications systems and other industrial processes.
 
Japan and the United States have both called their defense alliance the cornerstone of their regional policies and relations. Japan continues to evolve its interpretation of its constitutional limit on military activity, and Tokyo has pledged to Washington to take a greater role in ensuring regional security. The escalation of Chinese naval activity has given the impression of a confident and capable Beijing on its way to changing the balance of naval power in the region. China has built the impression of a strong modern navy backed by land-based missiles, with modern ships and technology and an emerging international reach. China's anti-access area denial strategy is an increasing point of contention in Japan and the United States, where there are warnings that the Chinese navy will soon outpace the U.S. Navy in the Pacific, limiting U.S. naval capabilities with its "carrier-killer" missiles and quantitatively superior fleet.


 
The Chinese navy has undergone a significant modernization program over the past decade. Still, it is far from ready to compete head to head with the Japanese navy, much less with Japan's treaty ally, the United States. Modernization efforts and the fleet-building program have yet to make for a superb Chinese navy, nor would having superb sailors. A superb navy requires organization, doctrine, principles and most of all experience. The main problem constraining China's navy is not its shipbuilding or recruitment but its limited ability to truly integrate its forces for war fighting and fleet operations. This requires substantial knowledge and training in logistics, cooperative air defense and myriad other complex factors.
 
There really is only one real measurement for a navy: Its ability to win against its likely rival. Part of determining the quality of a navy depends upon its technology and part on doctrine, but a substantial part is actual experience. China's navy has little war-fighting experience, even in the past. This has substantially limited the number of individuals within the officer corps knowledgeable or capable of effective operations in the highly complex world of modern military engagements. The Chinese navy may have new technology and be building toward numerical superiority, but it faces off against a U.S. Navy with centuries of experience and generations of admirals schooled in combat. Even the Japanese navy has more than a century of experience and a tradition of maritime warfare. The lack of combat experience significantly limits China's naval capability.
 
The Chinese government officially downplays these capabilities and any talk of a potentially aggressive nature of the Chinese military. But Beijing does little to dissuade such speculation, allowing a steady stream of images and commentaries in the Chinese popular media and the strategic leaking of imagery in China's social media. Beijing likes to appear fierce while saying it is not. But the problem with this strategy is exactly what Abe has pointed out: In appearing threatening, concrete steps are taken to counter China's maritime expansion. Abe is calling China's bluff, exhorting Beijing to reassess the correlation of forces in the region before continuing its aggressive pattern.
. - See more at: http://www.stratfor.com/weekly/china-tests-japanese-and-us-patience#sthash.oqzPu7Zd.dpuf

Read more: China Tests Japanese and U.S. Patience | Stratfor

[G M]

"Abe is calling China's bluff"

You can only call someone's bluff if they are bluffing.

[G M]

http://www.telegraph.co.uk/finance/china-business/9900009/Asia-has-more-billionaires-than-North-America.html

Asia has more billionaires than North America
A Chinese wealth survey has found that Asia has more billionaires than any other continent, apparently surpassing North America for the first time.
 
China's super-rich make their billions predominantly from real estate, manufacturing and investments, the report said. Photo: EPA
 By Denise Roland
2:02PM GMT 28 Feb 2013

The Hurun Report, compiled by British accountant and former Forbes Rich List researcher Rupert Hoogewerf, found that Asia had 608 dollar billionaires, compared with North America's 440 and 324 in Europe.

It is believed to be the first time Asia has been named as home of the largest proportion of super-rich on any global list.

Nonetheless the US, which has 409 billionaires, retains its crown as the most populous country for the so-called 'nine-zero' club, while Mexican telecoms tycoon Carlos Slim was named the "planet's richest man" with a personal wealth of $66bn (£43bn), according to the report. Mr Slim also topped last year's Forbes global list.

China ranked second with 317 super-rich individuals, which the report noted were "all self-made" and, with an average age of 58, were on the younger end of the spectrum. The Sino super-rich make their billions predominantly from real estate, manufacturing and investments, said the report. Seven of the top 20 real estate tycoons on the list live in China, a stat it attributed to the urbanisation boom in recent years.

The UK, where the index found 56 billionaires, came fifth, only just ahead of India, which is home to 53 billionaires.

Hong Kong real estate tycoon Li Ka-Shing kept his title of Asia's richest man with $32 billion, ranking him the seventh wealthiest person in the world, while 98-year-old Taiwanese glass magnate Lin Yu-Chia shared a podium with current patriarch of the US's Rockefeller dynasty, David Rockefeller Sr as the oldest billionaires worldwide.

Zong Qinghou, who heads soft-drink producer Wahaha, and Wang Jianlin of property developer Wanda were the only two from mainland China to make it into the top 100.

The report also noted that the Dragon and Horse were the dominant Chinese star signs on the list, which it pointed out also belonged to the globe's two richest men, Carlos Slim and the US financier Warren Buffett respectively.

[bigdog]

http://www.foreignpolicy.com/articles/2013/02/27/the_calm_before_the_storm_china_rise?page=full

From the article:

I also tell this story to illustrate how sensitive the establishment in Washington has become to any discussion on the nature of Sino-American relations. The real truth about this relationship is that, while there is a lot of calm on the surface, tension is brewing below. I am convinced that there is great simmering anger in Beijing about being pushed around callously by Washington. The Chinese resent, for instance, allegations of Chinese cyberspying that make no mention of America's own activities in this area. The Chinese do not believe that they are the only ones playing this game.

[Crafty_Dog]

I'm on a hotel connection for the next ten days and cannot sign up.  May I ask you to share more of this article?

[G M]

Book Review
Richard McGregor's 'The Party' reveals the secret world of China's communists
 
By Andrew Higgins
Sunday, July 25, 2010

"The Party: The Secret World of China's Communist Rulers"

By Richard McGregor

Harper. 302 pp. $27.99

At a dinner party in Beijing more than a decade ago, Rupert Murdoch, the boss of New York-based News Corp. and a hard-headed arbiter of global opinion, declared that he hadn't met a single communist during all his visits to China.

With all the noisy debate over China's gargantuan trade surplus with the United States, its currency policy and its censorship of the Internet, one truth seems self-evident: China may do lots of things Westerners don't like, but at least it has dumped communism in all but name. After all, how can a country that so often seems to beat the United States at its own capitalist game be considered communist in any meaningful way?

Yet for all the dizzying change in China over the past three decades, the modern Chinese state "still runs on Soviet hardware," argues Richard McGregor in his illuminating and important new book, "The Party." Unlike the glittering skyscrapers, Starbucks cafes, sprawling factories and soaring GDP figures that so easily catch and dazzle the eye, much of this hardware lies hidden from view. "The Party is like God. He is everywhere. You just can't see him," a professor at People's University in Beijing explained to McGregor.


At first glance, a book about the Communist Party seems curiously old-fashioned, a throwback to a time when scholars and journalists scoured the People's Daily for hints of who was up or down in the Politburo and competed to decipher party gobbledygook. The red flags, the portrait of Mao overlooking Tiananmen Square and the occasional retro-slogan about "workers of the world" can sometimes seem as quaintly removed from present-day reality as the portraits of Queen Elizabeth that grace the offices of British civil servants working for what is, in name at least, "Her Majesty's government." However, it is a measure of how much China has changed that McGregor has been able to write such a lively and penetrating account of a party that, since its founding in Shanghai as a clandestine organization in 1921, has clung to secrecy as an inviolable principle.

Since the death of Mao Zedong in 1976, China's ruling party has pulled off an extraordinary Houdini act, shaking off the horrors of Mao-made catastrophe -- including the death by starvation of 35 to 40 million people in the so-called Great Leap Forward -- and disentangling itself from the ideological chains that doomed the Soviet communists. Highly flexible on matters of economic doctrine but fiercely rigid in its commitment to political control, the party has not only survived but thrived. It now has 78 million members, including many multimillionaires. "We are the Communist Party," said Chen Yuan, a senior Chinese banker and the son of a Long March veteran, "and we decide what communism means."

But McGregor points out that "Lenin, who designed the prototype used to run communist countries around the world, would recognize the [Chinese] model immediately." Case in point: the Central Organization Department, the party's vast and opaque human resources agency. It has no public phone number, and there is no sign on the huge building it occupies near Tiananmen Square. Guardian of the party's personnel files, the department handles key personnel decisions not only in the government bureaucracy but also in business, media, the judiciary and even academia. Its deliberations are all secret. If such a body existed in the United States, McGregor writes, it "would oversee the appointment of the entire US cabinet, state governors and their deputies, the mayors of major cities, the heads of all federal regulatory agencies, the chief executives of GE, Exxon-Mobil, Wal-Mart and about fifty of the remaining largest US companies, the justices of the Supreme Court, the editors of the New York Times, the Wall Street Journal and the Washington Post, the bosses of the TV networks and cable stations, the presidents of Yale and Harvard and other big universities, and the heads of think-tanks like the Brookings Institution and the Heritage Foundation."

The central role of the party is hardly news to aficionados of Chinese-style Kremlinology. It has long been known, for example, that foreign policy is ultimately crafted not by the foreign ministry but the party's Central Leading Group on Foreign Affairs, and that military matters are decided not by the defense ministry but by the party's Central Military Commission. These and other party groups meet in secret. But McGregor adds flesh to dry bureaucratic bones through interviews with Chinese who know the system from the inside, though those who agreed to talk shed little light on the personal and political dynamics at the apex of the party. It is remarkable how little information has leaked from its upper echelons.

Nonetheless, McGregor provides many revealing nuggets, such as the existence of a network of special telephones known as "red machines," which sit on the desks of the party's most important members. Connected to a closed and encrypted communications system, they are China's version of the "vertushka" telephones that once formed an umbilical cord of party power across the vast expanse of the Soviet empire. All governments have their own secure communications systems. But China's network links not just ministers and senior party apparatchiks but also the chief executives of the biggest state-owned companies -- businessmen who, to outside eyes, look like exemplars of China's post-communist capitalism.

As a reporter for the Financial Times, McGregor -- who, incidentally, attended that dinner party with Murdoch -- has a firm grip on economics. Some of the most revealing parts of his book involve what he describes as the party's shadowy role in corporate decision-making and the overlap, as well as tension, between party and business interests. At times, the party's often hidden but decisive hand has served China well, as during the 2008 financial crisis when big Chinese state banks -- all of whose bosses are party members vetted by the Organization Department -- moved swiftly under instructions from the party leadership to pump out loans. But McGregor also relates how the party's orders can trump commercial good sense and even decency. When a dairy company called Sanlu discovered just before the opening of the Beijing Olympics that its milk products, including baby formula, were dangerously contaminated, the head of the company -- and of its party committee -- ruled against a recall and kept selling tainted goods. To announce a recall would have violated a party diktat that nothing should disturb the feel-good pre-Games mood.

The Chinese Communist Party's great success, despite the collapse of communism in the Soviet Union and across Eastern Europe, has obliterated Western wishful thinking about the "end of history" and the world's inexorable march toward liberal democracy. "The Chinese communist system is, in many ways, rotten, costly, corrupt and often dysfunctional," McGregor observes. "But the system has also proved to be flexible and protean enough to absorb everything that has been thrown at it, to the surprise and horror of many in the west. For the foreseeable future, it looks as though their wish, to bestride the world as a colossus on their own implacable terms, will come true."

McGregor's analysis does not preclude the possibility that the party might one day evolve into a more open and less secretive organization, as happened to its old enemy in Taiwan, the KMT, a once rigidly Leninist outfit. Indeed, since the publication of this book, the Chinese Communist Party has made a big show of greater transparency, inviting journalists to visit the Central Party School in Beijing and announcing the appointment of spokespersons for previously media-phobic party bodies, including the Central Organization Department.

But there is no sign of the party surrendering its core prerogative: immunity from independent scrutiny of its actions or checks on its authority. Chinese judges, police officers, journalists and others are no longer mere cogs in a vicious totalitarian system. But, for all the relative freedom they now enjoy to act as professionals, not simply as political hacks, they remain firmly subordinate to what has become the Chinese Communist Party's only real ideology: its own survival.

higginsandrew@washpost.com

Andrew Higgins is a foreign correspondent for The Washington Post who has reported in China and the former Soviet Union.

[G M]

http://blogs.the-american-interest.com/wrm/2013/02/28/the-unpivot-to-asia/

The Unpivot to Asia?
Walter Russell Mead

The Washington Post headline blares: “China is happy with John Kerry because it thinks he’ll drop the ‘pivot to Asia’”. The Post article itself gets its ammunition from this Liz Economy postover at CFR which rounds up some of the reactions to the new security team from around China. The mood is upbeat.

China Institute of International Studies’ Ruan Zongze: “Compared with Clinton’s tough diplomatic approach, Kerry as a moderate democrat is expected to stress the role of bilateral or multilateral dialogues”;

Chinese Academy of Social Sciences’ Ni Feng: Kerry’s “diplomatic measures” will “greatly embody Obama’s concepts.”

