Chinese Military,Political and Social Superthread

[Edward Campbell]

Meanwhile, here is an interesting, maybe slightly controversial, article about China’s economy, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from Saturday’s Globe and Mail:

http://www.theglobeandmail.com/report-on-business/reading-the-tea-leaves/article1268517/

China's economic recovery
Reading the tea leaves

There's the good, the bad and the ugly: Beijing's strong growth is the envy of the west, but empty wallets in the U.S. and Europe and thrifty Chinese consumers threaten to choke off the comeback

Andy Hoffman and Brian Milner

Friday, Aug. 28, 2009

THE GOOD: A 7.9-per-cent growth rate is the envy of the West; stockpiling and infrastructure have driven the global rebound in commodity prices

THE BAD: Who's buying? Empty wallets in the U.S. and Europe and thrifty Chinese consumers threaten to choke off the comeback

THE UGLY: When will Beijing stop boosting inefficient state enterprises and open the credit taps to millions of aspiring entrepreneurs?

Investment banker Ken Courtis has his own personal gauge for determining the health of the Chinese economy, and it has nothing to do with often-questionable government statistics, an overheated stock market or soaring purchases of commodities.

If traffic is light enough that he can make it to five or more meetings a day in the usually choked streets of Beijing or Shanghai, and if people can actually fit him into their schedules, he knows business is bad. Conversely, if he can be squeezed into only two meetings a day, it means business is booming.

And these days? “At the moment, you can do three,” says Mr. Courtis, a former vice-chairman of Goldman Sachs Asia. It's as good a signal as any that China's economy is on the rebound.

Reading the Chinese tea leaves has become a prerequisite for global business. Every reported statistic is carefully scrutinized, and every blip – whether up, down or sideways – has the ability to move equity, bond and commodity markets around the world. Quite simply, the planet is pinning its hopes of a recovery from the depths of the worst recession since the Dirty Thirties on China being able to sustain its surprisingly boisterous growth of recent months.

Yet no one, least of all the experts, is sure about the true state of the Chinese economy, or whether it has the ability to carry the rest of the world on its coattails.

On paper, China's economy is blowing the doors off the West. Despite sharply falling exports, it grew at an impressive 7.9-per-cent annual clip in the second quarter from a year earlier, according to government data, and a stunning 15 per cent from the first quarter of 2009. There are predictions China will overtake Japan to become the world's second-largest economy by 2010. Five years ago, that didn't seem likely until 2020 at the earliest.

But China's all-star performance comes with a major-league-sized caveat: Official data are notoriously unreliable. Even the most bullish analysts concede the GDP numbers are flawed. That's because the Chinese rely on lower levels of government to collect the data.

Local officials win promotions based on the figures they produce, so they have a strong incentive to exaggerate. Each level is eager to juice the numbers to please those above.

China's National Statistics Bureau recognizes this and typically cuts the tallied figures, which helps explain why, even in the official statistics yearbooks, the provincial and national figures rarely add up.

The official stats also fail to account for the enormous impact of China's burgeoning underground economy, which includes such services as restaurants and an army of small, illegal mining operations.

Such under-the-radar activity accounts for about 20 per cent of China's economy, says Scotia Capital China analyst Na Liu. But it never shows up in the figures of economic output. “It's like a major city in China never goes shopping, according to the GDP,” Mr. Liu says.

ALTERNATIVE INDICATORS

To get a better read on the country's economic health, China watchers are increasingly turning to alternative indicators to supplement the government stats. They're tracking everything from electricity consumption to satellite images from Google Earth to make their calls on the economy.

What they're finding are reasons for equal measures of optimism and concern.

A massive four trillion yuan ($586-billion U.S.) stimulus package has spurred a deluge of domestic infrastructure projects. Looser credit conditions have spawned a record 7.4 trillion yuan in new loans in the first six months of the year – that's nearly a quarter of China's gross domestic product, and well in excess of the government's own target of five trillion yuan in new loans for the entire year.

As much as one-third of this cheap money has flowed straight into speculative investments in real estate, stocks and commodities. And at least another third has gone to shore up struggling businesses in a tough economic environment. But there has been enough government money sloshing around to trigger fresh growth – and to create furious demand for Western commodities, including copper, iron ore and oil.

But the infrastructure spending and access to easy credit will soon come to an end. And that is where things could get dicey for China's economy.

The government's moves have likely exacerbated the overcapacity and inefficiency issues that have plagued some of China's largest state-controlled industries, such as steel making, that have received the lion's share of the new business loans. At the same time, smaller, more dynamic and entrepreneurial businesses, considered vital to China's long-term economic transformation, have been largely shut out of the government's stimulus and lending schemes.

Meanwhile, long-dormant Chinese consumers have sprung to life amid the current economic renaissance. Sales of vehicles and appliances have soared with the help of government rebates. But domestic consumption won't be enough to sustain current domestic growth once the stimulus measures peter out, let alone drive the global economy the way the American consumer did for so many years.

Daniel Rosen, a partner with the Rhodium Group, a New York-based advisory firm, is concerned that the rest of the world has become complacent about China's growth and “too laudatory” about what China has done to contribute to global recovery.

While China has admirably handled the stimulus element of its economic plan, it has failed to address deep-rooted constraints on the domestic economy. The Chinese remain too reliant on exports: “They haven't made the jump to domestic consumption-driven growth yet,” Mr. Rosen says.

Trying to decode the signals from China's hulking economy these days is no easy task. There are legitimate reasons to believe that a rebound is under way – but also signs that it may be fragile and unsustainable, once such vital props as unprecedented government spending and extremely loose monetary policy disappear.

COMMODITIES

No sector has benefited more from China's current financial might. China's aggressive purchasing has almost single-handedly driven an incredible rebound in copper prices and helped keep demand for iron ore and oil strong.

Amid the market meltdown last fall, China took advantage of low prices to stockpile copper in anticipation of the need for the metal used to make wire and pipe that would result from the slew of infrastructure projects. The buying also correctly predicted a pickup in housing construction.

“Looking at the commodities can give you a lot of confidence of where the economy is,” says Mr. Liu of Scotia Capital, who specializes in tracking Chinese commodity data as a gauge of overall economic health.

Last winter, when much of the world was bearish on China amid economic statistics indicating a major slowdown due to slumping export demand, Mr. Liu turned exceedingly bullish.

“When everybody was so bearish and thought things were going in the toilet, I talked to local people [in China] and I understood that people were buying copper and molybdenum and coking coal. Talking to these people, you were able to understand the tide was changing even though the macro data was still negative,” Mr. Liu says.

In the first six months of this year, China's consumption of refined copper jumped 48 per cent or 1.2 million tonnes. Even Chinese pig farmers have been jumping on the stockpiling bandwagon, storing scrap copper in their barns as a speculative investment.

China's massive steel industry has also picked up sharply, driving demand for iron ore and coking coal.

Mr. Rosen of The Rhodium Group agrees that commodities are a “fairly powerful” indicator, in part because the data is reliable. China's demand for foreign commodities can be correlated with export statistics from producing countries.

“There is no way for China to hide the supply and demand for things like iron ore and oil,” Mr. Rosen says.

INFRASTRUCTURE

New roads, bridges, tunnels, railways – they're all getting the green light in China right now.

The bulk of China's $586-billion stimulus package is flowing to infrastructure and there's no shortage of projects. Scores of construction plans that had been delayed during the heady days of 2006 and 2007, when the government was actually trying to temper growth, have now been given the go-ahead.

“The stimulus has simply brought the future expenditures to the forefront,” says Michael Deng, a China specialist with Canaccord Adams based in Calgary.

“The reason they can ramp up so quickly is because these projects had already been planned, but over a longer period. Now they are accelerating it.”

Infrastructure initiatives create jobs, improve the standard of living in underserviced areas and keep China's economy growing. As long as the money keeps flowing, there's almost no end to potential projects to finance because of China's sprawling geography and underdeveloped system of roads and railways.

LENDING

Credit is easy to come by in China today. The record pace of loans has helped prop up struggling businesses and offered consumers and industry the funds needed to expand.

Loosening credit flows is exceedingly simple in China. Under the state-controlled banking system, Beijing doesn't ask banks to lend. It orders them to. So far, the stimulus has not stoked inflation. In fact, Chinese consumer prices have been falling.

The majority of the record 7.4 trillion yuan in debt doled out this year has gone to state-controlled companies instead of more-vibrant private firms that are expanding at a quicker pace.

