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The Rising Threat from China: Seeing is Believing
AmericanEconomicAlert.org ^ | Monday, November 22, 2004 | William R. Hawkins

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.


TOPICS: Business/Economy; Culture/Society; Editorial; Foreign Affairs; Government
KEYWORDS: china; geopolitics; globalism; nationalsecurity; thebusheconomy; trade
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To: GOP_1900AD

Um, I urge you to leave. I was born here. You can take the hike. And you have no idea what I "believe." I just stated a fact: ECONOMICS COMES FIRST. Always has, always will. The U.S. colonies had a relatively open economic system, based on property rights, LONG before the Constitution was adopted. Indeed, as I recall, the entire Revolution was about "economics"---something about "no taxation without representation."


81 posted on 11/23/2004 10:27:33 AM PST by LS
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To: t-1000

One of the few insightful comments I've read yet.


82 posted on 11/23/2004 10:28:20 AM PST by Tempest (Click on my name for a long list of press contacts)
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To: Travis McGee; Willie Green; redgolum; joesnuffy; ampat; GOP_1900AD; Squantos
Good post...and sobering.

The Red Chinese (and make no mistake, they are still Red...just tending more toward fascism), are using their dollars to prepare for future confrontation.

Here is what is happening now in that regard...


THE RISING SEA DRAGON IN ASIA

...and this is where it could potentially lead.

THE DRAGON'S FURY

83 posted on 11/23/2004 10:29:33 AM PST by Jeff Head (www.dragonsfuryseries.com)
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To: muffaletaman

The US were incredibly naive between 1919 and 1941. We sold both scrap and oil to the Japanese, and had an economic relationship with Nazi Germany not entirely unlike that we now have with China, albeit with a much lower trade deficit. GM were essentially told at the point of US Marshals guns to cease and desist well after Dec 7, 1941. Meanwhile, especially once FDR became president, we bootlicked Stalin and more or less gave our unofficial approval to having US Communists and their sympathizers go and fight against Franco in the Spanish Civil War, thereby doing the bidding of the NKDV who were the real force behind the installation of the Stalinist "Republican" government in Madrid. Meanwhile on the homefront, Congress kowtowed to isolationists who lamely believed that we could stay out of the war forever. What a joke. My question is, did we learn anything from almost having lost WW2?


84 posted on 11/23/2004 10:32:28 AM PST by GOP_1900AD (Stomping on "PC," destroying the Left, and smoking out faux "conservatives" - Take Back The GOP!)
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To: GOP_1900AD

You have hit on the cultural underpinnings of the 'new feudalists'.

Many share a common bond in that they are amoral, and secular to the extreme, most being avowed athiests.

Why do they acquiesce to Islam? Because IMHO, Islam also establishes a feudal society, based on the traditions of the 7th century.


85 posted on 11/23/2004 10:32:34 AM PST by Dat Mon (clever tagline under construction)
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To: LS

Well I was born here too. Yes taxation had a bearing on our War for Independence. But so too did political conflicts going clear back into the 1600s, during the time of Cromwell. What, didn't learn that in school? Neither did I, had to learn it on my own.


86 posted on 11/23/2004 10:34:58 AM PST by GOP_1900AD (Stomping on "PC," destroying the Left, and smoking out faux "conservatives" - Take Back The GOP!)
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To: Dat Mon
China, I believe, will be the first society to fully evolve into the prototype of a feudal society

The current efforts to run farmers off the land is working pretty well at establishing a "serf" class dependent on the government for subsistance. The millions of those that left to work in the cities and factories work in conditions so bad they would rather go back to their farm villages and starve. Many of them are owed back wages for years, yet the government doth not protest the employers for their abuses.

The corrupt public/private partnerships used to run them off their land, include a scam to build hydroelectric plants using "river designation" as the means to deprive farmers of productive land. The farmers that don't leave are forced to farm on more and more marginal land, where harvets are much less bountiful.

BTW Carly Fiorina of Hewlett Packard is an American feudalist--efforts to recreate human society minus liberty, freedom and free will, are global.
87 posted on 11/23/2004 10:39:59 AM PST by hedgetrimmer
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To: Pondman88
"What happened, oh 100 years ago in America??? Immigrants flooded here, and mass produced, in shoddy factories, the industrial revolution. US labor was cheaper than European labor, goods were produced-which I bet the Europeans thought were shoddy reverse engineered crap."

