US-China strategic competition and its dangers

By S P SETH

The reported military exercises by Chinese forces to defend against a possible US attack have raised tensions between China and the United States. The question is: why has China raised the stakes in its relations with the United States?

It is important to realize that this is not a sudden phenomenon. There is a history of antagonism between the two countries, following the communist victory in 1949 in China’s civil war. Indeed, with their long historical memory China hasn’t forgotten the humiliation of Western domination in the 19^th century, including the United States’ advocacy of “Open Door” policy in 1899.

But with the ascension to power of Deng Xiaoping in the late-seventies, China sought to concentrate on building up its economy to create a modern and strong nation. Deng’s advise for his people was to bide their time until China was ready to play its role as a great power.

Apparently, his successors believe that China’s time has come, with its increased political, economic and military strength. Against a backdrop of its “century of humiliation”, China’s reaction to any perceived threat to its sovereignty has a tinge of bitterness with a new resolve not to allow any power to trample on China’s homeland.

Two recent incidents have highlighted this sensitivity. First: The holding of joint US-South Korean naval exercises in regional waters, against China’s stated opposition, has angered Beijing. It regards such activities by foreign warships and aircraft as a threat to China’s security.

By holding its own exercises, China has expressed its anger concretely. As the People’s Liberation Army (PLA), Military Weekly, newspaper said, “…they send a message… If other people threaten our interests, we have enough military means and technological methods to keep them in check.”

Second: North Korea is increasingly emerging as another flashpoint between China and the United States. The United States and its Western allies seem determined to reverse North Korea’s nuclear path. But Pyongyang is equally determined to use that as a tool to extract as much political and economic advantage from it.

With a view to achieve its goal of de-nuclearization in North Korea, the United States has actively sought China’s help, with its considerable leverage with Pyongyang that relies heavily on Chinese supplies of essential goods. In this respect, the United States did have some success, with Beijing hosting six-nation talks (including North Korea, South Korea, Japan, China, Russia and the United States) on non-proliferation until North Korea walked away from the talks.

Pyongyang wouldn’t agree to abandon its nuclear program without a sequential link between its various stages and the provision of political legitimacy, aid, trade and other related advantages. Since it wouldn’t agree to dismantle its nuclear weapons as a starting point, the entire negotiating process has collapsed. And Pyongyang is now refusing to return to the China-hosted six-nation talks. It is threatening a “physical response” to new US sanctions and has condemned US-South Korean naval exercises as “gunboat diplomacy.”

China’s response basically has been to counsel restraint. It has refused to take sides between North Korea and South Korea on the sinking of the South Korean warship, Cheonan, blamed on North Korea. But it hasn’t taken kindly to the US-South Korean exercises in seas that it regards as its security zone. Which accounts for China’s counter move to stage its own comprehensive exercises around Beijing and surrounding areas. According to General Zongqi of the PLA, “The aim is to raise fighting capabilities in this military region and make effective preparations for military combat.” This warning is as serious as they come.

North Korea is, therefore, a serious flashpoint. China has obviously decided to detach itself from the US-coordinated continuous pressure on Pyongyang. The US-South Korean joint naval exercises have obviously hardened China’s position. A serious flare up in the Korean peninsula is likely to send a flood of refugees from North Korea into China’s neighboring region.

At the same time, China regards Korean peninsula and seas surrounding it as its security zone. Therefore, the US participation in military exercises is regarded as a threat to China’s security. China seems to suffer from the Fifties’ Korean War syndrome when American armies pushed closer to its border with North Korea, inviting Chinese entry into the Korean War. Broadly, though, they want the US naval forces out of Asia-Pacific. If that were to eventuate, China will have no real challenge to its regional primacy.

In this tug of war for regional primacy, another important contentious issue is the South China Sea. In the nineties, China declared South China Sea as its territorial waters, thus overriding the rival claims of some of its neighbors to a clutch islands in these waters. However, it agreed to resolve these issues through diplomacy. But now it regards South China Sea as its “core national interest”, which puts it beyond any negotiation.

Even though some of China’s South East Asian neighbors might grumble about its high-handedness, most, however, are getting resigned to China’s growing power. The US, though, is not resigned to it because, among other things, China could restrict or control commercial and naval traffic through South China Sea through its exercise of sovereignty. For instance, one-third of global commercial shipping is said to pass through the waters that China claims its own.

In other words, the strategic competition between China and the United States is likely to intensify in Asia-Pacific region. Considering China’s “century of humiliation” by the West (in which the United States was a late entrant), it is seething with anger, just below the surface, to exclude foreigners from “its” region. Such anger is reflected in the comment of a retired Chinese admiral (reported in the Economist) who likened “the American navy to a man with a criminal record ‘wandering just outside the gate of a family home’.”

It would appear that even though neither the United States nor China is itching for military confrontation, there is always the danger of some miscalculation in a charged atmosphere. Over time, the strategic competition is likely to increase and intensify. And if the history of the two World Wars is any guide, there is always the danger of such competition sliding into confrontation and, eventually, leading to conflagration.

Note: This article was first printed in Daily Times

China’s push to oust US from Asia-Pacific

By S.P.SETH

China is flexing its muscles to assert its power on a range of issues. An interesting recent development of considerable significance over a period of time is the downgrading, by China’s Dagong Global Credit Rating agency, of US Treasury bonds from the top AAA rating to AA rating, with negative outlook.