In reviewing Secretary Kerry’s congressional voting record, Chinese observers also noted that he “generally voted in favor of bills conducive to promoting the development China-U.S. relations and generally voted against or expressed different opinions for bills not conducive to China-U.S. relations.” Overall, as People’s Daily observed, “Kerry stresses more on coordination rather than confrontation in foreign relations.”

What are the Chinese so happy about? One possible clue: during his confirmation hearings, John Kerry seemed to indicate that a further military buildup in Asia is not in the immediate future.

I’m not convinced that increased military ramp-up is critical yet. I’m not convinced of that. That’s something I’d want to look at very carefully when and if you folks confirm me and I can get in there and sort of dig into this a little deeper. But we have a lot more bases out there than any other nation in the world, including China today. We have a lot more forces out there than any other nation in the world, including China today. And we’ve just augmented the president’s announcement in Australia with additional Marines. You know, the Chinese take a look at that and say, what’s the United States doing? They trying to circle us? What’s going on? And so, you know, every action has its reaction. It’s the old — you know, it’s not just the law of physics; it’s the law of politics and diplomacy. I think we have to be thoughtful about, you know, sort of how we go forward.
Though the Chinese may be misunderstanding Secretary Kerry somewhat—he seems to have been been offering his assessment that our current force posture in the Pacific is adequate for the task at hand—there is an unmistakeable change of tone in his remarks.

Three possible things could be going on; one is excellent, one is OK but could bring trouble down the road, and one is catastrophic. Let’s start with the rosy scenario: the Obama administration hasn’t changed its Asia policy beyond changing the mood music and China, aware that it can’t change America’s basic approach to the region and lacks the strength to challenge us, has decided not to make a fuss about something it can’t change. It is taking the change in American tone as an opportunity to back down from a confrontation it can’t win without losing face.

That would be smart on China’s part: whining ineffectively about how much you hate something you can’t do anything about is an excellent way to look like a weakling and a fool (sort of like complaining about how much you hate Butcher Assad without doing anything about it).

If that’s what’s happening, look for things to quiet down in Asia.

Another, less hopeful possibility is that while US policy hasn’t changed in Asia, China thinks that it has. It has mistaken Secretary Kerry’s softer tone for a softer policy and is being nice because it thinks it has won the showdown. Chinese resolve and America’s Middle East and budget troubles have convinced the Americans that they can’t sustain the pivot, China thinks. In that case, we should expect some problems down the road as Chinese assertiveness runs into American resistance.

The third and worst possibility is that the Chinese are right and the Obama administration is ratting out on its own pivot and getting ready to betray our Asian allies who trusted the promises the administration made in its first term. In that case we can expect a crescendo of instability and crises that could escalate to include military conflicts and could well see South Korea, Japan and Taiwan going nuclear as China bids to establish a sphere of influence in the region.

It would be a tragic mistake for the Obama administration to shortchange the pivot by failing to devote the adequate amount of resources to the region—an enormous folly that would permanently undermine American credibility around the world. If your goal was to weaken the United States and alienate Washington’s closest allies, announcing a pivot to Asia with great fanfare and boldness, lots of parades and marches, and then slink ingloriously away would be about the best possible way to do it.

That said, the Obama administration has a big problem. Last year it seems to have believed it was on a winning streak in the Middle East that would allow it to continue withdrawing and moving toward a low-cost approach to a high-maintenance region. But that fell apart as the Syrian civil war, the mess in Libya and beyond, and the rising disquietude about Egyptian stability darkened the horizon. (Oh, and there’s that unfinished bit of business with Iran.) The pivot to Asia came when the administration felt bullish on its prospects for Middle East disengagement; that hope turned out to be misguided, and now the administration has got to deal both with a chaotic Middle East and an aroused China—when all it really wants to do is cut the defense budget and spend the money at home.

Backing away from Asia might seem like the easiest solution, but we hope and believe that the White House is smart enough to understand that this would be a mistake of historic proportions, one that historians would be shaking their heads over 100 years from now. Backing off from Asia might temporarily soothe US-Chinese relations, but at the cost of increasing the propensity among some Chinese to think the US is in such rapid decline that it can be bullied and pushed aside.

The White House, like most Americans, wants a calm international environment so that the US can concentrate on its problems at home. As we’ve said before, there’s nothing wrong with that, but unfortunately a calm overseas still depends on foreign perceptions that the US is willing to do what it takes to maintain its geopolitical position. If that confidence is lost, the international scene will become very tumultuous very quickly as other powers begin to plot the Wars of the American Succession. The cheapest and least risky foreign policy in the long run involves doing what it takes in both the Middle East AND Asia.

This is not as hard as some in the White House appear to think. President Obama would gain political capital and stature, not lose it, by stepping up to the plate overseas, and by explaining the international situation and our interests in it to the American people.

[G M]

For the record, this is exactly what's going to happen:

The third and worst possibility is that the Chinese are right and the Obama administration is ratting out on its own pivot and getting ready to betray our Asian allies who trusted the promises the administration made in its first term. In that case we can expect a crescendo of instability and crises that could escalate to include military conflicts and could well see South Korea, Japan and Taiwan going nuclear as China bids to establish a sphere of influence in the region.

It would be a tragic mistake for the Obama administration to shortchange the pivot by failing to devote the adequate amount of resources to the region—an enormous folly that would permanently undermine American credibility around the world. If your goal was to weaken the United States and alienate Washington’s closest allies, announcing a pivot to Asia with great fanfare and boldness, lots of parades and marches, and then slink ingloriously away would be about the best possible way to do it.

That said, the Obama administration has a big problem. Last year it seems to have believed it was on a winning streak in the Middle East that would allow it to continue withdrawing and moving toward a low-cost approach to a high-maintenance region. But that fell apart as the Syrian civil war, the mess in Libya and beyond, and the rising disquietude about Egyptian stability darkened the horizon. (Oh, and there’s that unfinished bit of business with Iran.) The pivot to Asia came when the administration felt bullish on its prospects for Middle East disengagement; that hope turned out to be misguided, and now the administration has got to deal both with a chaotic Middle East and an aroused China—when all it really wants to do is cut the defense budget and spend the money at home.

Backing away from Asia might seem like the easiest solution, but we hope and believe that the White House is smart enough to understand that this would be a mistake of historic proportions, one that historians would be shaking their heads over 100 years from now. Backing off from Asia might temporarily soothe US-Chinese relations, but at the cost of increasing the propensity among some Chinese to think the US is in such rapid decline that it can be bullied and pushed aside.

[Crafty_Dog]

An interesting line of analysis.  Not to detract from it but:

a) FWIW IMHO China has pivoted from a Communist model to a Fascist model (private ownership of production, directed by the State).  In that its fascist economic model is export driven its decisions remain informed by the pricing mechanisms of the international market place (i.e. the free market) thus avoiding many of the consequences that obtain from a more isolationist economic vision.

b) a very minor point, but I find the comment about the KMT being a Leninist group in its origins to be quite odd.

c) the concerns about projecting weakness are greatly heightened by the selection of Hagel to SecDef and what is happening to our military in the current budgetary clusterfcuk-- including the lack of Republic clarity of message to the American people on this point.

[G M]

The KMT was founded as a Chinese Nationalist party by Sun Yat Sen, but was shaped by Soviet advisors in the 20's after being ignored by the western powers. Zhou Enlai was originally a part of the KMT.

[Crafty_Dog]

I knew the part about Sun Yat Sen, but not the part about the Soviet influence or that Zhou Enlai started out that.  Thank you GM.

[bigdog]

Indeed, thank you.

[bigdog]

I'm on a hotel connection for the next ten days and cannot sign up.  May I ask you to share more of this article?

With apologies for the delay:

Since the dawn of geopolitics, there has always been tension between the world's greatest power and the world's greatest emerging power. No great power likes to cede its No. 1 spot. One of the few times the top power ceded its position to the No. 2 power peacefully was when Great Britain allowed the United States to surge ahead in the late 19th century. Many books have been written on why this transition happened peacefully. But the basic reason seems cultural: One Anglo-Saxon power was giving way to another.

COMMENTS (73)
 SHARE:

Share on twitterTwitter
 
Share on redditReddit
 
inShare0
 More...
Today, the situation is different. The No. 1 power is the United States, the standard-bearer of the West. The No. 2 power rapidly catching up is China, an Asian power. If China passes America in the next decade or two, it will be the first time in two centuries that a non-Western power has emerged as No. 1. (According to economic historian Angus Maddison's calculations, China was the world's No. 1 economy until 1890.)

The logic of history tells us that such power transitions do not happen peacefully. Indeed, we should expect to see a rising level of tension as America worries more and more about losing its primacy. Yet it has done little to act on these fears thus far. It would have been quite natural for America to carry out various moves to thwart China's rise. That's what great powers have done throughout history. That's how America faced the Soviet Union. So why isn't this happening? Why are we seeing an unnatural degree of geopolitical calm between the world's greatest power and the world's greatest emerging power?

It would be virtually impossible to get Beijing and Washington to agree on the answers to these natural questions, as there are two distinct and sometimes competing narratives in the two capitals.

The view in Beijing is that the calm in Sino-American relations is a result of the extraordinary patience and forbearance shown by China. Chinese leaders believe they have followed the wise advice of Deng Xiaoping, the late reformist leader, and decided not to challenge American leadership in any way or in any area. And when China has felt that it was directly provoked, it has also followed Deng's advice and swallowed its humiliation. Few Americans remember any such instances of provocation. Chinese leaders remember many. In May 1999, during the NATO bombing of Yugoslavia, a U.S. plane bombed the Chinese Embassy in Belgrade. America apologized, but no Chinese leader believed it was a mistake. Similarly, a Chinese fighter jet was downed when it crashed into a U.S. spy plane near Hainan Island, China, in April 2001. Here, too, China felt humiliated. Few Americans will recall the humiliation Premier Zhu Rongji suffered in April 1999 when he went to Washington to negotiate China's entry into the World Trade Organization (WTO); Chinese elites haven't forgotten. In their minds, China has been responsible for the low levels of tension in U.S.-China relations because China has swallowed such bitter pills time and again.

The view in Washington is almost exactly the opposite. Few Americans believe that China has been able to rise peacefully because of China's geopolitical acumen or America's geopolitical mistakes. Instead, the prevailing view is that America has been remarkably generous to China and allowed it to emerge peacefully because the United States is an inherently virtuous and generous country. There can be no denying that the United States has been generous to China in many real ways: allowing China's accession to the WTO (under stiff conditions, it must be emphasized, but stiff conditions that ironically benefited China); allowing China to enjoy massive trade surpluses; allowing China to join multilateral bodies like the Asia-Pacific Economic Cooperation forum; and perhaps most importantly of all, allowing hundreds of thousands of Chinese students to study in American universities. These are generous acts.

But it is also true that the United States allowed China to rise because it was so supremely self-confident that it would always remain on top. China's benign rise was a result of American neglect, not a result of any long-term strategy. China acted strategically; America did not. After the 9/11 attacks, for instance, the United States focused on the Middle East instead of the rise of China, leading Hong Kong journalist Frank Ching to write, "The fact is, it's not going too far to say that China owes a huge debt of gratitude to Osama bin Laden."

America has been sensitive to criticisms about its lack of a long-term strategy. I can speak about this from personal experience. In February 2009, Hillary Clinton visited China on her first overseas visit as U.S. secretary of state. I wrote at the time:

[T]here's little evidence Clinton has engaged in any serious strategic thinking about U.S.-China relations. If she had, she would have asked some big questions. Traditionally, relations between dominant powers and emerging powers have been tense. This should have been the norm with China and the United States. Yet China has emerged without alarming Americans. That's close to a geopolitical miracle. Who deserves credit for it? Beijing or Washington? China seems to have a clear, comprehensive strategy. The United States has none.

Officials in Washington reacted angrily to this column. A senior official at the National Security Council called up the Singaporean Embassy in Washington to complain about a Singaporean criticizing U.S. foreign policy -- even though, in theory, America welcomes debate and a free marketplace of ideas.

I also tell this story to illustrate how sensitive the establishment in Washington has become to any discussion on the nature of Sino-American relations. The real truth about this relationship is that, while there is a lot of calm on the surface, tension is brewing below. I am convinced that there is great simmering anger in Beijing about being pushed around callously by Washington. The Chinese resent, for instance, allegations of Chinese cyberspying that make no mention of America's own activities in this area. The Chinese do not believe that they are the only ones playing this game.

Given the many simmering tensions, it would be unwise to assume smooth sailing ahead for the United States and China. The need to cooperate is rising each day, as is the potential for a major U.S.-China misunderstanding. In November 2011, then-Secretary Clinton announced loudly and boldly a "pivot" to Asia, signifying a turning point in U.S. foreign policy that would reduce the focus on the Middle East. Barack Obama's administration took pains to avoid saying that this was America's response to a rising China, but nobody, including China, was fooled. Other countries saw it as a clear signal that Sino-American geopolitical competition was heating up. The logical consequence is therefore not difficult to figure out: We should be prepared for global turbulence if the U.S.-China relationship follows the millennial old patterns and no longer remains on an even keel.

