China is a Sleeping Dragon

Learn about China. In response to the “peaceful rise”of China, which has alarmed Asian neighbors such as Vietnam, arms sales have soared. With its ability and tendency to copy technology, China has become a prime supplier of arms to its near neighbors and to Africa. China competes directly with Russia as an arms seller.

“After decades of importing and reverse-engineering Russian arms, China has reached a tipping point: It now can produce many of its own advanced weapons—including high-tech fighter jets like the Su-27—and is on the verge of building an aircraft carrier.”

“Not only have Chinese engineers cloned the prized Su-27′s avionics and radar but they are fitting it with the last piece in the technological puzzle, a Chinese jet engine.”

“In the past two years, Beijing hasn’t placed a major order from Moscow.”

“Now, China is starting to export much of this weaponry, undercutting Russia in the developing world, and potentially altering the military balance in several of the world’s flash points.”

Deng Xiaoping’s decision in 1978 to promulgate the “Four Modernizations” (agriculture; industry; national defense, science and technology ) has resulted in an unprecedented expansion of an economy that was once moribund. Twenty years later china’s GDP was $1 trillion compared to the $9 trillion in the US. In 2009, China’s GDP had quintupled compared to1999. In 1986, China’s GDP amounted to $295,715,900,000.00 while Italy’s GDP was $617,003,100,000.00.

Napoleon observed in 1808: “. When it awakes, the world will shake.” China’s economy, like Popeye on organic spinach in the 20th century, will become like the Hulk on steroids during this century. It will one day surpass the United States in the output of goods. Why? Population, determination, consumption and the Party.

Two excellent books about China: When China Rules the World: The Rise Of The Middle Kingdom And The End Of The Western World by Jacques Martin and Superfusion: How China And America Became One Economy And Why The World’s Prosperity Depends On It, by Zachary Karabell.

Oct 1 12:11 AM US/Eastern
BEIJING (AP) – Growth in Chinese manufacturing picked up pace in September, a survey showed Friday, adding to evidence that China’s economic recovery remains on track.

The state-affiliated China Federation of Logistics and Purchasing said its purchasing managers index, or PMI, rose to 53.8 in September from 51.7 in August. Numbers above 50 show manufacturing activity expanding.

The index, an indicator of future manufacturing trends, has remained above 50 for 19 straight months after slowing in late 2008 and early 2009. September’s index was the highest since it hit 53.9 in May.

China’s growth cooled in the second quarter to 10.3 percent from 11.9 percent in the first quarter and is expected to drift lower. Some forecasters have cut their growth outlook for this year, though they say China easily can meet the government’s target of 8 percent.

On Wednesday a competing index, the HSBC China Manufacturing PMI—a seasonally adjusted index designed to measure the performance of the manufacturing economy—rose in September to 52.9 from 51.9 in August. Numbers above 50 show manufacturing activity expanding.

The China Federation’s survey showed that nine of 11 areas rose in September compared with the previous month, including production and new orders. New export orders climbed marginally to 52.8 from 52.2, showing steady external demand.

The two areas that fell below the expansionary mark of 50 were stocks of purchases and stocks of finished goods.

The subindex for input prices rose, which could show inflationary pressures. The China Federation said price increases were strong for food products.

The US on the other hand has become a service economy which precludes the participation of those individuals who are more suited to toil rather than the manipulation of data. Instead of constructing or rebuilding factories to make goods for consumption or export, our country builds casinos, provides Twitter and Facebook, services that do not create value but instead transfers wealth into fewer hands.

US-China Trade Statistics and China’s World Trade Statistics

Notes: US exports reported on FOB basis; imports on a general customs value, CIF basis Source: US International Trade Commission
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
US exports 16.3 19.2 22.1 28.4 34.7 41.8 55.2 65.2 71.5 69.6
% change 24.4 18.3 15.1 28.5 22.2 20.6 32.1 18.1 9.5 -2.6
US imports 100.0 102.3 125.2 152.4 196.7 243.5 287.8 321.5 337.8 296.4
% change 22.3 2.2 22.4 21.7 29.1 23.8 18.2 11.7 5.1 -12.3
Total 116.3 121.5 147.3 180.8 231.4 285.3 343 386.7 409.2 366.0
% change 22.6 21.4 21.2 22.8 28 23.3 20.2 12.7 5.8 -10.6
US balance -83.7 -83.0 -103.1 -124.0 -162.0 -201.6 -232.5 -256.3 -266.3 -226.8

October 8, 2010, 5:54 PM HKT

China to Overtake Japan in Global Wealth Rankings?

