A Dangerous Superpower Showdown is Brewing: China vs. America in Asia

National Interest.org ^ | April 12, 2016 | Hugh White

[cba123]

Asia's recent decades of economic growth have depended, among other things, on a remarkable period of regional peace and stability. The region will only keep growing if that can be sustained. We cannot take this for granted. The peace we have known has resulted from an unusual situation that emerged in the early 1970s, when China decided to follow Japan in accepting the United States as the primary strategic power in Asia. That has meant that US primacy has been uncontested by any major regional power in Asia, eliminating major-power rivalry as a source of tension and conflict.

But US primacy in Asia is now contested again. China no longer accepts American leadership as the foundation of the regional strategic order and instead seeks a 'new model of great power relations'. This probably means it wants to take America's place as Asia's primary power, and its new strategic weight means we have to take this seriously. Few, if any, in Asia want China to get what it wants. US leadership has served the region well and no one wants to live under China’s shadow.

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http://www.nationalinterest.org/blog/the-buzz/dangerous-superpower-showdown-brewing-china-vs-america-asia-15757

[cba123]

We are currently running history's largest trade deficit with China.

That means AMERICA is building up China.

[cba123]

http://www.nationalinterest.org/blog/the-buzz/dangerous-superpower-showdown-brewing-china-vs-america-asia-15757

[StoneWall Brigade]

Ping

[enduserindy]

Ah crap here comes the free traitor crowd to tell us how wonderful trade with China is.

[Fai Mao]

“That means AMERICA is building up China.”

That deficit is paper and electronic money not gold. In the event of a war the first thing that would be cancelled is that debt.

What is frightening about that thought is it gives lie-berals an economic reason to go to war with China

[Organic Panic]

Obama folds, we lose. Next.

[Candor7]

Yes America is building up China,and the Apologist in Chief has signaled America’s weakness as his “legacy.”

China means to rule the world, and it sstarts with absolute hegemony in the Pacific.

Get ready to say goodbye to Hawaii.

[cba123]

Actually I am much more concerned with the fact we are teaching China how to make everything.

All the things we send to China to make for us, to buy, become China’s.

Those factories, belong to China.

So in addition to us sending so much money to China to buy the stuff, now China has the capability to make all of the stuff we buy.

In effect, we are handing China our entire production infrastructure.

They are not joint ventures. All of the “joint ventures” with China are to the best of my knowledge, 51% owned by China. That means they own all of it.

China owns, all of (our) factories now.

At least, the massive amount, that we have sent there.

And it doesn’t seem to be slowing down. Our trade deficit with China just last year, was ANOTHER ALL TIME RECORD.

Yet everyone in our government, is 100% sold out.

Everyone.

[b4its2late]

We’ve been giving them the rope to hang us with for decades.

[kearnyirish2]

“The peace we have known has resulted from an unusual situation that emerged in the early 1970s, when China decided to follow Japan in accepting the United States as the primary strategic power in Asia.”

In the early 1970s, Laos, Cambodia, and all of Vietnam was ceded to Red China’s sphere of influence. Red China accepted nothing in terms of the US as the primary strategic power in Asia.

[alloysteel]

The real long-term effect of China’s ascendancy is that vast accumulation of gold by China, which now has stores that exceed those of George Soros. Not stored in a vault in stacks in Ft. Knox, but in various bank vaults within the Chinese territory, where they can control both the gold supply available for trade (as the go-to currency when all other currencies collapse), and the price of gold at any given moment. Price of gold too low? Withhold any draw-down of the hoard. Price of gold too high? A small increase in the amount of gold in daily physical trade should send prices plunging. Need a little “liquid” cash? Sell “paper gold”, a promise (rarely carried out) to deliver the physical gold at some future date, but these contracts are bought back up long before the end of the term, on a hedge against still further sales of “paper gold”. At any given moment, there may be dozens, hundreds, or thousands, even, of claims on the identical pile of physical gold.

“Full faith and credit”, not of the US government, but of the People’s Republic of China. Don’t you feel all better now that the nasty old capitalists of the Western world are getting just what Bernie Sanders think they should?

[nathanbedford]

I offer up my own thoughts on China with a warning that it is typically very long:

If one considers China's recent actions especially its creation of man-made islands, the belligerency of its naval encounters recently, it's bombast, and it's weapons development overtly aimed at knocking out American aircraft carriers, one must conclude that China is determined to exercise influence of not sovereignty in the Pacific rim region and perhaps beyond and might well be prepared to become aggressive. This is not just speculation, it is necessary to identify the motives and aims of a potential adversary in order to deal with them, just as it is necessary to identify the global goals of militant Islam to deal with that threat.

This conclusion about latent Chinese aggressiveness is reinforced by China's current economic situation. China faces a chronic challenge of finding work for millions of people every year who come off the farm and go to the cities in a pattern reminiscent of the Industrial Revolution in Europe. The problem is not just chronic but acute with riots or insurgencies of some kind occurring almost daily somewhere in China with the result that the party operating, of course, through its secret police, has become increasingly repressive. The solution to this challenge until now has been to trade with United States and the Western world which has been done so successfully that China is now challenging America as a number one economy and leading the world in manufacturing and exports. The hope of the central planners is that China with its historic growth in double digits and presumed growth of 7% or 8% can simply grow its way out of this dilemma.

