Posted on 11/23/2004 8:41:42 AM PST by Willie Green
For education and discussion only. Not for commercial use.
The scariest ride I have ever had was not at any amusement park. It was the ride I took recently through Shanghai, China from Hongqiao international airport to the Bund area along the Huangpu river front. It was just after dark, and this mammoth city was lit up in an awe-inspiring display the likes of which I had not seen even in Beijing. Shanghai has a skyline that puts New York or Chicago to shame, but then Shanghai has a larger population than New York and Chicago combined. Mile after mile of new high rise office buildings, many boosting the names of the world's major corporations, stun the viewer with their proclamation of wealth and power. Unlike the boxy concrete and steel designs I had seen in Tokyo, the Shanghai skyline is marked by some of the most beautiful urban architecture I had ever seen.
And that was before I saw Pudong, the new economic area on the other side of the river. I took a boat tour down the river to get a better look at this new economic zone for Shanghai development. It is already crammed with office towers and factories along the route to the new Pudong international airport. One impressive complex is the new Krupp steel plant. Another is the Jinmao Tower, the third tallest building in the world. It is an impressive 88-story office complex, but even more noteworthy was the forest of other towers around it. Over half of the high-rise buildings in the Shanghai-Pudong area have been completed in the last five years, and the new structures are much more massive than those that existed before. With the grandiose designs inherent in the development of this area, China is clearly sending a message to the world that it playing for keeps.
American security concerns have been focused on terrorism and the Middle East. This is understandable. Muslim terrorists are plotting more American deaths and must be combated. Yet, terrorism is the weapon of the weak. It cannot change the global balance of power. And Islamic fundamentalism is a backward looking doctrine of social and economic stagnation.
It is the rise of China that poses the greatest challenge to America's position in the world. Endowing an empire of 1.3 billion people with modern industry, technology, and capital gives the authoritarian central government in Beijing immense resources with which to support its ambitions. And what is driving China is the impassioned spirit of nationalism and the limitless energy of capitalism. This combination will rock the world.
Military threats always loom largest in the public mind, and China is creating such a danger. My visits to Beijing and Shanghai were preludes to the real reason for my trip, which was to attend the 5th Aviation and Aerospace Exhibition in Zhuhai. This event is held every two years. It has two purposes: to showcase China's advancements and to attract American and other Western companies who want to sell technology and systems to Beijing.
China's space program was highlighted, from the capsule astronaut Yang Liwei used to orbit the Earth in 2003 to animated projections of how China plans to land on the Moon and exploit its resources. Most of the displays, however, were devoted to Chinese fighters, remotely piloted (unmanned) military aircraft, helicopter gunships, and missiles of all types.
It was clear from the displays that there is no segregation of civilian from military aviation activities. The Chinese aerospace industry is run by the state. Its largest agency is Aviation Industries of China I (AVIC I), whose displays featured, side by side, a variety of civilian airliners and numerous military projects for fighters, bombers, military transports, trainers, and reconnaissance aircraft. Its sister organization, AVIC II, which was split off in 1999 to create competition and improve management, concentrates more on business jets, helicopters, and missiles. One display featured a row of cruise and air-to-air missiles under a large poster of a corporate jet, again showing the guiding Chinese principle of "Jun-min jiehe," which translates as "combine the military and the civil."
This principle was very evident as I strolled through the two halls devoted to American and Western firms trying to sell high-tech products to China. These firms are only supposed to be engaged on the civilian side of Chinese development. But that line cannot be drawn, and it is doubtful those marketing their wares in this booming market care.
Italian Deputy Minister of Defense Salvator Cicu was on hand for the signing of a co-production agreement between Agusta Westland and AVIC II for a new helicopter project. Italy, along with France and Germany, have been pressing the European Union to lift is arms embargo on China. But this embargo has long been undermined by the sale of dual use equipment and technology to Beijing. Helicopters are a prime example. Why else would a defense official be celebrating an allegedly civilian project?
One display showed two identical remotely piloted helicopters. One was configured for crop dusting, the other for military reconnaissance. It didn't take much imagination to consider what the crop duster might also be used for if armed with chemical or biological weapons.
American companies have been just as guilty as European in helping China improve its capabilities. Boeing had a large mural at its booth touting not only how many airliners it had sold to China, but also how much production work it had outsourced to Chinese industry, how many Chinese engineers and technical workers it had trained, and how much it was investing in Chinese research facilities.