[G M]

http://www.strategycenter.net/research/pubID.199/pub_detail.asp

The most recent period of PLA modernization very likely began shortly after the 1989 Tiananmen Massacre, when the Chinese Communist Party leadership reversed the formerly low priority given to military modernization, in order to better defend the Party from perceived heighted internal and external threats.

___________________________________________________

http://www.economist.com/node/21552193

The build-up has gone in fits and starts. It began in the early 1950s when the Soviet Union was China's most important ally and arms supplier, but abruptly ceased when Mao Zedong launched his decade-long Cultural Revolution in the mid-1960s. The two countries came close to war over their disputed border and China carried out its first nuclear test. The second phase of modernisation began in the 1980s, under Deng Xiaoping. Deng was seeking to reform the whole country and the army was no exception. But he told the PLA that his priority was the economy; the generals must be patient and live within a budget of less than 1.5% of GDP.

A third phase began in the early 1990s. Shaken by the destructive impact of the West's high-tech weaponry on the Iraqi army, the PLA realised that its huge ground forces were militarily obsolete. PLA scholars at the Academy of Military Science in Beijing began learning all they could from American think-tanks about the so-called “revolution in military affairs” (RMA), a change in strategy and weaponry made possible by exponentially greater computer-processing power. In a meeting with The Economist at the Academy, General Chen Zhou, the main author of the four most recent defence white papers, said: “We studied RMA exhaustively.

[Crafty_Dog]

Thank you BD.

I would add that the Chinese territorial claims in the South China Sea seem to me to not be without some justification.

[bigdog]

http://online.wsj.com/article/SB10001424127887324178904578339243545311174.html

From the article:

China's new leader, Xi Jinping, appears to be ingratiating himself with the country's generals by protecting the defense budget even as economic growth slows. He also is cultivating a public image as a strong military leader as China faces off with Japan over a group of disputed islands and seeks to counteract the U.S. strategic pivot toward Asia.

[Crafty_Dog]

Summary
 


China Photos/Getty Images
 
A Chinese marine police ship escorts a Maritime Safety Administration patrol vessel off Shanghai
 


China is reorganizing its maritime law enforcement agencies, its principal tool for pressing territorial claims in the South and East China seas. The new measures could significantly enhance the efficiency of the maritime law enforcement agencies by reducing redundancy, improving response time, strengthening communications and bolstering overall command and control mechanisms. Japan's coast guard is the only civilian agency in the region that is robust enough to directly counter China's maritime agencies. Though both sides do not want any escalation over this issue, one could occur accidentally.
 


Analysis
 
Beijing unveiled a plan March 10 to place four of China's five maritime law enforcement agencies under one administration. The four will remain distinct entities, but they now will be overseen by the National Oceanic Administration. The administration, which currently directs China Marine Surveillance, will have oversight of the coast guard forces of the Public Security Ministry, the fisheries law enforcement command of the Agriculture Ministry and the maritime anti-smuggling police of the General Administration of Customs. The China Maritime Safety Administration, which administers matters related to maritime and shipping safety, will remain under the Ministry of Transport.
 
The newly expanded body, to be known as the State Oceanic Administration, will remain linked to the Ministry of Land and Resources and will carry out law enforcement activities under the operational direction of the Ministry of Public Security. The administration will be tasked with setting overarching strategic goals. The need for consolidated oversight of China's maritime enforcement agencies has been recognized for some time. Until now, numerous factors -- including institutional inertia, turf fighting and the considerable effort required -- have hampered consolidation.
 
The reorganization comes as Beijing is becoming increasingly reliant on its maritime agencies to press its territorial claims in the South and East China seas. The Chinese government has been steadily strengthening its maritime agencies to patrol and project its presence on the large number of islands, islets and reefs that it is vying with its maritime neighbors to control. Beijing's push to improve the effectiveness of its maritime law enforcement agencies via reforms that enhance efficiency and command and control are running parallel to its efforts to build new vessels for the China Marine Surveillance.
 
Of all China's neighbors, only Japan has a maritime law enforcement agency that has proven able to match that of the Chinese. Both Beijing and Tokyo are making considerable efforts, spearheaded by their respective maritime law enforcement agencies, to maintain an edge over their claims to the Diaoyu/Senkaku Islands.
 






.
 

Tokyo has used its powerful coast guard to press its case. It plans to set up a new 600-member coast guard unit equipped with 12 patrol ships for exclusive deployment in missions around the disputed islands. This will entail the largest staff increase to the Japanese coast guard in 32 years. Taking a page from the Chinese playbook, Japanese Defense Minister Itsunori Onodera announced last week that Tokyo is also considering converting retired navy vessels into coast guard patrol ships.
 
China's maritime agencies and Japan's coast guard are largely unarmed. Using them in the Diaoyu/Senkaku Islands dispute rather than heavily armed naval vessels thus diminishes the likelihood of a military engagement. China has in fact pursued a strategy of using its maritime law enforcement agencies as a foreign policy tool to push its territorial claims without risking an escalation to actual shooting.
 
Still, as both China and Japan gear up for a serious buildup of their maritime agencies, the waters around the Diaoyu/Senkaku Islands are becoming increasingly crowded. There already have been a number of close calls between the Chinese and Japanese militaries near the disputed islands, including close fighter intercepts and radar lock-ons between ships. A miscalculation or accident as both maritime law enforcement agencies harass each other could very well occur, especially as tensions continue to drag on and both sides send more forces to the islands.


Read more: China's Maritime Law Enforcement Reorganization | Stratfor

[Crafty_Dog]

Hat tip to Doug:

Admiral Locklear: “It is not just about China and everybody else, because there are disputes between other partners down there, too. Sometimes I think the Chinese get handled a little too roughly on this.”

I wonder if our friends and allies in the region agree with him:
http://www.scmp.com/news/asia/article/1096687/china-naval-build-major-concern-india
http://chinadailymail.com/2013/01/05/chinese-navy-buildup-no-threat-to-us-but-a-possible-threat-to-japan/
http://www.spiegel.de/international/world/strengthening-of-chinese-navy-sparks-worries-in-region-and-beyond-a-855622.html
http://thediplomat.com/2010/09/29/china%E2%80%99s-naval-build-up-not-over/
http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20130209000029&cid=1703

[G M]

Meanwhile, the PLAN plots to destroy the 7th fleet.

[DougMacG]

I wonder if Admiral Locklear and/or President Obama have read this report about the other religion of peace.  No mention of global warming as the biggest threat.
-----------
http://online.wsj.com/article/SB10001424127887324128504578348774040546346.html

WSJ   CHINA NEWS (not the opinion section)  March 13, 2013, 8:19 a.m. ET

For Xi, a 'China Dream' of Military Power

By JEREMY PAGE

BEIJING—Soon after taking over as Communist Party and military chief, Xi Jinping launched a series of speeches referring to "The China Dream."

Chinese Communist Party leader Xi Jinping visited the destroyer Haikou in December and spoke of the 'dream of a strong military.'

It was music to the ears of Col. Liu Mingfu of the People's Liberation Army.

Three years ago, the former professor at its National Defense University wrote a book of the same name, arguing that China should aim to surpass the U.S. as the world's top military power and predicting a marathon contest for global dominion. The book flew off the shelves but was pulled over concerns it could damage relations with the U.S., according to people familiar with its publication.

The day after Mr. Xi's first "China Dream" speech, however, Col. Liu's publisher called to say he had gotten approval to launch a new edition. Now, it is on display in the "recommended books" section of a state-run bookstore.

"I don't know if he read the book, but he has sent a strong message," Col. Liu said in an interview at his apartment here, leaping to his feet with excitement to leaf through letters of support. "He could have grasped the economy, or some social issues, but instead he grasped the military."

As Mr. Xi prepares to add Chinese president to his other titles on Thursday, during a parliament meeting that caps a once-a-decade leadership change, "The China Dream" has become his signature. Officially defined as the rejuvenation of the Chinese nation, it in some ways echoes previous leaders dating back to the Qing Dynasty's collapse in 1912. But Mr. Xi is making the idea his own by giving it a strikingly military flavor.
Related Video

China's Xi Jinping is also the head of China's military. Scott Harold, an associate political scientist from Rand think tank, talks about what to expect from China's military under Xi's administration.

"This dream can be said to be the dream of a strong nation. And for the military, it is a dream of a strong military," Mr. Xi told sailors in December on board the Haikou, a guided-missile destroyer that has patrolled disputed waters in the South China Sea. "To achieve the great revival of the Chinese nation, we must ensure there is unison between a prosperous country and strong military."

Mr. Xi has also made high-profile visits to army, air force, space program and missile command facilities in his first 100 days in office, something neither of his two immediate predecessors did. He has taken personal control of China's military response to a newly inflamed territorial dispute with Japan. And he has launched a campaign to enhance the armed forces' capacity to "fight and win wars."

All this leads many diplomats, party insiders and analysts to believe Mr. Xi is casting himself as a strong military leader at home and embracing a more hawkish worldview long outlined by generals who think the U.S. is in decline and China will become the dominant military power in Asia by midcentury.

In doing so, they say, Mr. Xi is setting the stage for a prolonged period of tension between China and its neighbors, as well as for a potentially dangerous tussle for influence with a U.S. that is intent on reasserting its role as the dominant Pacific power.

He has even set a precise date for the fulfillment of his dream: 2049, the 100th anniversary of the Communist takeover of China.

No doubt Mr. Xi has a domestic political agenda. As the son of a revolutionary leader, he has strong family ties to the military and a keen appreciation for its role in elite Chinese politics. In another speech, he made clear he believes the Soviet Union collapsed largely because the Soviet Communist Party lost command of the military.

Some believe Mr. Xi is trying to build support among China's powerful generals as a prelude to launching potentially disruptive economic and other reforms, including moves to curb corruption within the military itself. Others suspect he is trying to distract attention from problems that could derail Chinese growth, especially official corruption and abuse of power, an issue highlighted by the Bo Xilai scandal last year.

More broadly, Mr. Xi is determined to set himself apart from his predecessor, Hu Jintao, who was popularly viewed as relatively weak and colorless, say party insiders, family friends, diplomats and analysts.

Whatever his domestic goals, Mr. Xi's military posturing represents a clear break with the past that has potentially profound implications for China's foreign and defense policies.

"I think this reflects Xi's mind-set, his view of China's strength and relations with the outside world," said Li Mingjiang, an assistant professor and China security-policy expert at Nanyang Technological University in Singapore. "Given his close personal ties, a lot of the information and policy suggestions he gets come from the military."

For three decades, the foundation of China's international relations has been the principle of taoguang yanghui—"hiding capabilities and biding one's time"—which was promoted by the late leader Deng Xiaoping.

Jiang Zemin, who became party and military chief in 1989 but had little authority over the generals until Mr. Deng's death in 1997, eventually won them over with defense-spending increases but kept them focused on building the capacity to defend borders and retake Taiwan.

After Mr. Hu became party chief in 2002, he kept a low military profile, not least because Mr. Jiang remained commander-in-chief until 2004. He focused on China's "peaceful rise," a term later toned down to "peaceful development." Although Mr. Hu encouraged the military to take on broader responsibilities, such as cybersecurity, he stressed their defensive nature.

By contrast, Mr. Xi has quickly asserted his authority over the 11-man Central Military Commission, on which he is the sole civilian. Among his first moves was to issue orders for the armed forces to focus on "real combat" and "fighting and winning wars," suggesting to many observers preparation for conflict beyond China's borders.

Mr. Xi also has added a qualification to Mr. Hu's signature foreign-policy idea: "We will stick to the road of peaceful development," he recently told the Politburo, according to the Xinhua news agency, "but we absolutely will not abandon our legitimate rights and interests, and absolutely cannot sacrifice core national interests." In China, the "core interests" term is taken to mean issues of sovereignty over which China would be prepared to go to war.

Mr. Xi has backed up his words with actions, overseeing a military response to the territorial dispute with Japan that included scrambling Chinese fighter jets and, according to Japanese and U.S. officials, locking weapons-guiding radar onto a Japanese ship and helicopter. Chinese officials deny those incidents.

"The Chinese are making up their own rules," said one U.S. military official, who described the radar incidents as "a serious escalation."

Mr. Xi's words and actions have played well with the Chinese public, as well as with military hawks like "China Dream" author Col. Liu. He and other outspoken officers don't reflect official policy but play an important part in molding public opinion, and do reflect the mind-set of more senior commanders, analysts say.

Col. Liu's book has a preface by Gen. Liu Yazhou, the political commissar of the National Defense University. "In my opinion," the general writes, "the competition between China and the U.S. in the 21st century should be a race, that is, a contest to see whose development results are better, whose comprehensive national power can rise faster, and to finally decide who can become the champion country to lead world progress."

Gen. Liu is among a small group of officers who have met regularly in private with Mr. Xi and helped to shape his strategic worldview, say people familiar with the matter.