With China set to overtake Japan as the world’s second largest economy in 2010, the Chinese consumer could also dethrone Japan in another key category in the next few years, according to a new report by Credit Suisse.

In its first Global Wealth Report, Credit Suisse predicts that total household wealth in China could more than double to $35 trillion by 2015 from $16.5 trillion at the moment. China currently is third in terms of the total share of global wealth after the U.S. and Japan, at $54.6 trillion and $21 trillion respectively, and is 35% ahead of France, the wealthiest European country.

A decade ago, China stood at seventh place in the global share of wealth. In the same period, Japan’s wealth only rose by 5%, largely because its adult population growth grew at a negligible 3% while equities and house prices have stagnated.

China has the largest proportion of what Credit Suisse calls the ‘middle segment’, or individuals with $10,000 to $100,000, or 60% of the global total of 1.05 billion people. This group comprises 23.5% of the global population and holds 16.5% of total wealth.

Giles Keating, global head of research for Credit Suisse’s private bank, said that it is this group which will be key in “reshaping the global economy” in the future, particularly as wealthier consumers in emerging markets shift from food to discretionary items.

For example, while food made up 34% of Chinese consumption in 2005, that number is expected to fall to 25% in 2015. Naturally, spending on health care, recreation and transportation is only going to increase.

“China’s investment rate as a percentage of gross domestic product is still at around 40%, which allows for very rapid capital accumulation,” said Keating at a media briefing in Hong Kong.

In contrast, the top 10 countries by level of total household debt are all developed Western economies, with the exception of Japan which is second after the U.S. South Korea has the largest total household debt out of Asian emerging markets at $830 billion, which is 6% of the U.S. level of $13.97 trillion.

Isabella Steger

China’s trade interests temper its regional rivalries
A recent spat with Japan over disputed islands illustrates Beijing’s concerns about flexing its growing muscle without endangering its economic boom.

By David Pierson and Megan K. Stack, Los Angeles Times
September 23, 2010 5:34 p.m.

Reporting from Beijing —
A dispute between China and Japan over the arrest of a Chinese fishing boat captain shows Beijing’s desire to assert itself on the world stage without severely damaging its primary goal of continuing its rapid growth.

In the two weeks since the fishing trawler collided with Japanese patrol boats near a group of disputed islands, Beijing has canceled ministerial level contact with Tokyo and Chinese travel agencies have been told to stop offering trips to Japan, a destination for 1.8 million Chinese tourists last year.

But Chinese officials this week denied a report that Beijing was banning exports to Japan of minerals needed for the manufacture of high-tech products such as hybrid cars and wind turbines. Such a restriction would represent the strongest move yet in the diplomatic row and signal China sees its commercial influence as a key way to protect its interests. Tensions remained high Thursday as four Japanese were reported to be under investigation on suspicion of illegally making videos of military targets in China, the official New China News Agency reported.

Buoyed by high economic growth, ample liquidity and one of the few growing consumer markets for multinational firms to battle over, China has in the last year rejected calls to appreciate its currency, walked away from a global emissions treaty and appeared unenthusiastic about international appeals to exert greater pressure on North Korea and Iran to abandon their nuclear programs.

International firms have complained that they are denied access to Chinese markets unless they are willing to give up intellectual property to Chinese joint venture companies. Others complain of being blocked out of government procurement contracts.

“If this fight continues, it’s possible that China would take such hard actions” as banning mineral exports to Japan, said Li Guanghui, a researcher for the Ministry of Commerce. “This dispute hurts China’s core interests.”

In January, China threatened to impose sanctions on American firms involved in a $6.4-billion arms deal with Taiwan, but those threats never materialized. Boeing, one of the largest companies that would have been affected, has since sold hundreds of millions of dollars’ worth of planes to China’s flagship airline.