Critics argue that China's banks are setting themselves up for a wave of bad debt in coming years that could shake confidence in the country's financial institutions. But others believe that most of the debt has been adequately vetted.

“A lot of the feasibility for the new loans was made years ago,” says Scotia's Mr. Liu. “In the past few years, the Chinese government was fighting against overheating, so they killed a lot of legitimate investment projects.”

Fears of a U.S.-style real estate meltdown driven by easy mortgages are also overblown, argues Mr. Liu. Chinese home buyers generally put down 30 per cent of a property's value. For a second home, they must put down 40 per cent.

THE TREND

Even if one doesn't believe China's economic stats, the trend can still be a friend. Most China watchers say the data is more than accurate enough to show the overall direction of the Chinese economy, and that is all that really matters.

“There is so much data on the Chinese economy today and so much is integrated with the global markets that while the headline statistical releases from Beijing do generate considerable debate about Chinese statistics, by and large people feel they can gauge the general direction of China's economic movement,” Rhodium Group's Mr. Rosen says.

OFFICIAL STATISTICS

To put it simply, many of China's statistical indicators can be extremely opaque. Those that aren't, often don't add up. The most recent example came earlier this month, when first-half GDP figures released individually by China's 31 provinces were 10 per cent higher than the data released by the National Bureau of Statistics.

At a time when the world is looking to China as an engine of growth, the inconsistencies have become a continual source of embarrassment to the central government. Most analysts don't rely on the government-issued numbers.

Take the nearly-useless unemployment stats, for example. The Chinese version measures only local employment and completely ignores the vast numbers of migrant workers, who number about 150 million people – nearly five times the population of Canada. Beijing recently announced that nearly all of the more than 20 million migrant workers laid off earlier this year from their factory jobs had managed to find new jobs when they returned home. But the government didn't explain where it got such good news.

Even the Chinese media is doubting the data. China Daily, a state-backed English-language news outlet, quoted a poll recently that said 91 per cent of respondents are skeptical of the government official numbers, up from 79 per cent in 2007.

THE CONSUMER

Chinese shoppers are definitely spending more, with retail sales growth of 15 per cent in the first half of the year. But they remain frugal by Western standards. Chinese household spending as a percentage of GDP is about 35 per cent, half the U.S. level and well below even the Japanese ratio.

The Chinese consumer is spending more. Retail sales increased 15 per cent in the first half of the year. Sales of autos and appliances have been boosted by government incentives. However, China’s transformation from an export-driven economy to a consumer-driven economy is still in its infancy.

The consumer expansion roughly offsets the decline in export earnings, leaving stimulus spending and public sector investment to account for just about all the current growth in the economy. Private sector investment is noticeably absent, as might be expected when the most profitable part of their business, exports to Western consumers, has fallen off a cliff.

Government largesse is not the recipe for sustained consumer-led growth. That task belongs to the private sector and the jobs it is capable of creating, provided it has access to the capital needed to shift away from exports and ramp up production of goods and services targeted at the domestic market.

To replace its reliance on exports, China is going to have to boost household consumption to 50 per cent of GDP, a tall order in any economy. In China, it will require a dramatic shift of capital and resources that could take years.

“They can't turn themselves inside out overnight,” says Mr. Courtis, the Hong Kong-based investment banker.

PERSISTENT OVERCAPACITY

The flow of easy credit to inefficient state-backed entities in sectors like steel and cement has been a setback to hopes of purging China's economy of its less-competitive companies. For China's economy to truly mature, more financing must be made available to small and medium-sized businesses and private companies. Instead, 70 per cent of all loans still go to state-owned enterprises.

Chinese officials said this week that they intend to curb overcapacity in steel and cement, which have expanded as a side effect of the stimulus package, the construction boom and easy credit.

These statements, however, exacerbated concerns that China's commodity consumption is slowing, and the so-called restocking process is now largely complete. Chinese steel prices are falling after months of gains. The head of BHP Billiton Ltd., the world's largest mining company, has warned of sluggish Chinese metals demand.

The fear now being voiced in some circles is that any significant Chinese cutback will send shock waves through world commodity markets and cause prices to crash again. China could, in fact, spur another downturn in resource-producing nations such as Brazil, Russia and Canada.

FEAR OF SOCIAL UNREST

The biggest threat facing China's economy is what happens when the funds from the stimulus package and government loans have been exhausted. The fledgling Chinese consumer can't do the heavy lifting for the global economy, which means that Western demand for China's exports will have to come to the rescue. “I would argue we're probably going to be seeing a W-shaped recovery,” says Jennifer Richmond, senior China analyst with Stratfor, a global intelligence firm based in Austin, Tex. “Everything that they're doing really isn't long-term. They're still not addressing some of the root issues.”

Within the corridors of power in Beijing, the darkest fear is that economic change will bring with it social instability. In the northeastern province of Jilin last month, a mob of steel workers beat an executive to death after he arrived to tell workers their factory was to be privatized in a takeover that would lead to job cuts.

The paramount need to maintain stability at any cost underlies every economic policy move. It explains why, for example, long before the global downturn, Chinese banks were providing cheap credit to anyone promising to employ people, no matter how shaky their business plan. And it is also the reason Chinese authorities have started fretting about asset bubbles.

The last thing Beijing wants is an inflation problem. “It's so hard to manage social stability when you've got inflation,” Ms. Richmond says. “When people can't be fed, that's when you've got a problem.”

The fear of social unrest is, I believe, the main factor for official China. But there is another, “new” and growing business China that may be at odds with the government. 

 

[CougarKing]

Another update:

Chinese helicopters enter Indian air space twice; dozens of incursions in Leh

Two Chinese helicopters have reportedly violated the Indian air space in recent months in Leh area of north Jammu and Kashmir during which they air-dropped some canned food in barren land at Chumar, northeast of this Himalayan town, along the border.

The MI series helicopters were reported to the nearby defence post by residents of this high altitude area living along the Pangong lake, located in the lap of majestic hills, prompting the Army Aviation Corps to rush its Cheetah and Chetak helicopters.

However, they could only find tell-tale signs left by Chinese helicopters which hovered in the Indian territory for nearly five minutes dropping the food material on June 21 this year, sources said.

When contacted, Army spokesperson for Udhampur-based Northern Command told PTI that “there was a report of a helicopter flying in the area south of Chumar, where India and China have differences in perception on the Line of Actual Control. It was reported by grazers.”
A confidential defence document accessed by PTI shows that Chinese helicopters entered into Indian air space along Damchok area and Trig Heights in Ladakh and air dropped canned food containing frozen pork and brinjal, which had passed the expiry date.

Chinese People’s Liberation Army has been crossing over into the Indian side in this region quite frequently with
August reporting the maximum number of incursions.
Trig Heights also known as Trade junction, which connected Ladakh with Tibet in earlier days, is an area where
Chinese patrol have frequented this year in June, July and August.
Chinese Army patrols have made 26 sorties in June, including two incursions by helicopters, and 21 in July.
In August this year, Chinese patrols have entered into the Indian territory 26 times and walked away with Petrol and
kerosene meant for jawans of the border guarding forces. The Chinese army had made 223 attempts last year and left
tell-tale signs.

The Army spokesperson, however, tried to downplay these incursions attempts saying "there are a few areas along the
border where India and China have different perceptions of the LAC. Both sides patrol upto their respective perceptions of LAC."
"Due to perceived differences in the alignment of LAC, the Chinese patrol does transgress beyond our perception of
the LAC in a few areas. The pattern of transgressions has remained similar over a long period of time," the spokesperson
said.

Incursions have taken place in eastern Ladakh and on the northern bank of Pangong Tso Lake, located 168 kilometres from Leh. Chinese patrols come frequently on the North and South of this lake, whose 45 kilometres are on Indian side while another 90 on Chinese side.

India and China have been engaged in talks over the Line of Actual Control and had exchanged maps in 2002. In the western sector (East Jammu and Kashmir), the Samar Lungpa area, between the Karakoram Pass and the Chipchap river, is contentious, with Chinese maps showing the LAC to be south of the Samar Lungpa.