For three years or so, many U.S. and Asian officials have attributed China's more assertive behavior, especially on territorial issues, partly to military hawks exerting pressure on a weak civilian leadership through the media, academia and informal lobbying channels.

Now those U.S. and Asian officials' concern is that Mr. Xi, while establishing clear authority over China's generals, has endorsed the more muscular approach to international relations, and a more prominent role for the military in China's development. Since his speech aboard the destroyer, China's military newspapers have been peppered with references to the "dream of a strong military" and the need for "combat readiness."

The PLA's General Staff Office published an article in Qiushi, the official journal of the party's Central Committee, in February that said: "History and reality show us that what determines the political and economic pattern of the world is, in the final analysis, a comparison of great powers' strength, and ultimately depends on force."

The PLA has also issued instructions for training to focus on real combat. Recently it for the first time published a schedule of exercises for the year, which will consist of 40 drills involving joint air-land combat and live fire operations on the open sea.

"Make no mistake, the PRC Navy is focused on war at sea and about sinking an opposing fleet," said Capt. James Fanell, deputy chief of staff for intelligence and information operations for the U.S. Pacific Fleet, at the U.S. Naval Institute in January. "In terms of their ultimate goals, they write a lot about national rejuvenation—restoration of China's rightful place. Well, we have to say: What does that mean? Where were they when they were back in their rightful place?"

For PLA commanders, according to many analysts, the dream of a strong military means securing the defense-spending increases needed to fund costly weapons programs such as aircraft carriers and stealth fighter jets, even as economic growth slows over the next decade.

The PLA has been focused for much of the past decade on developing and deploying the weapons it believes it needs to deny U.S. forces access to waters around China's shores. But while wary of entering an arms race with the U.S., it is increasingly preoccupied with enhancing capabilities to operate farther afield and establishing China as a maritime power.

"Even a blind man could see there is going to be a butter-versus-guns debate not far down the road," said Kenneth Lieberthal, an expert on Chinese politics at the Brookings Institution in Washington.

Many Chinese and foreign analysts see Mr. Xi's military stance, especially regarding the territorial dispute with Japan, as a direct response to the U.S. "pivot" toward Asia.

The short-term aim, those analysts say, is to discourage countries that have territorial disputes with China from feeling emboldened by the U.S. strategy of focusing more on Asia. Longer term, the goal is to convince the U.S. that the strategy is unsustainable, given financial pressures on the Pentagon and China's expanding power.

"China's strength can play a positive role in the region," said Xu Guangyu, a retired PLA general and now a senior researcher at the China Arms Control and Disarmament Association. "It's a strategic mistake for the U.S. to rely on Japan for its rebalancing in Asia."

One U.S. military adviser said Chinese military strategists see China becoming the dominant power in Asia by midcentury, by which time they believe the world will be divided into spheres of influence dominated by at least four great powers: China, the U.S., the European Union and Russia.

That view also appears to be reflected in Mr. Xi's main foreign-policy initiative, which is a proposal to redefine China's relationship with the U.S. as one between equal "great powers."

U.S. officials and analysts are still waiting for details about the proposal. But many foreign governments fear it is an attempt to curb U.S. influence in Asia, in much the way the U.S. sought to restrict European meddling in the Americas with the Monroe Doctrine in the early 19th century.

War remains an unlikely prospect, say most observers. Even Col. Liu, whose next book is titled "Why the People's Liberation Army Can Win," didn't predict war in "The China Dream," seeing instead a protracted competition that Beijing is destined to win.

Lee Kuan Yew, the former Singaporean leader, has said that Chinese leaders recognize they can't confront the U.S. militarily until they have overtaken it in terms of the development and application of technology. Nonetheless, he says he is sure they aspire to displace the U.S. as the leading power in Asia.

"The 21st century will be a contest for supremacy in the Pacific because that is where the growth will be," Mr. Lee was quoted as saying in a recently published book. "If the U.S. does not hold its ground in the Pacific, it cannot be a world leader."

[Crafty_Dog]

Summary
 
Vietnam held an anti-China protest in Hanoi on March 14, marking the 25th anniversary of a deadly naval battle with China and highlighting the continuing Vietnamese resentment and concerns over perceived Chinese aggression. These concerns have prompted Vietnam to boost its defenses, particularly its naval defenses. Vietnam's first full-size diesel-electric submarine from Russia will enter service this year, with five more to follow in the next few years. A rising China has pushed Vietnam to seek Russian assistance in expanding the Vietnamese navy to defend its interests in the South China Sea. While this expansion will not eliminate the competition, it will improve Vietnam's ability to defend its interests.
 
Analysis
 
China and Vietnam historically have been enemies, and their bilateral relations remain strained. Relations were especially tense during and after the brief but deadly 1979 war in which China invaded northern Vietnam in response to the Vietnamese intervention in Cambodia. Although relations have been normalized since 1991, China's increased maritime activities frequently have put the two countries at odds. As the value of maritime resources grows and as an increasing amount of trade is conducted by sea, maritime matters have become more important for both countries.
 
Chinese strategy calls for control over the South China Sea, putting Beijing in direct conflict with Hanoi's interests there. China, Vietnam and several other Southeast Asian countries disagree over ownership of the Spratly and Paracel islands in the South China Sea. In 1974 and 1988, China engaged in armed naval conflict with Vietnam, in both cases killing members of the Vietnamese military. Complicating Vietnam's efforts, Hanoi is not competing with just China for resources and influence, but with every country in the region, including the Philippines, Japan, Taiwan and Malaysia.
 
Vietnam thus needs a strong maritime force to leverage its strategic location in the South China Sea and to protect its economic interests there. The competition is stiff for resources such as oil and fish in the crowded waters east of Vietnam. A larger navy helps Hanoi ensure it is not muscled out of the region. Vietnam's long coastline also makes it vulnerable to attack from the sea, requiring at least a defense force.
 
To improve its defenses against China and to better position itself in ongoing maritime disputes in the South China Sea, Vietnam has partnered with other countries and greatly increased its defense budget. In the process, it has allocated significantly more money to its navy. 
 
In many ways, Vietnam is mirroring China's anti-access/area denial strategy, albeit on a more limited basis. This strategy is not achieved by building a fleet of aircraft carriers, but rather with anti-ship missiles, submarines and fast-attack missile craft -- weapons that will deter aggressors. Vietnam is not concerned about becoming a full blue-water navy, an ambition that does not match its needs and that its limited resources preclude. Instead, it is focusing on defending its maritime territorial claims.
 
The ongoing Vietnamese naval build-up has resulted in annual naval procurement budget increases of 150 percent since 2008, to $276 million in 2011. It is expected to grow to $400 million by 2015. Currently, Vietnam has six frigates, nine corvettes, 17 fast patrol craft and 30 patrol craft, but it is expanding quickly with Russian help.
 
For its defense procurement, Vietnam primarily has relied on the Russians, who are more willing to sell the advanced weaponry that Vietnam requires than other countries. Cost also is pushing Vietnam toward the Russians. Despite its growing naval budget, Vietnam is not a rich country, and so must shop for weapons carefully. Even if Russian weapons are not always the best on the market, they are often more cost-effective.
 
In addition to building a fleet of submarines for Vietnam, Russia also is providing training on operating the six improved Kilo-class submarines Vietnam has ordered. Including weapons and training, by 2018 Russia is to deliver the vessels for $3.2 billion. The Kilo-class submarine is a diesel-electric submarine, making it well-suited for patrolling Vietnam's noisy, shallow littoral. Since 2008, the Vietnamese navy also has taken delivery from Russia of two Gepard-class guided-missile stealth frigates and K-300P Bastion mobile coastal defense anti-ship missile systems.
 
 

A March 2013 visit to Vietnam by Russian Defense Minister Sergei Shoigu reaffirmed the strategic alliance between the two countries. In another matter of shared interest, Russian firms are updating and expanding the port of Cam Ranh Bay. The bay occupies a highly strategic location close to the sea-lanes of the South China Sea. Foreign navies have used it for more than 100 years as a deep-water port. Russia used Cam Ranh Bay as a naval base until 2002, when it withdrew for financial reasons. Moscow has since expressed a renewed interest in using the port.
 
The United States also has an increased interest in Vietnam and this strategic port at a time when the United States is gathering all the allies it can in Southeast Asia to counter China's power. For its part, Vietnam is using this renewed U.S. interest to play Washington and Beijing off each other. If China continues to exert its power in the South China Sea, Vietnam could threaten to make deals with the United States. And if the United States does not help Vietnam, Hanoi could block the United States from using Vietnamese ports.
 
While Vietnam's naval buildup will not eliminate the competition, it will improve Hanoi's position as it pursues its interests in the South China Sea.


Read more: Vietnam: Naval Strategy and the South China Sea | Stratfor

[G M]

As the US Navy is busy battling Global Warming, the PLAN can work on other issues.

China holds landing exercises in disputed seas

By CHRISTOPHER BODEEN
Associated Press
 


BEIJING (AP) -- China's increasingly powerful navy paid a symbolic visit to the country's southernmost territorial claim deep in the South China Sea this week as part of military drills in the disputed Spratly Islands involving amphibious landings and aircraft.
 
The visit to James Shoal, reported by state media, followed several days of drills starting Saturday and marked a high-profile show of China's determination to stake its claim to territory disputed by Vietnam, the Philippines, Taiwan, Malaysia and Brunei amid rising tensions in the region.
 
Sailors joined in the ceremony Tuesday aboard the amphibious ship Jinggangshan just off the collection of submerged rocks, located 80 kilometers (50 miles) off the coast of Malaysia and about 1,800 kilometers (1,120 miles) from the Chinese mainland, the official Xinhua News Agency reported Wednesday. China planted a monument on the shoal in 2010 declaring it Chinese territory.
 
Sailors gathered on the ship's helicopter deck declared their loyalty to the ruling Communist Party and vowed to "struggle arduously to realize the dream of a powerful nation," Xinhua said.
 

[G M]

Iraqi oil: Once seen as U.S. boon, now it’s mostly China’s
 
An U.S. Army soldier stands guard near a burning oil well in the Rumaylah Oil Fields in Southern Iraq April 2, 2003. | ARLO K. ABRAHAMSON/U.S. Navy NewsStay Connected
 
 
By Sean Cockerham McClatchy Newspapers
WASHINGTON — Ten years after the United States invaded and occupied Iraq, the country’s oil industry is poised to boom and make the troubled nation the No.2 oil exporter in the world. But the nation that’s moving to take advantage of Iraq’s riches isn’t the United States. It’s China.
America, with its own homegrown energy bonanza, isn’t going after the petroleum that lies beneath Iraq’s sands nearly as aggressively as is China, a country hungry to fuel its rise as an economic power.
Iraq remains highly unstable in terms of security, infrastructure and politics. Chinese state-owned oil companies appear more willing to put up with that than Americans are.
“The Chinese have a higher tolerance for risk,” said Gal Luft, a co-director of the Institute for the Analysis of Global Security, a Washington research center focused on energy.
The International Energy Agency expects China to become the main customer for Iraq’s vast oil reserves. Fatih Birol, the agency’s chief economist, recently declared “a new trade axis is being formed between Baghdad and Beijing.” Birol said that about 80 percent of Iraq’s future oil exports were expected to go to Asia, mainly to China.

Read more here: http://www.mcclatchydc.com/2013/03/27/187100/iraqi-oil-once-seen-as-us-boon.html

[Crafty_Dog]

China: A Historical Revelation and a Warning to Vietnam

April 1, 2013 | 1015 GMT
Summary

 
Chinese patrol boats docked at the pier in Sansha on an island in the disputed Paracel chain on July 27, 2012
 


Revelations that China quietly transferred control of an island in the South China Sea to Vietnam more than half a century ago could signal that Beijing is preparing to take a more aggressive stance on its territorial claims in the sea. Chinese semi-state-owned newspaper Huanqiu published an editorial March 27 titled "Expelling Vietnamese illegal shipping boats is justified" in defense of Vietnamese claims that a Chinese ship fired at Vietnamese fishing vessels near the disputed Paracel Islands. In a rare move, the article revealed a piece of history unknown to most of the public involving the transfer of Bach Long Vi Island (Bailongwei in Chinese) to Vietnam in early 1957. The article reasoned that, instead of returning the gesture of peace and friendship, Vietnam had increasingly challenged China's territorial claims in the South China Sea. The editorial was then reprinted in a number of major media outlets with the title "China transferred Bailongwei Island to Vietnam whereas Vietnam is stepping forward."
 
Not surprisingly, the articles sparked public outrage in China. Chinese citizens have condemned the government for conceding territory and have questioned the leadership's ability to safeguard the country's territory and national interest. The move was risky but it may fit Beijing's goal: To manufacture public outrage in order to add weight to Chinese moves in the South China Sea.
 


Analysis
 
Located about halfway between Vietnam's Haiphong city and China's Hainan Island in the Gulf of Tonkin (Beibu Bay in Chinese), Bach Long Vi Island is 3 kilometers (1.9 miles) long and 1.5 kilometers wide, making it the largest habitable island in the South China Sea. Official records are scant, but unverified accounts suggest Chinese leadership transferred the island to the North Vietnamese government in March 1957 as part of its aid package during the Vietnam War. The island has been administered by Vietnam's Haiphong city and inhabited by Vietnamese citizens ever since.
 