This is China’s first entry into the world of rating credit worthiness of different countries. China believes that the existing international credit rating system (involving agencies like Moody’s, Standard and Poor’s and Fitch) hasn’t worked well.

The Dagong chairman, Guan Jianzhong, reportedly said, “The essential reason for the global financial crisis and the Greek crisis is that the current international rating system cannot truly reflect repayment ability.”

By downgrading the US Treasury bonds and assessing other countries’ economic credentials (for instance, Japan, Britain and France have low AA- ratings), China is setting itself up as the alternative, if not the only, economic powerhouse.

If China were to follow the logic of its own Dagong agency, it would stop investing in US Treasury bonds and might even start winding down its considerable investments in the US bonds. Which could be very de-stabilizing for global economy, and damage China’s US-denominated investments.

The important question is: what leads China (Dagong obviously is a government approved credit agency, because nothing of this significance happens in China without its authorization) to believe that it can do a better job of credit rating than the existing agencies?

The assumption here is that China has a strong economy, with virtually no sovereign credit risk. But, if China were an open and transparent country, it would have to be concerned about its economic vulnerability on two counts. First, China’s total debt (to include central, regional and local authorities as well as other government instrumentalities) is estimated by some experts as close to 100 per cent of its GDP. If the hundred percent figure is true or close to reality, China’s credit worthiness is as flaky as the most indebted countries in the world.

Any country that rates its debt at 20 per cent, when the real figure is so much higher, cannot be trusted with rating the sovereign credit risk of other countries.

It should also apply to Western credit agencies because their track record in predicting the recent global economic crisis, as well as the Asian crisis of 1997 and 1998 and the bursting of the dot.com bubble of year 2000, was pretty terrible.

In their case, though, one might be able to say that they didn’t speak for their governments. In China’s case, despite the Dagong’s claim of independence, it is not believable. For instance, its report was launched at the headquarters of China’s official Xinhua News Agency.

At the second level: in the last year China experienced a phenomenal growth in lending by its banks and other agencies. According to one estimate, in the first half of 2009, Chinese bank lending was 28 per cent higher than official figures.

More and more loans have been repackaged into investment products, not unlike the subprime mortgage products. As William Pesek writes in Bloomberg, “Repackaging loans and moving them off balance sheet is exactly what got corporate America into trouble and almost killed Wall Street.” He adds, “Such practices raise the odds that China is paving the way for a wave of bad debts.”

China’s economy seems to combine the elements of both American and Japanese economic malaise of phenomenal credit growth, and emerging bubbles in real estate and stock markets.

In other words, setting up a credit rating agency doesn’t make China a superpower.

But China is not only challenging the US on the economic front, but also in regard to issues of territorial and maritime sovereignty. For instance, in the nineties, it had passed domestic legislation claiming South China Sea as its territorial waters.

However, at that time, it looked like an ambit claim still subject to peaceful negotiations with its Asian neighbors, with rival claims. China has now proclaimed the South China Sea into its “core national interest” beyond any negotiation.

Which means that China could restrict and control traffic through South China Sea, with one-third of all global commercial shipping passing through it.

In this way, China is not only claiming sovereignty, but also challenging the dominance of the US navy.

But the US response is as timid as it could be, with its Assistant Secretary of State, Kurt Campbell, emphasizing the importance of dialogue “not just with China but with our friends in south-east Asia, to ensure that we fully support the 2002 process between China and south-east Asian states to deal with any outstanding issues through diplomacy.”

China certainly doesn’t have any intention of doing it through diplomacy when it has nominated South China Sea as its “core national interest.”

At the same time, China has reacted strongly to the joint US-South Korea naval exercises in waters around South Korea. Coming as these exercises do after the sinking of the South Korean naval ship, Cheonan, by North Korea, these are a warning to Pyongyang that the US remains committed to the defense of South Korea.

China’s foreign ministry spokesman, Qin Gang, had earlier warned that China “firmly” opposed any foreign warships or aircraft conducting activities undermining China’s security in the Yellow Sea and China’s coastal waters.

China, though, is unwilling to exercise its leverage on Pyongyang to draw it back from its brinkmanship.

Indeed, North Korea is ratcheting up its rhetoric by warning of a “physical response” to new US sanctions—whatever that means.

The US Secretary of State, Hillary Clinton, said at the recent ASEAN Regional Forum gathering in Hanoi that ”… Peaceful resolution of the issues on Korean peninsula will be possible only if North Korea fundamentally changes its behavior”.

That doesn’t look like happening soon, if at all, while China looks the other way.

North Korea’s belligerence, as well as China’s assertive claims to maritime areas in South China Sea and elsewhere, is causing great concern in Japan. The US is also worried about China’s expansive claims to regional waters, now backed up with its blue-water fleet.

A Japanese government panel has reportedly recommended deploying more armed forces in coastal areas where Chinese naval traffic has increased.

The panel also recommends a more activist role for Japan in its alliance with the US. The report, as quoted in Yomiuri Shimbun, says: “From the viewpoint of strengthening the Japan-US alliance, there should be political will…to allow [Japanese forces] to attack missiles bound for the United States.”

In other words, the recommendation is for further strengthening and tightening of US-Japan security relationship.

China is pursuing a policy of laying claim to as much of Asia-Pacific (whether as sovereign territory or sphere of influence) as it can get away with it.