This is the northernmost part of the border, far to the north of Leh. But while the Indo-Tibetan Border Police operates north of the line the
Chinese claim to be the border, they remain south of the Lungpa. South of the Chipchap River are the Trig Heights, comprising Points 5495 and 5459.
Chinese troops frequently enter the area and in fact, they have a name for Point 5459; Manshen Hill. The area, south-east of Trig Heights, called Depsang Ridge is also contentious. Differences were found when Chinese small-scale maps were interposed on large-scaled Indian ones.

http://www.hindustantimes.com/China-...e1-448535.aspx

 

[CougarKing]

And the Dalai Lama visits Taiwan, further irking Beijing...

http://ca.news.yahoo.com/s/reuters/090831/n_top_news/cnews_us_taiwan_dalai_5

China again decries Dalai Lama visit to Taiwan
2 hours, 33 minutes ago


KAOHSIUNG, Taiwan (Reuters) - China denounced the Dalai Lama's trip to Taiwan, saying the visit by a man Beijing brands a separatist could have a "negative influence" on relations, Chinese state media said on Monday.


The Tibetan spiritual leader arrived late on Sunday in Taiwan, a self-ruled island claimed by China, to comfort victims of the island's worst typhoon in 50 years which struck this month, triggering floods that killed about 570 people.

"I'm very, very strict, (the trip is of a) non-political nature," the Dalai Lama told reporters on arrival from India, appearing to try to reassure Beijing.


Organizers had originally planned to host a news conference for the Dalai Lama on Monday, but that was cancelled, with the 1988 Nobel peace prize winner starting his day visiting flood-ravaged villages.


As with a denunciation it issued when the visit was announced last week, China focused its criticism on the opposition Democratic Progressive Party.

By not blaming Taiwan President Ma Ying-jeou or the ruling Nationalist Party (KMT), Beijing may have indicated that it does not wish to escalate the issue which brings together China's two most sensitive territorial issues -- Tibet and Taiwan.

China has claimed sovereignty over Taiwan since 1949, when Mao Zedong's forces won the Chinese civil war and Chiang Kai-shek's Nationalists fled to the island. Beijing has vowed to bring Taiwan under its rule, by force if necessary.


The Dalai Lama fled Tibet in 1959 after a failed uprising against Chinese rule.


"The Democratic Progressive Party has ulterior motives to instigate the Dalai Lama's visit to Taiwan, who has long been engaged in separatist activities," a spokesman for China's State Council's Taiwan Affairs Office was quoted as saying by Xinhua news agency.


"We resolutely oppose this and our position is firm and clear," the spokesman said. "The Dalai Lama's visit to Taiwan is bound to have a negative influence on the relations between the mainland and Taiwan."


China, which is considered unlikely to retaliate by choking off growing economic ties between the long-time political rivals, has always opposed the Dalai Lama's trips abroad and blames him for stirring up riots in Tibetan regions ahead of the Beijing Olympics last year.


Beijing calls the Dalai Lama a reactionary who seeks to split off nearly a quarter of the land mass of the People's Republic of China. It has been using its diplomatic clout to try to block the pro-Tibetan message.


The Dalai Lama denies the charge and says he seeks greater rights, including religious freedom, and autonomy for Tibetans.


(Reporting by Ralph Jennings and Simon Rabinovitch in Beijing; Writing by Lee Chyen Yee and Nick Macfie)

And someone else:

http://ca.news.yahoo.com/s/afp/090831/world/taiwan_china_politics_tibet_ties

Protest accuses Dalai Lama of 'politics' in Taiwan

1 hour, 15 minutes ago

BEIJING (AFP) - A group of 30 people who said they were Taiwan typhoon victims demonstrated against the Dalai Lama Monday, accusing him of using a visit to the island to stage a "political show."

The group, from Taiwan's aboriginal community, were standing outside the Tibetan spiritual leader's hotel in the southern city of Kaohsiung, holding up banners, one reading: "We don't want Dalai politics."


"The Dalai Lama is only staging a political show here," said the leader of the protesters, who declined to give his name.


The protest follows comments from a senior offical in Taiwan who warned that the current visit to the island would have a "negative influence" on ties between Beijing and Taipei, quoted by China's official Xinhua news agency.

"The Dalai Lama's visit to Taiwan is bound to have a negative influence on the relations between the mainland and Taiwan," a spokesman for the State Council's Taiwan Affairs Office said.


The spokesman took aim at Taiwan's opposition Democratic Progressive Party for inviting the exiled Tibetan spiritual leader, who began his visit on Sunday and aims to comfort victims of Typhoon Morakot.

 

[Edward Campbell]

This, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s Globe and Mail, will create yet another tempest in the Chinese teapot:

http://www.theglobeandmail.com/news/world/safeguard-democracy-dalai-lama-says/article1270856/

Safeguard democracy, Dalai Lama says
Political message contradicts assurances the spiritual leader would stay away from political issues during visit to typhoon ravaged island that angered China

Peter Enav

Shiao Lin, Taiwan — Associated Press
Monday, Aug. 31, 2009

The Dalai Lama exhorted Taiwan on Monday to safeguard its democracy, interspersing prayers for the victims of Typhoon Morakot with a challenge to Communist China.

The call from the Tibetan spiritual leader appeared to contradict assurances that his five-day visit to comfort the victims of the worst storm to hit the island in 50 years would steer clear of the political – a concern for President Ma Ying-jeou's administration, which is seeking closer ties with the mainland.

Kneeling on the ground to pray for the hundreds killed in this remote mountain village when torrential rains triggered two catastrophic mudslides earlier this month, the Dalai Lama acknowledged that Taiwan and China should maintain “their very close and unique links.”

However, he said, Taiwan should never lose sight of the importance of its democratic political system, which stands in marked contrast to China's one-party dictatorship.

“You enjoy democracy,” he said, addressing a crowd of several hundred amid a landscape of jagged boulders and twisted, upended tree trunks. “That must be preserved. No matter what political party, think common interest and work united.”

The trip has infuriated Beijing, which claims Taiwan as part of its territory and resents any outside effort to influence its future. It is likely to be particularly irked by such comments from the Dalai Lama, whom it denounces as a “splittist” – alleging he seeks independence for his native Tibet.

Beijing also regularly uses that sobriquet for advocates of formal independence for Taiwan, which split from the mainland amid civil war in 1949 – ten years before Chinese troops invaded Tibet and sent the Dalai Lama into exile in northern India.

The Buddhist spiritual leader, however, told the crowd, which included friends and relatives of those killed in Morakot, that he had a moral responsibility to visit the island – a seeming rebuke to his detractors, both in China, and here in Taiwan, where some 60 pro-China demonstrators hurled insults at him as he boarded a special train for the southern city of Kaohsiung on Sunday night.

But in Shiao Lin itself, some 50 former residents returned to greet him, many wearing T-shirts with pictures of the village before the mudslides buried the community under tons of rocks and rubble.

“We welcome him, and we're very happy that he's here,” said Liu Ming-chuan, 44, as he stood amid friends and family, his back toward the ruins of his former home.

The Dalai Lama's comments were followed by a simple prayer service, in which he held his palms together as a monk next to him recited a Buddhist sutra. When the prayers were finished he rose slowly and embraced two weeping relatives of Shiao Lin victims, holding their heads in his hands as they knelt on the ground beside him.

His arrival on the island created a dilemma for President Ma, who in his 15 months in office has turned the corner on his predecessor's pro-independence policies, reducing tensions across the 100-mile- (160-kilometre-) wide Taiwan Strait to their lowest point in six decades.

Mr. Ma was backed into a corner when seven mayors and county magistrates affiliated with the opposition Democratic Progressive Party invited the Tibetan spiritual leader to visit their area, amid mounting charges the president and his government had botched Morakot relief efforts.

While Beijing has said it “resolutely opposes” the Dalai Lama's visit, it has been careful not to blame Mr. Ma personally, putting the onus instead on the opposition mayors and magistrates – an apparent effort to keep cross-strait relations going on their current positive track, though even before the Dalai Lama's more political comments, it had also said the trip could harm ties.

The Dalai Lama is making mischief but, in so doing, he is drawing everyone’s attention to a huge problem for China: one country/two systems will be much, much harder to implement in Taiwan than it has been in Hong Kong.

Hong Kong was and remains much less democratic, albeit somewhat more law abiding, than Taiwan. The one country/two systems compromises required for Hong Kong were, largely, regulatory rather than political, per se. Absorbing Taiwan will oblige the Chinese to accept, at a provincial level – in what will, almost certainly be the richest and most visible province – a political system that it denies to all but a few Chinese (in relatively small cities, towns and villages).