.
 

Though China reportedly had considered reclaiming Bach Long Vi Island, it officially acknowledged Vietnam's sovereignty over it through a series of agreements as part of the border demarcation of the Gulf of Tonkin in the 2000s. The agreements also prohibit Chinese fishermen from approaching within 20 nautical miles of Bach Long Vi Island and granted 53.23 percent of the gulf's territory to Vietnam. (China was given control of the other 46.77 percent). Since then, there have been skirmishes over fishing but no major disputes.
 
Whether the settlements of Bach Long Vi Island and the Gulf of Tonkin were a result of strategic thinking or a lack of understanding of the island's importance, they have often been portrayed within Chinese policymaking circles as a shining example of Beijing's commitment to and flexibility in settling territorial disputes. China hoped to use that image to bring other neighbors to the negotiating table. The decision to now bring the resolution to light has stirred speculation that China could be reconsidering the agreement.
 
In publicizing the island transfer, Beijing is trying to portray itself as the responsible party while placing responsibility for the island disputes on Vietnam. Since Beijing shifted its focus to the maritime sphere, it has been increasingly evident that Hanoi will not back down from its claims on the Paracel and Spratly Islands or its desire to draw other countries into the disputes. Chinese policymakers have debated whether to be even more aggressive regarding their territorial claims as punishment or whether the previous relinquishment of territories is still useful for China's broader maritime interests. Therefore, now that Beijing is publicizing how its previous concessions were counterproductive, it could be that the country is trying to warn others to reach a peaceful settlement before it increases tensions or at least that Beijing may begin to reassess its territorial settlement with Vietnam.
 
Since tensions began to climb in the South China Sea in the late 2000s, China has not yet aggressively pushed Vietnam. Beijing has sent vessels to harass Vietnam fishing boats and to force Hanoi to cancel joint exploration deals with countries other than China along the nine-dash line, but it has not challenged Vietnam's control of islands or involved it in a severe confrontation. But now, in raising a fundamental fact of Chinese-Vietnamese relations -- the settlements of Bach Long Vi Island and the Gulf of Tonkin -- and perhaps suggesting that those settlements need to be reconsidered, China is warning Vietnam that a less accommodating Chinese stance may be imminent. At the same time, by inciting nationalist indignation, the Chinese government may be leaving itself with little room to de-escalate the dispute.
.

Read more: China: A Historical Revelation and a Warning to Vietnam | Stratfor

[Crafty_Dog]

stratfor
Summary

China may use the fatal shooting of a Taiwanese fisherman by the Philippine coast guard on May 9 as a chance to build an alliance with Taiwan in maritime territorial disputes where the two countries have shared historical claims, and to justify its aggressiveness in the South China Sea. Compared to most of its neighbors, Taiwan lacks maritime clout and could benefit from following China's lead in the disputes. But such a strategy may eventually come at the expense of Taiwanese interests. Thus, Taipei has to strike a careful balance between pursuing diplomatic independence and enforcing its maritime claims in a way that would benefit China -- still Taiwan's most serious and enduring security threat.
Analysis

Taipei has been gradually escalating its response to the shooting, which occurred in the Bashi Strait, about halfway between Taiwan and the Philippines in a part of the South China Sea that is disputed by both countries and China. After initially lodging somewhat muted diplomatic protests, Taipei on May 12 dispatched four ships to the disputed waters, including three coast guard vessels equipped with cannons and machine guns and a naval vessel carrying an S70-C helicopter. The administration of Taiwanese President Ma Ying-jeou also vowed to deploy F-16 fighter jets and additional warships, including Kidd-class destroyers, if Manila fails to make an official apology to the fisherman's family within 72 hours.

South China Sea

The shooting sparked intense public outrage in Taiwan over the government's inability to protect Taiwanese citizens in the waters in addition to the enduring perception that Taipei has a weak position in its ongoing territorial disputes in the East and South China seas. To enforce Taiwan's position, demand on the island has been increasing for some sort of territorial cooperation with China over mutual maritime interests. According to a survey conducted after the shooting, roughly 69 percent of Taiwanese residents support working more closely with China to pressure the Philippines in the maritime disputes.
Taiwan's Challenge

But such cooperation would highlight Taipei's constant struggle to reinforce its territorial claims without undermining its independence. Despite its early claims to parts of the East and South China seas and its relatively advanced military, Taiwan's position has long been constrained due to its lack of international recognition and its complicated relations with China, who views Taiwan as a disobedient province that will eventually be subsumed by the mainland.

Because China and Taiwan share a similar historical basis for their maritime assertions, Beijing believes that Taipei's territorial claims validate the South China Sea as rightly Chinese territory. Beijing also believes that Taiwan's weak position in the maritime conflicts can be exploited for Chinese interests. Thus, Taipei has long believed that its vulnerable position in the maritime disputes would eventually force it to support Chinese aggression in the waters, thereby threatening Taiwanese independence.

Immediately after the shooting, a spokeswoman for the Chinese Foreign Ministry strongly condemned the incident, urging Manila to apologize and to launch a thorough investigation. An editorial in China's semi-official Global Times then called for heavier Chinese pressure on the Philippines in support of Taipei. Beijing is hoping such gestures highlight its common ground with Taipei, considering that they share concerns over their identical claim against other claimant countries.
Beijing's Interests

Indeed, China has long been seeking to facilitate some sort of cross-strait collaboration over maritime disputes as something that could lay the groundwork for future civilian cooperation on other matters. This strategy has proved somewhat effective previously in the dispute with Japan over the Diaoyu/Senkaku Islands (known as the Diaoyutai in Taiwan) in the East China Sea. Since the 1970s, Taiwanese activism over the islands has been seen by Beijing as an anchor of cross-strait cooperation and international justification for anti-Japanese protests in China. Beijing is hoping to follow a similar course in the current maritime disputes, where cooperation could strengthen China's territorial claims and its relations with Taipei.

But in 2012, Taiwan attempted to reassert its independence in the East China Sea by signing a fishing agreement with Japan concerning the waters around the disputed islands -- a move that undermined Chinese interests. Thus, China is hoping to use the May 9 incident to demonstrate that it is better equipped to protect Taiwanese maritime interests than other regional states and deter Taipei from looking elsewhere for support.

Taiwan Escalates Tensions Over Maritime Claims

Beijing also sees the tensions between Manila and Taipei as an opportunity to justify its recent forceful actions in the disputed waters, in support of its broader strategy in the South China Sea. Since tensions over the waters renewed in 2010, Beijing has been more aggressive against the Philippines than it has been against Vietnam and other claimant countries. In April 2012, for example, a Philippine warship attempted to board Chinese fishing vessels anchored in the contested region. Beijing used the opportunity to seize control of Scarborough Shoal, an island also known as Huangyan in China and Bajo de Masinloc in the Philippines. Meanwhile, China has continued to make moves around contested parts of the Kalayaan island chain and other areas within the Spratly Islands, an archipelago also claimed by the Philippines.
A Balancing Act

From Manila's perspective, in light of Beijing's ongoing occupation of Scarborough Shoal, the Philippines risks losing 38 percent of its exclusive economic zone to China, forcing Manila to rely fully on an outside power (such as the United States) or an international tribunal to counter Chinese aggression. Although China may pursue a strategy of gradually containing Philippine influence in the South China Sea and strengthening its own presence in the waters, Beijing's recent eagerness to take on Manila stems primarily from the Philippines' insufficient naval and coast guard capability, as well as the current lack of attention given to the issue by the United States -- Manila's main military ally. Future incidents like the May 9 shooting could provide additional opportunities for Beijing to assert its presence in the contested waters.

While Beijing may seize the opportunity in the latest tensions to shape its political sphere and bolster its alignment with Taipei, it may not prove accommodating to Taiwanese interests. Taiwan's relatively weak position in the maritime issues has forced its claims to be marginal, yet pragmatic. The country can seek to secure its interest either with its limited navy or by exploiting the rivalries among other claimant countries' space. Nonetheless, Beijing's escalated rhetoric and gestures could further squeeze Taipei, even though Beijing has been careful to avoid pushing Taiwan further away.

Ultimately, since China is Taiwan's top security threat, Taipei may enjoy Beijing's maritime protection to varying degrees while still pursuing an independent course in territorial issues. The fisheries pact with Japan in 2012 clearly demonstrated Taiwan's willingness to ignore Beijing's interests in pursuit of Taiwanese claims. In a similar manner, Taiwan may seek to avoid locking itself in an antagonistic relationship with Manila that would benefit China.

Read more: China's Opportunities in Taiwanese-Philippine Tensions | Stratfor

[Crafty_Dog]

Summary
An ongoing standoff between China and the Philippines over the Second Thomas Shoal -- a remote shallow coral reef in the Spratly Islands -- could be a new flashpoint in the countries' ongoing territorial tensions in the South China Sea. The standoff is another example of Beijing's intention to enforce its territorial claims in the disputed waters. China's relatively advanced military and technological capabilities leave Manila with few options to physically counter Beijing's claim without relying on a third party. China is betting that a lack of willingness on the part of the United States will allow it to strengthen its occupation of the islands and islets it wishes to claim, and Beijing is working to force Washington to recognize China's maritime presence and interests.

Analysis
On May 29, Philippines Defense Secretary Voltaire Gazmin said Beijing had kept its vessels, including a naval frigate, around the Second Thomas Shoal (which China calls Renai Shoal and the Philippines have named Ayungin Shoal) since the vessels were dispatched in early May. Gazmin's comment came during an informal talk with Chinese Ambassador Ma Keqing, who had expressed concern that the Philippines might build additional structures on the shoal.

The coral reef, which is 15 kilometers (9 miles) long and 5 kilometers wide, is located approximately 105 nautical miles (120 miles) from the Philippines' western island of Palawan and is part of the Philippines' 200-nautical mile Exclusive Economic Zone. The reef has been under the Philippines' control since 1999, when a tank landing ship, the U.S.-built BRP Sierra Madre, was run aground deliberately to mark the territory. The vessel has since served as an outpost for the Philippine military. Located very close to the southeastern fringe of Beijing's nine-dash line -- a loose boundary line demarcating China's maritime claims in the South China Sea -- the reef apparently gained Beijing's attention recently, and China has been pushing its territorial claim as justification for its presence in the water. The Second Thomas Shoal also is a strategic pathway to Reed Bank (called Recto Bank by the Philippines), which is believed to hold oil and natural gas resources that have piqued China's interest.

China's Strategy for a Physical Presence

Until now, China and the Philippines showed good intentions in the standoff in order to defuse immediate tensions. However, China's keeping vessels around the shoal -- currently guarded by only a dozen soldiers aboard the BRP Sierra Madre -- appears to be a tactic to gradually isolate the shoal and eventually deprive the Philippines of a presence in the area drawing China's interest. According to the Philippines, China's encroachment on the reef has made it difficult to rotate troops and perform maintenance operations and has blocked supplies (currently, the troops on the shoal have supplies for only half a month).


The current standoff is the latest episode in a string of maritime disputes in the South China Sea between China and the Philippines. Tensions between the countries over territorial claims in the sea resurfaced in 2010. China's determination to expand and strengthen its maritime boundary was exemplified by the seizure of Scarborough Shoal in 2012 after a Philippine warship confronted several Chinese fishing vessels near the shoal. Following this, Beijing continued to carry out activities in other islands or islets within and surrounding the Spratlys. In fact, Manila has said that, based on China's occupation of Scarborough Shoal, the Philippines risks losing 38 percent of its entire Exclusive Economic Zone.

Moreover, Beijing appeared to have a particular interest in Thitu Island (called Pagasa in the Philippines and Zhongye in China), where the Philippines' military headquarters for the Spratlys is located. It seems as though Beijing's intention over the long term is to move forward with a military buildup adjacent to the island and conduct regular patrols in an attempt to encircle the Philippines' deployments in the Spratlys.

Beijing's Maritime Buildup

Over the years, Beijing's attention has turned to maritime territories to accommodate its appetite for economic growth and energy resources. China has entered into numerous competitions for control of islands and islets and extended its presence in the South China Sea. As part of this, Beijing has gradually enforced its claims based on the nine-dash line, using the line as a supposed historical justification and boundary for its intrusions into and presence in disputed waters. This strategy has become a dominant factor in the region's security environment, since it has been accompanied by a buildup of China's naval and civilian maritime forces and technological capabilities in deep-sea exploration and drilling. This has left little room for the Philippines, as well as other claimant countries such as Vietnam, to counter Beijing's claims.