Most of its neighbors, even where they contest China’s claims, are not inclined to stand up to Beijing because of its growing power.

As for the US, it seems to have lost its puff. China obviously wants to push the US out of the Asia-Pacific region. And if the US doesn’t take a stand on issues like South China Sea, the US might find itself pushed out of Asia-Pacific region.

At present the US has two loyal allies in the region—Japan and Australia. In the case of Japan, unless the United States asserts its regional role and presence, Tokyo might feel abandoned and start adjusting itself to a China-dominated region.

As for Australia, its medium and long-term prospect looks like being China’s quarry, with Beijing eventually able to dictate its policies.

.

US decline is China’s opportunity

By S.P.SETH

While terrorism continues to hog the limelight as an international issue, there is much more happening in the world that is not receiving due attention. One is the progressive decline of the US’ power in global affairs. Indeed, there is a correlation between the two. The 9/11 tragedy in 2001 was also the beginning of the US war on terrorism, leading to its invasion of Afghanistan.

As if Afghanistan was not enough, the United States opened another front in Iraq in 2003 to rid it of Saddam Hussein, and foster democracy in that country. Indeed, the “shock and awe” military campaign announced the practical workings of President Bush’s pre-emptive war strategy, with Iraq as a demonstration model of what might be in store for other regimes in the Middle East (like Iran, Syria and others) if they stood in the way of the US “vision” of the world. But, as we know, things didn’t work out quite like that and the US is seeking to extricate itself from these disasters.

The new Bush administration, at the turn of the new century, was keen to remake much of the world to suit its strategic priorities. There was a sense that the previous Clinton administration had squandered US power and opportunities to remake the world. The leading figures of the Bush administration already had a blueprint ready to make up for the lost time under Clinton. This was an administration in a hurry and convinced that the US should behave and act like the sovereign of the world. Because, in the ultimate analysis, what was good for America was good for the world.

The 9/11 tragedy, horrible as it was, simply spurred the new Bush administration to fix up the world. Their invasion of Afghanistan, against the backdrop of 9/11 and the Taliban and al-Qaeda link, seemed understandable to many countries. And the follow up in Iraq was an opportunity to solve the US’ Middle Eastern headaches by making an example of Iraq.

But its long involvement in these two wars, particularly in Afghanistan, with no satisfactory conclusion in sight, has damaged its global image as well as the reality of its power. It has overstretched its resources, both militarily and economically. That a superpower, with all its military muscle, has failed to produce a successful outcome against the Taliban insurgents in Afghanistan is an invitation to all the ragtag irregular militias anywhere in the world to pinprick the US and its allies.

The Somali insurgents of al-Shabab are an example in point. They recently struck in Uganda killing 75 people watching a World Cup Soccer match. The al-Shabab sees Uganda as a US proxy in Somalia. And by killing Ugandans they were in a way challenging the US power. The US, at times, appears like a giant groaning under its own weight and unable to turn around to reposition itself to its changing situation.

At the economic level, the war has seriously drained the US treasury. The cost of these two wars varies from $1 trillion to 3 trillion. The latter estimate tends to include all the societal, medical and related expenses resulting from the war operations.

Aside from the two wars, the Bush administration’s free market fundamentalism has also contributed to the US decline. For instance, it has brought the US economy to its lowest point since the 1930s depression. And infected most Western economies that bought into subprime US housing loan packages of dubious value. The merry-go round of almost limitless cheap credit seemed to have created the illusion of a new economy where all the assets (secured or unsecured) seemed to have only an upward trajectory.

And when the bubble burst, as it was bound to at some point, the American economy (and other Western economies) found themselves without any shock absorbers. With no rational solutions in sight, they all took recourse to huge borrowings to stimulate their downbeat economies to prevent a precipitous fall in unemployment, to revive failing and failed banks and so on. By socializing private losses of banks, financial institutions and insurance companies, the crisis is now assuming the form of sovereign debts. Greece is the leading example of this, with others to follow.

The United States is struggling with all these economic issues, while still mired in Afghanistan and, in a limited way, in Iraq. How this will all end is anybody’s guess! But it certainly has created an image of an America that is struggling to find its feet, while still acting as the global sheriff.

CHINA’S RISE

While the US has been busy in Afghanistan and Iraq, and the war against terrorism in general, China has steadily built up its image as an emerging superpower. In a sense, terrorism created a shared concern between the two countries with China eager to brand the Uighur separatists in Xinjiang as terrorists. It won an important concession from the US on this by labeling the East Turkistan movement as a terrorist organization.

The Uighur separatism, alongside Tibet, were major issues of human rights violations that the US had often raised with China to its discomfiture, and as an exercise (Beijing believed) in encouraging separatism in China. After the US declared war on terrorism, it softened on the human rights question in China, as well as on trade and political issues.

The trade between the two countries expanded, and the general tone of exchanges between them was marked by cordiality. China appeared to have gained certain respectability, buttressed further by its rapid rate of economic growth of about 10 per cent annually. China was becoming the factory of the world, with its exports of manufactured goods rising and creating sizeable trade surpluses in its favor. For instance, China’s trade surplus with the US is reportedly at about $200 billion a year, and another $100 billion with the rest of the world. It has amassed around $2.5 trillion of foreign currency reserves and rising.

