When pondering business and vacation trips to China be sure to consider the damage to your health. The world record holder for the marathon refuses to run the marathon in Beijing's polluted air.
The world's fastest long-distance runner said yesterday he will not compete in the marathon at the Beijing Olympic Games because of the city's choking air pollution, a move that is prompting runners of all levels to reassess the net health benefits of going for a jog in the smog.
"The pollution in China is a threat to my health and it would be difficult for me to run 42 kilometres in my current condition," Haile Gebrselassie, the 34-year-old Ethiopian who many enthusiasts call the best distance runner of all time, told Reuters.
Gebrselassie is still going to race the 10000 meter. He has asthma and figures a marathon in Beijing's polluted air could do permanent damage to his sensitive lungs.
A friend who went to China told me that at one point she had to pull over the car she was driving to throw up because the air was so bad it had made her sick to her stomach. But of course Chinese officials paint a rosier picture.
"I believe the air quality will only become better and better in Beijing," Foreign Minister Yang Jiechi said when asked about running eat Haile Gebrselassie's plans to skip the Olympic marathon because of pollution worries.
An Olympic tennis player might drop out too.
Justine Henin, the world’s top-ranked women’s tennis player and the 2004 Olympic gold medalist, said she was considering not competing in the Olympics because of air-quality concerns.
The International Olympic Committee made a serious mistake when it chose Beijing for the Olympics.
China's environmental protection agency is very small.
Environmentalists applauded the move to give the relatively small and weak environmental agency more clout, but noted that it is unclear how much additional budget allocation or staffing it will receive. The current State Environmental Protection Administration has about 300 employees, not including affiliated institutions. By comparison, the U.S. Environmental Protection Agency has about 18,000 employees and an annual budget of about $7 billion.
So many people in China are very poor that the trade off between pollution control and economic growth in China is really not the same as in Western countries. Unfortunately the rest of the world part of what China dumps into the air and water.
While Europe's elites try to convince America's elites to reduce fossil fuels usage to prevent global warming and while American elites argue about how best to waste massive sums of money in a pointless war in Iraq at the same time the Chinese are on course to make the Americans and Europeans steadily less important in the world. While we distract ourselves with foolishness the Chinese are busy creating an industrial civilization and burning through coal, minerals, and other natural resources at a rate that makes Western usage pale in comparison. In many categories the Chinese are soon going to use more than half the world's output.
The rapid industrialisation of China’s economy means that it is likely to consume a majority of the world’s supply of all the major metals and minerals, potentially leading to clashes with other countries over access to resources. Rio Tinto, the world’s second-largest miner, said last week that China already accounted for 47 per cent of all iron ore consumption, 32 per cent of aluminium and 25 per cent of copper.
Tom Albanese, Rio’s chief executive, has predicted that within the next couple of years this will move to 58 per cent of all iron ore, 45 per cent of aluminium and a third of all copper. He said: “Even with the assumption that the current growth intensity will slow, we are looking at China consuming a higher percentage of global supply.”
The only raw material the United States uses more of than China is oil.
The Chinese are doing deals to ensure their access to raw materials.
Back in the UK, Anglo American, which has its own iron ore businesses, announced a surprise strategic partnership with China Development Bank, the state-owned finance house headed by Chen Yuan which is bankrolling Chinalco's stake-building in Rio Tinto. Anglo and the bank will develop a range of mining projects together, primarily in Africa, where the Chinese have had significant success in convincing governments to favour Chinese companies over Western rivals. The Chinese have invested heavily in countries such as Angola, throwing in free infrastructure on top of very favourable terms to secure their energy supplies.
But sources close to the Anglo-China Development Bank tie-up say the Chinese have had considerable production difficulties and that the link-up with Anglo will give them access to the company's mining and logistics expertise.
Major mineral extraction companies are feeling the effects of Chinese business clout. The Chinese are busy pursuing access to minerals around the world.
BHP Billiton, the world's largest mining company, has rebuffed an approach from Chinalco to discuss the Chinese company's acquisition of a 12 per cent stake in Rio Tinto.
The state-owned aluminium producer is understood to have written to Don Argus, the BHP chairman, “hoping to open a dialogue” after blocking BHP's £65billion bid for Rio.