 

[CougarKing]

And a slightly different development from your oil sands update:

*The PRC will lose face (diu mian/丟面) among overseas Chinese across the world if the crackdown of an ethnic Chinese group like that one in Kokang continues. It remains to be seen whether the CCP will realize which of the two courses of action- supporting their allies in the Burma Junta or intervene in the plight of an ethnic Chinese group- will better serve China's interest in the long run. But the writer of this article seems to say that there is already a good indication how the CCP will act.

From today's Times

http://business.timesonline.co.uk/tol/business/columnists/article6816392.ece

For China, the cost of oil and gas has just doubled. You will not find this new oil price quoted anywhere, but its burden will weigh heavily on the leadership in Beijing.
It is not an oil price that can be measured in dollars per barrel on the New York Mercantile Exchange. There has been no cutback by Opec, nor has a hurricane toppled offshore platforms in the Gulf of Mexico. It is China's oil price; the cost of oil for the People's Republic is now measured in refugees, in tens of thousands of people fleeing Burma into China.
The UN High Commissioner for Refugees said on Friday that as many as 30,000 people had crossed the Burmese border into Yunnan province in southwest China. An assault by the Burmese Army on the Kokang militia, an ethnic Chinese rebel group in Shan state, started the flight, but the refugees mean much more than a spot of trouble on the border. The brazen assault by Rangoon threatens to wreck China's carefully drawn strategy to transform Burma into a trading corridor of highways and oil and gas pipelines bringing energy and minerals into China's heartlands.
It is trouble for Beijing because the refugees are ethnic Chinese, traders who have established small businesses in remote northeast Burma. About 7,000 Burmese troops moved to the border and reports suggest that they pursued the rebels on to Chinese soil.


Wrong-footed by the unexpected assault by an ally, a government on which Beijing has lavished military aid, China's response has been timid. A spokesman for the Chinese Government urged Burma to protect the legal rights of Chinese citizens and said Beijing hoped that Myanmar could "appropriately solve its relevant internal problems and safeguard the stability of the China-Myanmar [Burma] border".
China's loss of face might not have been so obvious had it not been for Daewoo's announcement of last week. The South Korean conglomerate trumpeted its participation in the Shwe gas project, a $5.6 billion (£3.4 billion) venture to exploit an offshore gasfield in the Bay of Bengal and pipe the gas to fuel-hungry cities in southwestern China. It is a massive undertaking, a steel tube stretching more than 1,000km across Burma and into the mountainous Yunnan province. The Shwe partners, which include Moge, the Burmese state oil company, have to supply gas to CNPC, the Chinese state oil group, for 30 years.
China outbid India for the right to buy the gas and the Shwe venture is only one of a gamut of Chinese collaborations with one of the world's detested regimes. America has banned investments in Burma by US citizens since the 1988 pro-democracy protests and the imprisonment of Aung San Suu Kyi, the opposition leader. The European Union prohibits military sales and has imposed a visa ban and asset freezes on the Burmese generals.
China has no such qualms. There are plans for an oil highway, a second pipeline that would link southwest China to the Burmese coast. The link would provide cheaper and safer transport for Middle Eastern and African crude, avoiding a lengthy and dangerous passage through the pirate-infested Straits of Malacca. Chinese companies are sinking cash into Burmese mines, logging its forest and digging up its precious stones.
After the bloody suppression of the monks' street protest in 2007, the West banged the table and harangued the generals, but for China it was business as usual. Foreign direct investment in Burma rose fivefold last year to almost $1 billion; almost all of the money was Chinese.
Last week the lapdog bit its master's hand, not badly but a wound that will, nonetheless, create embarrassment and expense for Beijing. In London and Washington, there will be smirks as Beijing's cynical realpolitik gets its just desert.
We should not be too smug. Britain was recently slapped by a general who turned out to be no poodle. We wanted lots of things from Libya - an end to its support for terrorism, diplomatic friendship, oil and gas deals and petrodollar investment. We may get some of those things but, in the embarrassing celebrations on the return to Tripoli of Abdul Baset Ali al-Megrahi, the convicted Lockerbie bomber, Colonel Muammar Gaddafi has reminded us that we have no right to presume; in diplomacy, everything is negotiable.
China's calculation over Burma is unlikely to be so different from our Government's assessment of Libya. Arguably, China is more realistic, less prone to moral histrionics. Burma's generals have waged war for decades against the country's ethnic minorities. Its Government is engaged in an intermittent but brutal campaign to subjugate a constellation of tribal groups whose stubborn independence mocks the generals' claim to dominion over the state that they renamed Myanmar.
Beijing knows the history, geography and ethnography better than we do - the warring tribes, the heroin trade, Rangoon's dubious peace deals with opium warlords on the Thai and Chinese borders. The ceasefire between the Burmese Army and the rebels appears to be unravelling and we could speculate as to the reasons. As Burma's links with China multiply, as roads are built, as pipe is laid, the risk posed by the rebels and the drug trade become more inconvenient than the short-term profit. Burma's new friend is not keen on insurrection and it might be prepared to look away while the Burmese Army cracks a few heads on Chinese soil.
We looked away; we dumped Burma, abandoning its people to their fate in a fit of righteous indignation over the pigheaded behaviour of the generals, a violent clique who showed not the slightest interest in bowing to the teachings of former colonial masters. We had Tony Blair's "ethical foreign policy" and Burma was the pilot test, the first and last occasion when we put morality before money. Premier Oil, a small British company, was told to quit Burma. Eventually, it did. Burma turned its face East and found bigger friends.
Our writ no longer runs east of Suez. It is China's dominion and one good outcome of this Burmese refugee crisis is that Beijing must begin to acknowledge that, if it wishes to plunder the world like a colonial power, it must police it, too. Power brings responsibility and refugees. A more civilised Burma would bring Beijing less trouble and more profit.
The same can be said of Libya. Our new "ally" is a staging post for African migrants who make their way in leaky boats to Sicily. It is a flow that could easily turn to a flood. As Burma is to China, Libya is our southern border. It is there, an opportunity for profit and for trouble, whether we like it or not.

 

[CougarKing]

And the PLA shows off new fei dan.

China to Unveil New Missiles At National Day Parade
AGENCE FRANCE-PRESSE
Published: 2 Sep 2009 05:43 

BEIJING - China will unveil a range of previously unknown missiles during its National Day parade Oct. 1, including intercontinental ballistic nuclear missiles, state media said Sept. 2.

New hardware on display also will include conventional cruise missiles, and both short- and medium-range missiles, the Global Times newspaper reported, citing an unnamed People's Liberation Army source.

"These missiles are domestically designed and manufactured and have never been officially reported before," the source, who is with the PLA's strategic missile defense unit, was quoted as saying.

The weapons have already been distributed to the military and are ready for operation, the source said.

China's missile development program has caused concern overseas, particularly in the United States, amid projections that it could soon tip the security balance in the Taiwan Strait.

An August report by the Rand Corporation, a U.S. think-tank, said China was increasing both the quantity and quality of its short-range ballistic missiles, which could challenge the United States' ability to protect Taiwan from possible attack.

China also caused alarm overseas in 2007 when it successfully tested an anti-satellite missile, raising fears of a space arms race.

China issued a military policy white paper earlier this year, saying its missile program was aimed mainly at "deterrence." However, it added it was also capable of "conducting nuclear counter-attacks and precision strikes with conventional missiles."

China will stage a huge military parade and pageant Oct. 1 in Beijing to celebrate the 60th anniversary of the founding of communist China.

The parades, held every 10 years, typically showcase new-generation weapons systems and are closely scrutinized by both domestic and foreign military watchers for clues about Chinese development trends.
The expert quoted by the Global Times did not reveal the model names or numbers of the missiles.

However, missiles believed to have been developed by China include the Dongfeng 41, a solid-fuel ICBM with an estimated range of up to 7,500 miles (12,000 kilometers).
The missile would be China's longest-range ICBM, according to U.S.-based GlobalSecurity.org, a leading independent source of military information.

 

[CougarKing]

If this proves true, so much for China's "non-interference in another nation's domestic afairs" policy.

China training, arming militants against India
China denies incursions by its troops into Indian territory across the Line of Actual Control. But NDTV has exclusive information that China is actively training and arming insurgent groups in Manipur and Nagaland.

On video, an alleged Manipur militant is interrogated. Intelligence officials say he confirms that China is training Manipuri militants.
Sources say at least 400 cadre of a Manipuri insurgent group, the People's Liberation Army (PLA), have been undergoing arms training in China's Yunnan province for the last year. Ronie, alias Robindro, a self-styled major of the Manipur PLA, brags "16 platoon went to China recently, some of them have come back."