Although China was hit by the global financial crisis with a significant fall in its exports, the situation has largely been retrieved. Even though Western economies are in bad shape, they have no real options except to buy cheap goods from China. Therefore, the US and European countries have been pressing China to revalue its currency to (1) regain the competiveness of their manufactures and (2) to reduce their respective trade deficits with China.

China has lately responded with some small appreciation of its currency but, unless the Chinese currency appreciates significantly, it will not make any dent in China’s trade surpluses with much of the world. And there is no sign that China will significantly appreciate its currency to the satisfaction of the US and its other Western trading partners.

However, China wants to reduce its dependence on exports and has taken some steps to stimulate its domestic economy. But there are dangers that this could create inflationary pressures. This has been evident in the real estate market where prices have simply ballooned to make it unaffordable for most Chinese people except the very rich.

As part of its large stimulation package, the government had leaned on banks to lend indiscriminately, resulting in upward pressure on real estate and stock markets. This has created serious economic distortions. In the industrial and construction sectors (like steel industry, infrastructure development, spending by local and regional governments) there has been a lot of wasteful spending and overproduction. The Chinese government is aware of some of these problems and has taken some remedial measures, like tightening the credit market.

Notwithstanding its counter-measures to rein in the economy, the hybrid nature of China’s capitalist economy and the Communist Party’s monopoly power is creating serious contradictions. It is difficult to reconcile the two irreconcilable elements. For instance, an uncomfortable nexus has developed between the Party and the new economic class spawned and controlled by the Party. Some of the major strategic industries, like power, transportation etc., are either owned or controlled by the children (dubbed ‘princelings’) of the top former and present Party leadership.

A similar picture is replicated at the lower rungs of the power structures in regions, local areas and so on. Which has led to widespread nepotism and corruption nationally causing great resentment among the people, even though dissemination of such information defaming China’s power elite is prohibited; except in cases where the defamed Party leaders have fallen foul of the dominant power group at different levels.

Which brings up the question of lack or absence of accountability, leading to the perpetuation of the same old rot for want of remedial avenues through open airing of corruption in relevant political and judicial structures.

Another serious problem arises from a relatively depressed rural sector of the economy. Indeed, the first sector to gain from a relatively open economy in China was the agricultural sector where communes and collectives were dismantled, with peasants energized to work on their farms (though, still, owned by the state) with increased production and improved earnings. However, from the nineties the emphasis shifted to industrial economy, with the rural sector providing a supportive role. In other words, the farming sector increasingly came to subsidize the urban economy.

The primary shift to industrial economy affected the rural sector in a number of ways: First, there was the relative neglect from the state, with very little new investments in the rural sector, (2) leading to depressed economic conditions with no new employment opportunities, (3) the influx into urban areas of rural migrant labor with no legal status and hence denied whatever state benefits accruing to those with legal urban residency, (4) cheap migrant labor, with staggered and delayed wages, and (5) the perpetuation of urban tales of rising crimes attributed to the new rural work force.

China is believed to have a floating rural migrant workforce of anywhere between 120 to 150 million and always on the move. Worst still, because of the needs of urban construction of housing and industrial plants, more and more rural land has been acquired legally (with grossly insufficient compensation) or illegally depriving its occupants of their living and occupations. In other words, there is a wide chasm between rural and urban China in terms of incomes and socially, creating a lot of resentment and protests in different parts of China. There are reportedly more than 100,000 cases of protests and demonstrations in China annually.

Out of China’s total population of 1.3 billion, its rural proportion is estimated at around 800 million. And these are the people who have either missed out or only partly gained from China’s industrial transformation, and are not terribly happy about the glaring inequalities and inequities of new China.

While China has opened up economically and socially in so many ways, its political system remains tightly controlled. The Party has largely co-opted the urban middle class into the glitter of moneymaking and upward mobility, thereby neutralizing its political aspirations and thus leaving the Party to exercise its political monopoly.

But the gap between the middle and rich classes (with Party connections) is growing fast, creating widespread resentment. And almost all Chinese people hate the systemic and ever-growing corruption involving the Party bureaucracy and political elites. Since China’s political system is largely closed, people do not have valid and legal channels of letting off steam. There is, therefore, always the danger of a spontaneous combustion of popular anger at some point in time.

However, as things stand today, China is increasingly emerging as a new superpower, though the United States still remains the world’s most powerful military power, with the world’s largest economy. The US economy, though, is plagued with all sorts of problems, with China emerging as a major creditor by investing close to 1 trillion in US securities. Indeed, China is emerging as a creditor to a number of countries, including some European countries. It has recently entered into a number of deals with Greece to invest in different sectors of its economy, thus propping up its hopeless economic situation. Greece is likely to be the stepping-stone for similar deals with other European countries in difficult economic situation.

China is investing and making deals all over the world (Africa, Middle East, Asia, Latin America) to secure the supply of oil, gas, metals and other resources to keep up the momentum of its growing economy. These deals sometimes reek of a neo-colonial pattern. For instance, these countries will not receive any share of profits until all the Chinese loans have been paid off with newly discovered resources. At the same time, China is developing new markets in these countries for its manufactures, with damaging effects on local industry.

Such dependent relationships, where even labor is exported from China to work on Chinese-funded projects, is already creating resentment in some countries. But China has the ready money, and is not concerned about the nature of the political regimes it is cultivating. Which gives Beijing an edge over the US and other Western countries, enabling it to expand its economic presence and political influence at the expense of the United States and Western Europe.