BHP received the faxed letter on Friday, as Chinalco's £7.1 billion share raid was being announced. The Chinese are not thought to have received a reply.
What does Chinalco want? BHP will hope it is merely motivated by industrial logic as an aluminum producer. Were Chinalco thinking only along those lines, it might encourage a Rio Tinto-BHP tie-up. Its shareholding could then be a front-row seat at the talks, with which it might buy cast-off assets, and catapult itself into the global mining mega-league.
But such thinking looks naive. Chinalco is a state-owned firm being bankrolled by a state-owned lender in the most ambitious country in the world. From a political perspective, a BHP-Rio Tinto deal is highly undesirable. China's steelmakers worry BHP and Rio Tinto would use their combined 35% market share to crank up iron-ore prices. That might fuel the inflationary pressures that worry Chinese politicians, too. A politically motivated interloper might prefer to block BHP's bid, or launch its own.
America is wasting precious time, energy, money, and lives in the Middle East. The war in Iraq is a very bad investment. While the Chinese concentrate on business we have dissipated our energies on war, financial shell games, and feeding of an unsustainable welfare state. We need to wake up and snap back to reality.
China today is reaching deep into Central Asia to tap oil and gas reserves, using pipelines and investments to challenge Russia's monopoly on gas shipments and to thwart Moscow's hopes of controlling a bigger share of the region's oil.
In recent years, China and Russia have forged a strategic alliance, as part of a group called the Shanghai Cooperation Organization, to squeeze the United States out of Central Asia, after the U.S. established military bases here. They have largely succeeded.
However, friction is developing between the two neighboring giants. And given China's 1.3 billion people and its economic strength, it seems certain that Russia, with its dwindling population and economy based narrowly on energy, will increasingly be on the defensive.
Of course, Russia's two-century presence in region gives it potent advantages in trying to preserve its influence.
But Niklas Swanstrom of Johns Hopkins University's School of Advanced International Studies argues China is succeeding in using "soft power" - judiciously apportioned aid, aggressive diplomacy and massive investment - to shove Russia aside.
"China will be the dominant player over time," he predicts.
Neoconservative military strategizing will come to nothing compared to a massive growing economy exporting large volumes of finished goods and importing large volumes of raw materials. The money spent on the stupid Iraqi war would be far better spent eliminating US dependence on imported oil. For the weekly cost of the Iraq war we could complete 1 nuclear reactor per week. Then we could shift all of our heating to ground sink heat pumps powered by nuclear electricity and shift most rail and a portion of vehicle transportation to electricity.
The China-Kazakhstan border is like the US-Mexico border.
Nowhere, perhaps, is China's presence more starkly evident than at Khorgos, straddling the Kazakh-China border.
On the Kazakh side sits a sleepy village, a mosque and arid steppes where shepherds ride horseback. On the Chinese side sprawls a city, its skyline punctuated by two construction cranes, the skeletons of several large buildings and a massive white arch topped by two scarlet Chinese flags.
Talipzhan Suleimanov, a captain in the Kazakh border service in Khorgos, stood outside his ramshackle post and pointed at the gleaming Chinese city across a dry riverbed.
"This looks like the U.S.-Mexican border," he said. "We are the Mexicans, because the Chinese are so much more advanced."
While George W. Bush and allies have pursued their losing strategy of what Steve Sailer calls "Invade the world, invite the world, in hock to the world" the Chinese have been busy building up capital stock, making fancier things, and pursuing commerce. The hope of the neocons to have continued influence on foreign affairs depends on the US continuing to be a world power. But that neocon hope will most certainly die unless the neocons start supporting policies that seek to reverse the financial and demographic trends that will otherwise make the United States into a second tier power.
I still remember when our elites assured us that giving China membership in the World Trade Organization was supposed to open up Chinese markets to our exports. What a naive era that was. Private equity is one of many industries where the Chinese government is working to build an unlevel playing field.
Beijing is encouraging domestic equity funds to supplant global private equity titans such as Carlyle (CYL.UL: Quote, Profile, Research) on Chinese turf, but their small size and lack of experience mean it will be years before they threaten their international rivals.
