Tag: China

U.S.-South Korea Alliance Treats Pentagon as Department of Foreign Welfare

As South and North Korea exchanged artillery fire in late August, the U.S. rushed three B-2 bombers to Guam. The Obama administration hoped to deter the North from taking military action, but why is Seoul still a helpless dependent 62 years after the Korean War ended?

Imagine a hostile relationship existing between the U.S. and Mexico. The Mexicans threaten America with war. Washington responds by begging Europe and Japan to send military aid.

America would face raucous laughter. After all, the U.S. has more than 2.5 times Mexico’s population. America’s GDP is an even more impressive 14 times that of Mexico’s.

Yet the disparity between the ROK and Democratic People’s Republic of Korea is larger. The South enjoys a population edge of two-to-one and an economic advantage upwards of 40-to-one.

Seoul has stolen away the North’s chief military allies, China and Russia, which no longer would fight for the DPRK. On every measure of national power save military South Korea dominates. And it lags on the latter only out of choice.

China’s REAL ID Program

China is implementing its “toughest-ever” mobile phone real-name registration system, according to the Want China Times. The effort seeks to get all remaining unregistered mobile phones associated with the true identities of their owners in the records of telecommunications firms. Those who do not register their phones will soon see their telecommunications restricted.

This policy will have wonderful security benefits. It will make identity fraud, anonymous communication, and various conspiracies much easier to detect and punish—including conspiracies to dissent from government policy.

The United States is a very different place from China—on the same tracking-and-control continuum. We have no official policy of registering phones to their owners, but in practice phone companies collect our Social Security numbers when we initiate service, they know our home addresses, and they have our credit card numbers. All of these are functional unique identifiers, and there is some evidence that the government can readily access data held by our telecommunications firms.

We have no national ID that would be used for phone registration, of course. The Department of Homeland Security says it will begin denying travel rights to people from states that do not comply with the REAL ID Act beginning in 2016.

Why China Is in Trouble

The course of an economy is determined by the course of that economy’s money supply (broadly determined). The relationship between money growth and nominal GDP growth is presented in the accompanying chart. It is persuasive. Indeed, money, not fiscal policy, dominates.

As I listen to all the ad hoc conjectures about the state of China’s economy and its near-term prospects, I am astounded to never hear anything said about the most important determinant of nominal economic growth: the money supply. The second chart tells the tale. The picture is not a pretty one. China’s money supply growth rate has been slowing down since early 2012. It now is growing at an annual rate of about 10%, which is well below the trend rate of money growth: 17.06%. China is in trouble. Slower money supply growth means that slower nominal GDP growth is already baked in the cake.

Chinese Repression Threatens Economic Dynamism and Political Stability

BEIJING—China’s capital looks like an American big city. Tall office buildings. Large shopping malls. Squat government offices. Horrid traffic jams.

The casual summer uniform is the same: shorts, athletic shoes, skirts, t-shirts, sandals, blouses. Even an occasional baseball cap.

It is a country which the Communist revolutionaries who ruled only four decades ago would not recognize. True believers still exist. One spoke to me reverently of Mao’s rise to power and service to the Chinese people. However, she is the exception, at least among China’s younger professionals.

Indeed, younger educated Chinese could not be further from Communist cadres once determined to create a revolution. The former are socially active, desire the newest technologies, and worry about going to good schools and getting good jobs. Cynicism about corrupt and unelected leaders is pervasive.

If there is one common belief, it is hostility toward government Internet controls. Students have complained to me in class about their inability to get to many websites and readily shared virtual private networks to circumvent state barriers.

But such opinions are not held only by the young. A high school student told me that his father urged him to study in America because of Beijing’s restrictions on freedom.

While Chinese from all walks of life are comfortable telling foreigners what they think, sharing those beliefs with other Chinese is problematic. The media, of course, is closely controlled. Internet sites are blocked, deleted, and revamped. Unofficial intimidation, legal restrictions, and even prison time await those who criticize Communist officialdom on social media and blogs.

But increasingly globalized Chinese are aware of their online disadvantage compared to their peers in the West. Google, YouTube, and Twitter are verboten. Today Bloomberg and the New York Times are beyond reach.

Last week as BBC television began to detail official abuses my TV went black. A couple minutes later BBC was back, after the China report had finished.