China’s imperial rise

By S.P.SETH

It rightly made news when China suddenly emerged as Greece’s economic savior of sorts. It happened around the time when credit ratings agency, Moody’s, had downgraded the country’s rating to junk level. Which means that investing in Greece or lending it money was a high-risk proposition.

Even though the European Union and IMF had thrown it a credit line to bolster up its credit worthiness, the markets weren’t convinced.

In Germany, the European Union’s biggest economy, the move to bail out Greece wasn’t popular at all. Greece was not only facing economic ruin but also political and social instability.

The austerity regime imposed on Greece by the European Union and IMF was creating turbulence. And the Greece’s socialist government was (and still is) at wit’s end.

It was against this backdrop that China entered into a series of bilateral agreements with Greece to further broaden China’s economic horizon that, in turn, will help Greece at a very difficult time.

It must be noted that China is not doing these economic deals out of the goodness of its heart. These deals make important political and economic sense. The Chinese vice premier, Zhang Dejiang, made two visits to Athens during a one month period to make deals worth billions of dollars in shipping, tourism, telecommunications and more.

It is reported that the 14 deals with Greece amounted to the biggest single investment by China in Europe, though no figure has been put on it.

As for Greece, it bolsters its economic situation at a critical time. By investing in Greece in such a public and dramatic way, China has expressed its confidence in Athens’ capacity to successfully deal with its debt situation.

Zhang Dejiang said, “ I am convinced that Greece can overcome its current economic difficulties.” And such a vote of confidence was very sorely needed by Greece in its current economic travails.

Of course, it will provide China a useful conduit to expand its economic and political tentacles into other countries in the European Union, especially Portugal, Spain, Ireland, and the Balkan region.

Even the United Kingdom is not looking good, with its budget deficit at around 11 percent of GDP, close to that of Greece. Its total debt is believed to be the second biggest in the European Union after Ireland.

Though China’s economy is not in sterling shape, it does have large foreign currency reserves from its trade surpluses, particularly with the United States. It is estimated to have over $2 trillion worth of foreign currency reserves, and rising.

Its annual trade surplus with the United States is rising at over $200 billion a year, and another $100 billion with rest of the world. Which means that its reserves are growing at the rate of over $300 billion a year.

China, therefore, can play politics with its money to expand its political and economic reach into Europe.

Although China has large foreign exchange reserves, it still has a fairly serious problem of indebtedness. China’s official figure of its debt at 20 per cent of GDP is simply, like its other statistics, not believable. Victor Shih of Northwestern University in Illinois, reportedly puts it at about 96 per cent of China’s GDP by next year—to include the debts of local instrumentalities and state-funded debts.

But, like in Japan, China’s debt is mostly internally funded, with low interest-bearing savings of its hard working and thrifty people. It is still debt, though. If there were to be a loss of faith in the government, this could lead to a run on government banks and other related agencies.

Be that as it may, China’s large foreign exchange reserves are an important part of its wide reach. And unless the European Union puts its house in order, China will have ample opportunities to use its financial power to create serious mischief.

For instance, in many African countries, China is already virtually pillaging their resources’ through investment in mining, oil, gas and other extractive industries. In return, these countries pledge their commodities to China over many years to pay for the Chinese debt.

In other words, these African countries will remain poor and destitute for many years to come even after their mines and oil fields become operational and profitable.

This was once called colonialism, and still is even if the perpetrator, China, once suffered and railed against such inequities.

Europe might not suffer in the same way as China’s African targets. But exchanging one kind of debt with another (even if it is called investment) from China doesn’t alter the fact that such relationships entrench economic dependency and hence exploitation.

With its long historical memories of how China was done in by the colonial powers in the past, it might not be averse to doing the same to European countries.

Europe apart, China is everywhere in the United States’ backyard of Latin America. For instance, China is now Brazil’s biggest trading partner, having supplanted the United States. Its trade with Brazil has reportedly risen from $10 billion a year in 2000 to over 100 billion today.

Like in Africa, Latin American exports to China are commodities and minerals. And they are increasingly becoming an important source of their revenues. With such growing economic dependence on China, these countries are losing the ability to develop an equitable relationship.

And China is exploiting its economic power to push exports of manufactured goods into these countries, with its artificially depressed wages aided by its undervalued currency.

In the circumstances, these countries will have no prospect of developing a manufacturing base. And where it does exist in a small way, that too will be destroyed in the face of China’s onslaught.

China is developing into a neocolonial power. And its entrenchment in the US’ backyard has all sorts of pitfalls for the United States and the region.

Sometimes, it would seem that China is seeking to contain or encircle the United States. The only thing missing is that it doesn’t yet have the military power to enforce its writ.

But they are working on it, conscious that China will need a much bigger military machine to enforce compliance on their economic dependencies.

But there are two important constraints here. First: they have too many internal problems to reckon with. Therefore, a large and disproportionate diversion of national resources to the PLA might further upset the internal imbalance.

As it is, China’s spending on health, education and social welfare are hopelessly inadequate.

Second: by elevating the armed forces to a higher level of guarding and expanding China’s imperial interests, the PLA might become a threat to the Party’s political supremacy.

Therefore, there are inbuilt internal constraints on China’s emerging imperial overstretch. At the same time, the promotion of national chauvinism would appear to be a calculated move by the Party to underpin its legitimacy.