The government has stepped up its efforts to bolster home-grown private equity by allowing yuan currency fund-raising, erecting hurdles for foreign rivals and encouraging IPOs on domestic markets.
Shouldn't we make our playing field less even for Chinese exporters?
The annual report fo the US-China Economic and Security Review Commission find that the Chinese are engaging in lots of espionage to steal US technology.
Chinese espionage poses "the single greatest risk" to the security of US technology, a panel has told Congress.
China is pursuing new technology "aggressively", it says, legitimately through research and business deals and illegally through industrial espionage.
China has also "embraced destructive warfare techniques", the report says, enabling it to carry out cyber attacks on other countries' infrastructure.
US companies should think twice about hiring Chinese nationals to do technological development. When those Chinese nationals leave to get jobs at Chinese companies any secrets and source code they had access to stands a good chance of going with them.
To read that report from the US-China Economic and Security Review Commission here are your choices (all PDF format): Press Release, 2007 Report to Congress, 2007 Report Introduction, 2007 Report Executive Summary, and 2007 Recommendations to Congress.
China is moving in several directions that are unfavorable (though unsurprising) from a Western perspective. Here is an excerpt from Chairman Carolyn Bartholomew’s opening statement on the release of the 2007 Annual Report to Congress (PDF)
The Commission’s conclusions as presented in this report are a mixture of good news and bad. China has taken a constructive role in reaching agreement among six nations to dismantle North Korea’s nuclear weapons production capacity. China has agreed to send a combat engineering battalion to Sudan to help with the U.N.’s peacekeeping and reconstruction activities there, and is showing signs of interest in strengthening its export control system to limit proliferation. China’s economic policies have helped lift 200 million of its people out of poverty, and its leaders also have begun to acknowledge the widespread environmental degradation of China’s air and water.
But, this past year revealed some disturbing trends in China. Rather than continue down the path towards a more market-based economy, China reversed course. In its 11th Five Year Plan, Beijing listed a dozen industries that it retains under central government control and ownership. These industries include information technology, telecommunications, shipping, civil aviation, and steel. This is problematic for several reasons. For one, these industries are more likely to receive the kinds of subsides, such as export-dependent tax cuts and low interest rate loans, that will continue to make them unfair global competitors. For another, by walling off a large sector of the economy from public ownership, China isn’t fulfilling the expectations of the members of the World Trade Organization who voted to admit China in 2001. China’s actions certainly violate the spirit and principles of the WTO. Free and fair trade depends on a market approach to international commerce, rather than a contest among governments and their closely owned and subsidized industries.
While speaking of subsidies and violations of free market principles, it is worth noting here that China is continuing to manipulate the value of its currency in order to gain an unfair export advantage. Meanwhile, China has not fulfilled its many promises to protect the intellectual property of foreign business software and entertainment companies from rampant piracy, just to cite two industries important to the U.S. economy. Nor has China reduced the many subsidies provided to exporting industries in China. As of this year, both of these issues are subjects of formal complaints before the World Trade Organization, a development that the Commission has advocated in the past.
The Commission has examined China’s energy and environmental policies over the past year as well. China’s lack of energy efficiency and poor enforcement of environmental regulations, are creating devastating environmental effects that threaten China, the United States, and other nations. China’s strategy for acquiring energy resources—a reliance on acquiring oil at the wellhead rather than through the international markets, for example—also concerns the Commissioners. As a result, China continues to invest in countries whose governments perpetuate human rights abuse, such as Sudan, Iran and Burma. China’s energy use patterns have also added substantially to the air pollution over the Western United States.
China's industrialization is driving up the prices of food, oil, coal, iron ore, and other raw materials. China's industrialization is also generating an increasing amount of pollution on an enormous scale. Plus, they are stealing our intellectual property on a similarly enormous scale.
Their huge trade surpluses aren't big enough for them.
WASHINGTON, Nov. 15 — Few American industries have had more success in selling goods to China than makers of medical devices like X-rays, pacemakers and patient monitors. Which is why a recent Chinese decree was so troubling.
The directive, issued in June, called for burdensome new safety inspections for foreign-made medical devices — but not for those made in China. The Bush administration is crying foul.
