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Author Topic: US-China (& Japan, South China Sea-- Vietnam, Philippines, etc)  (Read 25863 times)
G M
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« Reply #50 on: May 25, 2011, 05:07:18 PM »

The money flow to the Pak-thugocracy should end immediately and we need to make serious plans with India. Unfortunately, our president will do for our relationship with India what he's done with our relationship with England.
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Crafty_Dog
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« Reply #51 on: May 25, 2011, 05:34:34 PM »

The Philippine government continues to assess its security situation following a series of alleged incursions by the Chinese into disputed territories.

On May 20, just before the Chinese defense minister paid a visit to the Philippines, a report came out suggesting that two Chinese fighter jets had flown over Philippine territory in the disputed Spratly Islands. The story was initially played up as Chinese fighter jets shadowing Philippine patrol aircraft in the area but what later came out is that the Philippine OV-10s, which were patrolling the area, saw what they thought were contrails of fighter jets flying much higher and straight over the territory. But by bringing up a story right before the defense minister visited, it became a hot issue going into the talks.

The Spratly Islands are disputed by many claimants including the Philippines and China. Traditionally, control over the Spratly Islands in the South China Sea was primarily an issue of sea-lane control and the ability to interdict sea lanes. But more recently, there’s been active investigation, active exploration and exploitation of deep-sea mineral resources of oil and gas off the ocean floor and as additional exploration takes place, the issue of the South China Sea and control over these islands becomes much more significant.

One of the reasons the issue is being played up so much in the Philippines is the Defense Ministry is trying to find ways to obtain more and more modern military resources, and this plays into the relationship of the United States. The United States is the primary supplier of military equipment to the Philippines, but the United States also still has an alliance structure with the Philippines. But it’s unclear what level of confrontation it would take before the United States would actually really take action against China, and as we’ve seen in Chinese interventions in Japanese territorial waters or in disputed territories and Chinese actions in the Philippines, we haven’t seen a concerted effort from the United States to counter this at this point and that leaves a certain amount of confusion and uncertainty amongst these nations.

The Philippines really does have to walk a careful balance. China is the regional power in their area, China’s major economic partner for the Philippines. At the same time, the United States again is a significant economic partner and an alliance partner.

For the United States, whether it’s the Philippines drawing them in or the U.S. trying to get involved with Vietnam in this issue or even Malaysia, the expansion of Chinese activity in the South China Sea has become a significant issue for U.S. security in the long-term. And the United States is looking very clearly at what the Chinese are doing the South China Sea and beginning to reshape U.S. defense policy in the region to maintain U.S. control over access in the area.

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G M
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« Reply #52 on: June 03, 2011, 05:12:06 PM »

http://cnsnews.com/news/article/china-has-divested-97-percent-its-holdin

(CNSNews.com) - China has dropped 97 percent of its holdings in U.S. Treasury bills, decreasing its ownership of the short-term U.S. government securities from a peak of $210.4 billion in May 2009 to $5.69 billion in March 2011, the most recent month reported by the U.S. Treasury.
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DougMacG
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« Reply #53 on: June 03, 2011, 05:57:16 PM »

"China has dropped 97 percent of its holdings in U.S. Treasury bills, decreasing its ownership of the short-term U.S. government securities from a peak of $210.4 billion in May 2009 to $5.69 billion in March 2011, the most recent month reported by the U.S. Treasury."

Note that refers to short term holdings only.  Looking at this link, the ratio was close to 20:1 long term over short term holdings:  http://www.fas.org/sgp/crs/row/RL34314.pdf

This link would indicate China still held over 1.1 trillion as of 3/31/11, fairly constant since last Sept.  That is still a fairly low number if total debt is $14 trillion.

I'm sure we can make up for any loss foreign customer with our domestic demand for treasury bills - with our 0.000% savings rate.

This if true would be good news for us in the world of geo-politics.  China would hold far less over our head if it had already dumped our holdings. What then are they doing with those dollars that keep flowing to China?  They all come back one way or another.

One of the meanings of QE/QE2/QE-next monetary expansion is that we are running huge deficits without having to find buyers for our debt. 
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G M
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« Reply #54 on: June 03, 2011, 06:11:21 PM »

Any idea how long we can QE until we hit QE-Z (Zimbabwe)?
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G M
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« Reply #55 on: June 10, 2011, 03:12:41 PM »

http://ca.news.yahoo.com/china-ratings-house-says-us-defaulting-report-054309883.html

China ratings house says US defaulting: report


A Chinese ratings house has accused the United States of defaulting on its massive debt, state media said Friday, a day after Beijing urged Washington to put its fiscal house in order.
 
"In our opinion, the United States has already been defaulting," Guan Jianzhong, president of Dagong Global Credit Rating Co. Ltd., the only Chinese agency that gives sovereign ratings, was quoted by the Global Times saying.
 
Washington had already defaulted on its loans by allowing the dollar to weaken against other currencies -- eroding the wealth of creditors including China, Guan said.
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Crafty_Dog
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« Reply #56 on: June 12, 2011, 06:44:39 AM »

By KEITH JOHNSON

A 2,000-year-old board game holds the key to understanding how the Chinese really think—and U.S. officials had better learn to play if they want to win the real competition.

That's the pitch that David Lai, a professor at the Army War College, has been making in recent months to senior military officials in the U.S. and overseas. Learning the ancient board game of wei qi, known in the U.S. as Go, can teach non-Chinese how to see the geostrategic "board" the same way that Chinese leaders do, he says.

 
Wei qi, the game of "surrounding," has long been popular in the East -- known as Go in Japan and Baduk in Korea. Now, U.S. military officials are looking at the game in an attempt to understand how the Chinese really think. WSJ's Christina Tsuei gets a lesson on the game from 35-year GO veteran Jean-Claude Chetrit.

The game, already well known in the days of Confucius and still wildly popular in Asia, is starkly different from chess, the classic Western game of strategy. The object of Go is to place stones on the open board, balancing the need to expand with the need to build protected clusters.

Go features multiple battles over a wide front, rather than a single decisive encounter. It emphasizes long-term planning over quick tactical advantage, and games can take hours. In Chinese, its name, wei qi (roughly pronounced "way-chee"), means the "encirclement game."

"Go is the perfect reflection of Chinese strategic thinking and their operational art," says Mr. Lai, who grew up watching his father—who was jobless during the turmoil of the Cultural Revolution—constantly play the game. A self-described midlevel Go player, Mr. Lai came to the U.S. about 30 years ago.

Mr. Lai's best-known work about the nexus between Go and Chinese geopolitical strategy is a 2004 paper called "Learning From the Stones," a reference to the 361 black and white stone pieces that eventually fill the 19-by-19 Go board. He described China's long-term and indirect approach to acquiring influence. He also zeroed in on concrete geopolitical challenges such as Taiwan, which he described, in terms of Go, as a single isolated stone next to a huge mass of opposing pieces.

As Chinese leaders see it, he suggested, Taiwan was a vulnerable piece that the U.S. should want to trade away for a better position elsewhere on the board. The U.S., by contrast, sees Taiwan not as a bargaining chip but as a democratic ally that it has supported diplomatically and militarily for more than 60 years.

Mr. Lai's paper caught the attention not only of his then-bosses at the Air Force's Air University in Alabama but of former Secretary of State Henry Kissinger, who quickly became a convert to his way of thinking.

Throughout his new book, "On China," Mr. Kissinger uses wei qi to explain how Chinese leaders such as Mao Zedong and Deng Xiaoping managed crises during the Korean War, disputes over Taiwan, the Vietnam War, conflicts throughout Southeast Asia and with the Soviet Union, and the normalization of relations with the U.S.

In the first days of the Korean conflict, for example, President Harry Truman sent U.S. troops to South Korea and the U.S. Navy to the Taiwan strait. He had, "in Chinese eyes," Mr. Kissinger writes, "placed two stones on the wei qi board, both of which menaced China with the dreaded encirclement." Thus, despite being war-weary and impoverished, China felt the need to confront the U.S. directly.

The game can also be used to interpret recent Chinese behavior. Consider China's participation in antipiracy efforts in the Indian Ocean—the first time that China has undertaken blue-water naval operations in support of an international coalition. The West tends to see such cooperation as responsible behavior on China's part.

But a strategy paper published last December by the Central Committee of the Chinese Communist Party offers a different view: that antipiracy operations can help China to subtly gain a foothold in a vital region. "China can make use of this situation to expand its military presence in Africa," the paper said.

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Wei qi (roughly pronounced 'way-chee') means the 'encirclement game.'

One of Mr. Lai's first fans was Air Force Gen. Steve Lorenz, formerly the head of Air University, where Mr. Lai then taught. Gen. Lorenz heard one of his lectures in late 2005 and summoned him for a full briefing about the insights that Go could offer.

"It really intrigued me," recalls Gen. Lorenz, now retired. "He made a whole generation of airmen think about the world in a different way."

In recent months, Mr. Lai has briefed officers at Pacific Command, the U.S. Air Force Global Strike Command, the Center for Army Analysis and the Australian Defence College.

U.S. defense officials regularly receive strategy briefings from outside experts, and the U.S. military regularly taps ancient classics such as Sun Tzu's "The Art of War" and Xenophon's "The March of the Ten Thousand" to help educate modern officers.

One officer at the U.S. Air Force Global Strike Command, where Mr. Lai gave a presentation at a commander's conference in March to about three dozen officers, said "the game analogy really sparked fascination" and was useful for Air Force officers who might have to consider China a potential adversary one day. He conceded, though, that the briefing's heavy academic content left "plenty of heads hurting."

"You've got to think like the other guy thinks," said the officer, who spoke on the condition of anonymity.

Mr. Lai's theories are not universally embraced by China experts. For starters, some say, comparing national strategic thought to popular sports and games is an over-simplification—and at any rate, the Chinese version of chess has lots of adherents in China, too.

Furthermore, despite the ancient roots of Chinese military thinkers such as Sun Tzu, it's far from clear that Chinese leaders over the millennia, especially Communist Chinese leaders, have followed a single, broad strategy at all, let alone the one sketched by the board game.

"Go is a very useful device for analyzing Chinese strategy, but let's not overdo it," says James Holmes, an expert on Chinese strategy and professor at the Naval War College.

Though he agrees that Go helps to describe the strategic showdown between China and the U.S. in East Asia, he says that "we have to be extremely cautious about drawing a straight line from theory to the actions of real people in the real world."

He notes that China's "amateurish" diplomatic blunders in recent years, including bullying neighbors and trying to push other navies out of international waters, represent a departure from the patient, subtle tenets of Go.

Write to Keith Johnson at keith.johnson@wsj.com
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ccp
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« Reply #57 on: June 15, 2011, 11:16:02 AM »


Vietnam shift could see return of US ships
By Ben Bland in Cam Ranh Bay

Published: June 14 2011 22:46 | Last updated: June 14 2011 22:46

Nguyen Duc De knows at first hand how alliances can change. The former Vietnamese soldier was stationed on the disputed Spratly Islands in the 1980s, when tensions with China were high following their 1979 border war, and he used to take pot shots at the Chinese marines who approached his base, pretending to be fishermen.

When diplomatic relations between the Communist neighbours were restored in the 1990s, shooting was prohibited, he says, but, as China’s economic and military might has grown over the past decade, strains over contested islands in the South China Sea have been on the rise again.

China warns over South China Sea dispute - Jun-14Pilling: Asia’s quiet anger with ‘big, bad’ China - Jun-01Vietnam and China oil clashes intensify - May-29China defends naval actions - Jun-05US warns Beijing over South China Sea - Jun-04In depth: China shapes the world - Apr-25“They’re so big and we’re so small, so what can we do?” asks 50-year-old Mr De, who works as a security guard at a memorial to Vietnamese and Russian soldiers who lost their lives in the Spratly Islands and at the nearby naval and air base at Cam Ranh Bay in south-central Vietnam.

The historic military facility, located within one of Asia’s best natural harbours, is at the centre of a strategic push from Vietnam to counter China’s growing assertiveness over disputed waters in the commercially important South China Sea.

Nestled between soaring mountains and the South China Sea near Nha Trang, a popular resort city in south-central Vietnam, Cam Ranh Bay is one of Asia’s best natural, deepwater harbours.

In the 19th century, French colonial authorities constructed the first modern naval base in the vast bay, which extends for 20 miles north-south and is up to 10 miles wide.

France upgraded the military facilities before Japan invaded Indochina in 1940 and the Japanese then took advantage of the base to launch military sorties.

As the US assistance to the anti-communist southern Vietnamese regime developed into a combat role, the Republic of Vietnam offered Cam Ranh Bay to the US in 1965.

The US handed the base back to the Republic of Vietnam in 1972 under President Richard Nixon’s so-called Vietnamisation programme but communist forces seized the bay in 1975, the year they won the war.

The Soviet Union, a key ally of Vietnam, then pressed for access to the base and in 1979, was given a 25-year lease. The Russians moved out in 2002.

Today, the bay houses Vietnam’s small navy, while the air strip is the main access point for nearby Nha Trang.
Cam Ranh Bay became a potent cold war symbol, first as an American base during the war with Communist North Vietnam, and then as a Soviet base after 1979, hosting nuclear submarines and one of the most important spying stations outside Russia.

When the Russians finally pulled out in 2002, Hanoi vowed never to let any foreign power have control of the facility. But, last year, Nguyen Tan Dung, Vietnam’s prime minister, said he would let foreign naval ships use the base again to dock, resupply and undergo repairs on a commercial basis.

The move may generate some cash once the now crumbling facilities are refurbished, security analysts say. However, the main justification for opening up the bay is to balance China’s naval dominance in the South China Sea, which encompasses key global trade routes, valuable fisheries and is thought to sit atop vast oil and gas reserves.

“Who’s going to take up the offer to visit?” says Carl Thayer, an expert on security in the South China Sea at the Australian Defence Force Academy in Canberra. “Precisely those navies that China doesn’t want in the South China Sea, including the Americans, Australians, South Koreans and Indians.”

One senior Asian defence official argues that the US will be keenest to take advantage of the opportunity to use the base, which offers great protection from storms and is located close to key commercial shipping lanes and the disputed islands.

“The US has a Pacific fleet and it’s been more aggressive than many other countries in trying to build closer contacts with Vietnam to counter China’s rise,” he says.

The planned reopening of the base to foreign naval vessels is a sign of the shifting global strategic sands, with China’s inexorable rise causing concern among those such as Vietnam and the US, pushing these old enemies closer together.

Although Vietnam has developed deep economic and political ties with its larger northern neighbour since the 1990s, the relationship is coming under pressure because of China’s increasingly aggressive behaviour in the South China Sea, according to Ian Storey, a fellow at the Institute of Southeast Asian Studies in Singapore, who studies maritime security.

China, which recently built a large naval base on Hainan island, to the north of the disputed waters, increasingly has the capability to deploy coercive diplomacy in the South China Sea, says Mr Storey. Recent incidents where Chinese maritime surveillance vessels have tried to sabotage Vietnamese oil exploration ships show Beijing also has the political will to do so.

Hanoi has responded by seeking to internationalise the territorial dispute, calling on other claimants to some of the contested Paracel and Spratly Islands – Brunei, Malaysia, the Philippines and Taiwan – to hold joint talks and attempting to bring in the US as a mediator.

Despite macroeconomic difficulties, Vietnam has boosted its spending on military hardware, agreeing to buy a number of Sukhoi SU-30 jetfighters and six Kilo-class diesel submarines from Russia.

Once delivered in the next year or two, the submarines are expected to be based at Cam Ranh Bay, which analysts say Russia has agreed to refurbish as part of the $2bn contract to supply the craft. Echoing the patriotism of many Vietnamese, Mr De says he does not want to see any foreign forces in the bay.