The insurgents travel to Yunnan via Myanmar. Arms for these militants also come via this route. And China's role doesn't stop at training militants.

Issac Chisi Swu, chairman of the NSCN, a Naga insurgent group, which is still upholding a ceasefire with India, has been hosted in Beijing and Kunming this May. His main officer in charge of acquiring weapons has also been twice to China.

According to intelligence operatives, a Chinese company supplies machine guns and hi-tech communication equipment to both Naga and Manipuri militants. Anti-aircraft guns have also been acquired from China by these groups, which are currently in Myanmar.

The arrested Manipuri militant has told interrogators that the PLA and other Manipuri groups are being armed and trained by Chinese experts in Myanmar. This is apparently in preparation for a major showdown with Indian security forces next year. 

http://www.ndtv.com/news/india/china...inst_india.php

 

[Edward Campbell]

This sort of "interference" - support for armed revolutionaries - has been part of the CCP's official policy since the end of the 2nd World War, before there even was a Red China. The Malaya Emergency (1948 to 1960 (and beyond)) is my favourite example, but it's not the only one.

 

[Edward Campbell]

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s Globe and mail website, is a report on another sort of “interference:”

http://www.theglobeandmail.com/report-on-business/china-us-trade-tensions-mount/article1285968/

China-U.S. trade tensions mount
Beijing launches antidumping probes into imported U.S. auto, chicken products after U.S. slaps tariffs on tires

Gillian Wong

Beijing
The Associated Press
Sunday, Sep. 13, 2009

China is launching antidumping investigations into imported U.S. auto and chicken products, the government said Sunday, adding to a string of trade disputes with Washington including a recent decision to raise tariffs on Chinese-made tires.

The Commerce Ministry said it would look into complaints that American auto and chicken products are being dumped into the Chinese market or are benefiting from subsidies. The ministry said there are concerns the U.S. imports have “dealt a blow to domestic industries.”

The ministry statement did not elaborate on the complaints or how the investigation would proceed.

Washington and Beijing have recently traded accusations of protectionism, which they agree will hurt efforts to end the global economic crisis.

The U.S. and China, the world's largest and third-largest economies, have been engaged in a series of battles over access to each other's markets for goods such as tires, steel pipe, music and movies.

President Barack Obama on Friday approved new tariffs on all car and light truck tires coming into the U.S. from China, a move Beijing condemned as protectionist and a violation of global trade rules.

The Commerce Ministry's statement said China remained firmly opposed to protectionism.

“Since the financial crisis, China's actions have proven this point,” it said. “China is willing to work with countries around the world to act together to promote the quick recovery of the world economy.”

China and the U.S. banned each others' poultry in 2004 following an outbreak of bird flu in Asia. But China lifted the ban after a few months and has complained that Washington refused to do the same.

Since then, China has imported more than 4 million tons of U.S. poultry — mostly feet and other parts that are popular in China but not elsewhere.

The World Trade Organization launched an investigation of the U.S. ban on Chinese poultry at the end of July. Beijing told the WTO's dispute settlement body that Washington had imposed protectionist measures in completely banning Chinese chicken products entering the U.S. market. The United States said it was still examining whether Chinese poultry was safe for human consumption.

Last month, China said it revised its tariffs on imported auto parts after losing an appeal of a WTO ruling against its policy of requiring foreign automakers to buy more than 40 per cent of the components used in any China-made vehicle from local suppliers or pay more than double the usual tariff on imported parts.

Beijing's revision was such that all imported auto parts will be taxed at the same rate regardless of the percentage of foreign-made parts used to make a vehicle.

China argued the higher tariffs were needed to prevent auto makers from evading steep vehicle import duties by importing cars in large chunks. The U.S., the 27-nation EU and Canada contended that the tariffs encouraged car parts companies to shift production to China, costing Americans, Canadians and Europeans their jobs.

“We” contend, probably correctly, that ”the tariffs encouraged car parts companies to shift production to China, costing Americans, Canadians and Europeans their jobs.” Sauce for the goose/sauce for the gander, and all that.

Watch for China to snipe, more and more, at America as it (China) tries to elbow its way into the “front row” of the world’s powers.

 

[George Wallace]

This could also result in the Americans, Canadians and Europeans turning around and stopping the exporting of parts to China, preferring instead to assemble vehicles using those parts at home, reversing the trends and keeping auto workers at home happy.

 

[Edward Campbell]

This could also result in the Americans, Canadians and Europeans turning around and stopping the exporting of parts to China, preferring instead to assemble vehicles using those parts at home, reversing the trends and keeping auto workers at home happy.

That is, roughly, what Jeff Rubin predicts in his recent book, albeit for a different reason.

But the problem for America, Canada and Europe is the demand curve. The demand curve for automobiles (and therefore for auto parts) is trending down in North America and Europe. The places where the demand curve for automobiles are still trending upwards are China and India. China wants to create a domestic parts industry and it can, probably will, use unfair trade practices to get one. Watch for India to follow suit.

 

[CougarKing]

This sort of "interference" - support for armed revolutionaries - has been part of the CCP's official policy since the end of the 2nd World War, before there even was a Red China. The Malaya Emergency (1948 to 1960 (and beyond)) is my favourite example, but it's not the only one.

Well one does not really hear about China supporting the Maoists in Nepal or India? Or a similar movement in Bangladesh.

I have read though about a possible Chinese link in the past to the Marxist rebel movement in the Philippines called the New People's Army(NPA), though it is still unclear on whether they still support the NPA nowadays.

And speaking of rebellion- or more rather a possible seperatist Uighur Jihad- in China's own backyard...it seems the UAE's Emirati may have more sympathy for the Uighurs in China than previously thought.(even if the article says the plane was not heading directly to Xinjiang but to Hanyang in Hubei province, IIRC)

http://www.upi.com/Top_News/2009/09/07/India-detains-UAE-plane-crew/UPI-41251252380039/

India detains UAE plane, crew


Published: Sept. 7, 2009 at 11:20 PM
Order reprintsCALCUTTA, India, Sept. 7 (UPI) -- A United Arab Emirates transport plane bound for China was detained in Kolkata after it was found to be carrying weapons, Indian officials said.

The plane's nine crew members were being questioned as to why the cargo was not declared when the craft, bound for Hanyang in China, landed in Kolkata, formerly called Calcutta, for refueling, the BBC quoted an Indian Defense Ministry spokesman as saying.

It was not clear why the plane was carrying arms to a country which is an exporter of such items, the BBC report said.

The Times of India reported the C-130 Hercules aircraft was flying to China after taking off from UAE's Western Air Command base in Abu Dhabi.
The report said the UAE government had applied to Indian authorities for clearance, which is required for a military aircraft not only to fly over Indian airspace but also to land at a civilian airport.

"As permission was sought through proper diplomatic channels and UAE is a friendly country, the clearances were given," one official told the newspaper.

However, the official said spaces on the request form requiring mention of any arms aboard were marked "nil."

"This was in clear violation of rules and the crew was detained," the official said.

 

[Edward Campbell]

The “drama” appears to be over, according to this report, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from the Times of India website, but there are still questions:

http://timesofindia.indiatimes.com/news/city/kolkata-/Drama-over-UAE-plane-flies-to-China/articleshow/4997031.cms

Drama over, UAE plane flies to China

11 September 2009
KOLKATA:

The United Arab Emirates Air Force C-130 J Super Hercules aircraft, which had been held up at the Kolkata airport since Sunday evening following the discovery of arms, ammunition and explosives in its cargo, finally took off for Xiangyang in China at 9.24 am on Thursday. The nine crew members left by the flight as well.

Though there were speculations on whether the plane would be escorted back to Sunday's entry point into Indian airspace over the Arabian Sea, the defence ministry and Indian Air Force allowed it to take its original path. The plane reached Xiangyang around noon after flying over Dhaka, Chittagong and Kunming.

The plane had been seized by Customs authorities on Sunday night as the documentation submitted prior to its arrival did not disclose the cargo. The technical halt for refuelling and giving the crew rest was originally scheduled to last 13 hours, but stretched to 88 hours.

Though crew members had been cleared by the immigration department on Tuesday and the ministry of external affairs (MEA) and ministry of defence (MoD) indicated they would allow the aircraft to proceed the day after, the flight was held up due to delay in applying for Air Defence/AOR clearance by the UAE government.