Even more worrisome to the administration is that the directive seems part of a recent pattern in which Chinese officials issue new regulations aimed at favoring Chinese industries over foreign competitors, despite efforts by Treasury Secretary Henry M. Paulson Jr. to ease economic tensions.
Some months back I predicted that the declining dollar would, by lowering the Chinese currency against the Euro, stoke up European opposition to Chinese trade surpluses. This decline in the Chinese currency happened because the Chinese currency is pegged to the dollar and the dollar declined due to the huge US trade deficits. How twisted is that? European officials are showing increasing impatience with Chinese trade surpluses.
PARIS: Admitting that dialogue and cooperation with Beijing have failed to secure concessions for Europe, the European Union's top trade official has called for more aggressive action - in line with the United States - to hit back at Beijing.
In a document filled with hard-hitting criticism of what he terms the "Chinese juggernaut," Peter Mandelson, the European trade commissioner, said the EU should align policy more closely with Washington and be more ready to take cases against China to the World Trade Organization.
The Chinese trade deficit with Europe is rising at about $22 million per hour.
According to the European Commission, the EU trade deficit with China rose by one-fifth last year and is rising at €15 million an hour, a higher rate than that of the United States.
Beijing is now Europe's largest source of manufactured imports. But the bloc, with 27 countries and a population of around 470 million people, exports less to China than to Switzerland. Non-tariff barriers and regulatory discrimination cost European companies an estimated €20 billion a year.
Remember when Americans were told that Congress had to approve China's entry into the World Trade Organization in order to open Chinese markets to American goods? Huge numbers of lobbyists pushed for this. They sure suckered us.
China's trade surplus is up a shocking 59% this year so far.
China's trade surplus for the first 10 months jumped a massive 59 percent to $212.4 billion, according to figures released by the General Administration of Customs. The annual surplus already has surpassed the full-year record of $177.5 billion set in 2006.
October's trade gap rose to $27 billion, up 13.6 percent from the same month last year, according to the customs data. The previous monthly record high was $26.9 billion in June.
The Chinese trade surplus with the United States rose.
China's trade surplus with the United States rose 12 percent to $15.7 billion on total two-way trade of $26.7 billion, according to the customs agency.
The Chinese surplus with Europe rose much more rapidly. Why? The US dollar decline against the Euro translates into a Chinese yuan decline against the Europe because the Chinese fix the value of their currency against the US dollar. So Chinese goods have become cheaper as the US dollar has declined.
The surplus with Europe, China's biggest trading partner, rose nearly 50 percent to $13.9 billion on total trade of $31.4 billion, the agency reported.
The Europeans aren't going to be as tolerant of a big trade deficit with China the way US policy makers have been. US policy makers and economists are excessively enthralled with the supposedly (but not really) free market. It is hard to see how a fixed currency exchange rate or systematic intellectual property theft or regulatory biases against non-Chinese companies add up to something that can be called a free market.
Whereas the United States has a more laissez faire approach to reincarnation.
The Western liberal media had a laugh in August when China's State Administration of Religious Affairs announced Order No. 5, a law covering "the management measures for the reincarnation of living Buddhas in Tibetan Buddhism." This "important move to institutionalize management on reincarnation" basically prohibits Buddhist monks from returning from the dead without government permission: No one outside China can influence the reincarnation process; only monasteries in China can apply for permission.
What fun. So if you want to get reincarnated in China you had better get on friendly terms with a Chinese monastery. Picture all sorts of people with fatal illnesses the world over traveling to China to get a monastery to apply for permission to reincarnate them when they die.
China uses the same strategy that American elites like to use: replace a group with a huge demographic influx of some other group.
In recent years, the Chinese have changed their strategy in Tibet: In addition to military coercion, they increasingly rely on ethnic and economic colonization. Lhasa is transforming into a Chinese version of the capitalist Wild West, with karaoke bars and Disney-like Buddhist theme parks.
In short, the media image of brutal Chinese soldiers terrorizing Buddhist monks conceals a much more effective American-style socioeconomic transformation: In a decade or two, Tibetans will be reduced to the status of the Native Americans in the United States.