US dependence on China shortsighted

By S.P.SETH

North Korea continues to defy the world on almost everything. The latest was the sinking of a South Korean navy ship with a North Korean torpedo, killing 46 crews. Pyongyang denies the accusation, even though it has been investigated and confirmed by an international enquiry.

Even if one were to give some credence to Pyongyang’s denial, its history of killing its South Korean targets at different times in the past would suggest that the sinking of the South Korean ship is in character with the regime’s propensity to commit murders and create mayhem.

However, all the brouhaha created by this serious act of criminality seems to have died down. After making a big show of protests, and follow up action (with the support of the United States), Seoul too has gone relatively quiet.

There are two reasons for this. First, China has put a damper on getting involved in a punitive action against Pyongyang. Both the United States and South Korea were hopeful, that faced with the evidence of North Korean involvement, Beijing might line up with the rest of the world to take action against the Kim Jong-il’s notorious regime.

Therefore, they put much store by Chinese Premier Wen Jiabao’s recent visit to Seoul to examine the issue. But after a flurry of meetings in South Korea, Premier Wen wasn’t keen on blaming the North. He instead favored a policy of restraint to calm the situation.

In other words, China seemed to put both sides of the Korean peninsula on an equal footing in relation to the crisis. Apparently, China’s reluctance to buy into the inter-Korean crisis had a dampening effect on both South Korea and its ally-the United States.

Premier Wen’s South Korea trip has emphasized China’ special security interests in the Korean peninsula. It had apparently heard the North Korean version from the Dear Leader when Kim Jong-il visited China last month in a special train and was warmly welcomed by its top leadership. Therefore, it shouldn’t be surprising that Wen refused to take sides.

The United States might find comfort in the critical observations of some Chinese academics bemoaning that North Korea has high-jacked China’s foreign policy in the Korean peninsula. But, they argue, that this cannot be sustained and, sooner or later, China would have had enough of it. It might be part of the good cop and bad cop routine because nothing about China is all that simple.

Another reason for the calming of the rhetoric in the Korean situation is that the South Korea’s ruling part has suffered a drubbing in the country’s local and regional elections.

Seoul made a lot of noise (even cancelling the few economic ties it has had with the other side) over the question of its ship’s sinking. They believed that a South Korean government standing up to North Korea’s bullying would be a popular move.

After all, the present conservative government came to power promising a hard line. But it would appear that its strong rhetoric hasn’t gone well with many of its people. And the government has lowered the decibel level.

And where China is concerned, North Korea seems to get away with even the murder of Chinese citizens across their border in Liaoning province. According to a spokesman for the Chinese Ministry of Foreign Affairs, “On the morning of June 4, some residents of Dandong, in Liaoning province, were shot by a DPRK border guard on suspicion of crossing the border for trade activities, leaving three dead and one injured.”

China’s response was quite passive, simply raising “a solemn representation with the DPRK” and awaiting investigation. It will obviously be sorted out in a low-key fashion.

Whichever one looks, China’s role in the Korean peninsula is considered critical but Beijing is not inclined to effectively put pressure on North Korea. And without that there cannot be any forward movement, be it the issue of the sinking of the South Korean ship and, more importantly still, its nuclear program.

At one point, when North Korea was saber-rattling with its atomic tests Beijing seemed quite worried, and took a common stand in the UN Security Council to slap sanctions on North Korea. But it was weak on implementing the sanctions, thus continuing to provide lifeline for North’s regime.

China apparently has come to the conclusion that if it went all the way in denying North Korea its essential supplies, the regime would collapse and with it the country itself. Which would flood China with a horde of refugees creating all sorts of unpredictable problems.

Since then, the internal situation in North Korea has only got worse. The Dear Leader Kim Jong-il’s health seems to have further deteriorated, which the Chinese must have had time to assess during his recent trip to Beijing.

The succession issue, with his youngest son supposedly the favored one to take over, doesn’t appear to have been sorted out. The country is in a prolonged state of food scarcity with widespread hunger. Even though hope and morale are very low, there are no signs of rebellion of any sort.

With the government exercising total control, it is not surprising that people are afraid to challenge the regime. However, all the signs of a collapse from within are there.

But China’s economic and political support is delaying the inevitable day. China is, of course, worried about the influx of refugees if North Korea were to collapse. But that is going to happen any way sooner or later.

If such a reading of the situation were correct, it would be in China’s interest to work out with the United States and other countries a comprehensive refugee policy to share the burden.

But China obviously is not keen on a regional or global approach, because it regards Korean peninsula as its own strategic patch. It doesn’t want to involve other countries to further muddy the situation; when the US already has troops’ presence as well as military alliance with South Korea.

Despite this, the United States is depending more and more on China, believing that the US and China have shared non-proliferation objectives. That may well be true in a limited sense but China sees it in a larger context.

The US doesn’t share a border with North Korea. A murky and dangerous situation arising from an unstable North Korea might trigger a US military response on behalf of its South Korean ally from a perceived or actual attack from Pyongyang.

Therefore, for the US to imagine a shared or common strategic objective between itself and China in regard to North Korea is shortsighted. For China, geopolitically, Korean peninsula is its backyard.

For the US, on the other hand, North Korea (like Iran), is part of its global policy to stop nuclear proliferation, as well as to support South Korea against a potential or real military attack from the North.