But changing dynamics of global security mean that, in a twist of fate, American and Russian ships may soon be back at Cam Ranh Bay, this time working alongside each other and the Vietnamese to counterbalance an ever stronger China.
Copyright The Financial Times Limited 2011.
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Crafty_Dog
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« Reply #58 on: June 24, 2011, 11:49:52 AM »



Colin: Tensions have been rising again in the South China Sea, this time between Vietnam and the Philippines and China over disputed potentially oil-rich territory. This weekend China’s vice minister for foreign affairs and the United States assistant secretary of Asia-Pacific meet in Hawaii with the Chinese side advising Americans to urge restraint. (!!!) The vice foreign minister was quoted by the Wall Street Journal as saying, “some countries are playing with fire and I hope the U.S. won’t would be burned by this,” well we will see.

Welcome to agenda and joining me this week for his latest assessment of the Chinese Military is Nathan Hughes, Stratfor’s director of military analysis. Nate, it’s a good time to be discussing this. China’s first aircraft carrier goes for trials next week. It will be another year until, of course, it is in service but what difference will it make?

Nate: Well, the Chinese fixed-wing carrier aviation program is still very preliminary, they have had the Varyag in their possession for over a decade now. It was originally bought from the Ukraine as surplus to be a casino, at least extensively in 1998. But it takes a long time to really develop all the capabilities necessary to really run an effective flight deck, and that’s something that the United States has been doing for 100 years now and China is sort of just getting started with it. While the aircraft carrier goes to sea, it’s not even clear with the first time when they will actually start landing aircraft on at it. At the moment we’ve got some imagery that suggests there is still considerable amount of construction equipment and detritus on the deck itself, and it may go to sea with some of that because this first sea trial is really about putting the engines through their paces and making sure the basic shipboard systems are functioning properly.

Colin: So these are just sea trials not weapons testing?

Nate: Right, the initial sea trials of a vessel is really about making sure that the engines work the way they are supposed to and this sort of thing, and especially when you start talking about the purpose of an aircraft carrier, to feel and be able to launch and recover fixed wing aircraft, that is really quite a ways down the road for the Chinese even after, probably well after, the commissioning of this ship next year.

Colin: Of course even with this addition, the Chinese Navy only forms a relatively small part of China’s military. Most of it is in the army, which has also has a bigger budget. How much of the PLA’s effort is taken up with dealing with China’s internal problems?

Nate: Well, this is really an important thing to remember about China is that the vast majority of its military and security apparatus is devoted to land combat and internal security missions. While the navy and air force have gotten a lot of press lately, this is only a small fraction of, in fact combined the Navy and Air Force number fewer than nearly the internal security forces under the Ministry of Defense. It is important to remember the size of China. While it’s the size of the United States, it has one billion extra people. Almost all of whom exist in a fairly low state of subsistence or less, many are disillusioned with the amount of financial rebalancing that has taken place. Many are in buffer areas and some are ethnic minorities, so there is a lot for China to manage internally even as it appears to be expending a lot of effort externally.

Colin: Can you put any kind of percentage on it?

Nate: The Chinese People’s liberation Army Navy and People’s Liberation Army Air Force together, number less than 600,000, while the People’s armed police and a number of other internal security entities: everything from border police to railroad police, number over 700,000. And this isn’t even counting the 1.6 million-man People’s Liberation Army.

Colin: What are the chances of these forces actually having to be deployed in the short-term?

Nate: Well China spent almost its entire modern existence working with a very low- tech conscripted People’s Army. The idea was simply to be able to maintain internal security and defend China’s borders in a fairly traditional, attritional warfare sort of sense. So the challenges before China in the modernization that has taken place since the 1980’s are very profound in terms of taking these new techniques, these new systems and these new weapons that they have been working on, integrating them into an effective war fighting system, and being able to deploy them further afield. China’s been spending a lot of focus lately on China’s deployment of only two warships and a replenishment vessel at a time to the counter piracy mission off the coast of Somalia. And while this is somewhat of a prestige thing, it’s also about learning the basics of sustaining naval vessels far afield; the basics of maintenance, replenishment, the metrics of logistics, these are things China is still very unfamiliar with and those working to learn the tricks of the trade the idea, the idea that they will be able to deploy large numbers of forces anywhere beyond China’s borders, I think is very, is still a very real question.

Colin: What is your assessment of the quality of the hardware that China has invested in?

Nate: Which I have been doing since the 1980’s, has been investing a considerable amount in the latest Russian hardware, in the 1990’s when things were pretty bad for Russia, China was the single biggest buyer of high-end late Soviet technology. They’ve combined that with an aggressive espionage effort, including cyber espionage efforts, to glean the latest technology from the United States and its allies. China’s domestic efforts to put this all together, to be able to build it itself and use it itself, are very extensive, but the challenge is that because China is still new at this, and it’s been growing so rapidly, it’s in a very uncertain place while some of the technology it’s fielding is certainly very impressive, its ability to integrate that into a war fighting concept, it’s lack of real practical or operational experience with it, leaves very real questions about its performance in a shooting war.

Colin: Nate, thank you very much. STRATFOR’s Director of Military Analysis Nathan Hughes ending agenda for this week. I’m Colin Chapman, goodbye for now.

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G M
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« Reply #59 on: June 30, 2011, 06:19:15 PM »

http://www.businessinsider.com/navy-chinese-microchips-weapons-could-have-been-shut-off-2011-6

Navy Bought Fake Chinese Microchips That Could Have Disarmed U.S. Missiles

Read more: http://www.businessinsider.com/navy-chinese-microchips-weapons-could-have-been-shut-off-2011-6
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Crafty_Dog
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« Reply #60 on: July 02, 2011, 11:14:43 AM »



One of the world's flashpoints is the disputed waters of the South China Sea. The Philippines and Vietnam want explicit U.S. support against Chinese incursions, and the U.S. Senate passed a nonbinding resolution Monday deploring Chinese actions. But China is hardly backing down. Last week, Deputy Foreign Minister Cui Tiankai warned that "the individual countries are actually playing with fire, and I hope the fire will not be drawn to the United States."

Secretary of State Hillary Clinton is so far holding to the line she laid down last July in Hanoi: The U.S. doesn't take sides on the territorial disputes, but it wants to play a role in their peaceful resolution because of its interests in the region and support for freedom of navigation. As China ratchets up tension, it's time for something stronger.

Philippine Foreign Secretary Albert del Rosario was in Washington last week seeking to clarify the 1951 Mutual Defense Treaty between the two countries. In case of an attack on the Philippines, that agreement only obligates Washington to "consult" and "act to meet the common dangers." The Philippine media has been chasing its tail trying to figure out whether Mrs. Clinton and U.S. Ambassador to the Philippines Harry Thomas firmed up this U.S. commitment.
The real news is that the Philippines is coming back into the U.S. orbit. As recently as early this year, Manila seemed to be courting Beijing—for instance, by extraditing Taiwanese citizens to the mainland without consulting Taipei. Mr. Aquino's predecessor scuttled the efforts of Southeast Asian nations to negotiate as a bloc with China over the South China Sea, instead opting to cut a separate deal in late 2004 to sacrifice some Philippine claims so that joint oil exploration could go ahead.

The current about-face is the result of China overplaying its hand. Especially alarming is that the People's Liberation Army seems to be calling China's shots on the South China Sea. China's navy vessels have been involved in confrontations even as its diplomats sound conciliatory. While it is too early to say that Beijing is going down the militarist road, all of this has concentrated minds in Southeast Asian capitals.

The U.S. and its regional friends have two main objectives. The first is to upgrade the 2002 Declaration on Conduct of Parties in the South China Sea, which China has routinely violated, to a more rigorous code of conduct that spells out how ships and aircraft must behave. Beijing seems to be resuming its policy of "creeping assertiveness" by which it makes the area a Chinese lake by fait accompli.

The second is to convince China to spell out the basis of its claims to the islands and waters surrounding them. Singapore, which has no territorial dispute with China, recently called on Beijing to "clarify its claims with more precision as the current ambiguity as to their extent has caused serious concerns in the international maritime community."

This is important because Beijing has long claimed the South China Sea as its "historical waters" apparently on the basis of a 1947 map showing a dotted U-shaped line around 90% of the area, including the coastal waters of other nations. Customary law, to which Beijing is a signatory through the Law of the Sea treaty, does not recognize such expansive claims. But the Chinese position can't be subject to rigorous scrutiny until it is stated definitively.

No doubt Beijing would like to avoid that. Its preference has been to negotiate on a bilateral basis with each Southeast Asian neighbor, so that it can bring its superior economic and military power to bear. The Association of Southeast Asian Nations (Asean) had some brief success in getting China to take multilateral negotiations seriously in the early 2000s, until the Philippines bugged out.

Now that Asean is united again, U.S. involvement is an important bargaining chip. Should China continue to preach peace while its military harasses other vessels, Asean nations will be driven to tighten their security arrangements with the U.S. Indications from Washington that it will be a willing partner should put Beijing on notice that its civilian leaders need to rein in the military and put the dispute on track for a negotiated solution.

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« Reply #61 on: July 09, 2011, 02:41:12 AM »

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By JAMES BACCHUS

China's entry into the World Trade Organization in 2001 was an unambiguously positive step for China in terms of opening up the country to trade and overall economic development. Now it is becoming clearer that China's WTO membership is a benefit for other countries, too. Witness the way in which the WTO may help foreign governments and businesses compel Beijing to reconsider troubling export restrictions on important raw materials.

In recent years, Beijing has expanded a list of minerals and metals subject to stiff export taxes and quotas or outright export bans. A trend that started with elements such as bauxite and materials such as coke for use in steel production expanded dramatically last year to include so-called rare-earth metals—17 elements whose unique properties make them indispensable to high-technology applications such as magnets, lasers, computer screens and cell phones. China currently accounts for 97% of global production of these critical metals.

Foreign businesses and governments have struggled to convince Beijing to relax these export limits, especially in the case of rare earths. But the ruling in a WTO case decided this week suggests that the world trade body could be an effective tool for resolving this problem.

Responding to a complaint by the United States, the European Union and Mexico, a WTO panel ruled on Tuesday that duties and quotas imposed by China on exports of nine metal ores and other raw materials vital to steel, chemical, aluminum and other industries violate international trade rules. This case does not touch on rare earths specifically but the facts and legal concepts are very similar.

The most significant aspect of the finding relates to China's claim to an environmental defense of its export rules. China's WTO accession agreement committed Beijing to eliminate taxes and other charges on exports of all goods except for a list of 84 products; the list does not include any of the raw materials at issue in the current case or any of the rare-earth elements. The only exception allowed by the WTO would be if China could prove that an export restriction is necessary for health or environmental protection, which is what Beijing tried to do in this case.

Mining can at times damage the environment, so China's defense couldn't necessarily be ruled out automatically. The WTO panel's rationale in the raw-materials case decided this week helps set the ground rules for judging China's future environmental claims.

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An iron ore stock yard in Tianjin, China

Importantly, the panel in the raw-materials case concluded that commitments of this kind made in China's accession agreement are not eligible for the environmental defense that is available to many other WTO violations. The rule permitting an environmental defense is in the General Agreement on Tariffs and Trade (GATT) which is one of many agreements that, together, comprise the overall WTO treaty. An open legal question is the extent to which the scope of this rule extends to excusing violations of the specific accession agreements of China and other WTO members.

The raw-materials panel concluded that since China's WTO agreement didn't specifically invoke GATT rules for export duties relating to these products (and for rare-earths), China can't now base its defense on a GATT provision. Based on previous WTO rulings, this seems a sound conclusion.

The panel went on to say that even if an environmental defense were available in such cases, China did not meet the legal burden of proving such a defense in the raw-materials dispute. The panel found that China did not show that those restrictions would contribute to human health by reducing pollution. Further, although China argued that the raw-materials restrictions are justified because they relate to the conservation of exhaustible natural resources, the panel found otherwise.

The basic legal problem for Beijing in claiming an environmental defense is that while it has limited exports to foreigners, it has not simultaneously taken steps to limit domestic mining or consumption, which is required under the GATT rule for such a defense. This rationale has a direct bearing on the rare-earths limits because those too have affected only exports and not domestic consumption.

This week's panel decision may not be the last word in this case. China has 60 days to appeal to the WTO Appellate Body, the global trade appeals court, which would then have 90 days to render a final decision. China can be expected to appeal. Reacting to this week's ruling, the Chinese government reiterated its environmental argument, saying its restrictive export measures on the raw materials "are in line with the objective of sustainable development promoted by the WTO and they help induce the resource industry toward healthy development."

Based on findings in previous cases, though, it is by no means certain China would win an appeal. If the panel decision were upheld, Beijing would either have to comply with the ruling by removing the restrictions on raw-materials exports, or suffer costly sanctions in other areas of trade from the countries that filed the case.

Beijing can't necessarily afford for matters to go that far. There are signs the government may change its policies accordingly. For instance, although the rare-earths restrictions have not yet been the subject of any litigation, the Commerce Ministry announced that it may unilaterally reform the rare-earths restrictions "according to relevant laws and World Trade Organization rulings," even as other parts of the government seemed to press forward toward an appeal.

Some officials within Beijing understand that China needs the WTO as much as other WTO members need China. Because China has a stake in maintaining free trade under the WTO system—and in encouraging other countries to change their own policies in those WTO cases where China itself prevails—Beijing has an incentive to comply with the spirit of the ruling across the board, in addition to complying with the letter of the ruling for the affected exports.

One positive outcome would be a negotiated settlement to the rare-earths issue now—years before any WTO ruling on that case could be implemented. Such a settlement could address any legitimate health or environmental concerns Beijing may have while ensuring that domestic and foreign consumers of rare earths alike share in any costs associated with better health and environmental compliance.

The next chance for a breakthrough will come next week with the arrival in Beijing of EU Trade Commissioner Karel De Gucht. Commenting on the raw-materials ruling, Mr. De Gucht said, "I expect that China will now bring its export regime in line with international rules. Furthermore, in the light of this result, China should ensure free and fair access to rare earth supplies." That's good advice. Beijing would be wise to heed it.

Mr. Bacchus, a former Democratic Representative from Florida, is former chairman of the Appellate Body of the World Trade Organization and chairs the global practice of Greenberg Traurig LLP.
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« Reply #62 on: July 11, 2011, 02:21:32 PM »

http://m.apnews.com/ap/db_16028/contentdetail.htm?contentguid=1IhJ5lxA

 Guess who's been building the new span of the SF Bay Bridge?   
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« Reply #63 on: July 11, 2011, 02:56:37 PM »

second post   
BEIJING—Adm. Mike Mullen, Chairman of the U.S. Joint Chiefs of Staff, kicked off a visit to China with a vow to maintain the U.S. military presence in Asia and a warning that recent incidents in the disputed waters of the South China Sea could escalate into conflict.

At the start of a four-day visit, Adm. Mullen on Sunday acknowledged China as a fellow Pacific power, but urged its military to ease regional concerns about its rapid modernization by playing a more cooperative, responsible and transparent role in the world.

Adm. Mullen arrived Saturday on a reciprocal visit at the invitation of Gen. Chen Bingde, his Chinese counterpart, who visited the U.S. in May as part of bilateral efforts to rebuild military exchanges that resumed in January after a 12-month suspension by Beijing.

But even as both sides express their commitment to enhance military ties, tensions are mounting again over one of the most divisive issues between them—the South China Sea, where China, Taiwan, Vietnam, the Philippines, Malaysia and Brunei all have territorial claims.

View Full Image

Agence France-Presse/Getty Images
Admiral Mike Mullen, right, seen here alongside Defense Secretary Robert Gates during a committee hearing on Capitol Hill in March, is visiting Beijing in a bid to cool military tensions between the U.S. and China.

Adm. Mullen expressed concern about recent incidents in those waters that have provoked angry exchanges between China and two other claimants—Vietnam and the Philippines—as well as protests in Hanoi, the Vietnamese capital, over the past few weeks.