This practice hasn't just been done to the Native Americans. American industries like to bring in huge waves of foreigners in order to drive down wages. This gets done today in agriculture, construction, and other industries. In the past auto companies, the meat packing industry, and other industries brought in immigrant groups to lower wages. The difference with China's elites is they want the Han Chinese majority to supplant the minorities. Whereas in the United States elites want to replace the majority with minorities.
Just as the Bush Administration appointed Nicholas Negroponte to manage the US relationship with China the Chinese made a big percentage increase in their defense budget.
Apparently by coincidence, the Chinese government chose the same moment to announce that its declared military expenditures for 2007 will amount to $44.94 billion, an increase of 17.8 percent.
According to Pentagon estimates, that declared total represents about a third of actual military spending if equipment purchases are taken into account. But even that would amount to only a fraction of the U.S. military budget, which is proposed to rise to about $623 billion for fiscal 2008.
The difference is narrower than the numbers suggest. The US military has to pay some multiple of what the Chinese pay their soldiers.
The US military is eventually going to become the second most powerful military in the world. Continued economic growth in China with a population more than 4 times larger will make the Chinese economy bigger and they'll have plenty of technology for creating a powerful military.
The western democracies aren't growing in population as fast as the rest of the world. Also, much of the population growth in the West comes from groups that do poorly in school and in the private sector. So the Western democracies are going to continue to dwindle in relative importance on the world stage. The West peaked in world power over 100 years ago when Europeans made up about a quarter of the world's population and they controlled the world far more thoroughly than they do today. Increases in absolute affluence in the West and triumphalist talk have obscured this longer term trend.
A recurring ParaPundit theme: Do not trust what your elites tell you. They are wrong and/or deceitful with depressing regularity. Remember when we were told that World Trade Organization (WTO) membership for China would open up a huge market for our products and would be a boon for our companies?
Since the mid-1990s, China has aggressively courted foreign investment, crediting capital from abroad with helping it become a world economic power. In recent months, however, the Chinese government, saying it needs to protect homegrown companies from unfair competition, has thrown a multitude of new regulations at foreign firms seeking to do business in China.
While some believe the new restrictions -- which affect several sectors, including real estate, retailing, shipbuilding, banking and insurance -- may be only temporary measures to control growth, others worry that there's a larger political issue: that economic nationalism or even protectionism is rising.
First off, we found we could sell little to China as compared to what the Chinese would sell to us and they manipulated currency exchange rates to assure this. Now they aren't even going to let US companies benefit from Chinese economic growth.
American companies are pulling back on their China plans because legal changes block them.
Last month, eBay said it would close its Web site in China, saying it was facing difficulties because Chinese regulations limit the types of financial transactions foreign companies can conduct. In November, Warner Bros. International Cinemas, part of Time Warner, which had been planning a massive expansion in China, abruptly announced plans to close operations in the country. It cited a recent policy change that no longer allowed foreign companies to control domestic theaters except in a handful of large cities.
The full article lists an assortment of new regulations restricting foreign investments. The Chinese are nationalistic. They are becoming more anti-foreigner. They also have over a billion people, a rapidly growing economy, and values that are quite different from our own. The West has peaked demographically. As a percentage of the world's population white people peaked about 100 years ago and then went into a continuous decline ever since. The world of the future is going to be less supportive of free societies - unless the way people around the world use offspring genetic engineering turns the tide back toward cognitive qualities that make people more individualistic.
The next Cold War is starting up in little spurts.
China has fired high-power lasers at U.S. spy satellites flying over its territory in what experts see as a test of Chinese ability to blind the spacecraft, according to sources. It remains unclear how many times the ground-based laser was tested against U.S. spacecraft or whether it was successful.
But the combination of China’s efforts and advances in Russian satellite jamming capabilities illustrate vulnerabilities to the U.S. space network are at the core of U.S. Air Force plans to develop new space architectures and highly classified systems, according to sources.
...
According to top officials, however, China not only has the capability, but has exercised it. It is not clear when China first used lasers to attack American satellites. Sources would only say that there have been several tests over the past several years.