“What that suggests is China is flirting with using its economic leverage but it may not be confident pulling the trigger because of the implications,” said Patrick Chovanec, an associate professor at Tsinghua University’s School of Economics and Management in Beijing. “It all reflects the uncertainty of China’s rising influence. There is growing confidence and interest in being more assertive. But China is also economically interdependent with the region and the world. Its military and political heft is untested.”

Some experts are skeptical that China would be willing to risk rattling its economy, let alone a $230-billion trade relationship with Japan, to coerce diplomatic results. Any export ban probably would increase efforts by trading partners to tap alternative markets or develop sources at home.

But experts also say Beijing wants to appear tough against Japan, a neighbor still loathed and distrusted by many in China for its brutal oppressions during World War II. Public opinion influences the government’s policies involving Japan, they said.

“When it comes to Japan, the Chinese people tend to point their fingers at the government and say the government is acting too weak,” said Zhou Yongsheng, a professor at the Chinese Foreign Affairs University in Beijing. “ toward Japan has grown a lot.”

Diplomatic flare-ups between China and Japan are not uncommon, but have rarely been allowed to rise to such a level of tension.

In 2005, the publication of a Japanese history book that critics said whitewashed its World War II atrocities led to mass protests in China. During the rallies, which many believe were sponsored by the government, activists burned Japanese flags, threw rocks at the Japanese Embassy in Beijing and called for a boycott of Japanese products. Many also opposed Japan’s bid for a permanent seat on the U.N. Security Council.

Analysts point to more deeply seated issues that have divided the two Asian neighbors. In previous years, Chinese officials bristled when then-Japanese Prime Minister Junichiro Koizumi made his annual pilgrimage to Tokyo’s Yasukuni Shrine to Japan’s war dead, which includes the remains of convicted war criminals. Despite the diplomatic chill, the period was a boon for Sino-Japanese trade.

Along with the most recent dispute over the islands in the East China Sea — known in Japan as the Senkaku Islands and in China as the Diaoyu Islands — Japan also plans a $1-billion project to drill for oil and gas in a disputed stretch of water west of Okinawa that both countries claim as their exclusive economic zone.

China recently passed Japan to become the world’s second-largest economy, a milestone rich in symbolism for two nations whose profiles appear to be heading on unequal footing with Beijing’s continued ascendance all but guaranteed.

Though Chinese President Hu Jintao’s leadership has tried to define the country’s foreign policy as a “peaceful rise,” there is no denying the mounting unease neighbors feel about Beijing’s expanding presence.

“Japan fears China will use its growing economic leverage and military prowess to throw its weight around and dominate the region,” a 2008 report by the Council on Foreign Relations said.

China has increasingly pressed its territorial claims to waters and islands off its coast — areas rich in underwater oil and natural gas deposits.

Seven other countries have claims in the sea. Beijing has been trying to negotiate bilaterally with the smaller neighbors thinking its size and clout will give it advantage.

The Assn. of Southeast Asian Nations, however, has appealed to the United States to strengthen its position in the South China Sea to counter Beijing.

President Obama met separately with Chinese and Japanese leaders at the United Nations on Thursday, discussing the issue of Chinese currency as well as their maritime sovereignty disputes. He described the relationship between the U.S. and Japan as a cornerstone of world peace and security.

On the financial front, China has indirectly forced neighboring countries to devalue their currencies to keep up with China’s robust export sector.

Andy Xie, an independent economist based in Shanghai, said China’s new muscle reflects growing political will to act more boldly in the international arena.

“The policy of keeping your head down is running into some resistance,” Xie said. “The generation now grew up without the fear of hunger. They have a different perspective. The government has to reflect this mood. It’s why we’re seeing a stronger response.” Economists say a full-blown trade war between China and Japan would be highly damaging, but is also unlikely.

“My perception is this is largely theater,” said Arthur Kroeber, managing director of GaveKal-Dragonomics, a Beijing-based economics consultancy. “Historically, [the tension] lasts six months to a year and then it’s back to business as usual. … There isn’t a lot of ability or interest in using large-scale economic leverage against another country because you always punish the domestic economy as well. It’s always a two-way transaction.”