"We have an enduring presence here, we have an enduring responsibility," Adm. Mullen told foreign reporters at a briefing. "We seek to strongly support the peaceful resolution of these differences. The worry, among others that I have, is that the ongoing incidents could spark a miscalculation, and an outbreak that no one anticipated and we should seek to avoid that under all circumstances."

Several Southeast Asian nations—most notably Vietnam—have been strengthening military ties with the U.S. since Chinese military and civilian figures began using more strident rhetoric about their territorial claims early last year.

China has accused the U.S. of interfering in its territorial affairs since Hillary Clinton, the Secretary of State, declared in Hanoi last July that the U.S. had an interest in protecting freedom of navigation in the South China Sea. Beijing, which advocates resolving the territorial issues bilaterally without any U.S. involvement, has also repeatedly demanded that the U.S. cease aerial reconnaissance and joint exercises around what it sees as its territorial waters.

Adm. Mullen made it clear that the U.S. would maintain its military presence and activities in the region, which included low-level joint naval exercises with Japan and Australia in the South China Sea on Saturday.

"The U.S. is not going away," he said. "Our enduring presence in this region has been important to our allies for decades and it will continue to be so."

China's Foreign Ministry did not respond to a request for comment about Saturday's exercises, or Adm. Mullen's comments Sunday. But the state-run China Daily, an English-language newspaper, said in an editorial Friday that Southeast Asian nations should not tolerate attempts by outside forces to interfere in bilateral disputes.

"Asia's history proves outside forces have never worked whole-heartedly for Asian peace and development," it said.

Speaking later Sunday to students at Renmin University in Beijing, Adm. Mullen urged China's military to be more open about its modernization program. "With greater military power must come greater responsibility, greater cooperation, and just as important, greater transparency," he said. "Without these things, the expansion of military power in your region, rather than making it more secure and stable, could have the opposite affect."

The U.S. and many Asian countries have been alarmed by China's rapid development of advanced weaponry—notably a stealth fighter, a prototype of which it test-flew in January, and an aircraft carrier expected to begin sea trials in August.

"There are some very specific capabilities that are being developed here that are very focused on the United States' capability," Adm. Mullen told the earlier briefing.

However, he said it was not clear whether China would be able to make use of the carrier's full potential, given the huge cost and technical challenges.

"There is great symbolism associated with that and I understand that…. Sometimes matching the actual capability of it versus the symbolism of it, there can be a gap there so I, like you, wait to see what is forthcoming," he said.

He also expressed hope that China and the U.S. could find more ways to cooperate on antipiracy patrols, humanitarian operations, and North Korea, and to communicate directly with each other to help resolve crises.

"China and the United States are both Pacific powers and will be for a long, long time. And we need to, from my perspective, approach this relationship as two leaders with all of the responsibilities that that implies," he said. "And frankly I think we need to work a lot harder on strategic trust and transparency. And it's my hope that these reciprocal visits will get us started in this direction and that they can be sustained even through difficult issues."
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« Reply #64 on: July 13, 2011, 04:48:01 AM »

---------------------------
July 13, 2011


A COMPETITIVE CHINA-U.S. RE-ENGAGEMENT

U.S. Chairman of the Joint Chiefs of Staff Adm. Mike Mullen continued his visit to
China on Monday. He met with Chief of General Staff of the People's Liberation Army
Chen Bingde, future Chinese President Xi Jinping and other officials at naval and
air force bases in China.

Mullen's visit has attracted attention because the two sides have proved incapable
of sustained military communication and exchange, with disruptions arising from
intractable differences such as American military support for Taiwan. Mullen's trip
is the first for an official of his rank since 2007. There is every reason to think
that disruptions will continue to occur because of the disparity between the two
sides' views on how international military exchanges should function. The United
States seeks continual interaction separate from other aspects of the relationship,
whereas China cannot afford to separate what Washington views as "political" issues
from its military engagements and frequently cuts off exchange. Thus it is important
that the two sides are talking at all.

"Chen's comment that the United States should spend less on its military and focus
more on reviving its weak economy had a certain pointedness in the context of
American budget-deficit debates, but on a deeper level reflected China's fear that
it is becoming the United States' next target for direct competition before China is
ready."

However, the visit has also attracted attention because it is an exceedingly
interesting time for the two sides to be talking. As wars and a financial crisis
make the United States' strategic constraints more visible than at any other time in
the post-Cold War era, China's fast-growing economy and military development make
for a sharp contrast. The view among some regional players, whose national security
depends on their accurate assessment of the situation, is that a kind of leveling is
taking place.

The renewed engagement is also notable because it follows recent incidents and
conflicts that show regional animosities -- in the Koreas, the East and South China
Seas and Southeast Asia -- threaten to spill out of their former containers,
especially where American power is not considered to be overwhelming. Despite the
U.S. re-engagement throughout the region, some East Asian states suspect that
weakness and a long-term lack of commitment lie at the base of its prolonged
distance from regional affairs.

Thus what the United States and China say regarding military matters -- and any sign
of the trajectory of their intentions and capabilities -- are of great interest to
both parties as well as the rest of the region and world. So far the two sides have
shown they are capable proceeding with the calculated warming of relations formally
launched when Chinese President Hu Jintao met with U.S. President Barack Obama in
January. They have agreed to hold drills on humanitarian assistance and disaster
relief, as well as counter-piracy, and to work toward holding more traditional
military exercises in the future. These developments are not small, and they have at
least temporarily eased some fears in the region that relations between the United
States and China were on the verge of a downward spiral.

The recent warming in U.S.-China relations has drawn inevitable comparisons to the
Kissinger-style detente. However, the contrast between these events is more
striking. When Kissinger traveled to China, relations between the two countries
could hardly have been worse and because the countries shared a common enemy,
relations had ample opportunity to improve. At present, the prospects for
improvement appear limited, whereas their many differences on economic, military and
strategic interests present serious pitfalls. For instance, Chen's optimism
regarding China's future naval capabilities and his criticisms of U.S. military
exercises in the South China Sea with Australia, Japan, the Philippines and Vietnam
reflect Beijing's bolder stance. Meanwhile, Mullen's insistence on the durability
and depth of American power and presence in the region and emphasis on China's need
to become a more responsible power seem to reflect a warning to Beijing not to
become too bold. The clash over the South China Sea will intensify regardless of a
warmer diplomatic atmosphere.

Nevertheless, for the time being the warming of relations continues apace because
China is not yet the great power it aspires to be. What allows both countries to
defer confrontation is not only American preoccupation elsewhere but also -- as Chen
all too readily admitted during Monday's meeting -- China's persistent military
weaknesses, despite its recent highlighting of a fifth-generation fighter-jet
prototype, an aircraft carrier and anti-ship ballistic missiles. Chen's comment that
the United States should spend less on its military and focus more on reviving its
weak economy had a certain pointedness in the context of American budget-deficit
debates, but on a deeper level reflected China's fear that it is becoming the United
States' next target for direct competition before China is ready.

What Chen inadvertently pointed to is that, like the Soviets, Beijing's competition
with the United States has an economic basis. Economics is at the heart of military
power. However, in this regard the Chinese do not have as great an advantage as is
widely thought. The American economy has shown itself to be resilient after many
recessions, while the current Chinese model shows all the signs of unbalanced and
unsustainable growth. Coincidentally, the military meeting came as an American
financial delegation visited China to renew demands for inspections of auditing
firms, after a wave of accounting scandals struck Chinese companies listed on
American stock exchanges. The scandals have drawn attention because of their
flagrancy, but China's domestic economy is rife with false accounting. Hidden risks
have become more visible after recent revelations of gigantic debts held by local
governments that push China's total public debt up to levels comparable to
heavily-indebted, developed Western countries. The risks are located in the
state-owned banks, which can only hold things together so long as rapid growth
enables them to continue deferring debt payments. Thus China's great challenge is to
face not only a rising international rivalry but also its eventual combination with
deteriorating domestic economic conditions.

Copyright 2011 STRATFOR.
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« Reply #65 on: July 14, 2011, 01:09:05 PM »

http://www.usatoday.com/NEWS/usaedition/2011-07-13-ChinaYanks_CV_U.htm


Latest export to China: The American dream
By Calum MacLeod, USA TODAYPosted 1d 8h ago |
ShareReprints & PermissionsJIANKOU GREAT WALL, China — His sweat pools quickly as Carl Setzer carries another heavy sack of smoked malt into his farmhouse-turned-brewery beside the Great Wall of China near Beijing.



"I'm living the American dream, just not in America," says the Cleveland native, 29, who brews through the night with unusual ingredients such as Sichuan peppercorn to produce craft beers unique in China, and the world.

Setzer typifies a new breed of young Americans, China-savvy and Chinese-speaking, who share the pluck, patience and grit necessary to pursue their diverse dreams here.

After South Koreans, U.S. citizens had formed the second-largest national group among the nearly 600,000 foreigners living on the Chinese mainland at the end of 2010, says China's national statistics bureau.

At a time when many Americans back home worry whether fast-rising China is out to eat their lunch, the number of Americans living on the Chinese mainland has reached a record high of 71,493, according to Chinese census bureau figures released in April.
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« Reply #66 on: July 14, 2011, 01:34:03 PM »

Eliminate the students there for exchange/studying purposes only, I wonder how many of those 71,493 "U.S. citizens" in China are naturalized former Chinese who will come running back the the USA waiving their American Passport at the first sign of unrest or trouble.  Further, I bet only a very few will stay more than a 5 years in China.  In contrast, the line is unbelievably long for Chinese wishing to
come and live permanently in the USA.
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« Reply #67 on: July 14, 2011, 01:48:06 PM »

I wonder if they'll recognize America when they get back. Obama's Cloward-Pivin plan is starting to really do it's damage.
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« Reply #68 on: July 30, 2011, 07:51:14 AM »



STRATFOR
---------------------------
July 30, 2011


CHINA'S TECHNOLOGY SHOWCASES MASK ECONOMIC WARNING SIGNS

China is once again on the verge of sending its first aircraft carrier to sea. In
recent days, the Chinese media has expanded on comments, made during a Defense
Ministry press conference, openly confirming that China is refitting the Varyag and
preparing to enter the small club of nations with aircraft carriers.

China's outfitting of the never-completed Varyag has been one of the worst-kept
secrets in military history. Hiding something as large as an aircraft carrier, after
all, is difficult in this age of cameras and satellite imaging. And Chinese netizens
have been even more active than foreign observers at updating photos of the Varyag
at various stages in its development, postulating the timing of deployment, the
christening name, and the significance of China’s soon-to-be newest ship in the
navy.

"Perhaps rather than what these showcase projects mean for China, the greater
question is what is driving Beijing to pursue so many of them."

 
Even as Chinese officials consistently pretended the country was not working on the
Varyag for active use, Beijing knew that its public relations stance only added to
the mystique of China's naval development. Newspapers and defense journals along the
Pacific Rim and elsewhere are replete with foreign speculation on the future
activities of a more internationally active and aggressive Chinese navy, to say
nothing of more sober discussions of the constraints and limitations facing
potential Chinese naval ambitions with a single carrier (for now) and no history or
culture of carrier operations.
 
Beijing plays down the Varyag's significance by emphasizing that even after sea
trials, it will take two to five years to fully outfit the carrier and prepare it
for active service, and that the Varyag is intended more for training and scientific
purposes than for aggressive or even defensive military use. But the more China
plays down the carrier, the more foreign voices claim Beijing is hiding its true
agenda: to push the United States out of Asian waters and dominate the region.
 
The attention on the Varyag is, in many ways, misplaced. China is historically a
land power. Its biggest security challenges remain at home, across a vast territory
that will continue to require large expenditures for manpower, equipment and
transportation. China’s historical flirtation with a navy that travels far beyond
its immediate neighborhood has been limited. Even the famous voyages of Zheng He
could be called frivolous, rather than a serious attempt to dominate seas around the
world or even the region.
 
With the entrance of European navies into Asia, China found itself sorely lacking
any real defensive maritime capability. Unlike neighboring Japan, China’s attempts
to build up a navy to counter European influence proved ineffective, and the
emergent Japanese navy defeated the Chinese fleet. In the long run, however, Japan
was doomed once it launched its invasion of China. China’s population and size made
it nearly impossible for a foreign maritime power to truly conquer.
 
China's extensive geography and high population are its core strength and greatest
defense. Even if an invasion from the sea is initially successful, China has the
human resources to ultimately either absorb the conqueror (the one land power that
was successful in invading China -- the Mongols -- eventually became subsumed into
Chinese culture), or to outlast the invader through a long war of attrition.

STRATFOR has said that one of the reasons China appears bent on expanding its naval
capabilities relates to its shifting economic structure. The economic opening and
reform instituted by Deng Xiaoping led to a China that is much more dependent upon
foreign-sourced raw materials and foreign markets. China’s economic supply lines now
cross the globe. Beijing perceives the potential for a dominant naval power, namely
the United States, to interrupt those lines, or even to blockade Chinese ports in
case of confrontation.
 
China’s naval expansion, in that case, is not part of a strategy to engage in a
naval arms race with the United States or challenge U.S. dominance of the seas.
Rather, Beijing intends to build a defensive buffer around China's maritime
periphery. This would conceptually give Beijing the ability, in the event of a
confrontation with the United States, to continue carrying out trade, at least with
the countries bordering the South China Sea. This in part also explains China’s
so-called two-island chain strategy, and its increasing focus on disputed offshore
territories, like the Spratly Islands.
 
But the attention to China’s new aircraft carrier, deep-diving submarine, its space
exploration, and similar activities also helps Beijing distract audiences domestic
and global from real problems inside the country. China’s ability to refit and sail
an aircraft carrier built when the Soviet Union was still around and based on
technology from a generation earlier is similar to China’s first manned space launch
a few years ago. These projects are costly and address the periphery of China's
strategic needs, but they attract a lot of attention. Overseas, they somehow
reinforce the perception of a rising China -- and a rising China cannot be on the
verge of a major economic and social crisis. Domestically, they are intended to
inspire the population -- by creating a sense of unity, sacrifice and nationalism --
to rally behind an emerging global power.
 
Like the Three Gorges Dam, this show of China's capabilities is impressive for a
moment, but it does not really address the country's core needs. As China’s
high-speed rail accident shows, such leaps in Chinese showcase technologies are not
always perfected in the rush to highlight advancement. Perhaps attention should be
placed less on what these emerging showcase projects may mean for China than what is
driving Beijing to pursue so many of them. Beijing’s top concern is avoiding an
economic and social crisis, and Chinese leaders know that it may be only a matter of
time before the Chinese economy faces the same structural limitations that its East
Asian counterparts already faced.
 
The crisis may already be unfolding in China, as three decades of high growth rates
give way to more moderate growth and as inefficiencies within the economy become
more apparent. Sailing an aircraft carrier off the coast of China may make for great
video and breathless speculations of China’s emerging power. But the real show is
playing out at home. Stresses among small businesses and migrant laborers, between
the economic needs of the central planners and those of local and regional
governments, portend the looming question: What happens if China’s economic miracle
faces what all economic miracles eventually face -- the reality that there is no
such thing as unlimited, linear, multidigit growth.
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« Reply #69 on: August 06, 2011, 01:45:54 PM »

http://www.reuters.com/article/2011/08/06/crisis-idUSLDE77504R20110806

In the Xinhua commentary, China scorned the United States for its "debt addiction" and "short sighted" political wrangling.

"China, the largest creditor of the world's sole superpower, has every right now to demand the United States address its structural debt problems and ensure the safety of China's dollar assets," it said.

It urged the United States to cut military and social welfare expenditure. Further credit downgrades would very likely undermine the world economic recovery and trigger new rounds of financial turmoil, it said.