The crew had gone down to the airport on Wednesday afternoon, expecting a clearance to take off, but had to return to the hotel after a four-hour wait. They heaved a sigh of relief when the permissions arrived late on Wednesday.

It was learnt that the UAE government has admitted to a mistake in the documentation and apologized for failing to report the weapons. Since UAE has friendly relations with India, the government considered the matter sympathetically to avoid a diplomatic row.

The matter could have been resolved earlier had conventional weapons been on board. But the presence of three boxes, marked "combat missiles", led to the logjam. Sleuths suspected that deadly US-made Harpoon missiles were being channelized to China from UAE and Egypt. If that suspicion were proved true, the unauthorized proliferation could lead to regional imbalances and trigger a crisis, felt experts.

"The presence of missiles on board made the situation grave. Already, there are reports of Pakistan having modified Harpoon missiles to strike land targets in India," an analyst pointed out.

And, from the China Digital Times:

http://chinadigitaltimes.net/2009/09/arms-laden-uae-plane-gets-nod-to-leave/

Arms Laden UAE Plane Gets Nod to Leave

The plane held in China allegedly carrying undeclared arms heading for China from the United Arab Emirates has been released, the Times of India reports:

Sources say that the China-bound UAE Air Force aircraft detained at the NSC Bose International airport in Kolkata after arms and
ammunition were found on board as the Customs authorities has been allowed to leave India. It is said that the defense ministry has been told to leave the plane after the crew were found to be cooperative. The UAE has expressed regret over the incident. ( Watch Video )

The C-130 Hercules aircraft has been waiting to resume its flight for the past four days.

An external affairs ministry statement on Tuesday said that the UAE authorities, both in New Delhi and Abu Dhabi, had formally regretted the omission of items carried by the aircraft and had described it as a ‘technical error’.

See also an article from The Times which gives more details about the plane:

The discovery has raised eyebrows, as the UAE buys most of its weapons from the United States and European Union, which impose strict controls on arms transfers to China.

The most controversial theory is that the weapons include high-tech equipment that China would like to examine or copy.

Last year the UAE purchased 14 Maverick air-to-ground missiles from the United States and also signed a contract to buy US Patriot air defence missiles.

The UAE has refused to comment on the matter, fuelling suspicions that the three boxes of weapons found on the Hercules C130 transport plane were supposed to be secret. The aircraft was refuelling en route from Abu Dhabi to the northern Chinese city of Xianyang — a big arms production centre.

There are at least two “alternate theories” (other than arms for Uighur separatists):

• Arab weapons to be smuggled into Pakistan (or to other Muslim Asians outside of China); or

• US technology being (illegally) sold to China.

My personal inclination – based on next to nothing, I hasten to add -  is to believe the latter.

 

[CougarKing]

Not really that surprising- any foreign reporter in mainland China should be aware of the risks of trying to cover topics like these.

http://sg.news.yahoo.com/ap/20090919/tap-as-china-journalists-bb10fb8.html

3 with Japanese news agency assaulted in Beijing Updated September 19, 2009 03:05 PM 

BEIJING (AP) — Three employees from the Japanese news agency Kyodo were assaulted in their Beijing hotel room as they tried to cover a rehearsal of a military parade celebrating 60 years of China's communist rule, the news agency today (Sept. 19).

The three were kicked and made to kneel Friday evening at the Beijing Hotel, close to Tiananmen Square at the heart of Beijing, Kyodo reported.

Yasushi Kato, bureau chief of the Kyodo News Beijing office, told The Associated Press several men stormed into the hotel room after one of the journalists opened the door, but they did not identify themselves. Kyodo reported they destroyed two computers by throwing them into the corridor.

Kato said a reporter and a cameraman were Japanese and the third was a Chinese assistant.

China has been preparing for the Oct. 1 celebration with tightened security.

On Friday afternoon, police cleared streets and office buildings in parts of the capital before parade floats, tanks and trucks bearing intercontinental ballistic missiles rumbled toward the square for the late-night rehearsal.

Some foreign media were told not to film and photograph the parade. AP Television News carried a live feed of military convoys, but China's Foreign Ministry asked it to stop.

A Foreign Ministry spokeswoman said she had not heard about the Kyodo case and said the ministry had not asked news agencies not to take photos of the parade.

A woman at the information office of the Beijing Public Security Bureau said she had not heard about the case.

An employee at the front desk of the Beijing Hotel said the hotel had asked guests not to stand on the balconies to watch the rehearsal, but they could watch from inside their rooms. He did not give his name.

Kato said the Kyodo employees had been on the balcony to watch the rehearsal but had not taken pictures from there. He said they were inside the room when the men entered.

The journalists returned to their office this morning, he said.

The official Xinhua News Agency said Saturday a planned rehearsal for Sept. 26 had been called off to avoid further affecting the public. 

 

[Edward Campbell]

There is a good article, here, in CDAI’s 2008 Vimy papers by Christian Constantin and Brian Job in which they set out China’s 21st early century strategic aims:

”First, China’s priority remains domestic economic development and successfully dealing with the economic, social and political challenges resulting from reform. In order to deal with these domestic challenges, PRC leaders expect that the international environment will remain stable and conducive to economic interactions.

Second, China will defend agreed-upon international norms based on the fundamental norm of sovereignty and the national right to chose one’s path of development. In other words, Beijing remains dedicated to the reunification of territory —read Taiwan— and will remain cautious about international interventions unless authorized by the U.N.

Third, China is already a great power and expects to be treated as such; nonetheless it will behave responsibly by exercising caution and self-restraint in order not to threaten its partners while it develops.”


The key phrase is, ”China is already a great power and expects to be treated as such.” That’s why the Chinese are ”looking for more input on how the world runs,” and if they do not get it, if Europe and America demur, then China may just upset the economic apple cart.

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from yesterday’s National Post is further commentary of China’s aims and concerns:

http://www.financialpost.com/news-sectors/story.html?id=2008801

Saturday Interview: Yuen Pau Woo

Eric Lam, Financial Post

Friday, September 18, 2009

If economists had to pick a winner in the global recession, China might be it. Ruled by a communist government, but also home to a chaotic market, China has sailed through the economic crises of the past year relatively unscathed. Now, cash-rich and armed with a burgeoning middle class, China may be getting set to fulfill its destiny as the next great world power. But is this what the Chinese even want?

The Financial Post's Eric Lam spoke with Yuen Pau Woo, chief executive of the Vancouver-based Asia Pacific Foundation of Canada, about the China conundrum.

Q. How did the global economic crisis play out in China?

A. Well, there wasn't a crisis. In the period leading up to the fall of 2008, the problem in China was that it was growing too fast. The Chinese government in the 12- to 18-month period before September 2008, had been trying to slow the pace of Chinese growth. So when the Lehman Bros. implosion took place, the Chinese suddenly realized they should no longer decelerate the economy because the spillover effects of the U.S. recession would eventually affect Chinese exports. And it did.

Q. So how did China avoid financial ruin?
A. The key is to understand China entered the crisis in a strong position. If China was a locomotive, it was already gathering speed and the Chinese were stepping on the brakes. When the Chinese decided to put in place their stimulus package last November, they took their feet off the brakes. They could resume their acceleration very quickly. In the United States, the stimulus was about putting more gas in the engine to climb up already difficult terrain.

Q. The Chinese must be feeling pretty good about themselves right now?
A. You'd think the Chinese would be pretty smug about the crises and gloating about how the U.S. is in such a funk. But my conversations with Chinese leaders show no signs of triumph. On the contrary, they are petrified about what the U.S. downturn will mean for the Chinese economy. The comfortable modus operandi that the world lived in until September 2008 was for the U.S. to spend beyond its means and for exporting powers like China to supply them with consumer goods. The Chinese and most Asian leaders now recognize the U.S. downturn will be prolonged and economic growth will be subpar.

Q. Has this changed the power dynamic between China and the United States?
A. China's relative political and economic weight in the world has increased. With the crises, industrialized countries are forced to pay closer attention to China's role in the world and on international governance issues. Interdependence is still the watch word. China is seen as an emerging superpower, but it is emerging as a status quo power rather than a disruptive force.

Q. No plans for world domination then?
A. This is one of the big misconceptions of fear mongerers who have the idea China wants to dominate the world. When you speak to Chinese leaders, their principal concern is not how to run the world economy but domestic, economic and social challenges. The Chinese don't like to be mentioned in the same breath as the United States, because they don't believe they are the same level, and don't want the responsibility of being the policeman or the economic engine of the world because they are not ready for it.