China’s power grab

By Anne Applebaum
Tuesday, September 28, 2010

In April, the Chinese navy abruptly deployed 10 warships near the Japanese coast and sent helicopters to buzz Japanese ships. quiet In July, the Chinese foreign minister angrily asserted his country’s claim to international waters in the South China Sea, along with some islands claimed by others. Last week, a Chinese fishing trawler smashed into two Japanese Coast Guard boats, possibly on purpose, leading to a Japanese arrest and a furious reaction from Beijing.

Throw in a few rhetorical outbursts — the Chinese U.N. official who ranted a couple of weeks ago about not liking Americans — and certainly it does seem as if Chinese military, territorial and diplomatic aggression is rising. It is an extraordinary development, largely because, from China’s point of view, it doesn’t make sense. Why on earth should China shout, bully and push its neighbors around? Over the past decade, China has kept silent, lain low and behaved more like a multinational company than a global superpower — and garnered enormous political influence as a result.

The fruits of this success are everywhere. Look at Afghanistan, for example, where American troops have been fighting for nearly a decade, where billions of dollars of American aid money has been spent — and where a Chinese company has won the rights to exploit one of the world’s largest copper deposits. Though American troops don’t protect the miners directly, Afghan troops, trained and armed by Americans, do. And though the mine is still in its early phases, the Chinese businessmen and engineers — wearing civilian clothes, offering jobs — are already more popular with the locals than the U.S. troops, who carry guns and talk security. The Chinese paid a high price for their copper mining rights and took a huge risk. But if it pays off, our war against the Taliban might someday be remembered as the war that paved the way for Chinese domination of Afghanistan.

America fights, in other words, while China does business, and not only in Afghanistan. In Iraq, where American troops brought down a dictator and are still fighting an insurgency, Chinese oil companies have acquired bigger stakes in the oil business than their American counterparts. In Pakistan, where billions in American military aid helps the government keep the Taliban at bay, China has set up a free-trade area and is investing heavily in energy and ports.

China has found it lucrative to stay out of other kinds of conflicts as well. Along with Western Europeans, Americans are pouring vast amounts of public and private money into solar energy and wind power, hoping to wean themselves off fossil fuels and prevent climate change. China, by contrast, builds a new coal-fired plant every 10 days or so. While thus producing ever more greenhouse gases in the East, China makes clever use of those government subsidies in the West: Three Chinese companies now rank among the top 10 producers of wind turbines in the world.

Quietly, the Chinese have also cornered the market in rare-earth metals, unusual minerals that have lovely names (promethium, ytterbium) and are vital for the production of cellphones, lasers and computers — not to mention hybrid cars, solar panels and wind turbines. Though China doesn’t control the world’s reserves of these elements, some of which aren’t all that rare, mining them is dirty, labor-intensive and ideally suited for cheap production in a country with low wages and lower environmental standards. Nobody else can compete, which is why China now controls 99 percent of the world’s supply of some of these elements.

Of course if they are so inclined, their monopoly could be used to raise the prices of solar panels and cellphones. They could do even more damage if they wished. Last week, it was reported that China had stopped shipping rare-earth metals to Japan in retaliation for the Japanese arrest of that Chinese fisherman. The glitch in supplies now appears to have been connected to a Chinese holiday — or that’s what the Chinese are saying — but markets and pundits belated alarm bells nevertheless.

Which brings me back to my original point: Why on earth are the Chinese playing military games with Japan, threatening Southeast Asia or entering politics at all? When they stay silent, we ignore them. When they threaten boycotts or use nationalist language, we get scared and react. We still haven’t realized that the scariest thing about China is not the size of its navy or the arrogance of its diplomats. The scariest thing is the power China has already accumulated without ever deploying its military or its diplomats at all.

Dispute with Japan highlights China’s foreign-policy power struggle

By John Pomfret
Washington Post Staff Writer
Friday, September 24, 2010; 1:54 AM

The increasingly bitter dispute between China and Japan over a small group of islands in the Pacific is heightening concerns in capitals across the globe over who controls China’s foreign policy.