"International supervision over the issue of U.S. dollars should be introduced and a new, stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country," Xinhua said.
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« Reply #70 on: August 06, 2011, 01:51:11 PM »

http://the-diplomat.com/2011/07/24/china%e2%80%99s-two-pronged-maritime-rise/


China’s Two-Pronged Maritime Rise
July 24, 2011



By Robert C. O'Brien


China is following a two-prong strategy with its impressive maritime build-up. The West is making a mistake if it underestimates the implications.



For the past decade, while the West has been consumed battling Islamic extremists in the Middle East and Central Asia, China has been engaged in a rapid and impressive effort to establish itself as the supreme maritime power in the Eastern Pacific and Indian Oceans.
 
For years, China focused its military spending on the People’s Liberation Army, while the Air Force and Navy served as little more than adjuncts to the Army. But with the launch of its first aircraft carrier next month, the rest of the world – and especially the United States’ Asian allies – is taking note of how dramatically things have changed. China has big maritime ambitions, and they are backed up by a naval build-up unseen since Kaiser Wilhelm II decided to challenge British naval power with the building of the High Seas Fleet at the turn of the last century.   
 
China’s build-up is driven by a two-pronged strategy. First, China seeks to deny access by the United States and other naval powers to the Yellow, East China and South China Seas, thereby (1) establishing its own equivalent to the way the United States saw the Caribbean in the 20th century, from which its blue water navy can operate globally; (2) dominating the natural resources and disputed island chains such as the Spratly and Senkaku Island chains in those seas; and (3) giving it the capacity to reunify Taiwan with the mainland by force and without US interference, if necessary. China’s assertiveness in confronting and harassing Asian and US civilian and naval ships in the region over the past decade shows a sustained level of determination on this front.
 
Second, China seeks international prestige and a power projection capacity in the Pacific and Indian Ocean sea lanes by deploying multiple aircraft carriers and fifth-generation stealth fighter-bombers. The booming Chinese economy has become ever more dependent on imported minerals and oil from Africa and the Middle East, and the ability to protect its Indian Ocean and Strait of Malacca sea lanes is a responsibility that China is no longer willing to delegate to other powers.
 
The officially reported Chinese military budget for 2011 is $91.5 billion, a massive increase from its $14.6 billion budget in 2000.  China acknowledges that a third of its spending is now devoted to its Navy, yet even this big leap is almost certainly understated. China is notoriously non-transparent with its military expenditures, and most analysts believe that it spends significantly more on its armed forces than the publicly reported number. Further, Chinese military labour costs for its soldiers, sailors and airman is a fraction of what Western governments spend, where salaries, benefits and pensions are usually the largest share of defence budgets. This allows China to devote more of its budget to building weapons systems than its competitors. Unlike Western governments, which are slashing defence spending, China will continue to increase spending in coming years.
 
A key goal of China’s maritime build-up is access denial. While multifaceted, China is building its access denial strategy around two backbone platforms: the DF-21D (Dong Feng) anti-ship ballistic missile (ASBM), described as a ‘Carrier Killer,’ and an ever expanding and modern attack submarine fleet. US Navy Pacific Commander Adm. Robert F. Willard has characterized the DF-21D as already having reached the Initial Operational Capability stage of development, meaning that they are operable, but not yet necessarily deployable. Taiwan sources report that China has already deployed at least 20 ASBMs.  Whether deployed now or in the near future, the US Navy believes China already has the space-based intelligence, surveillance and reconnaissance, command and control structure, and ground processing capabilities necessary to support DF-21D employment. China also employs an array of non-space based sensors and surveillance assets capable of providing the targeting information necessary to employ the DF-21D.  With a recently reported range of 2,600 kilometres, these missiles will give naval planners real concern when operating anywhere nearby the Chinese mainland.
 
The Chinese submarine programme has been especially vigorous. For most of the Cold War, China operated outdated Soviet-era coastal submarines. In the 1990s, China purchased Russian Kilo-class diesel-electric attack submarines, and has been launching two indigenously-built Song-class diesel-electric attack submarines per year for the past decade. It has also developed and launched the high tech Yuan-class diesel-electric attack boat, which may have the silent air-independent propulsion system. Analysts believe that China will in the coming years also launch the Shang-class nuclear-powered attack submarine, further strengthening its already robust submarine fleet. It has surely not escaped China’s notice that US anti submarine warfare capability has atrophied significantly since the end of the Cold War.

**Read it all.
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« Reply #71 on: August 07, 2011, 12:11:40 PM »

Said to be 'huge', this discovery could break China's lock on rare earth elements, the minerals required for basic technology manufacturing of our time.  (If only the Obama EPA will allow them to mine there.)

http://www.businessinsider.com/elk-creek-rare-earth-2011-8
This Nebraska Village May Be Sitting On The World's Largest Untapped Deposit Of Rare Earth Minerals   Aug. 3, 2011

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« Reply #72 on: August 07, 2011, 12:25:57 PM »

Said to be 'huge', this discovery could break China's lock on rare earth elements, the minerals required for basic technology manufacturing of our time.  (If only the Obama EPA will allow them to mine there.)

http://www.businessinsider.com/elk-creek-rare-earth-2011-8
This Nebraska Village May Be Sitting On The World's Largest Untapped Deposit Of Rare Earth Minerals   Aug. 3, 2011



That's a big if.
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« Reply #73 on: August 07, 2011, 01:13:45 PM »

One of the articles on that story says the cellphone would be 3 pounds without the use of so-called rare earth elements.  Why don't we have people carry those for a couple of days until they tell the oppressionists in Washington, loudly and clearly, that we need to open this country for business, and that necessarily includes mining, drilling, processing and manufacturing - or someone else (like China) will.

I can only think of what Dean Wormer said to Flounder in Animal House: "Fat, drunk and stupid is no way to go through life, son."  What is the matter with our globally competitive, strategic economic team??  Terms like deaf, dumb and blind aren't fair to people who really suffer those afflictions.
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« Reply #74 on: August 07, 2011, 02:24:53 PM »

I can only think of what Dean Wormer said to Flounder in Animal House: "Fat, drunk and stupid is no way to go through life, son."  What is the matter with our globally competitive, strategic economic team??  Terms like deaf, dumb and blind aren't fair to people who really suffer those afflictions.

FAT


DRUNK


STUPID
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« Reply #75 on: August 08, 2011, 05:55:17 PM »

http://www.thedailybeast.com/newsweek/2011/08/07/china-s-view-of-the-debt-debate-america-in-decline.html


Whatever the rating agencies say, many in China believe the U.S. is no longer creditworthy.
Aug 7, 2011 10:00 AM EDT

Xian, China—viewed from inside the Beltway, the passage of legislation to raise the federal debt ceiling was a triumph for democracy.
 

“The push and pull Americans saw in Washington these past few weeks…was the will of the people working itself out,” declared Mitch McConnell, the Republican leader in the Senate. The appearance of Gabrielle Giffords to vote for the bill raised not just the ceiling but also the roof.
 

Viewed from Beijing, it looked very different. Indeed, it’s hard to imagine what more we could have done to vindicate the Chinese Communist Party’s position that Western democracy is a form of institutionalized chaos to be avoided by all sane Asians.
 

One of my friends from China asked me how much of the federal debt was owed by the government to itself. I had to check. The answer is just less than a third, since various agencies like the Social Security Trust Fund are major holders of U.S. Treasuries.
 

“So,” he mused, “Congress just voted not to default on the debt the government owes itself?” I had to admit that was correct. “And how much of the federal debt is owed by the government to the American people?” More checking. The answer is that just more than a third is owed to U.S. citizens and the banks and pension funds that manage their savings.
 

“So the will of the people was that it would be better not to default on the government’s debt to…the people?” I couldn’t deny it.
 

Readers who enjoy arithmetic can now answer a further question: what proportion of the federal debt is owed to foreigners? The answer is just less than a third. If you exclude the part of the debt the government owes to itself, the figure is 46 percent—nearly half. But my Chinese friend didn’t need me to tell him that. Everyone here knows that the United States is in hock to the rest of the world and that China is its No. 1 creditor.
 

According to official figures, mainland China holds $1.1 trillion in U.S.-government debt instruments. But it’s an open secret that the Chinese authorities also like to buy Treasuries via intermediaries in London, Hong Kong, and elsewhere. Add the U.K. and Hong Kong figures and the total is closer to $1.6 trillion—about 17 percent of the federal debt in public hands. And if you include nongovernmental securities held in China’s international reserves, the U.S. debt to China rises to more than $2 trillion.
 

The antics of American legislators take on a new significance when you realize how our leading creditor interprets them. As Beijing sees it, the last three months have furnished ample evidence that—regardless of what the American rating agencies may say—the United States is no longer creditworthy. Even if Congress has pulled back from the brink of outright default, many in China view the debt deal as at best a temporary fix. As the Xinhua News Agency put it, the 11th-hour deal has “failed to defuse Washington’s debt bomb for good, only delaying an immediate detonation by making the fuse an inch longer.” Meanwhile, the unspoken intention of the Federal Reserve is to debase the dollar through “quantitative easing,” which translates into Mandarin as “printing money.” (It’s no accident that one of the bestselling economics books in China is called Currency Wars.)
 

So the Chinese have skin in this game. And their U.S. exposure doesn’t stop there. In order to prevent devaluation of their dollars, they have no option but to keep buying yet more dollar-denominated securities. That strategy suits their exporters fine, since it keeps their goods competitive in the American market. But what if the effect of last week’s debt deal, which mandates deficit reduction of $2.1 trillion over the next 10 years, causes a further slowdown in U.S. growth? Not so good.
 

China has its own economic problems, to be sure. But they are the problems of a rising power. From Beijing’s standpoint, America’s problems are plainly those of a power in decline. We didn’t just raise a ceiling last week. In Chinese eyes, we also fell through a floor.
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« Reply #76 on: August 09, 2011, 01:44:59 AM »



STRATFOR CEO Dr. George Friedman explains why the United States should treat China as a regional power and not a superpower, in the third of a series on global pressure points.


Editor’s Note: Transcripts are generated using speech-recognition technology. Therefore, STRATFOR cannot guarantee their complete accuracy.

Colin: The world is full of pundits who predict that China will, sometime in the first half of this century, overtake the United States as an economic power. The only difference between them is when this will happen. STRATFOR doesn’t believe this will happen and as China’s economy slows down while facing inflation, many others have doubts also. For his latest assessment, we turn to George Friedman, who we welcome back to Agenda.

George, China argues that the United States should treat it as an equal. For the United States, this seems a step too far. Is this a chasm that can be resolved peacefully?

George: The United States doesn’t treat China as an equal or an unequal, it treats it as China. As a country it has interests and those interests may coincide with American interests or they may not. But the United States, and any other country treats any other country as its interests. In many cases, the problem really is that observers of China have bought into the Chinese view that China is a superpower economically, militarily, politically, and therefore the United States should it treat it as such. But the fact is that China is far from a superpower in any of these realms. It remains a relatively weak economic power and certainly a weak military and political power, and the United States treats it as it is: a significant regional power with a great many weaknesses, and when it threatens American interests, the United States is quite happy to slap it back.

Colin: With the possibility of confrontation between the world’s first and second largest economy troubles many countries in the Asia Pacific region. First of all Japan and Korea but also many nations of Southeast Asia: Indonesia, Vietnam and a resources giant, Australia.

George: Well I mean it’s interesting that they’re troubled. I must admit that I’ve never understood what it meant for a nation to be troubled—I understand people being troubled. Look, there can’t be confrontation militarily between the United States and China. Firstly because the United States is incapable of intruding on mainland China militarily—it’s a vast population, a large army. And China has no naval capability worthy of the name. They have launched their first aircraft carrier. That means they have one aircraft carrier. They don’t have the cruisers, they don’t necessarily have the advanced attack submarines, they don’t have the Aegis defense systems. In other words they’ve launched a ship and now they have to train their pilots to land and takeoff from the ship and the aircraft that take off from the ship have to be able to engage and survive American F-14s. The distance between being a challenge to the United States and having one aircraft carrier is vast and generational. Not only do they have to train the people to fly off the deck, they have to train naval commanders, admirals, to command carrier battle groups, and even more admirals who know how to command groups of carrier battle groups. The United States has been in the business of handling carrier battle groups since the 1930s. The Chinese have not yet floated their first carrier battle group, and one isn’t enough. So it’s really important to understand that while China has made a minor movement in floating aircraft carrier, a technology that is now just about 80 years old—that’s very nice but it does not make them a power.

Colin: Now, financial analysts and economists talk up China as an economic power but at STRATFOR we’re doubters. China has slowed down this year, but do we still believe that Chinese growth is unsustainable?

George: The question of Chinese growth is the wrong question. I can grow anything if I cut profit margins to the bone or take losses. According to the Chinese Ministry of Finance, Chinese profits on their exports are about 1.7 percent, which means that some of these people are exporting at almost no level. The Chinese grow their economy not in the way that Western economies grow that when you sell more products, you make more money. The Chinese grow their economy to avoid unemployment. The Chinese nightmare is unemployment because in China unemployment leads to massive social unrest. Therefore the Chinese government is prepared to subsidize factories that really should be bankrupt because they’re so inefficient in order to keep these companies going. They will lend money to these companies not to grow them but in order to make certain that they don’t default on other loans. So I think one of the mistakes we make is the growth rate of China being the measure of Chinese health. I want everyone to remember that in the 1980s Japan was growing phenomenally and yet their banking system crashed in spite of the fact of having vast dollar reserves. So when you look at the Japanese example you see a situation where growth rates, which Westerners focused on, were seen to be a sign of health when in fact they were simply a solution to a problem of unemployment and underneath it the economy was quite unhealthy. This doesn’t mean that China doesn’t have a large economy, but having a large economy and being able to sustain healthy, balanced growth are two very different things.

Colin: Wouldn’t it be in the interests of both countries to find more common ground, perhaps to work together to make the Western Pacific a zone of peace involving Japan and other countries?

George: Well first of all, there is a zone of peace in that region. There’s no war going on. Secondly, the guarantor that it’s a zone of peace is the American 7th Fleet—the Chinese can’t do anything about it. As for tension bubbling about, so much of this is what I’ll call newspaper babble. Some minister or some secretary says something hostile, something is said—these are merely words. Here’s the underlying fact: China cannot sell the products it produces in China because over a billion people living in China live in absolute poverty and can’t buy it. They’re the hostage to European and American consumers, and their great fear is that those consumers, if they go into a recession, won’t buy those products. The problem the Chinese have is that they can’t invest their own money into the Chinese economy—there’s no room to put it, there aren’t enough workers, there’s not enough land and so on. So they have this massive hangover that they’re willing to invest in the world to get out of China. So there is a very good relationship between the United States and China. The Chinese get to sell products to the Americans; the Americans get these products. The problem the Chinese have is that their wage rates are now higher than those of other countries. It is cheaper to hire workers in Mexico today than in China. Their great historic advantage is dissolving yet they must continue to export.  The American desire that the Chinese change the value of the yuan, that they float it, of course will never happen. The Chinese can’t afford to let that happen because of course that would make their exports even more expensive and place them in even more difficult trouble. So the United States enjoys jerking their chain by saying they should float the yuan. The Chinese respond saying that they will do that in a few years as soon as something else happens that’s unnamed. And the Chinese condemn the United States for their naval activities, and all of these are words. These two countries are locked together in a very beneficial relationship. In the long run it’s more beneficial to the United States than to the Chinese, and that’s one of the paradoxes. But again it takes a long time for people to realize that economies have failed or recovered. I remember back in 1993, people were still speaking about the Japanese super-state long after the banking system collapsed. One of the interesting things about the global financial community is that they always seem to be about two years behind reality, and the China situation is that they are in the midst of a massive slowdown. They’re admitting to a certain degree of slowdown—we suspect it’s much more substantial than that. In fact, given Chinese inflation rate, they may be entering negative territory. So this is a country that has had a magnificent run up in 30 years, it is going to be an important economic and military and political power over the next century but for right now it’s got problems.

