"China is catching it up as the world's biggest economic power .... learn Mandarin

If you want to understand the global economy and feel the pulse of capitalism in the early 21st century, look no further than the $19 billion bid by the China National Oil Operating Company - Cnooc - for Unocal of California. Add a large measure of geopolitical tension, and you have probably the single most important corporate event of the young millennium. The offer - which Cnooc's president Fu Chengyu and his team have been considering ever since rival US oil giant Chevron agreed a takeover of Unocal for $16.5 billion - encapsulates the growing business confidence of China, the land of totalitarian capitalism. Its dynamic economy needs raw materials if it is to continue the eye-watering growth rates of the past few years. Chinese demand has already helped push up global commodity prices, including oil. Now Beijing wants to own the means of production, too. A middle-ranking American oil company will do nicely.

American nerves are already frazzled by the rate at which China is catching it up as the world's biggest economic power. There have been takeovers by Chinese groups of such pillars of US capitalism as IBM's PC business and Hoover. These are serious brands - but not in the same league as an oil company with real, strategically significant assets. West coast senators are already beginning to lobby the President, who must be worried by the prospect of Chinese ownership of a quintessentially American business. (When Japan bought up a chunk of USA Inc in the Eighties, it was regarded as a corporate Pearl Harbour.) Throw in the spat over Chinese textile exports to the US and Europe, which will be the centre of bitter recriminations at the next meeting of the World Trade Organisation, and the import of the Cnooc bid looms even larger.

Americans will not admit it, but they are almost impotent in the face of Chinese financial firepower. The Cnooc bid is in cash, backed by the near-limitless resources of the Chinese state, and in a country like the US, which has always lived by the epigram 'cash is king', it looks hard to beat. Chevron would certainly struggle to match it. That is why the political lobby is already rolling, with much muttering about the 'national security' implications of the proposed deal.

(Notice, however, that such patriotic concerns do not extend to Wall Street. Goldman Sachs and JP Morgan, perhaps the finest names on the Street of Dreams, are advising the Chinese. Morgan Stanley is waving the flag for Unocal, but its fate will probably be decided by the mainly American hedge funds that dominate its share register. The business of America, it seems, is not business, but finance.)

And - to seal American paranoia - China is also a major holder of US debt. Put simply, the US is in hock to the Chinese to such an extent that if all the bills were called in at once, Uncle Sam would be bust. It's not in China's interests to destabilise the world economy at the moment, but circumstances change. Beijing might just like to keep that card - a financial nuclear option - up its sleeve for some future geopolitical crisis.

Corporate America will climb a traumatic learning curve over this bid, and be forced to confront the growing reality of Chinese economic power. For business people elsewhere, the lesson is far simpler: learn Mandarin - now.

Clauswitz makes sense only if you believe that people fight for purely political or economic reasons. While the majority of "great wars" are, in fact, fought for these reasons, they are not the ONLY reasons operative. This is why Clauswitz is wrong. And this is supposedly from a man who was inspired to write his treatise while watching the French revolutionary armies attack Moscow! He obviously did not learn anything from the experience. The French (not Napoleon and his marshalls) soldiers that marched on Moscow were not driven by nationalism or intent on plunder -- they were bringing a revolutionary ideology of freedom to an oppressed people. Happily and voluntarily.

The folks out here who fear China are overlooking two very important issues, both of which the PRC itself often ignores (which is kinda interesting). The first is that if American investment dried up tomorrow, China's economy would collapse in a relatively short time. We are, to paraphrase Lenin, selling the Chinese the rope with which they will hang us. There are still American politicians and businessmen out there that fervently believe that the CHinese government will eventually see the light vis-a-vis free trade. This is a fallicy because the Chinese economy, as it currently stands, does not engage in anything that could be called commerce in the most parochial sense. It's merely a political ploy to keep the population in line an dlaboring under the false belief that it's actually getting rich. In the meantime, we're merely preventing bad investments from becoming major losses.

The second overlooked issue is simply human nature. Masses of Chinese who are now finding a few crumbs falling into their laps will a) begin to want to protect the crumbs and b) eventually demand more than crumbs. Both will involve a liberalization (in the purest sense) of law and economic policy in China -- which is exactly what the communist leadership DOES NOT WANT. When "reform" movements begin to pick up steam in China, the government will react the way it's always done -- crack down hard, only this time, the reformers will be much better organized, informed and able to continue dissent.

Therefore, it is my belief that China will succumb to massive INTERNAL strife long before it finds itself confronting the west in war --- strife that will be caused because human nature (admittedly nudged by politics, tainted by economics)will assert itself.

Now, as to your formulation for future warfare --- you are under the impression that nuclear war could be integrated into a scheme in such a way as it would be severly limited. The problem with this is that you have failed to note that nukes are POLITICAL and not MILITARY weapons. This is something the Russians were able to grasp very early on, and we were not.

If you go to war on Clauswitzian premises (war is political or economic), and then unleash nuclear weapons, you disprove Clauswitz immediately. If your war was driven by politics, then your goal is to make your enemy think more like you or expand your ideology. You cannot do that when he's a mass of vaporized ash, and the example you present to the rest of the world does not make you popular. If your goal was economic, then you unleash destruction on economic bases and resources which you now cannot obtain or recover --- you destroyed them and made then radioactive for the next few hundred years. In the end, you have achieved nothing.

Nuclear weapons are merely a threat to be used to influence the behavior of your enemy in a limited fashion. The Cold War bore this out. War did not end because both sides could fry each other, it merely became more limited in scope and revolved around the superpowers using other peoples as proxies and political pawns. Neither side would actually go to war with each other, but they could still advance their ideologies on a limited scale.

Human nature rears it's ugly head again: neither side would want to be responsible for the destruction of mankind, and so there is a tacit agreement not to cross that line except in extremis. It would have taken an invasion of the Soviet Union or the continental United States to unleash nuclear hell during the Cold War. In the case of China, we could not conquer them nor they us. The distances and scales are too great for a conventional war to be very effective. China could not transport and supply a force sufficient to conquer and occupy, certainly not in the face of American naval power, and neither could we do likewise.

That leaves China in the position of having to try to cow us with a nuclear deterrent. The Chinese nuclear arsenal, at present, is a) puny by comparison and b) not under the control of madmen bent on destruction, but rather the perpetuation of their power and ideology. They fear their own more than they fear us. The Chinese nuclear arsenal is not intended to be used against the US, but rather to give us second thoughts about interfering in their internal affairs.

RE: "The problem with this is that you have failed to note that nukes are POLITICAL and not MILITARY weapons. This is something the Russians were able to grasp very early on, and we were not."

I disagree. They constitute excellent military weapons for specific purposes. The only reason they have not been used is because the Western countries against which they would actually be used militarily have kowtowed, negotiated, surrendered, run away from or done anything but fight to win an undeniable victory in each situation where they might have actaully been used (e.g. to resist the Communization of Eastern Europe, in the Korean War, in SE Asia, etc). So, since during the so called Cold War, the West reliably never really stood up to fight, fearing, as we did (and still do) the realities of Great War, there was no reason for our enemies to use them on us. But a false peace can only be sustained for a finite amount of time. The period since 1945, notwithstanding aforementioned self arresting wars, has been a remarkably lengthy interwar period. Also, we must consider the amazingly long lived UN facade as well - Western buy in to what is a de facto appeasement and stalemate mechanism has certainly played a prominent role in maintaining the false peace. The coming fall from false peace will be hard and fast.

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