Not completely true. There were serious advances in manufactuirng that came out of America 100 years ago. The invention of High Speed Steel and its use in machine tools would be one example. American machinery builders like Brown & Sharpe were second to none at the time. Over 100 years ago America invented the polyphase induction motor as well which has driven industry ever since. The Wright brothers, Alexander G. Bell, Thos. Edison, Frederick Taylor, George Westinghouse, and Nikola Tesla were not reverse engineering European inventions; they left Europe in the dust.

Point is that when a country has a stable government, property rights, and the rule of law the people of that country can create new technologies and advance themselves. A centrally planned type government that just borrows the technology without having the conditions that would have allowed it to develop those technologies in the first place is dangerous, like taking steroids.

The Chinese government will do what it takes to stay in power. Unless there is some sort of popular revolution in China it comes down to whether the Chinese government thinks it can best remain in control by trading with others and having a good standard of living for its people, or by stoking the fires of nationalism by picking a fight with Taiwan and/or sinking a US aircraft carrier or two. Problem is, planned economies don't work well in the long run and that leaves the second option. We can hope for the best, but we had better plan for the worst.
88 posted on 11/23/2004 10:43:57 AM PST by WmDonovan (http://www.geocities.com/thelawndaletimes)
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To: LS
All I have to do to witness China's economic ascendancy is look at the products I buy from them. 20 years ago it was jackstands and a vise. About the only things they made then that could be trusted were heavy lumps of steel. Recently I've purchased a combination lathe/milling machine and a set of Ryobi battery powered tools that compared quite favorably to my Dewalt for less than 1/2 the price. I can't say the lathe/mill is as good as those made in America, Germany or Japan, but I could afford to buy it and it does work.

The fact that their economy is growing by nearly 10% a year and has been doing so for decades now is also a pretty good indication that they are doing something right.

89 posted on 11/23/2004 10:48:42 AM PST by elmer fudd
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To: redgolum

**China, Russia, and the US will be in a war in this half of the century. The only question is who squares off against who.**

Wasn't that a Nostradamas prediction?


90 posted on 11/23/2004 11:01:32 AM PST by ljswisc
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To: Pondman88; ninenot; sittnick; steve50; Hegemony Cricket; Willie Green; Wolfie; ex-snook; FITZ; ...
What do we have to fear from a capitalist inspired economy? Capitalism promotes democracy, and China will become more democratic.

History shows that democracies do not last very long. The prevalence of democracy in the West is only a few generations old and the signs of decline are already showing.

Countries with the more republican form of democracy like ancient Rome or present USA last longer, but they seem to turn into the imperial oligarchic monarchy (disguised of old republican symbols) with the increase of prosperity and power abroad.

91 posted on 11/23/2004 11:04:19 AM PST by A. Pole ("For the love of money is the root of all evil" -- II Timothy 6:10)
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To: Willie Green
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.

Here is the skyline:

92 posted on 11/23/2004 11:13:36 AM PST by A. Pole ("For the love of money is the root of all evil" -- II Timothy 6:10)
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To: StoneGiant

Wow, if this article is accurate the Chinese are in for some big problems.

They are setting themselves up for a complete collapse of their banking system.

I would not have any holdings in any Chinese currency.
Inflation will tear through that economy at a hyper rate.
The Chinese goverment's overreaction will cause more panic.
Combined with the fact that China has to import it's resources.

Not good.



93 posted on 11/23/2004 11:23:30 AM PST by t-1000
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To: Ken K

Right now China is about 5 times bigger in population then the US. However, the growth rate in population is higher in the US due to the one child policy in China (see link http://www.os-connect.com/pop/p2a.asp?sort=2050). In addition, this policy is going to cause structural problems for China in the long term as it approaches a 1 to 1 ratio between parents and children.


94 posted on 11/23/2004 11:24:22 AM PST by cohokie
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To: ljswisc
Wasn't that a Nostradamas prediction?

LOL! I don't know.