A new generation of officials in the military, key government ministries and state-owned companies has begun to define how China deals with the rest of the world. Emboldened by China’s economic expansion, these officials are taking advantage of a weakened leadership at the top of the Communist Party to assert their interests in ways that would have been impossible even a decade ago.

It used to be that Chinese officials complained about the Byzantine decision-making process in the United States. Today, from Washington to Tokyo, the talk is about how difficult it is to contend with the explosion of special interests shaping China’s worldview.

“Now we have to deal across agencies and departments and ministries,” said a U.S. official who spoke on the condition of anonymity to discuss ties with China. “The relationship is extraordinarily complex.”

Said a senior Japanese diplomat: “We, too, are often confused about China’s intentions and who is calling the shots.”

Japanese officials said the People’s Liberation Army is responsible for the friction over the disputed island chain, known as the Senkakus in Japan and the Diaoyu islands in China. In early September, Japan’s coast guard detained the captain of a Chinese fishing trawler, accusing him of ramming a Japanese coast guard vessel. In previous crises, China’s Foreign Ministry has acted as a calming influence, but this time, Japanese diplomats said, the military led the charge.

China responded by demanding the captain’s release, suspending talks, canceling the visits of Japanese schoolchildren and on Thursday arresting four Japanese who allegedly were taking photographs near a Chinese military installation.

Washington signaled to Beijing on Thursday that it would back Japan in the territorial dispute. Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, told reporters: “Obviously we’re very, very strongly in support of . . . our ally in that region, Japan.”

Other examples

The island dispute is the latest instance of players other than the party’s central leadership driving China’s engagement with the outside world.

Throughout this year, officials from the Ministry of Commerce, who represent China’s exporters, have lobbied vociferously against revaluing China’s currency, the yuan, despite calls to the contrary from the People’s Bank of China and the Ministry of Finance.

In Iran, China’s state-owned oil companies are pushing to do more business, even though Beijing backed enhanced U.N. sanctions against Tehran because of its alleged nuclear weapons program. The China National Offshore Oil Co. is in talks to ramp up its investment in the massive Azadegan oil field just as Japanese companies are backing out, senior diplomatic sources said. The move by CNOOC would have the effect of “gutting” the new sanctions, one diplomat said. U.S. officials have stressed to China that they do not want to see China’s oil companies “filling in” as other oil companies leave, a senior U.S. official said.

China’s main nuclear power corporation wants to build a one-gigawatt nuclear power plant in Pakistan even though it appears to be a violation of international guidelines forbidding nuclear exports to countries that have not signed onto the nuclear Non-Proliferation Treaty or do not have international safeguards on reactors. Pakistan has not signed the treaty.

“We have never had this situation before,” said Huang Ping, the director of the Institute for American Studies at China’s Academy of Social Sciences. “And it is troubling. We need more coordination among all agencies, including the military.”

U.S. Reaction

The U.S. government is trying to adapt to this new China with a mixture of honey and vinegar.

In July, Secretary of State Hillary Rodham Clinton talked tough with China about its claims to the whole of the South China Sea, joining with Vietnam and 10 other Southeast Asian nations to criticize China’s recent aggressive behavior in that strategic waterway.

That message – that China should ensure freedom of the seas and negotiate disputed claims peacefully – is expected to be reinforced Friday when President Obama meets in New York with leaders from Southeast Asian nations. Several U.S. officials said the People’s Liberation Army and China’s state-owned oil companies had been driving China’s more forceful claims to the sea.

U.S. officials have also moved to establish more personal connections with Chinese officials. Last month, Deputy Secretary of State James Steinberg, the second-highest-ranking U.S. diplomat, spent a full day with Cui Tiankai, one of 12 assistant Chinese foreign ministers, taking him to the Inn at Little Washington, a restaurant in Virginia. The entourage proceeded to a 30-acre farm belonging to a senior State Department official, where Cui took a ride on a tractor. And in an attempt to engage more Chinese stakeholders than in the past, Clinton and Treasury Secretary Timothy F. Geithner led the largest-ever delegation of U.S. officials to Beijing in May.

Several factors account for the rise of competing interests. President Hu Jintao has led the Communist Party for eight years, but it is not clear that he has ever been fully in control. After Hu took power in 2002, his predecessor, Jiang Zemin, stayed on as chief of China’s military for two years. And Hu was the top man in a nine-member Politburo standing committee, but at least five of the seats were occupied by Jiang’s allies.