Colin: George Friedman there, ending the Agenda for this week. Thanks for joining us, and until the next time, goodbye.

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« Reply #77 on: August 22, 2011, 02:42:32 PM »

An issue predicted more than once by me many months ago.
====================

The trade magazine Defense News reports that the Obama Administration has notified Taiwan that it will not sell it new F-16s, but will agree to upgrade the island's older fighters. "They are going to split the baby," a defense industry source told reporter Wendell Minnick. The metaphor is apt, as this outcome would endanger the island democracy.

Both the U.S. and Taiwan have denied the report, but whether it is final or not, we're hearing the Administration is leaning this way. If so, Beijing will have bullied another American President into scaling back the sale of defensive arms required under the Taiwan Relations Act. The island's weak defense is now becoming critical, as a report on Taiwanese air power due out shortly from the Pentagon will show.

Trying to paper over this reality with moves like upgrading Taiwan's F-16 A/B fighter only makes matters worse. These aging airframes reportedly will get sophisticated radars and electronic countermeasures that in some ways will make them more capable than the U.S. Air Force's own F-16s. So in order to make up the shortfall in Taiwan's defenses caused by its unwillingness to sell plain vanilla F-16 C/Ds, the Obama Administration is risking this more advanced technology falling into Beijing's hands by way of its espionage rings on the island.

Taiwan doesn't need the most advanced weaponry on the market to defend itself; it needs reasonably capable weapons in sufficient quantities. China is improving the capabilities of its weapons, but its biggest advantage on Taiwan is in numbers. The mainland can send missiles and fighters in waves across the Strait to overwhelm the island's air force. Taiwan is buying advanced Patriot missile defenses, which will help, but new F-16s are a crucial part of its defense in depth.

By hesitating to provide Taiwan with the arms it needs, President Obama is setting up a future U.S. President for a crisis. Beijing has declared that it will attack if Taiwan's leaders try to put off reunification indefinitely. In practice, this means that when the Chinese military enjoys a decisive advantage in the Taiwan Strait, the threats against Taiwan could begin in earnest. If the Obama Administration fails to honor America's commitments to Taiwan, Beijing's threats could turn to war sooner than anyone anticipates.

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« Reply #78 on: August 22, 2011, 04:04:45 PM »

Taiwan is in a way the Israel of its region.  Our best natural ally but we aren't supposed to admit we like them or support them.  They aren't even a country on the map of the United Nations, just like Israel is missing from some maps in their region.  We wouldn't want to offend our friends the repressive communists, or Hamas, Hezbollah and the Mullahs.  Did anyone ask Huntsman is he thinks Taiwan should be limited to flying old planes as the world's largest army threatening their shores is building new aircraft carriers?  No.  Evolution policy was more pressing.
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« Reply #79 on: August 26, 2011, 01:21:05 PM »

This whole thing is sad because manufacturing of high technology is not about cheap, low end labor costs.  Our misguided policies over a long period have cost us far more of our manufacturing base and jobs base for more than what was needed based on just free trade and comparative advantage reasons.

http://www.forbes.com/sites/stevedenning/2011/08/17/why-amazon-cant-make-a-kindle-in-the-usa/

“So the decline of manufacturing in a region sets off a chain reaction. Once manufacturing is outsourced, process-engineering expertise can’t be maintained, since it depends on daily interactions with manufacturing. Without process-engineering capabilities, companies find it increasingly difficult to conduct advanced research on next-generation process technologies. Without the ability to develop such new processes, they find they can no longer develop new products. In the long term, then, an economy that lacks an infrastructure for advanced process engineering and manufacturing will lose its ability to innovate.”
----
 Amazon’s Kindle 2 couldn’t be made in the U.S., even if Amazon wanted to:

    * The flex circuit connectors are made in China because the US supplier base migrated to Asia.
    * The electrophoretic display is made in Taiwan because the expertise developed from producting flat-panel LCDs migrated to Asia with semiconductor manufacturing.
    * The highly polished injection-molded case is made in China because the U.S. supplier base eroded as the manufacture of toys, consumer electronics and computers migrated to China.
    * The wireless card is made in South Korea because that country became a center for making mobile phone components and handsets.
    * The controller board is made in China because U.S. companies long ago transferred manufacture of printed circuit boards to Asia.
    * The Lithium polymer battery is made in China because battery development and manufacturing migrated to China along with the development and manufacture of consumer electronics and notebook computers.
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« Reply #80 on: September 02, 2011, 01:14:57 PM »



Summary
Philippine President Benigno Aquino III is leading a delegation of businessmen on a state visit to China from Aug. 30 to Sept. 3. Manila appeared to have toned down its criticisms of Beijing ahead of the visit, hoping to secure more Chinese investment in the country. But China has warned the Philippines that its cooperation in the current context has a cost, namely a bigger hand in the Philippine mining sector and more restraint from Manila in the South China Sea.

Analysis
Philippine President Benigno Aquino III began his first-ever state visit to China on Aug. 30, a long-delayed trip that will conclude Sept. 3. Relations between the countries have been tense since March because of their ongoing dispute over the South China Sea, and have been compounded by the fact that the visit comes a week after the one-year anniversary of the hostage crisis in Manila that killed eight people, mostly tourists from Hong Kong, not to mention that Aquino openly refused to apologize a week before his visit for the botched rescue by Philippine security forces during that incident.

However, prior to the visit, Manila appeared to tone down its public criticism of China’s assertiveness and incursions into the disputed sea, instead relying on conciliatory rhetoric in a bid to garner Chinese investment. The Philippines traditionally has played China and the United States off one another, reaping the benefits of economic cooperation with Beijing while protecting itself with security guarantees from Washington. Beijing recognizes this — and that the recent accommodative rhetoric from Manila is hollow — and will try to use Aquino’s request for investment to extract concessions and restrain the Philippines’ behavior in the South China Sea.


Manila’s Need for Investment

With the Philippine economy signaling slower growth, Aquino is in a tough spot. More than a year into his presidency, he is far from fulfilling a number of campaign promises and is facing a declining popularity rating. As a result, the Philippines is increasingly in need of external investment, and Aquino is looking to Beijing to provide it.

China has become the Philippines’ third-largest trade partner. But Chinese investment in the Philippines was only around $100 million in 2010, a tiny portion of the $59 billion of total overseas investment in the country that year and even lower than China’s investment there five years ago. In other words, there is a great deal of room for Chinese investment to grow in the investment-strapped country.

A delegation of 300 businessmen is accompanying Aquino on the five-day trip to China. According to reports, Aquino wants to double bilateral trade (from about $28 billion to $60 billion) with China by 2016. Meanwhile, he is seeking up to $7 billion worth of deals from China, promising that the investment-hungry country is “open for business.” In particular, Aquino is campaigning for Chinese investment in the automobile industry; shipbuilding, railway and agriculture projects; and his government’s public-private partnership program, the centerpiece of the Aquino administration’s push to restructure the economy and generate employment opportunities.


The Philippine Balancing Act

China’s rapid economic growth and expanding influence in the region, in conjunction with reduced investment and aid from Japan, has drawn more and more Southeast Asian countries into China’s economic sphere. Beijing has leveraged this economic influence to gain political influence and to help address diplomatic disputes.

However, unlike other countries in the region, the Philippines enjoys a security alliance with the United States, which provides Manila with alternative options to counterbalance China’s growing influence and maximize its own interests. In fact, Manila has proved capable of balancing the two powers, gaining U.S. defense guarantees while reaping the benefits of economic cooperation with China. However, with the U.S. re-engagement policy, competing interests in the South China Sea and other regional matters, Manila needs to walk a more careful line to balance the two powers and continue to secure the respective benefits of cooperation with each.


China’s Demands

Beijing has responded coldly to Manila’s latest overtures. The Global Times, a state-run Chinese newspaper, clearly suggested in a recent editorial that Beijing would not easily fulfill Manila’s request for investment, especially following the latest tension over the South China Sea during which Beijing saw the Philippines as using U.S. backing to its advantage. The editorial went on to say Beijing would not put its own interests at risk and encourage Manila’s game between China and the United States by granting easy access to investment. It also said China should use its economic leverage over the Philippines to address bilateral disputes and shape Manila’s behavior. Simply put, China has warned the Philippines that its cooperation in the current context will come with a price, namely a bigger hand in the Philippine mining sector and more influence in the South China Sea.

Beijing has long been interested in engaging the  Philippines’ rich resource and energy sectors. In fact, shortly before Aquino’s visit, Chinese Ambassador to the Philippines Liu Jianchao called on Manila to liberalize its economic policies in order to facilitate Chinese investments, particularly in mining. But resistance within the Philippines has hampered China’s efforts.

China’s interest in the Philippine mining sector stems from its need to meet its growing energy and resource demand over the long term, but for the Philippines, mining is a politically controversial issue. The Philippine Mining Act of 1995 essentially allows 100 percent foreign ownership for large-scale mining and limited equity for smaller operations. Attempts to open mining to foreign investors has been impeded, however, by opponents ranging from Catholic bishops, indigenous groups, environmentalists and the leftist political group known as the New People’s Army. Aquino has been under pressure to revoke the government’s mining policy, so acceding to China’s demand for more access to the Philippine mining sector will be difficult for him to do.

Meanwhile, Beijing may also pressure Manila to exercise more restraint in the South China Sea, emphasizing China’s preferred approach of bilateral dialogue and joint exploration projects. Still, the latest disagreement over potential joint exploration efforts shows that both sides are unlikely to abandon their positions. The Philippines will not make concessions on its territorial integrity, and thus it continues military purchases and calls for more assistance from Washington despite its moderated rhetoric. Indeed, just before Aquino’s visit, Manila made a show of its recently acquired patrol ship from the United States, the refurbished 115-meter (377-foot) BRP Gregorio del Pilar, and indicated that more purchases would be made.

Despite reduced tensions during the Philippine president’s visit, Beijing’s and Manila’s competing interests in the South China Sea continue to inhibit closer relations. Beijing expects concessions from Manila, particularly in the South China Sea, in return for investment. However, China also understands not to push the pro-U.S. administration in Manila too far, which would likely bring more attention from Washington to the disputed South China Sea region.



Read more: China Seeks Increased Leverage over the Philippines | STRATFOR
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G M
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« Reply #81 on: September 02, 2011, 01:35:45 PM »

Doing business with China is like playing pool or cards with a guy named after a geographical feature. You damn well better know what you are doing.
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« Reply #82 on: September 02, 2011, 03:17:51 PM »

This is but one step towards making the South China Sea their lake, setting up the day they back us off from supporting Taiwan, restricting the movements of our Navy and much more.
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G M
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« Reply #83 on: September 02, 2011, 04:36:34 PM »

This is but one step towards making the South China Sea their lake, setting up the day they back us off from supporting Taiwan, restricting the movements of our Navy and much more.


Of course it is.
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« Reply #84 on: September 05, 2011, 05:11:14 PM »


http://www.strategypage.com/qnd/china/articles/20110903.aspx

September 3, 2011:

The U.S. recently released its annual report on Chinese military power, and the main point was that growing Chinese military capabilities were being used to coerce or covertly attack other countries. Chinese neighbors agreed with this, as did more distant targets (of Chinese Cyber War attacks). China promptly denounced the American analysis as “baseless.” But the reality is otherwise. The growing Chinese navy is increasingly showing up to enforce Chinese claims over disputed islands, and large areas of (according to the rest of the world) international waters. China’s neighbors are increasing their naval capabilities (more ships, aircraft and weapons) and getting cozy with the United States (which has the largest fleet on the planet.)
During the recent fighting in Libya, the rebels complained of encountering government troops armed with new Chinese weapons. Accusations were made that China was selling weapons to the Kaddafi dictatorship despite a UN embargo. A little investigating found that this was indeed the case, and that Chinese arms merchants had approached the Libyan government earlier in the year, offering to sneak the weapons in via Algeria and South Africa. The last shipments appear to have arrived in July. Back then, there were reports of smugglers moving truckloads of weapons across the Algerian border into Libya.

In response to Chinese spy ships operating in the area, India is increasing its military forces in its Andaman (off the Burmese coast), Nicobar (near Indonesia) and Lakshadweep (off the southwest Indian coast) Islands. This means increasing maritime and electronic surveillance capabilities on the islands, as Chinese naval forces are expected to be a more frequent sight around these islands. Indian politicians are complaining about the expense of all these security measures (including creating and deploying new units on the Chinese border). But popular fear of growing Chinese military power forces the politicians to come up with the money.

The Chinese government has apparently leaned on some of the most prominent hacker groups to advise their members and followers to avoid hacking Chinese targets, and to be more discreet (don’t get caught) when attacking foreign targets. Those who are not skilled enough to avoid getting caught, are advised to not attack foreign corporations and governments at all. China has long maintained remarkable control over its own hackers, organizing many of them into a semi-official cyber-militia and permitting, and even encouraging, a lot of illegal hacking against foreign targets. The hacker organizations also served as a recruiting pool for government and military Cyber War organizations. But despite all the precautions, a lot of the subsequent Cyber War and espionage operations were traced back to China. This has caused a growing crescendo of accusations and threats from foreign nations. While China denies everything, it has now told its hackers to cool it, or else. That means something in China, where “enemies of the state” are still sent to labor camps or executed. Unfortunately, given the size and nature of the hacker underground (even in China), the cease and desist orders could not be given in secret.

It’s also recently been revealed (via wikileaks) that Apple Corporation set up a major anti-counterfeiting effort operation three years ago. One of the main targets was China, where corrupt officials tolerate massive counterfeiting, despite government promises to stamp out the practice. The Apple investigation resulted in considerable detail about counterfeiting operations in China, and the extent of official and unofficial government involvement. The U.S. government used these details to put more pressure on China to shut down the rampant counterfeiting and government approved hacking.

While the Chinese government is making a big deal about investing in North Korea, via new “free trade zones,” Chinese government controlled business publications are putting out articles detailing why such efforts have little chance of success. North Korea is still considered, even by the Chinese, as too unstable an area for any major investments. This is known from the experience of Chinese traders and businessmen who have been operating (at great risk) in North Korea for decades.

Several years of growing inflation in China is causing more unrest. Government efforts to curb the rising prices, like by restricting credit to companies, is being undermined by corruption, which makes it possible for companies to get loans from overseas lenders. This demonstrates that the widespread corruption not only creates popular unrest, but limits the ability of the government to govern.

August 29, 2011:  A court sentenced a senior Buddhist monk to 11 years in jail for his role in allowing another monk to kill himself last March. The dead monk burned himself to death as a protest against Chinese persecutions of Tibetan Buddhists. Last month, another monk burned himself to death in protest.

August 26, 2011: Chinese web portal Sina.com, following government orders, announced that it had suspended several microblogs (the local equivalent of Twitter, which is banned in China) that had spread “misinformation.” What microblogs more frequently do is spread news the government wants to control (which is why Twitter cannot operate in China.) The Sina.com move generated a lot of protest by many other microbloggers. The government seeks to control Internet use to avoid stirring up unrest. But these censorship efforts often do just that.  The government is also increasing its use of blacklists of popular culture items, like foreign (especially American) songs that cannot be available on the Chinese Internet. Recent hits by Lady Gaga and Beyonce are typical of the forbidden sounds. The stuff gets through anyway, aided by increased demand because of blacklist status. If the government doesn’t like it, it must be good.

August 25, 2011: State run TV removed a video from its web site that showed (apparently by accident) a Cyber War tool (that can launch a DDOS attack on another site and shut it down temporarily.) The government denied that the Cyber War program was government property, but refused to comment further. The video first appeared on TV in July.

August 24, 2011:  The U.S. Department of Defense released its annual review of Chinese military power. Over the next week, China denounced the implications (that all this new Chinese military capabilities might be a problem.)