“The Chinese are very strategically minded and are extremely active in this arena,” said one senior former Pentagon official. “They really believe all the stuff written in the 1980s about the high frontier and are looking at symmetrical and asymmetrical means to offset American dominance in space.”
They are not inclined to show us more respect than this?
In an article in Foreign Policy Minxin Pei spells out the problems facing China's economy.
But before we all start learning Chinese and marveling at the accomplishments of the Chinese Communist Party, we might want to pause for a moment. Upon close examination, China’s record loses some of its luster. China’s economic performance since 1979, for example, is actually less impressive than that of its East Asian neighbors, such as Japan, South Korea, and Taiwan, during comparable periods of growth. Its banking system, which costs Beijing about 30 percent of annual GDP in bailouts, is saddled with nonperforming loans and is probably the most fragile in Asia. The comparison with India is especially striking. In six major industrial sectors (ranging from autos to telecom), from 1999 to 2003, Indian companies delivered rates of return on investment that were 80 to 200 percent higher than their Chinese counterparts. The often breathless conventional wisdom on China’s economic reform overlooks major flaws that render many predictions about China’s trajectory misleading, if not downright hazardous.
...
The Chinese state remains deeply entrenched in the economy. According to official data for 2003, the state directly accounted for 38 percent of the country’s GDP and employed 85 million people (about one third of the urban workforce). For its part, the formal private sector in urban areas employed only 67 million people. A research report by the financial firm UBS argues that the private sector in China accounts for no more than 30 percent of the economy. These figures are startling even for Asia, where there is a tradition of heavy state involvement in the economy. State-owned enterprises in most Asian countries contribute about 5 percent of GDP. In India, traditionally considered a socialist economy, state-owned firms generate less than 7 percent of GDP.
The Chinese government still owns most of the economy.
But China’s tentacles are even more securely wrapped around the economy than these figures suggest. First, Beijing continues to own the bulk of capital. In 2003, the state controlled $1.2 trillion worth of capital stock, or 56 percent of the country’s fixed industrial assets. Second, the state remains, as befits a quintessentially Leninist regime, securely in control of the “commanding heights” of the economy: It is either a monopolist or a dominant player in the most important sectors, including financial services, banking, telecommunications, energy, steel, automobiles, natural resources, and transportation. It protects its monopoly profits in these sectors by blocking private domestic firms and foreign companies from entering the market (although in a few sectors, such as steel, telecom, and automobiles, there is competition among state firms). Third, the government maintains tight control over most investment projects through the power to issue long-term bank credit and grant land-use rights.
This strengthens my belief that Western capitalists looking to build up big markets in China are going to come to tears. The Chinese government will prevent any of them from becoming too successful. Meanwhile, China's pursuing a strategy for capital accumulation that has as much in common with Stalin's rapid industrialization of the Soviet Union as it does on Western models of free market capitalism.
Pei sees the state corporations as vast patronage systems that the government depends on to maintain control of the economy as a whole. The thing that strikes me about this is just how little countries change. The Arabs are not about to become liberal democrats. The Russians are sliding back toward the pattern of authoritarian central control that has marked the country for centuries.
Tyler Cowen fears an economic depression China and America.
More specifically, how about a bone-crunching, bubble-bursting, no soft landing, Chinese auto crash-style depression within the next seven years? This is also my biggest worry for the U.S. economy, I might add.
If you are not convinced, raise your right hand and repeat after me: "China in the 20th century had two major revolutions, a civil war, a World War, The Great Leap Forward [sic], mass starvation, the Cultural Revolution, arguably the most tyrannical dictator ever and he didn't even brush his teeth, and now they will go from rags to riches without even a business cycle burp." I don't think you can do it with a straight face.
While the US industrialization process was marred by some severe economic downturns optimists can argue that our understanding of macroeconomics and monetary policy are much greater now. So the Chinese ought to be able to avoid our past mistakes. However, by that logic they should already have taken steps to avoid huge losses in their banking system. Also, their corruption and government involvement in their economy are both far greater than was the case in 19th and early 20th century US history.
If China goes down I have a hard time seeing how the US will manage to avoid a parallel depression. Picture the Chinese suddenly stopping the purchase of US bonds and instead selling them to use the money to bail out their own collapsed economy. The US would experience very high interest rates, a sharp rise in import prices, and even though the US Dollar might decline export sales would still drop as the whole world economy contracted.