Considered one of Asia's weakest militaries -- and preoccupied with numerous internal insurgencies -- the Philippine navy is inherently inferior to the Chinese blue-water navy gradually taking shape. Although the Philippines had attempted to shift the focus of its security agenda from internal disputes to maritime matters, its military is far from on par with China's, especially considering Beijing's massive military upgrade. Moreover, China is building up its civilian maritime vessels, which it relies heavily upon in its strategies for the South and East China seas: When Beijing dispatches civilian maritime enforcement ships to reaffirm sovereignty, it effectively precludes other countries from confronting it with ships of their own. This strategy also allows the civilian vessels -- which are far more advanced than those belonging to other South China Sea claimants -- to patrol the waters without necessarily sparking an armed conflict.

In addition, Beijing relies on offshore energy exploration as a means of physically substantiating its territorial claims. Through indigenous development and partnerships with foreign companies, Chinese state-owned offshore oil companies -- particularly the China National Offshore Oil Corporation -- have built a growing deep-water exploration capability far more advanced than the capabilities of the Philippines and other claimants. This leaves the Philippines two options should it pursue energy exploration in the South China Sea: either partner with China at the expense of acknowledging Chinese claims in the disputed area, or seek external corporate partnerships (which often fail early on because of the military threat from China and the uncertain outcome of exploration). 

Beijing's plan to gradually enhance its physical presence along the maritime boundary with the Philippines largely was driven by the Philippines' insufficient naval and coast guard capability and the lack of attention or assistance from outside powers, particularly the United States, the Philippines' security ally. Meanwhile, Beijing will find it logistically difficult, particularly during a crisis, to maintain a presence at all the islands, which are disconnected from each other. However, its actions around these islands have constituted a small-scale encroachment in its disputes with the Philippines and allowed China to test boundaries and highlight the United States' lack of action on behalf of its treaty allies in the region despite Washington's intentions to bulk up its presence in Asia. Ultimately, Beijing's intention may not be to monopolize the South China Sea, but to create a situation in which the United States will be forced to acknowledge China's interests and presence in the maritime sphere.



Read more: China, Philippines: The Latest Conflict in the South China Sea | Stratfor

[Crafty_Dog]

http://stratrisks.com/geostrat/13282

[DougMacG]

Philippines to lead growth among region's investment darlings

The expectations continue to rise for the Philippine economy's growth prospects.

The country is seen to have the highest growth potential in the eight years to 2020 among Southeast Asia's new investment darlings – Thailand, Indonesia and the Philippines, or the TIP economies, a new report said.

In a June 18 report titled “Road map to 2020: TH, ID, PH,” Singapore-based DBS Ltd. economist Eugene Leow said, “The Philippines has the highest growth potential amongst the TIP economies.”

Thailand's gross domestic product (GDP) growth is seen averaging at 5.2 percent until 2020, while both Indonesia and the Philippines' expansion for the eight-year period is projected at 6.3 percent, according to the report.

Leow said the Philippines “can potentially run at trend GDP growth of 7  to 8 percent,” as its healthy fiscal position, manageable inflation and a financial system awash with cash has yet to be fully utilized.  But he said, “A more conservative growth figure of 6 to 6.5 percent is realistic in the coming eight years as we factor in a gradual improvement in investment rates.”

Even as the Philippines' largely consumption-driven economy grew at the fastest rate in Asia at 7.8 percent in the first quarter, foreign direct investments (FDI) remain the region's lowest at $1.3 billion in the period.

Low investments from both domestic and international fronts has seen joblessness at a stubbornly high 7.5 percent of the labor force.

Leow said this forms part of the Philippines transitioning into a more investment driven economy.  Debt-watchers Fitch Ratings and Standard & Poor’s Ratings Services' decision to award the country investment grades are seen fuel much needed foreign and domestic investments.

The report noted that “the Philippines has the strongest external account balance, a banking sector best able to extend credit and a solid fiscal policy that is not threatened by heavy subsidy spending.”

http://www.gmanetwork.com/news/story/313394/economy/business/philippines-to-lead-growth-among-region-s-investment-darlings-dbs-ltd

[Crafty_Dog]

Devices Given to Chinese Legal Advocate Had Tracking Spyware, N.Y.U. Says
By ANDREW JACOBS
Published: June 21, 2013


BEIJING — Dissidents inside China have long been accustomed to a lack of privacy in their daily routines. Phone conversations are monitored, e-mails are read and public security agents trail human rights activists when they venture outside their homes.


Several electronic devices that were given to Chen Guangcheng last year were loaded with spyware designed to track his family’s movements and their online activity.

But according to officials at New York University, several electronic devices that were given to Chen Guangcheng, a Chinese legal advocate, soon after his arrival in the United States last year were loaded with spyware designed to track his family’s movements and their online activity.

Two of those devices, an iPhone and an iPad, were given to Mr. Chen by China Aid, a Texas-based Christian group that pushes for greater religious freedom in China. Bob Fu, the president of the group, said that he was out of the country when Mr. Chen arrived in New York so his wife, Heidi, handed over the equipment. The discovery of the tracking software came as a complete surprise, he said.

“This story is just crazy,” said Mr. Fu, an exiled Chinese dissident who championed Mr. Chen’s plight during the years of persecution Mr. Chen endured as an opponent of forced abortion.

The allegations, first reported by Reuters, threatened to further complicate an already messy narrative surrounding Mr. Chen’s tenure at N.Y.U., which includes accusations that school officials, bowing to pressure from the Chinese government, sought to curtail his public advocacy and then forced him to leave the Greenwich Village campus sooner than he expected.

School officials and associates of Mr. Chen, who is blind, have vehemently rejected such assertions and insisted that his fellowship at N.Y.U. was always meant to last one year.

Mr. Chen has declined to provide evidence backing up his assertions, issued in a brief statement last Sunday, that Beijing pressured N.Y.U. to terminate what he acknowledged was a generous arrangement that included tutors, security and housing for him, his wife, and their two children.

With Mr. Chen silent in recent days, Mr. Fu has become one of his more vocal advocates, eagerly telling reporters what Mr. Fu said were instances in which N.Y.U. tried to limit Mr. Chen’s access to conservative political figures and advocates who opposed abortion. Representative Christopher H. Smith, Republican of New Jersey, who frequently confers with Mr. Fu on human rights issues in China, has threatened to convene a Congressional hearing on Mr. Chen’s time at N.Y.U.

According to people with knowledge of the episode, Mr. Fu’s wife presented the Apple devices to an assistant of Jerome Cohen, the N.Y.U. law professor who was instrumental in arranging Mr. Chen’s exit from the American Embassy in Beijing, where he had sought refuge after escaping house arrest.

The gifts, along with at least two other phones that were handed to the assistant, arrived on the chaotic day Mr. Chen and his family landed in New York. After an examination by N.Y.U. technicians, all the devices were found to be compromised with spyware, said an associate, who asked to remain anonymous because he was not authorized to speak to the news media.

The spyware included global positioning software that allowed a third party to track the whereabouts of the device, and presumably its owner, and another program that copied its contents to a remote server. After removing the spyware, technicians returned the Apple devices to the Chens, who were told about what had happened. The two other phones, their provenance a mystery, were not given to Mr. Chen.

“He was upset, but he was more concerned about the relatives he left behind who were being mistreated by the authorities,” the associate said.

Mr. Fu was not informed about the spyware on the items, and by all accounts, his relationship with the family deepened in the months that followed.

John H. Beckman, an N.Y.U. spokesman, confirmed the broad outlines of the episode but said he had no further information. Professor Cohen told Reuters he thought the compromised devices were an attempt to keep tabs on Mr. Chen remotely. “These people supposedly were out to help him, and they give him a kind of Trojan horse that would have enabled them to monitor his communications secretly,” he said.

Professor Cohen was traveling in Asia on Friday and could not be reached for comment.

In an interview, Mr. Fu said he learned on Thursday from Reuters that the items his wife had bought at an AT&T store in Texas were compromised. He said a technician he employs had activated the devices and added Skype but nothing else.

He suggested that the spyware could have been installed after his wife dropped off the items but before they were given to the Chens, a gap of at least a day.

“More than anyone else, we want to get to the bottom of this,” he said, adding that he had asked the F.B.I. to look into the matter. “We will fully cooperate with any investigation and hope N.Y.U. will do the same.”

[Crafty_Dog]

U.S. Seen Losing to China as World Leader
Global Survey Finds Economic Shifts are Changing Perceptions of the Two Nations
By JAMES T. AREDDY

SHANGHAI—People in the U.S. and China view each other with increasing suspicion, and many others around the world see the U.S. losing its place to China as the leading economic and political power, a new public opinion poll shows.

According to a survey of around 38,000 people in 39 countries released on Thursday by the Washington-based Pew Research Center, majorities or pluralities in 23 of the nations surveyed said China either has replaced or eventually will oust the U.S. as the world's top superpower. The Chinese don't question their nation's eventual dominance, but Americans are split on the question, the poll found.

The Pew survey is the latest indication that the global impact of China's economic expansion over the past three decades and the 2008 U.S. economic stumble are reordering perceptions about China—the world's most populous nation—and the U.S.—its biggest economy.

"China's economic power is on the rise, and many think it will eventually supplant the United States as the world's dominant superpower," the report concludes.

The new data show a shrinking number of Americans, 47%, believing the U.S. will continue to hold its lead over China, compared with 54% in 2008. By contrast, about two-thirds of Chinese say their country has overtaken the U.S., or eventually will, and 56% say China deserves more respect, Pew found.

The data also suggest deepening mutual suspicion. Only 37% of people in the U.S. view China favorably, similar to the 40% of Chinese who hold a positive view of the U.S. For both countries, the percentages for favorable views have declined since Pew asked the questions in 2008.

Less than a third of the Chinese surveyed described their nation's relationship with the U.S. as cooperative, down sharply from 68%, figures that hew closely to plummeting opinions in China about U.S. President Barack Obama.

Some 23% of Chinese describe the U.S. relationship as hostile. Pew said China is the only non-Islamic country where more than half the people, 54%, hold an unfavorable opinion of Americans.

Still, China has work to do on its own reputation, the survey found. The U.S. commands a 63% favorable rating around the world, and the survey found it is far more often considered by other nations as a partner compared with China, which gets a favorable rating from only half those surveyed elsewhere.


Where China holds positive images is in areas such as science and technology. Such so-called "soft power" influences on others are a particularly strong aspect of the generally positive international image the U.S. holds. "Science and technology are China's most popular soft power," Pew concludes. It found the biggest positive impact across Africa and Latin America. About 59% of Africans appreciate China's business methods, Pew said.

Achievements don't necessarily make China popular. Pew detected widespread distaste for China's military and human rights policies and little interest in its cultural exports.

Still, outright anti-Chinese sentiment is limited around the world, according to Pew. The country is least popular among Japanese, 5% of whom hold a favorable view, with most doubting China will emerge the dominant superpower. While Japanese sentiment follows tension with China over territorial issues, Germans too have grown less positive about China, despite strong exports to the country.

Beijing's strongest supporters include Malaysia, Pakistan, Kenya, Senegal and Nigeria, along with Venezuela, Brazil and Chile. In pockets of Asia, Africa and South America, China is considered a partner, though to most countries China is neither a partner nor an enemy.

In more and more areas, China generates similar sentiment as the U.S. Neither gets good marks for considering how their policy affects citizens elsewhere, for example.

Younger and better-educated people tend to be more positive about both nations. "China's greatest global asset in the future may be its appeal among young adults around the world," Pew found.

China is already the world's leading economic power, say many citizens of nations the U.S. considers its closest allies, including both the U.K. and Germany. People living closer to China, including Japan and South Korea, say the U.S. is at the top; those nations report growing suspicion about China's military ambition. "One of the major challenges for China's global image is that few," only 11 countries surveyed, "believe the Chinese government respects the personal freedoms of its people," the survey found.

Write to James T. Areddy at james.areddy@wsj.com

[Crafty_Dog]

By Robert D. Kaplan

The biggest question in international affairs has nothing to do with Syria or Iran going nuclear. It is has to do with the state of the Chinese economy, and the ability of China's one-party system to navigate through an economic slowdown to a different growth model. China's leaders will likely survive this trial. But what if they don't? What if China faces a severe socio-economic crisis and attendant political one of an unforeseen magnitude? What would be the second-order geopolitical effects? If Syria explodes, it does so regionally. If China explodes, it does so globally.

Such a crisis could lead to an upsurge in nationalism, an emotion that can be easily dialed upwards by Communist party leaders as a means of clinging to power. And it would not only be Communist leaders who play the nationalist card: dissidents and aspiring democrats both might do so as a way to gain political legitimacy. More nationalism would mean more of the same military activity in China's near abroad. China's defense budget has already increased eight-fold since 2001, and might continue to do so under a more nationalist-style regime (even amid slowing growth), enabling China to further implement an anti-access area-denial strategy in the East and South China seas, emphasizing submarine, ballistic missile, and cyber warfare capabilities. The aim would not be to go to war with the U.S. Navy and Air Force (quite the opposite, in fact), but to establish a force ratio more favorable to the continued, perceived growth of Chinese maritime power. But none of this would alter the current state of play in the Indian and Western Pacific oceans -- defined by a slowly diminishing unipolar American air and naval environment.