While it makes sense to have China on its side to stop North Korea’s nuclear proliferation, it doesn’t make sense, though, to depend largely on China to promote US strategic goals.

US dependence on China shortsighted

By S.P.SETH

North Korea continues to defy the world on almost everything. The latest was the sinking of a South Korean navy ship with a North Korean torpedo, killing 46 crews. Pyongyang denies the accusation, even though it has been investigated and confirmed by an international enquiry.

Even if one were to give some credence to Pyongyang’s denial, its history of killing its South Korean targets at different times in the past would suggest that the sinking of the South Korean ship is in character with the regime’s propensity to commit murders and create mayhem.

However, all the brouhaha created by this serious act of criminality seems to have died down. After making a big show of protests, and follow up action (with the support of the United States), Seoul too has gone relatively quiet.

There are two reasons for this. First, China has put a damper on getting involved in a punitive action against Pyongyang. Both the United States and South Korea were hopeful, that faced with the evidence of North Korean involvement, Beijing might line up with the rest of the world to take action against the Kim Jong-il’s notorious regime.

Therefore, they put much store by Chinese Premier Wen Jiabao’s recent visit to Seoul to examine the issue. But after a flurry of meetings in South Korea, Premier Wen wasn’t keen on blaming the North. He instead favored a policy of restraint to calm the situation.

In other words, China seemed to put both sides of the Korean peninsula on an equal footing in relation to the crisis. Apparently, China’s reluctance to buy into the inter-Korean crisis had a dampening effect on both South Korea and its ally-the United States.

Premier Wen’s South Korea trip has emphasized China’ special security interests in the Korean peninsula. It had apparently heard the North Korean version from the Dear Leader when Kim Jong-il visited China last month in a special train and was warmly welcomed by its top leadership. Therefore, it shouldn’t be surprising that Wen refused to take sides.

The United States might find comfort in the critical observations of some Chinese academics bemoaning that North Korea has high-jacked China’s foreign policy in the Korean peninsula. But, they argue, that this cannot be sustained and, sooner or later, China would have had enough of it. It might be part of the good cop and bad cop routine because nothing about China is all that simple.

Another reason for the calming of the rhetoric in the Korean situation is that the South Korea’s ruling part has suffered a drubbing in the country’s local and regional elections.

Seoul made a lot of noise (even cancelling the few economic ties it has had with the other side) over the question of its ship’s sinking. They believed that a South Korean government standing up to North Korea’s bullying would be a popular move.

After all, the present conservative government came to power promising a hard line. But it would appear that its strong rhetoric hasn’t gone well with many of its people. And the government has lowered the decibel level.

And where China is concerned, North Korea seems to get away with even the murder of Chinese citizens across their border in Liaoning province. According to a spokesman for the Chinese Ministry of Foreign Affairs, “On the morning of June 4, some residents of Dandong, in Liaoning province, were shot by a DPRK border guard on suspicion of crossing the border for trade activities, leaving three dead and one injured.”

China’s response was quite passive, simply raising “a solemn representation with the DPRK” and awaiting investigation. It will obviously be sorted out in a low-key fashion.

Whichever one looks, China’s role in the Korean peninsula is considered critical but Beijing is not inclined to effectively put pressure on North Korea. And without that there cannot be any forward movement, be it the issue of the sinking of the South Korean ship and, more importantly still, its nuclear program.

At one point, when North Korea was saber-rattling with its atomic tests Beijing seemed quite worried, and took a common stand in the UN Security Council to slap sanctions on North Korea. But it was weak on implementing the sanctions, thus continuing to provide lifeline for North’s regime.

China apparently has come to the conclusion that if it went all the way in denying North Korea its essential supplies, the regime would collapse and with it the country itself. Which would flood China with a horde of refugees creating all sorts of unpredictable problems.

Since then, the internal situation in North Korea has only got worse. The Dear Leader Kim Jong-il’s health seems to have further deteriorated, which the Chinese must have had time to assess during his recent trip to Beijing.

The succession issue, with his youngest son supposedly the favored one to take over, doesn’t appear to have been sorted out. The country is in a prolonged state of food scarcity with widespread hunger. Even though hope and morale are very low, there are no signs of rebellion of any sort.

With the government exercising total control, it is not surprising that people are afraid to challenge the regime. However, all the signs of a collapse from within are there.

But China’s economic and political support is delaying the inevitable day. China is, of course, worried about the influx of refugees if North Korea were to collapse. But that is going to happen any way sooner or later.

If such a reading of the situation were correct, it would be in China’s interest to work out with the United States and other countries a comprehensive refugee policy to share the burden.

But China obviously is not keen on a regional or global approach, because it regards Korean peninsula as its own strategic patch. It doesn’t want to involve other countries to further muddy the situation; when the US already has troops’ presence as well as military alliance with South Korea.

Despite this, the United States is depending more and more on China, believing that the US and China have shared non-proliferation objectives. That may well be true in a limited sense but China sees it in a larger context.

The US doesn’t share a border with North Korea. A murky and dangerous situation arising from an unstable North Korea might trigger a US military response on behalf of its South Korean ally from a perceived or actual attack from Pyongyang.

Therefore, for the US to imagine a shared or common strategic objective between itself and China in regard to North Korea is shortsighted. For China, geopolitically, Korean peninsula is its backyard.