This idea that China is still maintaining growth in the 7-8% range is disputed by Western observers who believe that the books are cooked. The same problem that is at the root of the banking corruption problem, the central authorities must rely on data which is unreliable. If GDP growth is really substantially lower than reported, the debt ratio will not be "brought down sharply" as the authorities and analysts predict. It is certainly a dubious proposition that "wise old men" acting on questionable data can artfully navigate between the rocks of recession and the shoals of runaway inflation while steering a corrupt system that must be run at high speed to avoid Armageddon. The Chinese introduced massive amounts of liquidity into their economy through the banking system precisely because they cannot afford to have less than phenomenal growth. If growth in China is closer to 0% than to 7% or 8%, the problem is virtually insoluble. More, the cost of manufacturing in China is rendering its mercantilist advantages less attractive than the manufacturing opportunities in India and Indonesia and even in America. That may well be why the manufacturing sector is giving way to the consumer sector and this "transition" might rather be seen as a symptom of slowing GDP and weak manufacturing rather than a rising and needed increase in the consumer economy.

Recently China's problems have been compounded by a recession which might very well be the harbinger of a severe economic contraction and pricking of a huge bubble generated by the government in an attempt to come out of the Great Recession and aggravated by widespread corruption in the provinces operating behind an opaque lack of transparency. In other words, the geniuses in Beijing who manage China's top-down economy or at least China's finances have not been able to curb the greed of the bankers and businessmen in the provinces (many of whom are Army officers) who generate questionable loans for dubious businesses which are destined to fail but only after the principals have skimmed a tidy profit.

It is been clear for some time that the Chinese provincial banking system has been out of control. The problem is compounded because it is the banking system rather than the stock market which generates the capital needed for Chinese growth. The provincial banks are motivated to make imprudent loans in order to secure corrupt kickbacks which now threaten the whole financial system. Whether growth is funded in a fiat economy by a central banks gushing out money to other banks or to Wall Street banking houses, the counter forces introduced (possibility of inflation, distortion of the economy) remain whether it is done in China or in America. The central bank in America has proved time and again that it is terribly difficult to time and administer Keynesian doses of fiscal medicine even as those decisions are based on the best data collection system in the world. The central command economy of China is based on a data system which is through and through corrupt.

The central authority is presented with the dilemma made very acute by the Great Recession, in order to avoid collapse China massively introduced liquidity into its economy through the banking system (because the stock market system simply was not set up to handle it) but in doing so it could not hope to avoid corruption.If it seeks to rein in corruption now, it risks reintroducing recession. Ghost cities reflect the volume of liquidity that has poured out of Beijing in an effort to keep the music playing. The last thing Beijing wants is to trigger the popping of that bubble because the situation might become irretrievable and mutate from a financial problem to a political revolution evidenced by the brushfire insurgencies in the provinces.

This is not to say that the rise of China has not been phenomenal. It is not to say that the future for China is unquestionably that of economic growth. The question is whether that growth will be uneven and tragically stunted by Top-down authoritarianism. Eventually, if China is to really prosper it must control corruption but that is not just a legal problem it is a cultural problem, a problem endemic in China for millennia which has infected every dynasty, not excluding the communists and neo-communists. Superficially, one would think that Top-down control of society would make it easier to cleanse it of corruption but it is historically true that free markets and free societies are invariably less corrupt than command economies in statist governments.

In view of this economic condition which appears to be chronic and acute, why would the Chinese take belligerent steps endangering their trade relationship with America and threatening the golden goose which lays eggs amounting this year to half a trillion dollars of trade deficit running in favor of China? Why would China risk bringing down the whole house of cards?

I do not presume to know but why should that stop me speculating? We think of China as a vast land with a huge population but yet a single-minded authoritarian entity. But the history of communism in both Russia and China indicate that there is much jockeying and chafing for power and control of policy going on below the surface. It might well be possible that the old men who run the finance part of the economy in China, the successors to the Communist Party, are being challenged by the bosses of the Army who, after all, have a huge investment in much the Chinese industry. It might be the both of these entities are battled by the intelligence forces, the Chinese KGB as it were, who have their interests and particular fears. Very often one group must make concessions urged by a competing group in order to have its way in another sphere. So for example, the Beijing central planners might have to loosen the leash on the military in order to continue in control of the economy, hence, the belligerency in the South China Sea. It might be that the intelligence service is warning of revolution, intimidating the other two branches with exposure of their corruption.

It might well be that the destiny of the Spratly Islands and the South China Sea will depend not so much on American policy, or American military readiness, or the reliability of our so-called Pacific Rim allies, rather that history could be entirely dependent on an internal struggle below the surface in China.

[Darteaus94025]

Strengthen India and Japan to give China a counterweight in Asia.

[Bulwyf]

It’s very alarming how much land and properties the Chinese buy up in Vancouver and the surrounding areas.

That should not be allowed.

A day of reckoning is coming, there are multiple wolves at our door.

[dljordan]

“Strengthen India and Japan to give China a counterweight in Asia.”

You think India is our friend? I just don’t see that.

[DoodleDawg]

Obama folds, we lose. Next.

Trump is saying that the local countries should see to their own defense and that the U.S. is too poor to police the area for them. So it looks like the U.S. is forfeiting leadership to China regardless.

[SaraJohnson]

Jugears does not care.

[cva66snipe]

Nixon's biggest foreign policy blunder was the diplomatic warming toward China. An even more major blunder under the Bush family terms. We should have never moved the first factory there. With factories come obtaining technology which China will eventually use against us military wise and economically.

Ironically Japan's investing their factories here somewhat helped keep the failed Obama economic policies and economy downturn from hurting areas where Japan's based USA manufacturing has factories. As Reagan said "Trade partners not trade patsies."