August 18, 2011: For the first time, Chinese PC shipments (18.5 million for this past April-June) exceeded those of the U.S. (17.7 million) for a three month period.
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« Reply #85 on: September 06, 2011, 08:25:25 AM »

After the Carter Administration established diplomatic relations with mainland China in 1979, the U.S. Congress passed the Taiwan Relations Act with veto-proof majorities to ensure that future Presidents would sell the island the arms it needs to defend itself. The law is now in danger of becoming a dead letter, as the Obama Administration is reportedly planning to reject Taiwan's request to buy badly needed new F-16 fighters. It's time for Congress to act again to correct the executive branch's inability to withstand pressure from China.

A move is afoot to do exactly that. If the Administration decides against the deal by its self-imposed deadline of Oct. 1, Senator John Cornyn of Texas says he will propose an amendment to the defense authorization bill mandating the sale. He would probably get support from a majority of lawmakers in both houses, who have signed on to letters supporting the sale. The idea is that President Obama would find it difficult if not impossible to veto a law that keeps the entire military funded.

A precedent was set for such a move in 2000, when a Republican-controlled Congress threatened to force President Bill Clinton to sell Aegis destroyers to Taiwan. That became a bargaining ploy that helped a lame-duck Administration see its way to selling a bigger package of weapons and radars than it otherwise would have approved.

In this case, Taiwan badly needs the new F-16s, as well as an upgrade of its older planes. Late last month, the Pentagon released its annual report on Chinese military power acknowledging the upcoming leap in capabilities represented by China's J-20 stealth fighter, now in testing. A separate report on Taiwan's airpower is now 18 months overdue, which suggests there is bureaucratic infighting over contents that would show the island's air defenses need upgrading.

In normal circumstances, we would not advocate Congress interfering in the conduct of foreign affairs, the responsibility of the executive branch. However, since 1979 China has brought increasing pressure to bear on U.S. Presidents, so that they have tended to put off arms sales to Taiwan for their successor to handle. As Taiwan's defense becomes more and more precarious, a future U.S. President may have to put Americans in harm's way to defend the island or see a democracy capitulate to an aggressor.

In this case Congress would be enhancing President Obama's foreign-policy leverage in Asia, not undermining it. Some of the wiser figures in the White House might even be thankful if the Congress takes this difficult decision off their hands. As well as selling the F-16s, lawmakers might also consider how to strengthen the Taiwan Relations Act to put arms sales to the island on a more automatic schedule that would allow future Presidents to deflect Chinese pressure. That would be a boon to American policy making, an assurance for Taiwan's freedom—and a spur to more responsible Chinese conduct.

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« Reply #86 on: September 12, 2011, 10:38:53 AM »

  By CHESTER DAWSON
TOKYO—Japan's new defense minister said that while the American alliance remains the core of security policy, he wants to improve ties between Chinese and Japanese armed forces as a means of dealing with China's military rise.

"The U.S.-Japan security relationship is the cornerstone of our national security policy, but based on that foundation we need to improve relations with China," Yasuo Ichikawa said Monday in an interview with The Wall Street Journal, his first with a foreign media organization since taking office Sept. 2.

Mr. Ichikawa also said the contract for a next-generation fighter aircraft, a long-delayed and highly anticipated project sought by three global defense titans, will be awarded by year's end.

Sino-Japanese relations have been strained by a series of recent incursions by Chinese ships into Japan's territorial waters in the East China Sea. A war of words between Beijing and Tokyo followed the arrest of a Chinese fishing crew last year, raising alarms about China's intentions toward its Asian neighbors. The dispute came shortly after the resignation of Yukio Hatoyama, who as prime minister had made improved ties with China a central focus of policy.

Japan's new defense minister, appointed by Prime Minister Yoshihiko Noda, downplayed the territorial spat's impact and stressed the importance of opening communications channels with his counterparts in China.

"I'd like to work toward increasing interaction between Japanese and Chinese defense personnel," Mr. Ichikawa said, adding that he would try to visit China personally. He wouldn't be the first Japanese defense minister to do so, but a trip would signal a thaw.

That overture to Beijing evokes Mr. Hatoyama's embrace of China as a counterweight to the U.S., but Mr. Ichikawa said he has no intention of putting distance between Tokyo and Washington.

However, resolution of a long-simmering controversy involving plans to relocate a U.S. military base in Okinawa may take more time, he said. While Washington's desire to make progress is clear, the defense minister indicated Okinawan anti-base sentiment and budgetary limits might slow progress. The countries will share the cost of the move.

"We have to be mindful about the feelings of the Okinawan people and Japan's own schedule issues such as the deadline for budget requests" on defense-related allocations, he said.

In June, the U.S. and Japan agreed to postpone plans dating from 2006 to close a U.S. Marine Corps base at Futenma in Okinawa by 2014, citing cost concerns and local opposition to the proposed relocated Okinawa base.

At the same time, Japan's new defense minister signaled greater willingness to cooperate with the U.S. and other allies sharing the burden of developing advanced military technologies.

Noting the country's "three principles" banning arms exports has inhibited co-development of cutting-edge weapons, Mr. Ichikawa said he favors moving swiftly with the Japanese government's effort to "study" a relaxation of the ban.

"There's no set schedule, but it's not the kind of problem that we can take too long to consider," the defense minister said. "It's important to start taking gradual steps to sound out a direction as soon as possible." He added that relaxing the ban would bolster Japanese manufacturers who are struggling from weak domestic demand.

The review of the restrictions on weapons exports is politically sensitive in Japan because of the country's pacifist constitution. First established as policy in 1967, the principles were originally designed to prevent military technology from falling into the hands of Communist Bloc countries.

Earlier this month, the policy chief of the governing Democratic Party of Japan, former foreign minister Seiji Maehara, ruffled feathers by openly calling for a review of the ban at a speech in Washington, apparently without first consulting with Cabinet officials, including Mr. Ichikawa.

The issue of Japan's ban on arms exports has loomed large as it invests in developing expensive advanced weapons such as ballistic-missile systems. It has also colored the debate on Japanese plans to procure a new generation of fighter planes, since Japan has not been able to co-develop one with allies and missed an opportunity to do so with the F-35 joint strike fighter program spearheaded by the U.S.

Mr. Ichikawa said that Japan will accept formal bids for its next-generation fighter on Sept. 26 and that he expects a decision to be reached by December as part of budgetary discussions for fiscal 2012, at least three years later than initially planned.

The fighter program, dubbed the FX in Japan, will likely call for the purchase of about 40 to 60 planes in a deal expected to total around $4 billion, according to industry officials.

In an era of declining defense budgets, the project has attracted three of the world's biggest defense contractors: Boeing Co. with its F-18 Super Hornet, Lockheed Martin Corp. with the F-35 JSF and Eurofighter GmbH with the Typhoon.

Mr. Ichikawa said it is too early to say who will prevail.

That latest delay in the FX program came earlier this year when the ministry, which had been expected to start vetting bids in March, postponed the process an additional six months due to the March 11 earthquake and tsunami. The new fighter will replace Japan's aging squads of F-4 Phantom fighters, made by McDonnell Douglas, now part of Boeing.

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« Reply #87 on: September 12, 2011, 10:46:36 AM »

Almost like Japan is questioning America's will and ability to defend them.....


Who could have seen this coming?


 rolleyes

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« Reply #88 on: September 15, 2011, 10:34:27 AM »

'The Economist' editorializes on a new book forecasting China to become the world's predominant economy and superpower.  The author says there is little the U.S. can do; the editorial questions that.  Obviously the full script for what happens next in the world has not been written.  My view is that the economic rise of competing economies is a good thing, except if they are our military enemies.  With China, who knows.  Also I don't agree with his numbers; we aren't down to a 13-12 economic advantage over China right now.  With the U.S., a real  challenge coming from elsewhere should be reason enough to get focused on getting our own act back together.

http://www.economist.com/node/21528591
The celestial economy
By 2030 China’s economy could loom as large as Britain’s in the 1870s or America’s in the 1970s

Sep 10th 2011 | from the print edition



IT IS perhaps a measure of America’s resilience as an economic power that its demise is so often foretold. In 1956 the Russians politely informed Westerners that “history is on our side. We will bury you.” In the 1980s history seemed to side instead with Japan. Now it appears to be taking China’s part.

These prophesies are “self-denying”, according to Larry Summers, a former economic adviser to President Barack Obama. They fail to come to pass partly because America buys into them, then rouses itself to defy them. “As long as we’re worried about the future, the future will be better,” he said, shortly before leaving the White House. His speech is quoted in “Eclipse”, a new book by Arvind Subramanian of the Peterson Institute for International Economics. Mr Subramanian argues that China’s economic might will overshadow America’s sooner than people think. He denies that his prophecy is self-denying. Even if America heeds its warning, there is precious little it can do about it.

Three forces will dictate China’s rise, Mr Subramanian argues: demography, convergence and “gravity”. Since China has over four times America’s population, it only has to produce a quarter of America’s output per head to exceed America’s total output. Indeed, Mr Subramanian thinks China is already the world’s biggest economy, when due account is taken of the low prices charged for many local Chinese goods and services outside its cities. Big though it is, China’s economy is also somewhat “backward”. That gives it plenty of scope to enjoy catch-up growth, unlike Japan’s economy, which was still far smaller than America’s when it reached the technological frontier.

Buoyed by these two forces, China will account for over 23% of world GDP by 2030, measured at PPP, Mr Subramanian calculates. America will account for less than 12%. China will be equally dominant in trade, accounting for twice America’s share of imports and exports. That projection relies on the “gravity” model of trade, which assumes that commerce between countries depends on their economic weight and the distance between them. China’s trade will outpace America’s both because its own economy will expand faster and also because its neighbours will grow faster than those in America’s backyard.

Mr Subramanian combines each country’s share of world GDP, trade and foreign investment into an index of economic “dominance”. By 2030 China’s share of global economic power will match America’s in the 1970s and Britain’s a century before (see chart). Those prudent American strategists preparing their countrymen for a “multipolar” world are wrong. The global economy will remain unipolar, dominated by a “G1”, Mr Subramanian argues. It’s just that the one will be China not America.

Mr Subramanian’s conclusion is controversial. The assumptions, however, are conservative. He does not rule out a “major financial crisis”. He projects that China’s per-person income will grow by 5.5% a year over the next two decades, 3.3 percentage points slower than it grew over the past two decades or so. You might almost say that Mr Subramanian is a “China bear”. He lists several countries (Japan, Hong Kong, Germany, Spain, Taiwan, Greece, South Korea) that reached a comparable stage of development—a living standard equivalent to 25% of America’s at the time—and then grew faster than 5.5% per head over the subsequent 20 years. He could find only one, Nicolae Ceausescu’s Romania, which reached that threshold and then suffered a worse slowdown than the one he envisages for China.

He is overly sanguine only on the problems posed by China’s ageing population. In the next few years, the ratio of Chinese workers to dependants will stop rising and start falling. He dismisses this demographic turnaround in a footnote, arguing that it will not weigh heavily on China’s growth until after 2030.

Both China and America could surprise people, of course. If China’s political regime implodes, “all bets will be off”, Mr Subramanian admits. Indonesia’s economy, by way of comparison, took over four years to right itself after the financial crisis that ended President Suharto’s 32-year reign. But even that upheaval only interrupted Indonesia’s progress without halting it. America might also rediscover the vim of the 1990s boom, growing by 2.7% per head, rather than the 1.7% Mr Subramanian otherwise assumes. But even that stirring comeback would not stop it falling behind a Chinese economy growing at twice that pace. So Americans are wrong to think their “pre-eminence is America’s to lose”.

Bratty or benign?

If China does usurp America, what kind of hegemon will it be? Some argue that it will be a “premature” superpower. Because it will be big before it is rich, it will dwell on its domestic needs to the neglect of its global duties. If so, the world may resemble the headless global economy of the inter-war years, when Britain was unable, and America unwilling, to lead. But Mr Subramanian prefers to describe China as a precocious superpower. It will not be among the richest economies, but it will not be poor either. Its standard of living will be about half America’s in 2030, and a little higher than the European Union’s today.

With luck China will combine its precocity in economic development with a plodding conservatism in economic diplomacy. It should remain committed to preserving an open world economy. Indeed, its commitment may run deeper than America’s, because its ratio of trade to GDP is far higher.

China’s dominance will also have limits, as Mr Subramanian points out. Unlike America in the 1940s, it will not inherit a blank institutional slate, wiped clean by war. The economic order will not yield easily to bold new designs, and China is unlikely to offer any. Why use its dominant position to undermine the very system that helped secure that position in the first place? In a white paper published this week, China’s State Council insisted that “China does not seek regional hegemony or a sphere of influence.” Whether it is precocious or premature, China is still a tentative superpower. As long as it remains worried about the future, its rivals need not worry too much.
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« Reply #89 on: September 20, 2011, 05:19:21 PM »

Vice President of Strategic Intelligence Rodger Baker explains how increasing Indian involvement in the South China Sea is a maneuver to outflank China, which is becoming involved in the Indian Ocean.


Editor’s Note: Transcripts are generated using speech-recognition technology. Therefore, STRATFOR cannot guarantee their complete accuracy.

Although competition between China and India is not terribly new, we do see a current flare-up in the relations between the two countries. India has been expanding its relations with Vietnam, focusing on oil and gas exploration and production as well as military cooperation. This has received a strong verbal response from the Chinese as well as some physical activity.

India and Vietnam have been cooperating in offshore oil and gas exploration for several years. However, they are moving to a new phase with more of the exploitation of the resources. It appears that later this year a new memorandum of understanding between the two countries is going to be signed. China has responded to this by accusing India of violating Chinese territorial waters and of interfering in Chinese territorial issues. There has been a report of an incident where Chinese maritime police have interfered with the operations of an Indian vessel in the Vietnamese waters, and we see statements coming out of Beijing warning India to back off.

India for a long time has pursued what it calls a “Look East” policy but it has not pursued it very strongly. We see India now moving back again into the ASEAN [Association of Southeast Asian Nations] nations, into the South China Sea, trying to expand its activity, trying to secure some of its influence, and ultimately taking a role in securing the major supply routes to the area, but also in trying to counter the Chinese. Chinese activity in Pakistan, Chinese activity in Myanmar, the expansion of Chinese port agreements throughout the Indian Ocean Basin, even the Chinese naval activity in regard to the anti-piracy operations off of Africa, have left the Indians feeling a little bit vulnerable.

Seeing the Chinese become stronger, at least theoretically, in their operations in the Indian Ocean, India is looking in some sense to flank China now. In response to the Chinese activities in the Indian Ocean, the Indians are going to become more active in the South China Sea and maybe even farther north. There is talk about creating a trilateral grouping to discuss security, economics and politics of the region between India, the United States and Japan, for example. This very obviously to the Chinese looks like an attempt to constrain Chinese operations and Chinese capabilities within in their own sphere of influence.

The South China Sea has long been the center of competition for sea lane control as well as, for the most part, theoretically for resources; though fishing is there, there has been some offshore oil and gas activity. In recent years we’ve seen an expansion of attention into not only exploring but truly exploiting the undersea resources, and not just in oil and gas but also now in mineral exploration. This is changing, in some sense, the way in which the countries interact because formerly when lots of countries claimed either all or parts of the territory, there was little to force them into confrontation. Now as countries begin to access resources, begin to explore the resources in the sea beds, they are doing so in ways that in some sense asserts their territorial claim to that area. That leaves the other countries that don’t interfere with that in some sense accepting those territorial claims.

The concreteness of this has changed, in some sense, the way in which interactions regarding the South China Sea play out. As countries expand their operations, as they put in installations, semi-permanent, permanent installations, to be able to access these resources, they find themselves needing to defend those resources. Other countries may be interfering in the operations and so we see these issues where China will send a boat to interfere with the activity of another country’s ships. The response, then, from Vietnam, or from India in this case, may be to become more robust in their own military patrols in the area. And this builds up a case where you have more military vessels in the area at the same time and the chances for accidental confrontation start to rise.