Q. China may not have a choice?
A. The U.S. economy will not provide the engine of growth it provided in the first part of this decade. The Chinese understand that and they're terrified. China was a closed economy until the late 1970s. Can you imagine the kind of fear and apprehension Chinese citizens felt when their government told them they would open China to the world economy? Expose China to Western competition and all the ravages of Western capitalism? Change is frightening and fear works on both ends of the equation. As Canadians now prepare for an era of more visible Chinese presence, the only way to equip ourselves is to learn more about China.

Q. How does Canada fit in? What do the Chinese think of us?
A. The man on the street understands the Canada-China relationship has gone through a rocky spell. You hear that from taxi drivers and students and office workers. But the government seems to be trying to change course. A very important test coming up will be the regulatory review process of the [$1.9-billion] PetroChina bid in the [Athabasca] oil sands. This investment will likely be reviewed by Industry Canada, which can, on the grounds of national security, reject the investment. That would send a very negative signal to the Chinese both at the business level and at the political level.

Q. Does this mean you'll have to move to China to smooth things over?
A. You know, I've never lived in China, but I go there often. I consider myself Canadian, born in Malaysia and grew up in Singapore. I came to Canada to go to school, and I've lived in Vancouver and Newfoundland. But maybe the tables will flip and I will be of more use there. We will see.

Financial Posterlam@nationalpost.com

Consider:

• “They [the Chinese leadership] are petrified about what the U.S. downturn will mean for the Chinese economy;


• ”China's relative political and economic weight in the world has increased;”


• ”Industrialized countries are forced to pay closer attention to China's role in the world and on international governance issues;”


• [China] ”is emerging as a status quo power rather than a disruptive force;” and


• [Chinese leaders’] ”principal concern is not how to run the world economy but domestic, economic and social challenges.”

This is, pretty much, the mainstream view of China, as I understand it. Most people who might be described as “experts” or old China hands and the like say, roughly, the same thing.

China IS a “great power,” but it is not, à la the USA, a hyper-power, yet and while it wants, expects to be treated as a great power it will, for many years, eschew a self-imposed global “leadership” role. China still needs to sort out China; the internal, Chinese job is not done; it has gotten off to a good start but it is still just starting.

China is building its military muscle but it is not a threat, despite the best efforts of a huge, well funded “China threatens us” lobby in Washington.

 

[Kirkhill]

The fear of the Chinese hierarchy, in my distant view, derives from the nature of China.  Like Edward, I believe, I see China as an old-fashioned kind of empire as opposed to a unitary, national state.  It defines itself by walls and boundaries and spheres of influence and taxable clients.

China’s conservatism demands that it is reluctant to let go of the ancient paradigm that they trace back to the Yellow Emperor.  The well defined hierarchy and controlled economy is their preferred position.  This is not a unique cultural position…..even my Scots were (are?) afflicted despite Adam Smith.  In the 1200s people lamented the death of Alexander III with the comment that “all their gold turned to lead” when he died leaving the country leaderless and setting the stage for the Bruces, the Balliols and ultimately the Stewarts and 400 years of war.  There is a comfort in the notion of the benevolent dictator, or the Great Leader.

Historically though that system is only as good as the Leader and seldom outlasts him or her.  That results in empires suffering the fate of the French, the Spanish, the Russians and the Victorian Brits (as opposed to the Georgian Brits of which more shortly).  One of China’s problems is that there is no singular historical entity that is China.  There have been many Chinas and the Chinese follow an ancient human tradition of seeing their past in the best possible light and lay their claims based on the sum of their ancestors conquests, much as Lithuanians look back on their glory days when they ruled the empires of Moscow, Kiev and Warsaw.

It seems to me that the Chinese have yet to have the Little England discussion that characterized the Georgian and Early Victorian period of Britain after the loss of the American colonies.

Put succinctly the Little Englanders argued for an empire of trade vs a political empire.  This empire of trade was characterized by more Calcuttas, Singapores and Hong Kongs and fewer Indias, Canadas and Australias.  It manifested itself in support for the Royal Navy maintain freedom of commerce on the high seas vs an army dedicated to controlling restive populations.

China, like Prussia, Russia, France and Spain is still spending too much energy and effort trying to control “its” people.  It can’t let go and accept the chaos that comes with letting people make their own decisions.  It is expending effort and resources trying to hold its political empire together and missing the opportunity to become a hyper-power like the US.

When the US cut away from Britain that gave Brits the opportunity to rethink what had happened to their empire.  Initially their political empire was tiny.  They only governed the many dialects and languages found on the British Isles.  They made money the way the Dutch, the Danes and the Swedes had, by trading.  That led to York Factory and Calcutta and the early ports in the US.  They were trade emporia.  IKEAs of their day if you will.  The problems arose when settlers moved into the shadow of the emporia, disrupted the lives of the natives and then demanded protection, for which they were unwilling to pay.

When the US settlers finally decided to quit the protection of the Empire, the reaction of the Little Englanders was: “Thank God”.  They promptly turned around and started investing billions of pounds in the US economy.  Other Little Englanders, like Raffles, ran off to Singapore, or the Mathesons and Jardines to Hong Kong, and set up their own little trading posts.  They had no desire to dominate the locals.  They just wanted to milk them.

The British Empire fell when the Victorians, on grounds that combined morality and national pride, decided they wanted to start painting maps pink.  The cost of doing business, which now included the cost of governance, rose exponentially and ultimately bankrupted the treasury (circa 1947).

The US, which is the son of the Georgians, in my humble opinion, was content to let the dollar work for it.  Its empirical urges could be contained at a relatively limited cost within the constraints of the continental US.  Once the continent had been tamed then the discussion became between those harbouring empirical urges and those just seeking liberty to live and trade.  By and large the traders have won out in the US, both domestically and internationally.  The hegemony of the US was largely built on the Dollar, not on the army or the navy.  (The yanks seem determined to turn all of that around now….. but that is too much of a digression, even for me).

Until the Chinese can let go of their need for a physical empire then I don’t see the likelihood of a Chinese hegemony any time soon.

That doesn’t mean that, in trying to maintain and, needs must, expand their empire they will not create problems for us.  Just like Louis XIV had to keep pushing outwards to keep his population both fed and occupied so the CCP will have to keep acquiring new resources, as Thucydides alludes to in his thread on Canada and the impact on nationalism.

For me that suggests potentials for conflict that could impact Canada both at home and abroad.

Internationally, what do we do when China and its ancient enemy India, finally come to serious blows for control of South East Asia and the Stans? 

Domestically, what do we do if China invests in our oilsands and a pipeline to Rupert and we decide to turn off the taps to protest a human rights violation, or to take sides in the aforementioned conflict, and China decides to support a Haida land claim in order to exert control over the pipeline that they built?  Call it a Canadian Suez Crisis with China in the role of Britain and Canada’s Prime Minister acting as Nasser.  As we are constantly reminded China has a strong need for energy and it remains an open question, as far as I am concerned, as to whether or not China would let us become a major contributor to their economy and then live with the vagaries of decisions made by our democratically elected governments.

 

[Edward Campbell]

A few rather random arguments follow.

The Chinese are accustomed to having to ”accept the chaos that comes with letting people make their own decisions.” There have been, by my guesstimate, about 25 interregna over the past 4,000± years – about one period of chaos and local, if not really individual, decision making every 160 years. That’s, probably, more often than the Brits have done the same thing.

In fairness, in every case the Chinese have fallen back on a “strong” (stronger than its competitors, anyway) government – but so, by my (very imperfect) reading of history, did pretty much everyone over about 5,700± of the past 6,000± years of world history.

The Chinese may be the exception to the decline and fall rule. Chinese “empires” have declined and, indeed have fallen in the past – most recently in 1644 when the Qing ( 清 ) replaced the Ming ( 明 ) (with an extended, named, interregnum by the Shun ( 順 ). China, Han China, those descended from the Yellow Emperor, is, once again, a great power and may (but not in my lifetime) be a great “empire” again. If fact some might argue that by “holding” Tibet and Xinjiang, by regaining Hong Kong and by having secured broad international acceptance of its position that Taiwan is just a “missing” province,  China is, already, a great empire “again.”

Confucian thought gets in the way.