Looked at in this light the lowering of Western trade barriers to Chinese goods may turn out to have been a reckless and irresponsible move because it allowed the major economies of the world to become vulnerable to events in an unstable state. Of course, the same can be said about Western dependence on Middle Eastern oil. The West might be one well placed bomb attack on Saudi Arabia's main oil processing facility away from at least a severe recession. But a severe recession in the West would probably drive China into a depression which would probably then suck the rest of the world even further down.
Here's what I want to know: If the Chinese experience an economic meltdown will they switch to a more private system of capital ownership in response? If they do then they will emerge from their depression more firmly on course to become the most powerful country in the world.
Also, will a future economic crisis catalyze reform demands for democracy? Will the tough times of a depression so reduce the ability of the government to buy off potential opponents that a democratic revolution becomes possible? Or will any revolution just lead back to authoritarianism? Read Pei's whole article and make your guess.
A Chinese car company may ship an entire high tech engine plant from Brazil to China.
In the latest sign of this country's manufacturing ambitions, a major Chinese company, hand-in-hand with the Communist Party, is bidding to buy from DaimlerChrysler and BMW a car engine plant in Brazil. Because the plant is so sophisticated, it is far more feasible for the Chinese carmaker, the Lifan Group, to go through such an effort to move it 8,300 miles, rather than to develop its own technology in this industrial hub in western China, the company's president said Thursday. If the purchase succeeds — and it is early in the process — China could leapfrog competitors like South Korea to catch up with Japan, Germany and the United States in selling some of the most fuel-efficient yet comfortable cars on the market, like the Honda Civic or the Toyota Corolla.
The guy negotiating the deal for the Chinese car company isn't from the car company. He's a senior Chinese Communist Party official. Think about that. Of course the banks in China will probably be ordered to lend money to finance the deal. Some would have us believe that the massive US budget deficit at 5.8% of GDP is just the product of the natural workings of the market. I see currency markets and capital markets manipulated by governments and am highly skeptical of this claim.
Will DaimlerChrysler and BMW join other companies in selling the Chinese technology that'll get used to undersell them?
Ford and GM look increasingly like road kill run down by globalisation and the United Auto Workers. How can Ford and GM avoid bankruptcy once Chinese cars made with very cheap labor and embodying lots of Western technology hit the market in the United States? As things stand now GM is bleeding cash and is a few years away from bankruptcy already. That road to bankruptcy could get accelerated by events at GM's former division Delphi. Delphi's employees might go on strike when Delphi, now operating under a bankruptcy filing, cuts wages and benefits. A halt of Delphi's production lines would, in turn, stop many GM production lines. Can't build cars without engine, brake, and transmisson controllers.
About Delphi, here's what I wonder: How quickly could Delphi shift production abroad or into plants in other states in event of a strike? Also, how rapidly could GM substitute controllers from other controller makers? GM could do some engineering work in advance to qualify some controllers as drop-in replacements should Delphi go out on strike. Might be prudent to do that, especially for models that sell at healthy profits.
The official ideology will not be abandoned as a source of political legitimacy.
BEIJING, Dec. 4 -- The Communist Party has launched a campaign among political leaders and senior academics to modernize Chinese Marxism, seeking to reconcile increasingly obvious contradictions between the government's founding ideology and its broad free-market reforms.
The campaign involves the allocation of millions of dollars to produce new translations of Marxist literature and to update texts for secondary school and university students obliged to study the official philosophy, officials said. In addition, the campaign will promote more research on how Marxism can be redefined to inform China's policies even as private enterprise increasingly becomes the basis of its economy, they explained.
This reminds me of the Protestant Reformation and the resulting Catholic Reformation in their later stages. Certainly it is not an exact analogy. But they are trying to reconcile their official (albeit secular) faith with modernity. Where will the Chinese go with this? Will they produce a new revisionist interpretation of Marxism where the leaders are still the vanguard of proletariat and hence still justified in ruling by dictatorship? If they are the vanguard and the masses have to go through a capitalist phase before seeing the communist light then that would justify having the leaders rule over the emerging middle class reactionary bourgeoisie.