In the end, while India is becoming more involved, there are some serious limitations. The Indians certainly have very large land borders that they are much more concerned about. The country still struggles with several internal insurgencies or militancy. And their ability to forcefully push themselves into the South China Sea is very limited. The Vietnamese who are working with them know this. Vietnam is playing a lot of different options, not just working with India but also working with China, with the United States, with Japan and several other countries.

As we watch this competition play, the countries in Southeast Asia are put in an interesting position. They have the ability to exploit this competition to draw, perhaps, greater attention from each of the different players. At the same time they have the risk of being exploited by these players and finding themselves caught up in this big power confrontation.

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« Reply #90 on: September 23, 2011, 10:40:31 AM »

The Obama Administration is claiming that its decision to upgrade Taiwan's aging F-16s rather than furnish it with new versions of the fighter is proof that the U.S. remains firmly committed to the island democracy's defense. But a revealing comment by an Administration official shows it isn't fooling anyone.

The comment, from an unnamed source quoted in the Washington Post, came in response to a suggestion from Andrew N.D. Yang, Taiwan's vice minister of defense, that the U.S. might sell Taiwan the state-of-the-art F-35, which outmatches every fighter in China's arsenal and could restore Taiwan's old qualitative edge. Replied the U.S. official: "It's like not getting a Prius and asking for a custom-built Ferrari instead."

The quick dismissal shows the Administration has no intention of selling the island modern aircraft. That's especially true of the stealth F-35s, which the U.S. hasn't even deployed yet and whose advanced technology needs to be protected from foreign spies.

That "like not getting a Prius" line also isn't quite what the Administration would have the Taiwanese believe. "The upgraded A/Bs will provide essentially C/D quality planes," another Administration official told the Wall Street Journal—the A/Bs referring to the F-16s Taipei already has and C/Ds meaning the better versions they won't get. The official added that "Taiwan gets them quicker and they get them cheaper than the C/Ds."

The Taiwanese aren't drinking the Administration Kool-Aid. The notion that the upgraded planes are the equivalent of new ones is "not a very honest opinion," says one savvy Taipei legislator. Among other deficiencies, the upgraded planes will not have new engines. The deal also means that Taiwan will be unable to retire its ancient and diminished fleet of F-5s.

Yesterday in the Senate, Texas Republican John Cornyn tried to move his legislation co-sponsored by New Jersey Democrat Robert Menendez to require the U.S. to sell 66 of the new fighters to Taiwan. That would help keep the U.S. F-16 production line open while honoring our treaty commitments to defend Taiwan. He was blocked by Senate Democrats who were responding to pressure from the White House, which is responding to pressure from China. The big winner is Beijing.

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« Reply #91 on: September 30, 2011, 11:47:10 AM »


Summary
A military cooperation agreement between Japan and the Philippines indicates the countries are going beyond their traditional economic ties and elevating security-related matters. The move comes as Japan’s role in regional security appears to be expanding and as Tokyo, looking to rebuild its influence in Southeast Asia, may consider greater involvement in territorial disputes in the South China Sea.

Analysis
During Philippine President Benigno Aquino III’s visit to Japan from Sept. 25 to Sept. 27, the Philippines and Japan signed a military cooperation agreement to expand joint naval exercises and regular talks between maritime defense officials. The agreement moves the countries’ relationship beyond their traditional economic ties and into the realm of security. Aquino had said prior to his visit that he would also seek backing from the Japanese government on territorial disputes in the South China Sea.

Though it has avoided direct involvement in South China Sea disputes, Japan’s interest in the South China Sea is long-standing and pragmatic, linked to its immediate geographic concerns: securing access to trade routes and to resources the archipelago lacks. Earlier this year, tensions in the South China Sea heightened between China, the Philippines and Vietnam as Beijing increasingly asserted its territorial claims. Just as Japan sees China’s rapidly expanding influence as a challenge to Tokyo’s historically strong position in Southeast Asia, it also sees China’s dominance in the South China Sea as a threat to its critical sea-lane and to its own strategic sphere. As other countries with claims in the South China Sea seek partnerships to boost their positions, and as the United States renews its engagement in the region, Tokyo could use maritime disputes in the South China Sea to reassert itself in Southeast Asia.

Japan’s Interest in Southeast Asia
Japan has been active in the South China Sea since industrialization prompted the country to secure trade routes and seek resources. This ran parallel to Japan’s militarization and expansion in its periphery. Japan began mining in the Spratley Islands as early as 1918 and occupied the Spratleys and the Paracel Islands in the South China Sea during World War II as part of its deployment in the Asia-Pacific.



(click here to enlarge image)
After the war, Japan’s policy was to become an economic leader in Southeast Asia, largely through aid and investment, and to build trust among the region’s nations with a limited military doctrine. From 1977 to 1992, Japan’s development aid to Southeast Asian countries increased from $1.42 billion to $50 billion. During this period, Japan retained considerable influence over Southeast Asia and remained greatly involved in regional affairs.

However, since the 1990s, Japan’s influence in the region has declined considerably because of domestic economic and political constraints and increasing challenges from regional rivals, particularly China. This does not mean the South China Sea is no longer important to Japan. The import of crude oil and raw materials is critical to the energy- and resource-poor country (Japan’s current dependence on foreign oil sources is nearly 100 percent, and approximately 88 percent of its supplies pass through the South China Sea). Furthermore, the Strait of Malacca is a crucial shipment point for Japanese goods going to foreign markets. Yet Japan’s limitations, along with waning U.S. interest in the region, allowed China to use its expanding political and economic influence to project itself as a rising power in Southeast Asia.

Regional Concerns About China
Over the past five years, China’s blue-water strategy and military expansion have led to concerns among Southeast Asian nations about a Chinese military buildup and renewed tensions over the South China Sea. These developments have also attracted attention from Japan, which sees China’s increasing assertiveness over the waters as a possible threat to Japan’s supply lines. Japan has its own territorial disputes with China, over the Senkaku Islands (known in China as the Diaoyu Islands) in the East China Sea, and has engaged in frequent rows with Beijing over joint exploration projects. For Japan, China’s military buildup and sovereignty claims in the South China Sea not only suggest similar approaches could be used in Beijing’s territorial disputes with Japan but also indicate that China wants to play a more dominant role in Southeast Asian affairs.

Previously, Japan was reluctant to directly challenge China on the South China Sea, but recently Tokyo has become more vocal on regional issues, particularly regarding the South China Sea. Since tensions in the sea reached new heights earlier this year, Japan has several times voiced concern about China’s dominance of the waters at Association of Southeast Asian Nations (ASEAN) gatherings and assisted claimant countries calling for greater attention to regional security issues.

Japan also seems to have accelerated its efforts to increase Washington’s security interests in the South China Sea, as demonstrated by Tokyo’s attempt to formulate a framework for U.S.-Japanese cooperation along with ASEAN countries to pressure China to abide by international rules. Japan also put forth an initiative for cooperation with the United States and South Korea to defuse tensions in the South China Sea, and a proposal for U.S.-Indian-Japanese talks on regional security issues. Furthermore, the Japan Maritime Self-Defense Force (JMSDF) deployed to the South China Sea earlier this year for a small joint military exercise with the U.S. and Australian navies off the coast of Brunei.

Japan’s Possible Changing Role
Several changes have made it possible for Japan to use tensions in the South China Sea to take a stronger stance against China. First, thanks to renewed U.S. interest in Asia-Pacific affairs, Japan — the strongest U.S. ally in the region — has been under pressure from Washington to play a greater role in regional affairs in order to counterbalance China. Japan in the past decade has gradually shifted away from the U.S. security umbrella and begun taking more responsibility for its defense. This, along with China’s growing economic clout and military modernization and expansion in the region, has caused both Washington and Tokyo to rethink their relations with Beijing. Japan’s interest in protecting its sea-lane from an encroaching China has given Tokyo one more motive to take a greater role in regional security.

Second, Japan can be expected to continue gradually expanding the role of the JMSDF to address energy supply line vulnerability and the general threat posed by China — both of which are growing in importance. The JMSDF is considered among the most sophisticated and capable naval forces in the world, but lingering memories of World War II and public perceptions of the Japanese military have strongly impeded its expansion. These perceptions show signs of gradually shifting, making it easier for Tokyo to argue for humanitarian and overseas deployments (as seen with the JMSDF’s disaster response following the March 11 earthquake and tsunami). China’s aggressiveness in the South China Sea, therefore, could help justify JMSDF operations. So far, the JMSDF’s expanding role largely has been focused on disaster relief or peacekeeping missions, but anti-piracy missions off the Somali coast and an air force base in Djibouti demonstrate Tokyo’s intention to increase the JMSDF’s peaceful presence overseas. Bilateral JMSDF training with Southeast Asian countries could be the start of greater military involvement in the South China Sea in particular.

Finally, Japan has also been pursuing both bilateral and multilateral security relationships with other countries in the region, with U.S participation. Tokyo has forged defense cooperation with countries including the Philippines and Vietnam — both of which have territorial claims in the South China Sea — and  India, which has a strategic interest in containing China’s expanding sphere of influence. Some defense-related bilateral summits and trilateral talks involving the United States have also been proposed. Southeast Asian countries with territorial claims in the South China Sea believe working with Japan could increase their leverage in negotiations with China, drawing international attention to the territorial disputes. Moreover, working with Japan is an immense opportunity for the Philippines.

Despite Japan’s apparent interest in the South China Sea as part of its strategy to regain influence in Southeast Asia amid China’s increasing aggressiveness, Tokyo appears to be taking a cautious approach to avoid risking greater tensions with Beijing. It is not yet clear whether the new Japanese government wants to take an assertive stance against China on maritime issues. So far, the new Cabinet does not seem to be planning any bold moves in this area. Before taking a major step toward reinterpreting its role in Southeast Asia, Tokyo might have to garner the political will and intent to fit into the broader U.S. strategy for the region.



Read more: Japan Taking a New Role in the South China Sea? | STRATFOR
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« Reply #92 on: October 03, 2011, 03:21:25 PM »



We have seen a lot of activity in the South China Sea with questions of Chinese expansionism, responses by other countries and tensions building that region. We have seen the Japanese, the Indians, the Vietnamese getting strongly involved. But it is not just in the South China Sea that we are seeing maritime activity in the Asia-Pacific. The South Koreans right now are looking at two new projects— a new naval base on Ulleung island, just west of the disputed Dokdo/Takeshima island, and a new base on the large southern island of Jeju, which would give the South Korean navy much more rapid and greater access to the South China Sea and beyond.
The two bases in some ways are very different. The base on Ulleung-do is focused on rapid reaction to get South Korean naval vessels to the disputed Dokdo islets. This is a dispute between Japan and South Korea that has been going on for quite a while but ultimately is not a very strategic dispute, it is more of a public relations issue. The Jeju base, however, would be a very large facility. This is a facility that would be able to host Aegis destroyers, it would be able to host aircraft carriers. This really is where we see the major expansion potentially taking place for the South Korean navy.
We have been watching an evolution in South Korean military development for the past decade or so. One of the things in particular is the decision by the South Koreans to create, if not an independent military force that is non-reliant upon the U.S., at least a force that is strong, that is capable and that focuses on issues of importance to the Korean strategic interest rather than necessarily just retaining themselves as a force designed to back up or support U.S. interests in the region and the U.S. protection of South Korea from North Korea.
The naval expansions we have seen in South Korea have been a big part of this. South Korea is a major trading nation. South Korea is about twelfth largest economy in the world. A lot of that is based on trade, a lot of that is based on access to resources, access to markets, and therefore ultimately South Korea feels somewhat vulnerable in its supply lines and in finding a way to ensure that it has the ability to secure its resource acquisitions and its overseas operations.
The South Koreans are certainly not carrying out this expansion in isolation. They do have an eye on what is going on around them. They have noticed the big changes in the Chinese navy and the more assertive nature of Chinese maritime security interests. They have watched the Japanese who very quietly have been developing a pace within the region and remain, aside from the United States, probably the single strongest navy in the Asia-Pacific region. And they are looking in general at an area that is growing more tense, is growing somewhat more contested and that has become a lot more active both for exploration of potential undersea resources but also in the sense of nationalistic defense of claims territories.
In the short term, certainly on the issue of the base on Ulleung Island, this has the potential to continue to rankle relations with Japan. But those are largely manageable relations, it is really the naval base in Jeju that seems to be the most significant. This puts the South Korean navy probably more active within the South China Sea, maybe even onto the Indian Ocean as they look particularly at the energy supply lines. But it also puts them in a place where in the South China Sea, which is ultimately a very small place, a very cramped place, it is an area that we are seeing a lot of maritime activity, we are seeing a lot of ships in the area, we are seeing a lot of aircraft in the area, we are seeing a lot of countries that are really trying to push their interest or their claims of ownership. And having this much activity in that area really leaves it open to not only the possibility but perhaps the likelihood of some unintentional conflicts in the not-too-distant future.
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« Reply #93 on: October 04, 2011, 01:25:55 PM »

Economics continues as not so strong link in Stratfor diagnostic chain

Rhetoric and Reality in U.S.-China Currency Tensions
The U.S. Senate voted Monday to advance a bill pressuring China to stop undervaluing its currency. This paves the way for the bill, titled the Currency Exchange Rate Oversight Reform Act of 2011, to receive a final vote as soon as this week. A STRATFOR source said the bill may pass the Senate but likely will fail in the House of Representatives, despite the currency issue having some bipartisan support. This includes the support of a few Republican presidential candidates who, though normally against trade regulations, are tying China’s rising economic power to domestic unemployment and U.S. President Barack Obama’s handling of the economy.
“The U.S. domestic situation may be conducive to using the China issue for political gain.”
China always makes a good target for American officials seeking to demonstrate their worth in the political and foreign policy arenas or as a distraction from domestic economic issues that are not easy to resolve. As the U.S. electoral cycle gets into gear, the currency bill may serve as a gauge of potential interest in raising China’s economy as a campaign issue. The bill itself is not entirely new. Lawmakers have been accusing China of undervaluing the yuan and engaging in unfair trade practices for years, but these accusations often serve more as sounding boards for the campaigners or as ways to negotiate within Congress for other issues of interest. The current bill brings a few new elements to the table, but it still amounts to little more than a domestic political message linked to Obama’s jobs plan, rather than a serious attempt to change Chinese trade practices.
Beijing has embarked on a relatively steady appreciation of the yuan since shifting to a managed peg in 2010. This is still insufficient for many observers, but Chinese authorities have domestic reasons for wanting to avoid any rapid shift in the yuan’s value. The Obama administration is mostly satisfied with this slower pace of appreciation and has refrained from using levers available to pressure China for any more rapid adjustments.
However, the U.S. domestic situation may be conducive to using the China issue for political gain. When there is a tough economic problem at home that cannot be resolved easily or quickly, it is often politically expedient to blame a foreign power of unfair practices. The rhetoric alone can often serve as a rallying point for political support.
Whether the bill is a serious attempt to curtail trade or just a source of renewed rhetoric, China must still respond based on the potential implications rather than the likelihood of passage or action. This creates another minor bump in the already bumpy road of U.S.-Chinese relations. As China’s power increases, and its economy pushes Chinese interests farther from home, it is increasingly in competition with Washington. This is not aggressiveness per se, but the natural result of a large and emerging power moving into the sphere of an existing power. But the more China reaches, the more insecure it feels. This makes Beijing particularly sensitive to any perceived encirclement campaign or economic pressure by Washington.
Meanwhile, perhaps not coincidentally, as China’s economic influence expands, the United States is pursuing a policy of economic and political re-engagement in the Asia-Pacific region. Two elements of this re-engagement are the U.S. participation in the East Asia Summit, in which the United States will be participating for the first time as a full member, and the U.S.-initiated Trans-Pacific Partnership, a trade zone designed to increase U.S. competitiveness in the Asia-Pacific region and tap into Asia’s continuing economic growth. These fit U.S. interests even in the absence of an expanding China, but from Beijing’s perspective, they are clearly aimed at containing and rolling back Chinese political and economic gains.
What concerns China most, however, is Washington’s growing commitment in disputes regarding the South China Sea, which is increasingly becoming the core security issue for the entire region. Obama will be touring Asia in November and will deliver a speech at the East Asia Summit. The speech could have an impact similar to that of Secretary of State Hillary Clinton in 2010 at the Association of Southeast Asian Nations Regional Forum, which changed the regional dynamic regarding maritime disputes when Clinton said it was in the United States’ “national interest” to ensure freedom of navigation in the South China Sea. Ultimately, Washington will want the summit to go beyond its normal energy- and economy-centered focus and address regional security issues, giving the United States a forum to counterbalance Beijing’s influence in that arena.
China is an easy target for U.S. politicians in rhetoric but far less so in the reality of regional competition. What bears watching is whether China reads moves such as the currency bill as rhetorical, and thus issues a measured response, or whether Beijing attaches more significance to the move and counters disproportionately. Beijing clearly wants a good domestic environment to pave the way for its own leadership transition in 2012. Depending upon domestic issues in China, particularly an economic slowdown and social stability concerns, Beijing could determine it beneficial to ratchet up tensions with the United States.
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WSJ

SHANGHAI—China's angry response to a U.S. Senate vote to move ahead with a bill to punish Beijing for keeping the value of its currency low reflects domestic pressures on the leadership to act tough, but is unlikely to result in any precipitous action, analysts and economists say.