“This is a time when the Chinese government is weak,” said Shen Dingli, the executive dean of the Center for American Studies at Fudan University in Shanghai. “As a result, different interest groups have been unleashed in a less coordinated and less centralized way.”

Simultaneously, the influence of China’s Foreign Ministry is waning. Dai Bingguo, the current foreign policy supremo has no seat on the powerful 25-member Politburo; the military has two, and the state-owned sector has at least one.

While there is competition across ministries in China, U.S. officials have focused on the gap between the civilian side of the government and the People’s Liberation Army. In recent months, military officers have begun to air their views on foreign policy matters, seeking to define China’s interests in the seas around the country.

Gen. Ma Xiaotian, deputy chief of the army’s general staff, has blasted the United States for its involvement in the South China Sea. And in August, Maj. Gen. Luo Yuan lashed out at the United States for reportedly planning to deploy the aircraft carrier USS George Washington in the Yellow Sea for joint exercises with South Korea. (The George Washington was subsequently sent to the Sea of Japan, farther away from China.)

Pushback vs. military

Not all of the military statements went over well in China. In recent weeks, the Foreign Ministry has begun to push back against the military. In recent interviews in Beijing, officials and senior advisers to the government excoriated the military for making policy pronouncements.

“For me it is surprising that I’m seeing a general from the People’s Liberation Army making a public statement regarding foreign policy, but this is China today,” said Wu Jianmin, a former ambassador who helps run a think tank and advises China’s leadership on foreign policy.

“This is not something the military should do,” said Chu Shulong, professor of international relations at Tsinghua University. “These people don’t represent the government, but it creates international repercussions when they speak out.”

China’s media is another factor in the fracturing of China’s foreign policy. Another foreign policy player, the Ministry of Propaganda, has allowed the state-run press to criticize foreign governments as a way to bolster the Communist Party’s position at home. As a result, China’s newer publications, such as the mass-circulation Global Times, cover international affairs – in particular its relations with the United States and Japan – with all the verve that People magazine pours into the adventures of Paris Hilton.

“We are not happy about many of the stories published today,” Wu said. “We Foreign Ministry people have told them you shouldn’t do that, but they say, ‘So what? Let the Americans hear a different voice.’ “

Shen, the American-studies scholar, said some in China’s leadership may support the idea of sending mixed messages on foreign policy as a way of testing the United States or Japan.

“The civilian government may think it does no harm,” he said. “After all, if they succeed, it may advance China’s interests.”

Jenica Lim | December 15 4:42am | Permalink
I don’t believe western people when they say: “hate the communist government but love the chinese people”. Just look at the anti-chinese racism prevalent in the UK, US and other parts of western Europe. This is not a recent phenomenon but has been going on for centuries. There is a set of freedoms for the white race and a constrained set for the chinese. Just look at the marginalization of chinese/asian-american males in US society. There are few chinese-americans in political, corporate and social high places despite them as a group trumping the white majority in every measurable metric of abilities. Ridiculous rationalization that the chinese-american male is too unassuming, too this, too that. And when a chinese guy stands up for his rights, he’s branded too aggressive and violent. This is clearly sinophobia and it has been conditioned in the west for centuries. Now that China is rebounding from two centuries of weakness and division, it has come as a full-frontal shock to the western races. This is why western journalists write about China in such censorious tones and arm chair internet commentators threaten war and predict China’s demise. Think about it, your anger and frustration towards China and all things Chinese are more about your peoples’ state of mind and insecurities than it is about the Chinese. Consider that in 10-20 years’ time, your bitter criticisms of China will no longer matter as the US and Europe become less important to the rest of the world.

China is a Sleeping Dragon

About Jerry Frey

Born 1953. Vietnam Veteran. Graduated Ohio State 1980. Have 5 published books. In the Woods Before Dawn; Grandpa's Gone; Longstreet's Assault; Pioneer of Salvation; Three Quarter Cadillac
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One Response to China is a Sleeping Dragon

  1. bob says:

    An interesting read

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