For the US, on the other hand, North Korea (like Iran), is part of its global policy to stop nuclear proliferation, as well as to support South Korea against a potential or real military attack from the North.

While it makes sense to have China on its side to stop North Korea’s nuclear proliferation, it doesn’t make sense, though, to depend largely on China to promote US strategic goals.

Hu Jintao’s “harmonious society” is a cruel joke

By S.P.SETH

The recent spate of killings in China, mostly of young children, raises several questions.
The frequency of it---eight assaults in 10 weeks---cannot just be explained away as the work of mentally deranged killers or copycat incidents, though some of them might be.
The Chinese authorities have sought to limit media coverage on the ground that it simply encourages copycat killings. While one sympathizes with China’s ordeal in the wake of such horrible killings---the latest involving the use of a kitchen cleaver to kill seven children and two adults at a kindergarten--- limiting or censoring its exposure by the media is hardly the right approach.
It is only through media exposure and open investigation that a clear picture of such human tragedy is likely to emerge. And on this will depend the desired course of action to deal with such incidents.
But, as with any other disaster, the first response of the Chinese authorities is to clamp down on public information.
Even in the absence any substantive information about the killing of children, there are some plausible explanations.
It so happens that when some people start acting out their murderous impulses to wreak vengeance on society, particularly children, it is most likely that their dramatic action is intended to invite attention in the absence of legitimate avenues to be heard.
They might nurse terrible agony that has remained bottled up, needing psychological counseling/treatment, as well as social interaction.
According to a study conducted last year by Dr. Michael Phillips, a mental health expert at Tongji University, Shanghai, 173 million Chinese suffered from mental problems ranging from schizophrenia to alcohol abuse. Of these, 91 per cent had never been treated.
China’s rapid economic growth, and consequent social disruption, has created a serious disconnect between its rulers and the people.
True, China’s ruling oligarchy has created a new social base in urban middle class. But they too, like most other people, feel frustrated with the growing income gap between them and the rich business class.
Not only this. The new business class and the Party apparatchik work in cahoots; with the princelings of the top Party leadership at the top of the pyramid. Therefore, wherever one looks, corruption and nepotism are the order of the day.
In the midst of such venality, China’s rulers have the gumption to talk about creating a “harmonious society”. And to rally people around the flag by staging national extravaganzas like the Beijing Olympics and the Shanghai World Expo jamborees.
At the same time when horrible killings of school children occur, Premier Wen Jiabao has platitudes aplenty to offer. Reacting to the killings, he reportedly said that besides taking “…vigorous safety measures, we also have to pay attention to addressing some deep-seated causes behind these problems, including dealing with some social conflicts and resolving disputes.”
And what has he in mind precisely? Not much except to urge that, “We must strengthen the role of mediation at the grassroots…” Which means nothing in real terms.
As Prime Minister presiding over the rising social contradictions and cleavages in his country, there should be a well thought out plan to deal with and resolve these issues that threaten the country’s social stability.
Of course, any well-thought out plan will require open debate and investigation into the “deep-seated causes behind these problems.”
But this is not what the government would want. They had squelched the persistent demands by the parents of the children buried alive under shoddy school buildings during 2008 Szechuan earthquake, as well as brushing aside the scandal about the poisoning of children with milk mixed with chemical melamine.
The first response to all these and other tragedies is to manage and censor the media as is being done with schoolyard killings.
In a recent media exposure of children’s deaths and illnesses from the use of unrefrigerated vaccines, the authorities removed Bao Yueyang, editor of the China Economic Times, which carried out the investigation.
The second method is to buy out the victims’ silence with money. And if that doesn’t work to threaten them with physical harm.
And in most cases it works when victims are arrayed against state authorities without any other recourse for redress to their grievances.
The third method is to frame them in some fake criminal case and throw them into jail. A variant of this is to throw some of them into mental institutions.
However, if some victims still persist in taking their cases to Beijing, they are waylaid on the way and thrown into “black jails”--dungeons operated by gangsters hired by local and regional authorities.
In other words, there are no legitimate avenues for Chinese citizens to seek justice.
The media are managed, manipulated and censored; courts work under state direction and politics of the country is the monopoly of the Party.
No wonder, there is so much repressed anger in the society, that tends to find outlet through outbursts like schoolyard killings.
The pursuit of greed at any cost has cost the country its anchors in community life and traditional beliefs as social props. China is increasingly becoming a dog-eat-dog society.
In the light of all this, Hu Jintao’s talk of bringing about a “harmonious society” is not only a contradiction in terms but also a cruel joke. China needs to ease up and open up.
And some of the Chinese academics are coming to this conclusion. Since they manage to say certain things without threatening the one-party system, they serve a useful role.
For instance, the Southern Weekend newspaper recently published extracts from a report by a group of sociologists, led by Professor Sun Liping of Tsinghua University.
The report, quoted in the press, said: “Without fundamental resolution of the question of mechanisms for social justice and balancing interests, blindly preventing the expression of legitimate interests in the name of stability will only accumulate contradictions and render society even more unstable.”
Still another academic, Professor Yu Jianrong at the Chinese Academy of Social Sciences has argued for opening up the system for people’s participation. He warns that if this is not done, “Great social upheaval may thus occur, and the existing social and political orders are likely to be destroyed.”
But China’s ruling party is drunk with power, and in no mood to listen.