It may not come to a military showdown. The economic changes may be so large, that America will simply back down if there is a major confrontation. It is really the economic changes that determine what resources governments can mobilize to advance or protect national interests. Wars, when they occur, test whether the changes have been sufficient to reorder how the world is run and whose decisions matter.
In Shanghai, I stayed at the Broadway Mansions hotel in the Bund. The Bund is the area where the European powers had their offices when they ran China's affairs. The British were the most powerful of the imperialist powers and the Broadway Mansions was built by a British businessman in the 1930s when England was still considered the leading global superpower.
Today, Britain no longer holds that position in the world hierarchy or in Chinese affairs. In 1999, there was no serious thought given in London to holding on to Hong Kong. This beautiful city of free and prosperous people was handed over to the Beijing dictatorship without a whimper. The balance of power had obviously changed from what it had been in 1842 when England first laid claim to Hong Kong, or 1945 when London reclaimed the city after it had been captured by Japan at the outbreak of World War II..
The British were on the winning side of both world wars. Indeed, England has not lost a major war since the Duke of Wellington defeated Napoleon at Waterloo in 1815. But they still declined as their economy fell out from under their empire. And the danger to us, as the British example should make clear, is that we have embraced the same classical liberal economic notions about "free trade" and the neglect of international economic strategy that had their origins in 19th century British thought.
Economic strategy is at the top of Beijing's agenda: the core of its pursuit of "comprehensive national power." Zhuhai, like Pudong, is a designated economic development zone. It has a new international airport, about 25 miles from the port city. There is an 8-lane superhighway running from the city to the airport, mainly through farm land with very little traffic. But there are massive housing projects built (and being built) for the expected future workforce. Near the city, new factories line the highway. A friend of mine who had been to the 4th Aviation Expo noted that where there had been a single line of factories two years ago, the plants are now 2-4 deep along the road.
The first challenge China poses is economic. It goes beyond the lop-sided trade imbalance which is menacing American domestic industry and the value of the dollar as the international medium of exchange. The longer term threat is from the vast new wealth and array of modern capabilities that will be available to a regime whose strategic ambitions clash with those of the United States.
Washington must concentrate its attention on enlarging and sustaining its own economic capabilities – industrial, technological, financial, to ensure that its stays generations ahead of China. This will take more effort than was needed to defeat the Soviet Union, as Chinese capitalism is a much more vigorous contender than was Russian communism. But safeguarding America's preeminence is just as imperative, regardless of the nature o f the threat.
Lao Gai..........stuff........
And what happens then?
My pick: We see The Yard Sale At The End Of History 2.0.
It will be China and Russia against the U.S..
During my 25 years in the Navy, Red China was always our 2nd biggest threat. The red army is very big, but there is no way to get it from china to the U.S., in one piece. After the USSR collapsed, everyone except the military, forgot about China. Bad move. They can still take south Korea, Taiwan and Japan for starters.
Since everybody already knows how dependent we are on Chinese imports,
thank-you for demonstrating what a flippant and myopic view you have regarding our national security.
China is developing a first world military and actually threatening to USE it (see what they regularly say to Taiwan), but most freepers think that the 10th-world-ragtag-army of a small time thug named Saddam Hussein was our real threat, and we had to spend thousands of American lives and (ultimately) hundreds of billions of dollars to dislodge him (and turn his country into chaos). In other words, we're living in Alice in Wonderland times.
China has power conficts will all of the following:
1. The US - for domination of the Pacific.
2. All the Asian nuclear powers;
- Russia
- the competitive economy of India.
(They happen to be using Pakistan & Islamists against India, but that is a dangerous game for them).
3. The Pacific Rim economic powerhouses - S Korea, Japan, Taiwan (which they want back for obvious reasons), and all the Pacific island countries.
Just like the Cold War, they won't attack Russia or India directly (or us). But they will use whatever leverage they can to muscle in wherever they can.
Ultimately, the North Korea question will be settled just like the Cold War conflicts were - by finding a temporary solution that gets China closer to Taiwan & Pacific power, and gets stops NK from threatening the US directly, or from arming our enemies - without a massive war a stone's throw from Beijing. Our trick will be to use India & Russia to block whatever advantage China gets.
RE: These firms are only supposed to be engaged on the civilian side of Chinese development. But that line cannot be drawn, and it is doubtful those marketing their wares in this booming market care.
There are export control laws. Actually enforcing them in full might be sort of interesting (but not for the faint of heart).