But what if the opposite occurred? What if an economic and political crisis ignited a downward trend in Chinese military procurements, or at least a less steep growth curve? This is also quite possible: to assuage public anger at poverty and lack of jobs, China's leaders might, for political reasons, ask the military to make sacrifices of its own. After all, a Chinese Spring might be all about demanding more freedom and not about nationalism. Over time, this could affect the foundations of the Eurasian maritime order, albeit to a lesser extent than the collapse of the Berlin Wall shook the foundations of the European continental order.

Stalled Chinese defense budgets would reinvigorate a Pax Americana from the Sea of Japan to the Persian Gulf, despite the debacles of the Iraq and Afghanistan wars, and despite the U.S. military budget crunch. The U.S. Navy would own the seas as though World War II had just ended. Japan, which continues to modernize its air force and navy (the latter is several times larger than the British Royal Navy), would emerge as an enhanced air and sea power in Asia. The same goes for a future reunified Korea governed from Seoul, which, in the event of a weakened China, would face Japan as a principal rival, with the United States keeping the peace between the two states. Remember that Japan occupied Korea from 1910 to 1945, and the hostility between Japan and Korea is thus much greater than the hostility between Korea and China.

Turmoil in China would slow the economic and security integration of Taiwan with the mainland. With more than 1,500 ballistic missiles aimed at Taiwan from the mainland and 270 commercial flights per week between the two Chinas, U.S. military aid to Taipei is designed to defend Taiwan against a sudden Chinese attack, but not necessarily to postpone an inevitable unification of sorts. But the inevitable unification might not happen in the event of a prolonged political crisis in Beijing: a likelier scenario in this case would be for different regional Chinas, democratic to greater or lesser extents, more loosely tied to Beijing, to begin to emerge. This, too, translates into a renewed Pax Americana as long as U.S. defense cuts don't go too far.         

The South China Sea is where the effects of U.S. military decline would, in a geopolitical sense, be most keenly felt. China's geographical centrality, its economic heft (still considerable), and its burgeoning air and naval forces translate into Finlandization for Vietnam, Malaysia, the Philippines, and Singapore in the event of large-scale U.S. defense cuts. However, internal disarray in China, combined with modest U.S. defense cuts that do not fundamentally affect America's Pacific forces, could unleash the opposite effect. Emboldened by a continued American presence and a less than dominant Chinese military, countries such as Singapore and Australia, which are already spending impressively on arms relative to the size of their populations, could emerge, in a comparable military sense at least, as little Israels in Asia, without having to spend more on defense than they already are. Vietnam, meanwhile, with a larger population than Turkey or Iran, and dominating the South China Sea's western seaboard, could become a full-fledged middle-level power in its own right were Beijing's regional grip to loosen, and were Vietnam to gradually gets its own economic house in order.

India, like Vietnam and Taiwan, gains most from a profound economic and political crisis inside China. Suddenly China would be more vulnerable to ethnic unrest on the Tibetan plateau abutting the Indian subcontinent. This would not necessarily alleviate the Chinese threat on India's northern borderlands (given the possibility of heightened ethnic unrest inside an economically weakened China), but it would give India greater diplomatic leverage in its bilateral relations with Nepal, Bangladesh, Sri Lanka, and Myanmar, all of which have been venues for the quiet great game India has been playing with China. Myanmar has historically been where Indian and Chinese political and cultural influences overlap. Though China has been the dominant outside economic influence in Myanmar in recent decades, prior to World War II Indian economic middlemen were a major force in the capital of Yangon. Look for the Indian role in Myanmar to ramp up in the event of a partial Chinese political meltdown. Given Myanmar's massive stores of natural gas, coal, zinc, copper, precious stones, timber and hydropower, this would not be an insignificant geopolitical development.

If India were among the biggest winners in the event of severe Chinese internal turmoil, Pakistan would be the biggest loser. China has been Pakistan's greatest and surest patron in recent decades, and has given Pakistan stores of infrastructure aid -- highways in the north and a port in the south -- without lectures about human rights and terrorism, or threats about withdrawing aid. China has balanced against India, Pakistan's principal enemy, even as China keeps Pakistan from becoming friendless in the event of a rupture with the United States. A weakened China would leave Pakistan facing a strengthened India and a United States in a measurably better position to influence the future of Afghanistan over the next decade or so. Pakistan's options would still be considerable, on account its geographic centrality to southern Central Asia and Afghanistan in particular. But otherwise, without a strong China, Pakistan would be lonely in a hostile world.

Such a bleak scenario for China overall would leave the United States and its allies -- both de facto like India and Vietnam, and de jure like Japan and Australia -- in a commanding position around Eurasia's navigable southern rimland. But such a scenario is unlikely, even if the Chinese economy significantly slows and domestic unrest follows. More likely will be a tumultuous period of consolidation and readjustment within China, with China's strategic and military planners able to weather the storm with adjustments of their own for the long term.

But there is a larger point: geopolitics, while ostensibly about the geographically-constrained interactions of states, rests also on the internal conditions of states themselves, in which the actions of individuals are crucial and so much hangs on a thread. While both the United States and China face epochal budgetary and economic crises -- which in both countries bleed over into the political realm -- the crisis in China is far more profound than in the United States. After all, the system of governance in Washington simply enjoys so much more legitimacy than the one in Beijing, with the American public institutionally better equipped to vent its frustrations than the Chinese one. Such internal realities will remain the overriding geopolitical facts in Asia.

Read more: China's Geopolitical Fallout | Stratfor

[Crafty_Dog]

http://globalnation.inquirer.net/39913/pentagon-us-to-equip-philippines-with-powerful-radar

[G M]

http://www.scmp.com/business/economy/article/1323967/cautious-start-shanghais-free-trade-zone

Cautious start for Shanghai's free trade zone
 






The free-trade zone is up and running after much fanfare but questions still remain about exactly how free the region will be


 07 Oct 2013



The Waigaoqiao Bonded area of the pilot Shanghai free trade zone, which is making a cautious start since being launched on Sunday amid great expectations. Photo: Xinhua
 






After the big-bang unwrapping, the uncertainty: how free is the Shanghai Free Trade Zone (FTZ)?
 
As the central government's propaganda machine churned out news of the inauguration on Sunday, which star supporter Premier Li Keqiang and other state leaders decided to give a miss, some analysts have started asking exactly how different will the 29 square kilometre slice of trade haven in coastal Pudong New Area be.
 
Clues to concessions on corporate income tax have been elusive while very little has been said on capital account and interest rate liberalisation.
 
While dos are scarce, there is a long list of don'ts in the form of a "negative list" for foreign investors. Moreover, private companies are required to make public their annual profit and loss account, which some say would make foreign companies "uncomfortable".
 
In Hong Kong, private companies are required to submit their accounts to the inland revenue department, but they are under no obligation to make them public.
 
"It suggests to us a cautious start and the gradual approach that officials want to take in this experiment," said Nomura chief economist Zhang Zhiwei, referring to the "negative list".
 
Billed as a path-breaking experiment for China's economic and financial reforms, the zone is a new economic model comprising the existing tariff-free port areas and the Pudong airport, and will integrate free movement of goods with financial innovation. The trial, if proven successful, will be replicated in other parts of the country.
 
The zone has identified six focus areas: financial services, shipping, trade, professional services, culture and the public sector. A first wave of 36 companies have been given the go-ahead to set up business inside the zone, but Citibank and DBS are so far the only foreign banks chosen to operate there.
 
However, although the financial sector is the soul of the zone, foreign capital investment is restricted in banks, finance companies, trust companies, foreign exchange dealing, insurance companies, securities entities and microcredit companies.
 
Other no-go areas for foreign investors include broadcasting and online news. They are even barred from setting up internet cafes and golf courses.
 
To the disappointment of investors, the zone does not offer any corporate income tax concessions, which they say would severely dent its attractiveness. It was widely expected that the corporate income tax would be reduced from the existing minimum rate of 25 per cent to 15 per cent, or lower.
 
Wang Wei, tariff director at the Ministry of Finance, has argued the zone would set the precedent for other regions and that it would not be feasible to replicate the 15 per cent tax incentive elsewhere in the country without undermining the national tax net.
 
Comparing the tax rates offered at the Shanghai zone and that by the new economic zone in Qianhai, Deloitte China tax partner Caesar Wong Shun-on said it would actually make more sense to have preferential tax rates in Qianhai to attract foreign investors because the latter is starting from scratch while Shanghai is an established business hub.
 
However, among its advantages, foreign parents of firms operating in the zone are allowed to issue yuan-denominated bonds as part of the financial services incentive. The FTZ has also promised to issue business licences and tax registration certificates in four days, compared with the 29 days elsewhere in China.
 
Despite the zone's overall shortcomings, some analysts said that it should not mean Hong Kong is insulated from competition. "It is a wake-up call for Hong Kong. The city must act proactively and more swiftly for its future," one analyst said.
 
Wong said Hong Kong should combine its strength with that of Macau and the three new economic zones across the border - Qianhai in Shenzhen, Hengqin in Zhuhai and Nansha of Guangzhou. "In 15 or 20 years, China itself may become a free-trade zone."
 
Federation of Hong Kong Industries chairman Stanley Lau Chin-ho said that to lift its competitiveness, Hong Kong should integrate deeper with the Pearl River Delta region.
 
"Guangdong has infrastructure and available land while Hong Kong has free flow of information and expertise in financial services," he said. "Hong Kong should improve its quality of life to attract more talent and foreign investors."
 
HSBC chief executive, Peter Wong Tung-shun, said he does not think the zone is "a zero-sum game". The zone would create more opportunities, a bigger pool of assets and a more varied range of assets that in turn would benefit Hong Kong, he said.
 
HSBC, the largest foreign bank on the mainland, is seeking to set up a sub-branch in the free-trade zone.
 
"We believe that further liberalisation offers new opportunities for foreign banks in areas like product innovation, fund raising and corporate investment," Wong said. "As the largest foreign bank in mainland China, HSBC looks forward to participating in the pilot programmes within the free-trade zone and contributing to its development by leveraging our global expertise."
 
Daniel Rosen, a partner at the Rhodium Group think tank, sees the zone as a test bed for policies and lessons that might later be applied on a national scale.
 
"There are tonnes of learning along the way," said Rosen. "Those immediately involved in designing this programme don't have any reservation that this is the right way to go for China in the long run. Letting it seep in gradually allows it to deal with the political resistance."
 
When deciding on the zone's details, the leadership is likely to keep in mind the experiences of other countries in the region who have opened up their capital markets in the past.
 
"Most of the ideas being tested at the FTZ are widely practised and tried before by other countries. But many of those countries, such as Korea, Thailand and Malaysia, have suffered financial crises afterwards for reasons such as lack of vigilance or getting the order of capital account liberalisation wrong," said Alaistair Chan, economist at Moody's Analytics.
 
"The Chinese government is keen to avoid any potential instability from opening up its capital account and so will proceed cautiously," he said.
 .



This article appeared in the South China Morning Post print edition as Wary start for Shanghai experiment

[Crafty_Dog]

WSJ

TOKYO—Japanese Prime Minister Shinzo Abe said he envisions a resurgent Japan taking a more assertive leadership role in Asia to counter China's power, seeking to place Tokyo at the helm of countries in the region nervous about Beijing's military buildup amid fears of an American pullback.

In an exclusive, wide-ranging interview with The Journal, Mr. Abe also defended his program of economic reforms against growing criticism that the package lacks substance—though he offered few details of new programs, or a timetable, that anxious foreign investors have been seeking.

"I've realized that Japan is expected to exert leadership not just on the economic front, but also in the field of security in the Asia-Pacific," Mr. Abe said, referring to his meetings with the region's leaders at a series of summits earlier this month.

Mr. Abe also defended his program of economic reforms against growing criticism that the package lacks substance—although he offered few details of new programs, or a timetable, that anxious foreign investors have been seeking.
 

And in his continuing attempt to juggle his desire to enact economic stimulus policies with the need to pay down Japan's massive debt, the prime minister said he was open to reviewing the second stage of a planned increase in the sales tax in 2015 if the economy weakens after the first hike is implemented next spring.

Less than a year after taking office, Mr. Abe has already emerged as one of Japan's most influential prime ministers in decades. He has shaken up the country's economic policy in an attempt to pull Japan out of a two-decade-long slump, and plotted a more active diplomacy for a country whose global leadership has been crimped by a rapid turnover of weak prime ministers.

In the interview, Mr. Abe made a direct link between his quest for a prosperous Japan, and a country wielding greater influence in the region and the world.

"Japan shrank too much in the last 15 years," the leader said, explaining how people have become "inward-looking" with students shunning opportunities to study abroad and the public increasingly becoming critical of Tokyo providing aid to other countries.

"By regaining a strong economy, Japan will regain confidence as well, and we'd like to contribute more to making the world a better place."

Mr. Abe's views expressed in the interview reflect his broader, long-standing nationalistic vision of a more assertive Japan, one he has argued should break free of constraints imposed on Japan's military by a postwar pacifist constitution written by the U.S.– and that has also been hampered by economic decline.