While internet and media restrictions have not prevented rapid economic growth, barring the PRC’s best and brightest to a world of information is likely to dampen innovation and entrepreneurship. Moreover, those denied their full freedoms are more likely to leave home. Many of China’s wealthiest citizens have been departing an authoritarian system unbounded by the rule of law.

Repression also stultifies China’s political evolution to a more mature and stable political order. Democracy provides an important safety valve for popular dissent.

The Chinese Communist Party’s control may not be as firm as often presumed. The oppressive establishment which most Chinese have faced for most of their lives is Communist.

Indeed, for many if not most party members, Communism is a means of personal advancement, even enrichment. President Xi Jinping’s anti-corruption campaign is popular, but is widely seen as politically motivated.

Moreover, Xi has abrogated the well-understood “deal” of the last four decades, that rulers can retire and be immune from future prosecution. Will incumbents so readily yield power in the future?

Perhaps even more threatening for the CCP is the potential for an economic slowdown and consequent political unrest. Already protests are common against local governments, which tend to be ostentatiously rapacious. What if that antagonism shifts against the center?

A poorer PRC means a poorer world: China is a major supplier and increasingly important source of global demand. A politically unstable Beijing would have unpredictable effects on its neighbors.

As I wrote for Forbes online: “Since Mao’s death in 1976, the PRC has changed dramatically—and dramatically for the better. But this second revolution has stalled. Economic liberalization remains incomplete. Political reform never started. Individual liberty has regressed.”

The Chinese people deserve to be free. The Chinese nation would benefit from their freedom. The rest of the world would gain from a freer Chinese nation. Everyone desiring a peaceful and prosperous 21st century should hope for the successful conclusion of China’s second revolution.

Washington Is Fostering Anti-U.S. Cooperation between Russia and China

Relations between the United States and Russia continue to deteriorate, with the U.S.-led NATO alliance planning to station troops and heavy weaponry on Russia’s border.  At the same time that U.S.-Russian relations are reaching frosty levels not seen since the days of the Cold War, ties between China and Russia are growing noticeably closer.  Symbolizing that trend was a powerful visual seen on television sets around the world in early May.  Chinese president Xi Jinping not only attended the celebration in Moscow marking the 70th anniversary of the end of World War II, he occupied the position of honor at the side of Russian president Vladimir Putin.  The image was especially powerful because the United States and several other major Western powers pointedly refused to attend the gathering to show their continuing displeasure with Russia’s annexation of Crimea and aid to rebel forces in eastern Ukraine. 

As I point out in a recent article in Aspenia Online, the events in Moscow were only one signal of a Russian-Chinese rapprochement that seems  motivated by a joint desire to curb America’s global dominance.  Bilateral economic agreements between Moscow and Beijing are on the rise, including a May 2015 $400 billion deal to sell Russian natural gas to the voracious Chinese economy.  In addition, Russia has now replaced Saudi Arabia as China’s principal source of oil.

The prevailing assumption in the West that Russia and China would become geopolitical competitors, if not outright adversaries, in Central Asia also apparently needs to be reassessed.  Following the May 8 Putin-Xi summit in Moscow, the two leaders signed a new declaration announcing the coordinated development of the so-called Silk Road Economic Belt in Central Asia.  Although Russian and Chinese ambitions in that region are still in conflict over the long run, it appears that both governments have declared a truce in their rivalry.

The South China Sea Is Not Worth the Risk of War

Contrasting Chinese and American perspectives were on display at the recent Shangri-La Dialogue, during which Defense Secretary Ashton Carter challenged Beijing over its island expansion program. Privately the possibility of war has emerged as a serious topic in Washington. Both nations should draw back from their increasingly dangerous game of chicken.

China’s territorial claims involve a complex mix of control, historical practice, international law, and treaty. In the view of most observers, Beijing’s claims are extravagant. Yet they are not unprecedented.

The early American republic made aggressive claims against both Canada and Mexico. The United States won its claims in the first case through conquest and in the second instance through negotiation. Great Britain’s decision to accommodate the United States yielded long-term peace and future friendship.

As territory most of the islands are worthless rocks. However, they carry with them control over surrounding waters and underlying resources.

