Tag: China

China Needs a Foreign Policy which Makes Friends

Rising powers tend to be cocky and pushy. They believe their time has arrived and they want their just deserts—now. So it is with China.

Alas, there’s a downside, which Beijing has discovered. Rising powers don’t make many friends.

If you listen to the debate on the U.S. presidential campaign trail—not recommended for the faint-hearted!—you’d think America was a helpless Third World state, besieged by enemies deploying vast armies and armadas. The truth is, the United States dominates the globe. Among its advantages is being allied with every major industrialized state, save China and Russia, and is friendly with many other states as well.

The latter point underscores America’s extraordinary global reach. There are many reasons Washington has so much international clout. Much of this has is because U.S. policy has emphasized making friends and acquiring allies.

There are downsides to this approach. Nevertheless, overall the United States is stronger because it has a cooperative relationship with so many other countries.

In contrast, let’s look at the international response to Beijing’s so-called peaceful rise.

Governments - Big Players - Make Markets Unsafe

Reportage in The Wall Street Journal on April 3th states that “A fund owned by China’s foreign-exchange regulator has been taking stakes in some of the country’s biggest banks, raising speculation that it may be a new member of the so-called ‘national team’ of investors the Chinese government unleashes to support its stock market.”

Statists and interventionists around the world (read: those who embrace State Capitalism) think “Big Players,” as the academic literature has dubbed them, will protect us from economic storms. While there is a budding and serious academic literature on Big Players – aka Market Disrupters – the financial press virtually ignores the Disrupters’ potential to bury us. Indeed, instead of stabilizing markets, the Big Players disrupt them. They are the purveyors of instability. For those who wish to grapple with the technical literature, I recommend: Roger Koppl. Big Players and the Economic Theory of Expectations. New York: Palgrave Macmillan, 2002.

Big Players have three defining characteristics. Firstly, they are big — big enough to influence markets. Secondly, they are largely insensitive to the discipline of profits and losses, insulating them from competitive pressures. Thirdly, their freedom from a prescribed set of rules affords them a high degree of discretion.

With these characteristics, Big Players are hard to predict. In consequence, they can disrupt. They divert entrepreneurial attention away from the assessment of strictly economic market fundamentals, such as the present value of prospective cash flows. Instead, the focus shifts toward attempting to predict the actions of Big Players, which are inherently political and unpredictable. This reduces the reliability of expectations, replacing skill with luck.

Is Washington Courting India as an Anti-China Ally?

The just completed visit of Secretary of Defense Ashton Carter to India has generated considerable speculation.  That is especially true in China, where opinion leaders noted not only was this was Carter’s second trip to India during his relatively short tenure as Pentagon chief, but that he cancelled a previously scheduled trip to Beijing so that he could make this latest journey.  That move, they feared, suggested a rather unsubtle tilt against China in favor of one of its potential geostrategic competitors.

The agreement that came from Carter’s visit will do nothing to reassure the Chinese.  Carter and his Indian counterpart, Defense Minister Manohar Parrikar, pledged to increase logistical cooperation in the military arena, especially maritime cooperation.  Although that agreement is still a considerable distance away from constituting a full-fledged military alliance between the two nations, it continues a trend that has emerged over the past decade of ever deepening strategic ties.  And mutual concerns about China’s ambitions appear to be the driving force in the bilateral relationship.

At a minimum, the United States appears to be trying to put in place the building blocks of a containment policy directed against China, if U.S. leaders later decide that such a full-blown policy has become necessary.  On this same trip, Carter made a stop in the Philippines to reassure that country of strong U.S. backing in its South China Sea territorial dispute with China. Apparently previous statements by the Secretary of State and President Obama himself, combined with a buildup of U.S. troops in the island nation were not sufficient evidence of resolve.

And Carter’s sojourn in India must be seen in the larger context of Washington’s efforts to strengthen its long-standing alliances with South Korea and Japan and to forge cooperative military ties with such former adversaries as Vietnam.  Along with Japan, though, India would be the biggest prize as a strategic ally.

Despite the wishes of some Sinophobes in Washington, we are likely to see a more measured response from India.  Delhi has much to lose and little to gain by becoming a cat’s paw ally of the United States against China.  That is especially true if Washington is not willing to sever its close ties with India’s arch-enemy, Pakistan.  Yet as long as U.S. leaders insist on waging a “war on terror” with a major Central Asia/South Asia component, centered in Afghanistan, they will not cut Washington’s supposed Pakistani ally loose.  And as long as that is the case, Indian leaders and the Indian public will view professions of U.S. loyalty to their country’s vital interests with justifiable skepticism.

Moreover, shrewd Indian policymakers may conclude that the best position for their country is one of constructive neutrality in the growing tensions between the United States and China.  Whatever side India would take, it would anger one of those great powers, lose potential benefits, and increase its risk level.  Only if China truly adopted a policy of rogue expansionism is that sober calculation likely to change.  In the meantime, Ash Carter and other American suitors may press their courtship of India, but they are likely to come away disappointed.

China Must Confront Its North Korea Problem

Great powers usually have client states. Although a sign of influence, the latter often are more trouble than they are worth. North Korea increasingly appears that way for Beijing.

The Chinese-North Korean relationship was oft said to be like lips and teeth, forged in blood during the Korean War. But even then, the relationship was fraught with tension.