Mr. Abe made clear that one important way that Japan would "contribute" would be countering China in Asia. "There are concerns that China is attempting to change the status quo by force, rather than by rule of law. But if China opts to take that path, then it won't be able to emerge peacefully," Mr. Abe said.

"So it shouldn't take that path, and many nations expect Japan to strongly express that view. And they hope that as a result, China will take responsible action in the international community."

China's foreign ministry did not immediately respond to requests for comment on Mr. Abe's assertions. In the past, the Chinese government has said that Mr. Abe's government was in danger of leading Japan toward a revival of right-wing militarism.

Mr. Abe's comments come amid a period of heightened tensions between the two Asian giants, as high-level diplomatic contact has virtually dried up, amid a territorial dispute in the East China Sea. While the conflict preceded Mr. Abe becoming prime minister last December, Beijing has accused him of aggravating relations, with assertive rhetoric defending Japan's claims, and ramping up Coast Guard defense over the chain of islands known as the Senkakus in Japan and Diaoyu in China.

His remarks also follow months of active diplomacy that has taken him to summit meetings with heads of state in virtually every country in the region—with the notable exceptions of China and South Korea, which also has its own strained ties with Tokyo.

In December, he intends to host in Japan the leaders of the 10 members of Association of Southeast Asian Nations. The event is intended to mark 40 years of Japan's ties with the bloc that includes countries from Thailand to Indonesia to the Philippines to Myanmar, but also to further elevate Japan's role as a leader in a region where China has also sought influence.

Mr. Abe's pursuit of a more expansive role was on full display at a pair of Southeast Asia summits earlier this month, where he openly took sides in public comments with the Philippines in a South China Sea territorial dispute between Manila and Beijing. Mr. Abe's role in those meetings was amplified by the absence of American President Barack Obama, who canceled his participation in the Indonesia and Brunei summits amid budget paralysis back in Washington.

Some leaders expressed concern that Mr. Obama's absence symbolized a pullback in U.S. participation, and influence, in the region, as domestic political divisions undermine the American leader. Mr. Abe declined to answer directly a question about whether he was concerned about a decline in the clout of Japan's close ally.

"In the world today, there are many things which only U.S. can take care of. And in this context, the U.S. takes leadership and we expect the U.S. to do so going forward."

Mr. Obama's political woes have been in contrast to Mr. Abe, who has accumulated unusual power for a Japanese leader, steering his party this year to unified control of parliament, riding the popularity of his economic program, dubbed Abenomics. A quick dose of stimulus—easy money from the Bank of Japan, and new public works spending—has given Japan the fastest-growing economy and stock market of the advanced economies this year.

But now Mr. Abe's economic program is at a turning point. The next phase involves debating politically difficult economic reforms and deregulation measures, like making it easier for companies to shed workers, or reducing protections for farmers. He is facing increasing criticism from local media, economists, and global investors that these "pro-growth" plans are too vague.

Mr. Abe said the government had submitted related bills to the parliament, stressing that what mattered were the results.

"I am aware of the various criticism over my growth strategy. It may lack the flashy sort of features, but I think what is important is the outcome."

But Mr. Abe stopped short of shedding light on whether he would proceed with some key measures seen vital for growth.

On whether to review a 40-year-old system providing income support for rice farmers, long blamed for their low productivity, the prime minister said he would let experts discuss the issue first.

And on slashing the corporate tax rate, one of the highest among advanced economies which critics blame for the low foreign investment in Japan, Mr. Abe said his ruling party is the one in charge of setting tax policy.

Asked about whether he would proceed with a plan to raise the sales tax again to 10% in October 2015, Mr. Abe said he would first review the impact of the increase to 8% next April from the current 5%.

He said he expected the economy to be dragged down by the tax hike effect from April to June, and the key would be how it recovers afterward. "I would like to watch carefully how much it can recover in July, August and September. And then I'll make an appropriate decision."

[Crafty_Dog]

http://www.nytimes.com/newsgraphics/2013/10/27/south-china-sea/?nl=todaysheadlines&emc=edit_th_20131027

[Crafty_Dog]

The Senkaku Boomerang
Japan needs U.S. support against Chinese bullying.
Updated Oct. 31, 2013 7:23 p.m. ET

China's leaders may have thought that by frequently dispatching ships and planes into Japan's territory around the tiny Senkaku Islands they would cause Tokyo to bow to their demands. Instead, their strategy of harassment and intimidation has accomplished the opposite—and then some.

Prime Minister Shinzo Abe has rallied Japanese to defend their territorial sovereignty, and he may succeed in reinterpreting the Japanese constitution to allow Japan to come to the military aid of its allies. The threat to the Senakakus has strengthened Tokyo's alliance with Washington, with the two countries agreeing earlier this month to bolster their military ties, including the deployment of U.S. P-8 maritime surveillance planes in Japan and stationing a second missile-defense radar.

Japan has also strengthened its ties with Southeast Asia. Smaller regional powers have come to see Tokyo as a potential defender, along with the U.S., of the peace against a hegemonic Middle Kingdom.
Enlarge Image

Japan Coast Guard vessel PS206 Houou sails in front of Uotsuri island, one of the disputed islands, called Senkaku in Japan and Diaoyu in China, in the East China Sea on August 18, 2013. Reuters

In an interview with the Journal last week, Mr. Abe, fresh from a successful tour of the region, signalled his willingness to take up a greater leadership role and issued a warning to Beijing. "There are concerns that China is attempting to change the status quo by force, rather than by rule of law. But if China opts to take that path, then it won't be able to emerge peacefully," he said.

Mr. Abe's remarks were followed by more clear-eyed talk from Defense Minister Itsunori Onodera, who on Tuesday accused China of endangering the peace by sending its coast guard vessels into the Senkaku waters more than once a week: "I believe the intrusions by China in the territorial waters around the Senkaku islands fall in the 'grey zone' (between) peacetime and an emergency situation."

Japan has begun conducting amphibious exercises that simulate the kind of operations that might be needed to defend or retake the Senkakus. It is expected to create a new unit tasked with such missions.

The danger now is that the chances of accident, miscalculation or even a shooting incident grow with each Chinese foray near the islands. That's what makes Japan's demonstration of political resolve and military capability all the more important, but Japan cannot be left on its own. The U.S. took the Senkakus from Japan after World War II and returned them in the early 1970s, effectively settling the question of their sovereignty for American purposes. The more explicit the Obama Administration is that the Senkakus are Japanese, the likelier Beijing is to back down.

In the long term, there may be a possibility for Japan and China to resolve their differences by freezing the status quo and deferring resolution of the dispute to future generations. That was the view Deng Xiaoping had of the matter, and current leader Xi Jinping would do well to follow in those footsteps. The alternative is to further alienate China from its neighbors, and further call into doubt the promise—and the hope—that China's rise will be peaceful.

[Crafty_Dog]

hina's Evolving Nuclear Capability
Analysis
October 31, 2013 | 1040 Print Text Size
China's Evolving Nuclear Capability
A Chinese nuclear-powered submarine prepares to dive. (AFP/AFP/Getty Images)
Summary

Despite notable progress over the past few years, the sea-based leg of the Chinese nuclear triad will remain significantly constrained by geographical and technological factors. In the last week the Chinese media have provided unprecedented coverage of the shadowy Chinese nuclear submarine force. During a slew of media reports and interviews, numerous Chinese military analysts have emphasized that China's nuclear ballistic missile submarines are now capable of conducting extended deterrent patrols.

This news is not entirely surprising. In its 2012 draft to the U.S. Congress circulated in November 2012, the U.S.-China Economic and Security Review Commission indicated that China was on the cusp of attaining a credible nuclear triad. The report came at a time when the U.S. Department of Defense had emphasized Chinese military progress, including the projected fielding of a new submarine-launched ballistic missile by 2014. While it is important to highlight such Chinese advancements, limiting factors must be kept in mind as well. For now, China must rely on its land-based nuclear arsenal as a deterrent against the West.
Analysis

China's ambition to build a three-pronged nuclear capability, specifically by bolstering its submarine-launched nuclear missile arsenal, is tied to its desire to enhance its deterrent potential against other nuclear powers, especially the United States, Russia and India. With continuing advancements in the precision and potency of the U.S., Russian and Indian nuclear arsenals, the Chinese are all the more determined to strengthen their own nuclear deterrent. Maintaining a credible sea-based nuclear arsenal will greatly enhance China's ability to respond to a nuclear first strike (i.e., its second-strike capability). A sea-based deterrent is also a matter of prestige for Beijing, since only a few countries have such a capability.
Technical Limits

China has seen significant progress in the development of its sea-based strategic nuclear deterrent but still lags considerably behind leading powers, especially the United States. The first Chinese submarine-launched ballistic missile, the JL-1A, which has a range of approximately 2,500 kilometers (nearly 1,600 miles), is believed to still be the Chinese nuclear submarine force's main missile. By comparison, the U.S. Navy's primary submarine-launched ballistic missile has more than four times the range (the exact figure is classified). China is currently developing a second-generation missile that is supposed to have an operational range of 7,000-8,000 kilometers, but little is known about it except that it is expected to be operational in a limited capacity by 2014.

China also lags in nuclear submarine technology. Aside from a single submarine, the Type 092 Xia class that is used largely for test purposes, the Chinese nuclear-powered ballistic missile submarine force consists entirely of the Type 094 Jin class. Three or four vessels of the Jin class have reportedly been completed since the first was launched in 2004. The Type 094 is a clear improvement over the Type 092 but still underwhelms in many areas, especially in quieting technology, a critical variable when it comes to a submarine's survivability. According to a report by the U.S. Navy's Office of Naval Intelligence, the Jin class is even more detectable than the Soviet Delta III class submarines from the 1970s.
Problems of Geography

Despite technological improvements, Chinese nuclear submarines would still need to safely bypass the "first island chain" into the open waters of the Philippine Sea to truly possess a global sea-based nuclear deterrent. Even when the early versions of the second-generation submarine-launched ballistic missiles, the JL-2, enter service, Chinese submarines operating in the East China Sea or within the first island chain will not be able to target the continental United States or Western Europe.

U.S., China: Exploring the Undersea Balance

The most likely route for Chinese submarines into the wider Pacific Ocean is through the Luzon Strait, which is situated between Taiwan and the Philippines and provides direct access into the Philippine Sea. The Luzon Strait is a safer access point than those that lie north between Taiwan and Japan because the Philippines does not have an anti-submarine warfare capability and Taiwan's anti-submarine capability is relatively limited, especially when compared to Japan's. Furthermore, U.S. conventional forces are not stationed in Taiwan or the Philippines like they are in South Korea and Japan.

Still, the Luzon Strait is not perfect, especially in the event of conflict with the United States. First, Taiwan is making a concerted effort to improve its anti-submarine warfare capabilities. By August 2015, Taiwan will have inducted a dozen P-3C Orion aircraft suitable for anti-submarine warfare in an airfield in the south, ideally positioned to monitor the Luzon Strait. Given that the Type 094 is a relatively noisy submarine, U.S. nuclear attack submarines patrolling the Luzon Strait would also be well positioned to detect and track the Chinese vessels.

These limitations are the principal reason the People's Liberation Army Navy has seemingly elected to adopt a modified "bastion strategy" around the South China Sea. So far, the Chinese have positioned their nuclear ballistic submarines with the North Sea and South Sea fleets. The North Sea Fleet includes the single Type 092 and reportedly another Type 094, while other Type 094s appear to have been deployed with the South Sea Fleet. In addition, the construction of the Sanya submarine base on Hainan Island means the infrastructure is mostly in place to support expanded nuclear submarine operations in the South China Sea.

There are a number of advantages that the South China Sea offers the Chinese in terms of nuclear ballistic submarine operations. First, unlike the East China Sea or Yellow Sea, the South China Sea is distant from the very capable South Korean and Japanese anti-submarine assets as well as the U.S. forces stationed in those countries. The South China Sea also gives Chinese submarines considerable room to maneuver compared to the more constricted waters immediately east of China. Finally, unlike the East China Sea, the South China Sea provides multiple access points to the wider oceans. In other words, while the South China Sea could offer a reasonably safe operating area for the Chinese navy, it also provides considerable potential for breakout operations in the future, whether through the Luzon Strait or other passageways such as the Sulu Sea or the Karimata Strait.

Operating from the East China Sea, South China Sea or Yellow Sea, Chinese submarines will soon have a credible sea-based nuclear deterrent against Russia and India. But the Chinese submarine fleet will still need to access the open waters beyond the first island chain to maintain a sea-based deterrent against Western Europe and the United States. Until China builds a nuclear submarine fleet (with well-trained crew and support) stealthy enough to routinely attempt access into the Philippine Sea, or submarine-launched ballistic missiles with enough range to target the continental United States, it will have to rely on its land-based strategic nuclear forces as the primary nuclear deterrent against the United States.

Read more: China's Evolving Nuclear Capability | Stratfor
Follow us: @stratfor on Twitter | Stratfor on Facebook