While Washington lays claim to no land, it insists on free transit in surrounding waters. Equally important, with China expanding many Americans want the United States to contain Beijing.

Indeed, there is increasing comment among the chattering classes about the importance of making China “pay a price” for its aggressive behavior. The administration is more vigorously advancing claims than the claimants themselves. The United States created particular controversy flying over islands claimed by China, courting a corresponding challenge from the latter.

The problem is not asserting American navigational freedoms, but doing so in a way seemingly designed to provoke a response. In 2001 similar military gamesmanship resulted in an aerial collision which killed a Chinese pilot and brought down an American spy plane, leading to an extended bilateral stand-off.

Since then both nations have become even more concerned over credibility and reputation, which means neither will readily back down when challenged. This creates a real danger of a military confrontation.

Rather than working to prevent such an eventuality, however, a number of officials, pundits, and analysts appear to view it as almost inevitable. I recently attended a gathering which mixed policy and non-political professionals. Without a neoconservative at the table there was broad agreement that Beijing had tossed down the gauntlet, so to speak, and had to be confronted.

Most sobering was the acknowledgement that an aggressive reaction could trigger a Chinese response in kind and a confrontation such as a ship collision or plane shoot-down. The consensus was that Washington would have to act immediately and firmly by, for instance, sinking a vessel or destroying a runway.

As I point out on China-US Focus: “The unspoken presumption was that the confrontation would end there, with Beijing duly chastened. But the obvious question is what if the Chinese made a similar calculation and escalated in turn? Some “damn fool thing” in the Asia-Pacific just might trigger war between the two nations.”

Washington enjoys military superiority but must disperse its forces around the globe. More important, the PRC views its interests in nearby waters as important if not vital. In contrast, American domination is not necessary for America’s defense. Beijing knows that and will risk much more than the United States in handling nearby territorial issues.

The possibility of miscalculation and misjudgment makes it even more important that all participants step back from confrontation. The fuse to war may be long, but no one should risk lighting it.

All parties should look for creative solutions to the plethora of territorial disputes. Countries could set aside deciding on sovereignty while jointly developing resources. Neighbors could share sovereignty and resources. Beijing could pledge to maintain navigational freedoms irrespective of the islands’ ultimate disposition. 

The disputed territory is important, but not worth war. Yet a dangerous dynamic appears to have taken hold. Instead of sleepwalking into a shooting war while assuming the other party will bend, both America and China should renew their determination to defuse territorial controversies peacefully.

Fear of Chinese Economic Hegemony

In the context of discussing the Trans Pacific Partnership (TPP), and the U.S. role in the Asia-Pacific region, Robert Kagan of Brookings raises the specter of competition with China and says this:

Economically, China would like to turn Asia into a region of Chinese hegemony, where every key trade relationship is with Beijing.

Along the same lines, law professor Noah Feldman says:

China is using its close economic relationship with its neighbors as leverage to build its geopolitical position. Its ultimate goal is to displace the U.S. as the regional hegemon.

I’m puzzled by statements like these.  What do Kagan and Feldman think Chinese economic “hegemony” in Asia would look like?  What exactly do they fear?

I don’t know the answer to what’s going on in their minds, but I have tried to look at what China is actually doing.  One thing it is doing is signing trade agreements with other countries in the region.  So are these trade agreements part of a scheme to dominate its neighbors?  Well, the text of the agreement China signed with Australia was just released, so let’s take a look at some of what it says.  As described by the Australian government, China would liberalize a lot of its trade with Australia, including the following:

  • Health and aged care services: China will permit Australian service suppliers to establish profit-making aged care institutions throughout China, and wholly Australian-owned hospitals in certain provinces. This will greatly expand the Australian private health sector’s offering of medical services through East Asia.

So Australia is touting the agreement as a way to build hospitals in China, and more generally to sell products there. (Australia also notes that 92.9 per cent of China’s imports of resources, energy, and manufactured products from Australia will enter duty free right away, with most remaining tariffs removed within four years.) This makes the whole idea of China’s “economic hegemony” sounds a lot less scary. Rather than setting up a system to compete with the United States, China seems to be participating in the same rules-based, liberalizing trading system that the United States and just about everyone else is in.

I wrote more about this issue in a recent Free Trade Bulletin.