Today those look like the “good ol’ days.” There is little doubt that the so-called Democratic People’s Republic of Korea has lost the support of Chinese public opinion.

Academics and analysts outside of government also show little love for China’s one ally, which only takes and never gives. Top officials no longer attempt to disguise their frustration with the North’s behavior.

The Kim regime has returned ill-disguised contempt. Emissaries from the People’s Republic of China came and went as the North Korean leader failed to make even a pretense of listening.

So Se Pyong, Pyongyang’s ambassador to the UN in Geneva and the UN’s Conference on Disarmament, predictably denounced the United States and South Korea. When asked if the North felt pressure from the PRC after President Xi called for dialogue over the Korean “predicament,” So responded: “Whether they are going to do anything, we don’t care. We are going on our own way.”

Taiwan’s Best Option for Deterring China? Anti-Access/Area Denial

There are few David versus Goliath matchups in the international system quite like Taiwan versus China. Across virtually every indicator of national power, Taiwan is completely outclassed. In the past, Taiwan relied on a qualitatively superior military and an implicit U.S. security guarantee to maintain its de facto independence, but advances in military technology have enabled Beijing to close the quality gap. Taiwan’s military equipment and doctrine is ill-suited to this new reality. If Taiwan wishes to preserve its de facto independence, it must take a page out of Beijing’s playbook and adopt an anti-access/area denial (A2/AD) strategy.

A2/AD incorporates guided weapons and intelligence/observation systems to prevent enemy military forces from entering a specified area, and, failing that, make it costly for forces to operate within said area. Relatively inexpensive weapons systems that are difficult to defend against, such as long-range anti-ship cruise and ballistic missiles, are a hallmark of A2/AD. American military and political objectives in East Asia require power projection, the moving of air and naval power close to China’s shores. A2/AD is designed to make that difficult.

The same A2/AD concepts and technology that threaten U.S. forces’ freedom of movement can be used by Taiwan to defend against a Chinese invasion. This is just one of several military scenarios that could unfold, but the Taiwanese military should be prepared for the worst. The first phase of a Chinese invasion would be establishing air superiority over the Taiwan Strait and control of the sea around Taiwan. China needs to project power in order to accomplish its objectives. Taiwan can’t defeat China in a stand-up fight, but it can deny the PLA from achieving its objectives with an A2/AD strategy.

Today, Taiwan does not have the necessary military equipment, especially air and naval forces, to conduct an effective A2/AD strategy. Despite having talented pilots, the fighter aircraft of Taiwan’s air force are outclassed by new and numerous Chinese aircraft and missile systems. Earlier this week, the RAND Corporation published a study assessing Taiwan’s air defense options. The study recommends reducing the size of Taiwan’s relatively costly, aging, and increasingly vulnerable fighter fleet to invest a limited military budget toward mobile surface to air (SAM) missile systems. The relatively few surface warships in Taiwan’s navy are similarly vulnerable to Chinese weapons systems. James Holmes of the Naval War College recently recommended that Taiwan’s navy acquire more numerous, fast missile boats armed with anti-ship missiles instead of fewer, larger surface warships that would be relatively easy for the PLA to locate and sink.

Contrary to Trump-Sanders Theory Imports Rise in Booms and Fall in Recessions

Real GDP Growth and ImportsNearly all surviving Democrat and Republican presidential candidates (except John Kasich) have essentially endorsed the shared campaign theme of Donald Trump and Bernie Sanders that the U.S. economy is weak because we import too many goods from foreign countries.  If only we could raise the cost of imports with tariffs, according to the Trump-Sanders theory, then the U.S. economy would supposedly have more jobs and higher real wages.   

Paying more for anything (such as Fords or iPhones) is no way to get rich.  Yet that concept somehow eludes many non-economists.  Theory aside, the idea that fewer imports are good for the economy is the exact opposite of what we have experienced.  The fact is that U.S. imports always fall when the economy slips into recession and imports rise briskly whenever the economy does.

Why You Shouldn’t Fear Trade with China

Trade has enriched humanity, continuously providing cheaper and better goods while dramatically decreasing global poverty. Extreme poverty’s end is now in sight. A Gallup poll released recently shows that 58 percent of Americans view trade as an opportunity rather than a threat, and this belief has been rising. Yet we seldom hear of the incredible benefits of exchange. The 2016 presidential election has brought with it an increased interest in U.S. trade with China, with political figures like Donald Trump prominently focusing on the alleged “harm” done by China to the United States. Here are the three main arguments that trade-skeptics use regarding China and reasons why those arguments are wrong. 

1) Trade-skeptics often claim that trade with China is “taking American jobs.” However, in most cases American and Chinese workers are not competing for the same jobs because they do different kinds of work.   

Comparative advantage and specialization play an important role in every trade relationship. China has the comparative advantage in light manufacturing and heavy industry, while the United States has an advantage in areas involving a high degree of human capital like technology, education, and precision industrial manufacturing

Fewer and fewer Americans work in grueling areas like traditional manufacturing and agriculture, both of which are still common in China. The fall in traditional manufacturing and agriculture employment has been more than offset by a rise in the caring professions and in creative and knowledge-intensive careers, which are safer, more intellectually stimulating, and help improve the standard of living in the United States. 

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