An overall comment. The first couple of times I went to the PRC I thought it was really neato and stuff. All the new construction, etc. That was back in the first half of the 1990s, back when I was still (I sheepishly admit) a Transnational Progressive of the GOP-lite stripe. Back then I had, like most of my peers still do, a geopolitical IQ of about 40. Thank GOD for the subsequent miracle, by which I started to learn things they don't teach at Wharton or Columbia - things that are probably considered "bad for market morale." Yes, we are selling Communist Red China the rope which they will use, in concert with their Axis partners, to hang the West.
But ever since 1945, the Japanese have been in the pro Western camp, not the anti Western camp, a difference which matters. Oh but you probably only care about the market, not geopolitics.
the banking problem in China is *WORSE* than the one in Japan!!!!!
RE: Capitalism promotes democracy
Yeah, like it did in Germany prior to WW2. However, republican government (not democracy) does promote capitalism and other indicators of freedom. You have a lot to learn.
Actutally, China is weaker than Japan. Always has been. The Chicoms have made no difference in that regard. To the extent that the Chicoms get freer and allow capitalism in, it causes their control to collapse just like the Russkies.
Yep. Whatever sells books.
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(from January, 2004)
THE world's business leaders now assembling in Davos for the annual World Economic Forum have currency fluctuations at, or close to the top of, the list of what they are worrying about.
They see the collapse in the dollar's value as having the potential to spread economic pain throughout the world - something President Bush failed to mention in his State of the Union Address on Tuesday.
One aspect of dollar weakness largely overlooked, even in Davos, is how it heightens the risk of an economic crisis in China. Because that country is fixing its exchange rate to slide down with the dollar, it has experienced an effective 40% devaluation against the euro and only a little less against sterling in the past 18 months.
But because the Chinese economy was already running flat out, the stimulus from devaluation could cause it to blow in a way that would be eerily reminiscent of the 1997-98 Asian economic meltdown.
All the economic warning signs are there. According to a December paper from Lombard Street Research, industrial growth was then running at more than 17%, exports were growing at an annual rate of 36%, imports at 30% and broad money in excess of 20% - all this in an economy with a sustainable potential growth rate of 8% a year.
Such indicators show that the economy is running at collision speed, but there is no sign of understanding from anyone in the leadership that the brakes need to be applied.
There are other reasons to think the Chinese boom cannot go on much longer without an enforced pause for breath. The nation is undoubtedly home to most of the worst banks in the world, organisations so riddled with corruption, nepotism and bad debts that they make the Japanese banks look like pillars of economic probity and virtue.
Their dominant purpose is to prop up the legions of businesses that are chronically loss-making, and to protect the interests of the local party politicians and businessmen who dominate them.
This desperate weakness of the banking system is also the main reason the Chinese have become so open to foreign investment.
Chinese banks on their own could never supply the capital needed. The Chinese boom is massively dependent on ever-expanding inflows of foreign money.
At some time in the next few months - or, if we are very lucky, years - most of the foreign investors' money will be lost, just as it was in Asia, and the dollar collapse brings that day nearer.
In the words of those estimable fund managers* Bedlam Asset Management, ‘China is a fundamentally bad equity investment.’
Profits, dividends* and return on capital are not the priorities. The businesses are run for market share, family wealth and political influence.
A major factor behind the Asian collapse was the belated realisation by the investment banking and fund management hot shots that so many of the region's businesses were making a nil return, and had been for years. It is the same in China.
Corporation tax, a proxy for profits, is rising at less than a third the rate of sales. Even allowing for flaky government statistics, this indicates that most Chinese businesses are operating at a loss - and relying on banks to continue to prop them up.
When this is realised, or when investors notice that they are not getting any dividends, the inflow of money will slow and the local banks will have to take the strain. That could be the breaking point.
To give the last word to Bedlam, it is all terribly reminiscent of 19th century America, where there was stunning growth, an immature legal system, poor shareholder protection, overcapacity and weak banks.
(Source: http://www.thisismoney.com/20040122/nm73290.html)
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So, what will be the effect of China's economic collapse... besides an international economic collapse when the world's manufacturing market basket implodes?
It is at such times that a country's leadership attempts to distract the populous by engaging in military ventures. Not only do the Chinese Communist Party leaders survive retaliation from the masses, but resources critical to economic health are acquired.
Polytech.
Talk to me after they hold free elections.
They are only separated by about 100 mile slivers of Laos and Myanmar. The territorial dispute in question is in the Pacific waters.
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