95 posted on 11/23/2004 11:26:27 AM PST by redgolum (Molon labe)
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To: Max Combined
Doesn't that mean that we got stuff and they have our paper money?

Yes and lot of it. Also they get treasury notes, assets and more. They also get relocated industrial base. We get perishable consumer goods and redundant workers on welfare.

96 posted on 11/23/2004 11:30:32 AM PST by A. Pole ("For the love of money is the root of all evil" -- II Timothy 6:10)
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To: Willie Green

First of all, I don't like William R. Hawkins' writings. I've read his writings before and I find him contemptable. He talks about changes in China that should be seen as positive and phrase them in such a way as being a threat.

The perfect example is what he already stated; the skylines of Shanghai. So what!! Shouldn't a major city in a major country have skylines? Or should China be relegated to being an agricultural nation forever?!

China should be allowed to build their skyscapers, fancy hotels, and factories without it always being seen as a threat.

Also, as far as China's influence surpassing Britain or nullifying Britain's presence in China, once again; so what?! Shouldn't a country of 1.3 billion people that head down the road of economic reform eventually surpass a country (Britain) of only 55 million people in influence, especially in their own country or neighboring countries.

Britain still retains greater influence than most of the 200 or so countries in the world. The average person in Switzerland and Findland have a higher standard of living than Britain, but Britain retains greater influence in the world. That's because Britain is a larger country in terms of population. And many larger countries such as Indonesia, Brazil, Pakistan, etc., Britain continues to weild tremendously more influence in the world than these countries.

I wish people who are anti-China would quit taking every day improvements that are happening over there as a threat.

I believe I've even seen a thread on this message board about toilets. People posting comments were mocking China's attempt at trying to impove their sanitation conditions. Now there's a real threat to talk about; toilets.


97 posted on 11/23/2004 11:46:43 AM PST by ponder life
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To: Tenacious0
N. Korea is the one who scares me.

Then it should interest you to know that the North Korean government is nothing but a puppet regime of Communist China.

98 posted on 11/23/2004 12:56:11 PM PST by Prime Choice (I like Democrats, too. Let's exchange recipes.)
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To: ljswisc
Wasn't that a Nostradamas prediction?

No. Nostradamus predicted a great war with an Arabian or Persian being the aggressor against the United States. He further indicated that, in the course of the war, Russia would join the U.S. in defeating the Middle Eastern enemy...and that it would be a nuclear war.

99 posted on 11/23/2004 12:58:09 PM PST by Prime Choice (I like Democrats, too. Let's exchange recipes.)
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To: Ken K

"Undoubtedly China's economy will overtake the U.S.' in terms of GNP in a decade or two and per capita GNP a decade or two after that. Along with the growth of India, China will become the center of the world's capitalistic free market economy. Already some believe that China has more millionaire than the U.S. and the size of the middle class is approaching ours."

This kind of bulls**t is hysterical!

The Chinese live under one of the most repressive regimes in history. They have no legal or political system that respects individual rights, including property rights. They have no appreciation for entrepreneurial or free-market capitalism beyond giving the control of national assets to the corrupt gangs of communist party apparatchiks. Their economy is likely to expand quickly in the short term due to pent-up demand caused by fifty years of communist mismanagement. But they have no social, legal, political, or economic foundation that will sustain this growth curve over the long term. They will eventually reach a point of diminishing marginal returns, as many other European countries and other "Asian Tigers" have already done.

The reason the US has become the most powerful and overwhelmingly dominant country known to man is because of our history, including our social, legal, political, and economic traditions. The Chinese, or anyone else, never have, and never will, recreate the phenomenal success that the US enjoys because they have no PHILOSOPHICAL foundation that makes this success possible. I look for China to eventually falter and stagnate just like the Soviet Union did, and every other competitor to the US during the past hundred years (Germany, Japan, France, Russia, even Great Britain). Their failure is built in to their respective systems!

The only REAL threat the US has is if we continue to implement welfare-state, mixed economy policies that destroy the engine of economic creativity and growth here in our own country by ourselves. That is to say, if the people of the US destroys our own FREEDOM!


100 posted on 11/23/2004 1:00:02 PM PST by bowzer313
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