China's reaction Tuesday to the 79-19 vote was swift and coordinated.

Money's Worth
U.S. Senate Moves to Punish China on Yuan
China Real Time: How to Value a Currency
.Journal Community
..The People's Bank of China cautioned in a statement that passage of the bill won't resolve U.S. domestic economic difficulties but could instead "seriously affect" China's continuing exchange-rate reform and even lead to a trade war. It said that with inflation factored in, the yuan has appreciated "greatly" and is close to a balanced level.

China's Foreign Ministry said the bill violates rules of the World Trade Organization, while the Ministry of Commerce described it as "unfair" and in violation of international practice.

Economists say they don't expect the angry words will translate into policy shifts or retaliation, at least not while the fate of the bill is up in the air. Even though the vote advanced in the Democrat-controlled Senate, it faces an uncertain future in the Republican-controlled House.

"I don't think China will make any big move in response," said UBS economist Wang Tao, adding she believes there is only a small chance the bill will become law.

"China won't yield to the pressure from the U.S. or change its gradual approach to yuan exchange-rate reform," Ms. Wang said.

The Senate bill seeks to impose tariffs on exports from countries with undervalued currencies. Supporters of the bill complain that China's yuan is undervalued, making its products cheaper on world markets. They say a higher yuan would boost U.S. exports and create thousands of American jobs. Opponents say the measure would accomplish little besides infuriating China, and that the U.S.-Chinese relationship faces far bigger issues.

Senior Chinese officials have become increasingly forceful in their approach to the U.S. since the global recession, with many convinced that China is now in the ascendant and the U.S. is in permanent decline. Some feel China has the upper hand as the largest holder of U.S. debt—and the only major economy still growing rapidly.

Chinese leaders say the U.S. is to blame for plunging the world into crisis as a result of economic mismanagement, and resent moves that America has taken to boost its recovery, including buying bonds to hold down interest rates —so-called quantitative easing—which they argue is debasing the U.S. dollar and pumping up inflation in China and other emerging economies.

Pressure on the Chinese leadership also is coming from a nationalistic public outraged by continued U.S. arms sales to Taiwan and a more forceful U.S. diplomatic engagement with Southeast Asia, where several countries are in territorial disputes with China in the South China Sea.

Still, balanced against Chinese assertiveness is a strong desire by China's leaders to avoid upsetting the relationship with the U.S. ahead of 2012, when there will be presidential elections in America and a leadership transition in China. They need external stability to focus on delicate transition politics.

Chinese leaders also recognize that in a globalized economy, their own fate is closely linked to that of the U.S., and a trade war would likely be as damaging to China as the U.S.—perhaps even more so given China's greater reliance on exports.

But under the surface of harsh response to the Senate vote, Beijing left the door open for reconciliation, reiterating its long-standing pledge to continue exchange-rate reforms. That is likely a sign of lingering hopes that the Republican-controlled U.S. House will vote down the currency bill.

Indeed, both the Foreign Ministry and central bank also repeated Tuesday Beijing's standard rhetoric that China will continue to increase the yuan's flexibility over time.

There are indications Beijing has been trying to keep the yuan's appreciation intact despite mounting global economic uncertainties caused by the debt woes in Europe and slowing growth in the U.S. In the face of heavy yuan selling last week, triggered by risk aversion and concerns that the Chinese economy will have a hard landing, the central bank kept supporting the yuan's value by setting the currency higher through a daily reference exchange rate.

At 6.3859 yuan to the dollar ahead of China's week-long National Day holiday, the yuan was down 0.1% against the U.S. currency in September, but up 6.9% since June 2010, when China ended its currency's two-year peg to the dollar.

The Senate's vote appeared to have little notable impact on the yuan in the less restricted offshore Hong Kong market, where the currency mostly tracked its regional peers and remained more or less steady versus the dollar on Tuesday.

The Senate vote puts the White House in a delicate position. Like previous administrations, the Obama White House is wary of antagonizing Chinese leaders, whose cooperation it needs not just on economic issues but also on an array of national security matters. But criticizing China remains popular with the public, and many Democrats, including those from big industrial states, say China's currency policy is unfair to U.S. workers.

"They use the rules of free trade when it benefits them, and spurn the rules of free trade when it benefits them," said Sen. Charles Schumer (D., N.Y.), a major sponsor of the bill. "For years and years and years, Americans have grimaced, shrugged their shoulders, but never done anything effective" to stop these policies.

Opponents of the bill say that instead of potentially sparking a trade war, the U.S. should face its own problems, such as the burgeoning federal budget deficit. "It's like we know what we've got to do but we won't do it," said Sen. Bob Corker (R., Tenn.). "It's like we've got to find a bogeyman."

Because House leaders are reluctant to bring up the bill, its future is uncertain. The House overwhelmingly passed a similar bill in September 2010, when Democrats controlled the chamber, but GOP leaders argue today that the new bill could have unintended consequences.

—Stefanie Qi and Andrew Browne contributed to this article.

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DougMacG
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« Reply #94 on: October 09, 2011, 03:38:33 PM »

Time magazine piece poses interesting questions:
http://www.time.com/time/magazine/article/0,9171,2096345,00.html
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maija
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« Reply #95 on: October 09, 2011, 07:37:54 PM »

Forgive my ego/vanity, but I would point out I have been questioning here the Chinese miracle for a number of years now-- including for shoddy, dishonest bookkeeping and bubble dynamics.

Marc
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It will seem difficult at first, but everything is difficult at first.
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Crafty_Dog
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« Reply #96 on: October 17, 2011, 03:03:54 PM »



http://www.bloomberg.com/news/2011-09-28/rare-earths-fall-as-toyota-develops-alternatives-commodities.html
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bigdog
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« Reply #97 on: October 21, 2011, 06:20:43 AM »

http://www.foreignpolicy.com/articles/2011/10/11/americas_pacific_century
« Last Edit: October 21, 2011, 03:54:36 PM by Crafty_Dog » Logged
Crafty_Dog
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« Reply #98 on: October 27, 2011, 10:27:07 AM »

U.S. President Barack Obama is preparing for a series of visits throughout East Asia. In mid-November, he will be visiting several of the East Asian countries, as well as attending to the APEC summit in Hawaii and the East Asia summit in Bali, Indonesia. The trip is being seen as a key part of U.S. re-engagement in East Asia. In many ways, this term “re-engagement” is somewhat misleading — the U.S. never really disengaged from East Asia. But there’s a perception that the U.S. interest in the region has been lower than it was in the past. In the immediate post-Cold War period, the United States really did not have a strategic focus anywhere in the world. In the post 9/11 period, the U.S. was obviously focused very heavily upon the Middle East. During that same time period, the Chinese began to expand rapidly in their economic activity. And the perception in the region is that there’s now an unbalanced structure that China has in many ways become too strong economically and that the United States has not maintained a position in there to balance out this rising China. And with Japan’s economy continuing to remain in malaise, Japan has been unable also to provide that stabilizing force.
In many ways, as the United States looks at the world, it sees East Asia as one of its highest potential economic opportunities. By the mid-90s, containerized shipping from the United States and to the United States across the Pacific had basically equaled containerized shipping across the Atlantic. By the late 2000s, the Trans-Pacific accounted for nearly 2/3 of U.S. containerized shipping. So we see a much stronger role for East Asia in U.S. trade for both imports and exports. This is the place where the United States would like to be able to expand. One of the key elements to this is going to be the Trans-Pacific Partnership (TPP). This is, in essence, a free trade agreement of the Pacific. Critical to this is Japan’s participation. While there are a lot of other countries that are or will be involved in these TPP negotiations, Japan really is the linchpin for the United States — it is the large economy sitting in Asia, and it is one that the U.S. wants to reintegrate within that trade agreement and within that framework.
In Japan, there’s some reticence to joining into this. We see the prime minister perhaps more interested in working with Obama to bring this about, but we see a lot of resistance from other elements of the political spectrum and particularly from agriculture in Japan. And this is something that seems to come up pretty regularly in U.S. free trade agreements — the question of agriculture.
In the United States, there is also resistance to free trade agreements, but with the passage of the Korus FTA, the Colombian and the Panama free trade agreements it seems that there is some space for momentum, some potential for the president to be able to make progress on this proposal.
Conspicuously absent from any of the early forms of these TPP discussions is China. This is a free trade agreement that in many ways doesn’t recognize China as potentially being part, and even with some of the smaller players the U.S. is getting some resistance because of negotiations over what role state-owned enterprises may play. If China ever gets drawn into this, it will be in a manner that tries to deal with the benefits the state-owned enterprises gain. Not only with the TPP but with the entire concept of U.S. re-engagement in the region, the Chinese see this as some counter to Beijing’s economic success and to Beijing’s interests.
We’re going to see as the U.S. continues to become more active politically, militarily and economically in the region, we’re going to see the Chinese pushing back. We’re going to see the Chinese work with some of the East Asian countries — maybe give them more incentives to pull closer to China and try to maintain that level of influence. And so as the U.S. pulls out of Iraq, as the U.S. reduces its forces in Afghanistan, it may have the bandwidth to be able to start shifting attention to other areas of the world. They have identified East Asia as a primary place to look, and, in doing so, we’re going to start seeing some tensions play out, I think, between the United States and between the Chinese in this area where China feels is really its sphere of influence.
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Crafty_Dog
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« Reply #99 on: November 10, 2011, 04:14:36 PM »



Summary
China has been carefully monitoring the U.S. strategy for re-engagement in the Asia-Pacific region and understands the challenges its own regional strategies now face. The possibility of a new power balance will test both China’s ability to achieve its long-term goals and its relations with countries on its periphery.

Analysis
U.S. President Barack Obama is set to visit Australia and Indonesia later in November after months of diplomatic efforts aimed at improving perceptions of the U.S. commitment to the Asia-Pacific region, largely to counter growing Chinese power. This is coming as maritime security issues have begun to dominate regional affairs, with China taking a particularly aggressive stance in the South China Sea. Part of the U.S. re-engagement includes the intent to reshape the East Asia Summit (EAS) into a U.S.-led regional security institution. This year’s EAS, set for Nov. 18-19 in Bali, will thus serve as a gauge for Washington to demonstrate its commitment to Asia-Pacific maritime security affairs.

Beijing, which has been carefully developing its strategy for Southeast Asia over the past two decades, understands the challenges posed to it by the United States’ re-entry into the region, particularly to its South China Sea plans. The possibility of a new power balance will test both China’s ability to achieve its long-term goals and its relations with countries on its periphery.

China’s rapidly expanding economic influence in past years has enabled it to improve relations with neighboring states and gradually take a leading role in Southeast Asia, turning it into a testing ground for its strategy of soft-power diplomacy in an important sphere of influence. Beijing’s strategy largely has been based on economic cooperation, such as Chinese investment and aid to individual countries and increased trade through bilateral arrangements and regional mechanisms. One example of this is the free trade area that went into effect between China and members of the Association of Southeast Asian Nations (ASEAN), the most extensive set of trade and investment agreements between the two. As Southeast Asia is one of the few regions that generally marks trade surpluses with China, Beijing has attempted to convince ASEAN countries that they will benefit from China’s economic growth with its economic clout. China has been making progress with a charm offensive in the region, building political and security influence that has been facilitated by high-level military visits and arms sales, a longstanding policy of noninterference in other countries’ internal affairs, and, notably, a decadelong period of relative neglect by the United States.

Beijing has used this leverage to gain an advantage in the South China Sea. It has raised its profile in regional security facilities, such as the EAS and ASEAN Defense Ministers Meetings, and cultivated relations with mainland ASEAN countries, such as Laos and Cambodia, to prevent maritime disputes from gaining prominence in these regional organizations. It also has begun bilateral negotiations over maritime issues such as energy exploration, shunning third-party involvement and dealing with individual countries to prevent them from adopting a unified stance.

However, China’s increasingly aggressive moves to stake its maritime claim have shifted Asian perceptions, leading to growing tensions between China and other claimant countries such as Vietnam and the Philippines. The rapid modernization of the Chinese military and the expansion of its blue-water strategy — especially its aggressive moves in the South China Sea since the beginning of 2011 — also have caused disquiet among China’s Southeast Asian neighbors. These countries have both begun to cooperate regionally to counter Beijing’s dominance in the South China Sea and call for outside powers, particularly the United States, to do the same.

With Washington’s renewed interest in the region, Beijing sees considerable uncertainty in its maritime and Southeast Asia strategies. In particular, China expects the upcoming EAS to officially institutionalize a multilateral mechanism to address South China Sea issues — running directly counter to its attempts to deal with these issues bilaterally. However, direct confrontation between China and the United States would come at the expense of both China’s domestic situation and regional stability. Moreover, the United States’ physical distance from the region, as well as heavy U.S.-Chinese economic and political interactions in other areas, means that both sides have more reasons to cooperate than they do to press their agendas for the South China Sea.

Meanwhile, Beijing has seen the need to adopt proactive diplomatic efforts, such as enhancing traditional economic ties with ASEAN countries and indicating that it would be open to leading regional discussion forums for negotiating South China Sea issues. Such gestures may be appealing to Southeast Asian claimant countries; no matter how far the United States goes to re-engage in the region, these countries’ economic futures will be inextricably linked to China. China has proposed a set of principles that would govern future EAS discussions, called the Declaration of the East Asia Summit on the Principles of Mutually Beneficial Relations. In it, China calls for an integrated East Asian community and enhanced Chinese-ASEAN interdependence through economic ties.

At the same time, as the United States’ Asia-Pacific strategy becomes clearer, it provides an opportunity for Beijing to clarify its role in regional strategic affairs, and particularly to remedy the increasing disunity between its economic strategy and security strategy. As part of this, the United States’ stated intention of leading the EAS means China likely will try to support ASEAN as the premier regional bloc, something that ASEAN countries likely will be interested in as they try to avoid being hostages for either side in the increasing U.S.-Chinese competition.

It remains to be seen whether the U.S. plan for Asia-Pacific re-engagement will shift the balance of power in the region. Nonetheless, China will need to take a much more active stance to maintain its position.

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