There are five important “relationships” that are central to Confucian thought:

1. Father to Son – requiring kindness in the father, and filial piety in the son;
2. Elder Brother to Younger Brother – requiring gentility (politeness) in the elder brother, and humility in the younger;
3. Husband to Wife – requiring righteousness in the husband and obedience in the wife;
4. Friend to (younger) friend – requiring consideration among the elders and deference among the younger; and
5. Ruler to Subject – requiring benevolence among the rulers and loyalty among the subjects.

Also central is the idea of the “gentleman” (for want of a better word) who is:

• Moral;
• Bound by filial piety and loyalty where these are due; and
• Humane and benevolent.

These relationships with their required conduct and the required attributes of the gentleman do not leave much, if any, room for the sort of liberalism that allows, much less encourages people to accept, even embrace the ”the chaos that comes with letting people make their own decisions.”

In fact the very nature of real conservatism is that one accepts that society is like the water in which the fish swims and it must be tended – kept clean and safe. A Chinese conservative is bound, by the rules of filial piety and loyalty, to do his best for his family within very real, important and respected limits imposed by social custom and the “needs” of morality, humanity and benevolence. The decisions of the rulers, so long as they do not conflict with filial piety (the first commandment, in a way), gentility, righteousness, consideration, etc, must be loyally supported. This is diametrically opposite to “our” (Anglo-American) history and traditions. It leads to a diametrically opposite political “model,” too. That’s why the idea of the “mandate of heaven” ( 天命 ) lasted so long, and, indeed, lasts still. The “mandate” of the current Red Dynasty will last so long as the rulers are able and just – but it will, as every other dynasty has, fall when the rulers forget their duty of “benevolence” (which goes well beyond kindness and includes justice and “good” governance, too).

...
Domestically, what do we do if China invests in our oilsands and a pipeline to Rupert and we decide to turn off the taps to protest a human rights violation, or to take sides in the aforementioned conflict, and China decides to support a Haida land claim in order to exert control over the pipeline that they built?  Call it a Canadian Suez Crisis with China in the role of Britain and Canada’s Prime Minister acting as Nasser.  As we are constantly reminded China has a strong need for energy and it remains an open question, as far as I am concerned, as to whether or not China would let us become a major contributor to their economy and then live with the vagaries of decisions made by our democratically elected governments.

Very interesting prospect! Lots of fuel for debate. Good question!

 

[Kirkhill]

The Chinese are accustomed to having to ”accept the chaos that comes with letting people make their own decisions.” There have been, by my guesstimate, about 25 interregna over the past 4,000± years – about one period of chaos and local, if not really individual, decision making every 160 years. That’s, probably, more often than the Brits have done the same thing.

In fairness, in every case the Chinese have fallen back on a “strong” (stronger than its competitors, anyway) government – but so, by my (very imperfect) reading of history, did pretty much everyone over about 5,700± of the past 6,000± years of world history.

One of the triumphs and curses of Chinese society, one that is shared by the Jews, is that they have had a literate bureaucracy for a few thousand years that has recorded their history and thus has a body of "case law" available to them to justify precedence.

My illiterate, barbarian ancestors have only been so afflicted for the last 1000 years (and it spawned a radical offshoot that required everyone to write their own history).  We're still making it up as we go along.

I take your point on reversion to strong central government, as I noted in my missive,  my brethren may be more inclined than I care to admit towards a Great Leader.....cf the discussions about controlling socialists and the tendency for Clydesiders to elect the likes of Red Rory and George Galloway.

But, I think the net tendency of the Chinese in the foreseeable future is towards a centralized government while the "West", broadly and largely defined, still has a significant element that pines for a degree of chaos in their lives.

Are we violently agreeing again?

 

[CougarKing]

And Liang emphasizes something that is already increasingly evident:

http://www.defensenews.com/story.php?i=4287428&c=ASI&s=LAN

China Defense Minister: We Can Compete with West
AGENCE FRANCE-PRESSE
Published: 21 Sep 2009 15:37 

BEIJING - China's military capability has taken a "quantum leap" thanks to a modernization drive and its weaponry rivals that of Western countries, the nation's defense minister said in an interview Sept. 21.

The comments by Liang Guanglie came in an interview published by Xinhua News Agency 10 days before China is set to roll out a range of advanced weaponry in a National Day military parade.

"Our capabilities in waging defensive combat under modern conditions have taken a quantum leap," Liang was quoted as saying.

Liang rattled off a list of achievements in military technology and hardware by the People's Liberation Army (PLA), including military-use satellites, advance aircraft, tanks, artillery and missiles.

"It could be said that China has basically all the kinds of equipment possessed by Western countries, much of which reaches or approaches advanced world standards.

"This is a very remarkable achievement, which not only reflects the level of modernization of our army, but also tremendous changes in national science and technology strength."

Chinese media said earlier this month that "52 types" of new homegrown weapons would debut during the Oct. 1 parade, and recent rehearsals through the capital have offered glimpses of the hardware, notably an array of powerful missiles.
"It is no exaggeration to say that our Army has a strong combat capability," Liang said.

China has poured money into its armed forces in recent years in a bid to transform the once-backward PLA into a lean, professional and high-tech fighting force.

China's military spending rose 15.3 percent in 2009 to $69 billion, according to a budget submitted to parliament in March, the latest in a string of double-digit increases.

Amid growing concern overseas about China's military intentions, Beijing stresses the defensive nature of its armed forces.

 

[CougarKing]

Another update regarding Cross-Strait Relations and US-China relations:

U.S. NSC Reviewing Taiwan Issues
By wendell minnick
Published: 21 Sep 2009 14:39 

TAIPEI - The U.S. National Security Council (NSC) is conducting a review of U.S. defense programs for Taiwan amid great recent changes in China-Taiwan relations, said sources in Taipei and Washington.

A Taiwan defense official said the NSC is conducting an overall review of U.S. policy on Taiwan, but a U.S. government source would only confirm that the "administration is working on decisions for various [Taiwan] defense programs still on the books, but not on a Taiwan policy review."

Programs under review include the release of 60 Sikorsky UH-60M Black Hawk utility helicopters and 66 Lockheed F-16C/D Block 50/52 fighters the United States has on hold. Taiwan has been pushing hard for the release to replace ageing Bll UH-1 utility helicopters and Northrop F-5 Tiger fighters.

There are still calls for a policy review that first emerged in April in Washington policy circles. The recent shift in China-Taiwan relations has placed the Obama administration in an awkward position of trying to improve ties with China while supporting Taiwan's defense needs.
Dennis Wilder, former senior director for East Asian affairs on the Bush administration's NSC, said a "review at this time is quite appropriate."

"There is a new U.S. representative in Taipei and it has been over a year since [Taiwan] president Ma Ying-jeou entered office," Wilder said, now with the Brookings Institution.

"There will be higher attention at the White House to Asia as President Obama plans for his November trip to Asia to attend the APEC Summit in Singapore and make stops in other Asian capitals, including Beijing," he said.

Current policy does not account for the dramatic changes in cross­strait relations and internal politics since the United States switched official recognition from Taipei to Beijing in 1979. Since then, China has emerged as a diplomatic, military and economic powerhouse, and Taiwan has shed dictatorial rule to become a thriving democracy.

Cross-strait negotiations, stalled since 1998, have progressed quickly since the Chinese Nationalist Party (KMT) retook the Taiwan presidency and legislature in 2008 elections. In November 2008, China and Taiwan signed 13 agreements, including a formal end to the 1949 ban on direct travel.

China and Taiwan are now working on the Economic Cooperation Framework Agreement and a memorandum of understanding on final supervision cooperation across the Taiwan Strait. There have been open discussions both in China and Taiwan of military confidence-building measures and a possible peace treaty.

"Cross-strait relations are changing and U.S. policy must adapt to these changes. However, I think any review should and will reaffirm strong U.S. support for Taiwan as codified into law in the Taiwan Relations Act," Wilder said.

Improved relations between China and Taiwan could actually serve as a silencer of debate on Taiwan in the U.S. government.

"With North Korea and China sucking up most people's time, the cross-strait issue seemingly is going smoothly, and with the no-troublemaking policy of the Ma administration, I just don't see Taiwan getting a lot of attention," said a former U.S. defense official.

From 2000-2008, the United States was distracted by the antics of Taiwan President Chen Shui-bian, now serving life in prison for corruption. Chen's pro-independence position and a tendency to irritate China and the United States forced Washington to focus on Taiwan issues. However, with the return of the KMT to power in Taipei, cross-strait relations have been on the fast track.