Imagine the Muslims still had a Caliphate that could order an updating of Islam just as the Chinese are trying to modernise Marxism. Such a modernization might make dealing with Muslims a lot easier for the rest of us.
Robert Kagan argues against the conventional wisdom that wise policies can "manage" the rise of China to produce a favorable outcome. Attempts to manage China fly in the face of a historical record of failed attempts "manage" the rise of Germany, Japan, and other powers in the past.
The security structures of East Asia, the Western liberal values that so dominate our thinking, the "liberal world order" we favor -- this is the "international system" into which we would "integrate" China. But isn't it possible that China does not want to be integrated into a political and security system that it had no part in shaping and that conforms neither to its ambitions nor to its own autocratic and hierarchical principles of rule? Might not China, like all rising powers of the past, including the United States, want to reshape the international system to suit its own purposes, commensurate with its new power, and to make the world safe for its autocracy? Yes, the Chinese want the prosperity that comes from integration in the global economy, but might they believe, as the Japanese did a century ago, that the purpose of getting rich is not to join the international system but to change it?
Kagan argues that the Chinese really want to see US influence in Asia to decline and that the values and goals of the Chinese are sufficiently different that US and Chinese interests will inevitably clash. He also argues that the US already has a containment policy toward China even as US policymakers attempt to deny this.
Kagan's essay strikes me as pretty reasonable. Go read the whole thing. China already supports elements of an illiberal world order in North Korea, Zimbabwe, and elsewhere. The extent of China's economic rise will determine the extent of the growth of Chinese influence. If, as I expect, China becomes the wealthiest country in the world illiberal autocracy will gain against liberal democracy.
From the perspective of non-Chinese East Asians, Americans, and Europeans here are what I see as the key questions about China's future:
- Can China as an authoritarian free market system continue to grow toward Western levels of per capita GDP?
- Will rising living standards inevitably lead to unstoppable pressures for democracy in China?
- If China becomes a democracy will it become a liberal democracy with protection of indivdual rights including political speech rights at levels that begin to approach the political speech rights of Europeans? (keep in mind that Americans have much stronger political speech rights than Europeans and even more than Brits or Canadians and so I'm setting a lower bar here)
- Would democracy make China more or less aggressive toward Taiwan and neighboring countries?
One argument advanced for why China has to become a democracy is that only a democracy will be able to control corruption well enough to prevent corrupt officials from undermining private enterprise. But first note that China has to achieve only a quarter of American per capita GDP in order to have a much larger economy than the United States. If corruption prevents China from becoming more than a third as efficient as the United States then China will still become the most powerful country in the world.
One argument made against non-democratic systems is that the quality of the leadership will typically change much more from generation to generation than is the case with democracy. Democracy will not reach peaks of good government as high as the best dictators have managed. But it will not hit troughs in leadership quality (or so the argument goes) that are as low as that which will be found when, say, a king's eldest son is a moron. However, note that a period of relatively good dictatorial leadership can last for decades. China might well be on such a roll.
We should be reluctant to assume that dictatorships always will turn in worse economic records than democracies for another reason: Most of the countries that are poor failed states and not democracies may not be failed states because of a lack of democracy. Rather, they may be failed states economically for the same reasons that they failed to achieve or sustain liberal democracy. Instead of democracy that is making some states wealthy other factors (e.g. intelligence distributions, culture, religion, location, etc) may be making some countries both wealthy and capable of supporting a democracy.
One advantage of democracy is that the ballot box sometimes provides an effective means to limit the excesses of corruption. However, in the current era democracy also comes with Robin Hood voters who vote for taxes to fund welfare state transfer payments. While democracy is a net benefit for many countries it is far from clear that a better economic growth is an assured outcome of democracy in all societies at all times.
When dictators have both sufficient virtue and a firm grasp of market economics then one potential gain from a dictatorial system could be a more pragmatic Benthamite utilitarian approach to managing a society. The Chinese have an obvious successful modern model for this approach to government with Lee Kuan Yew who ruled Singapore for decades in an only superficially democratic system. But can an undemocratically chosen much larger mainland Chinese government possibly become as well run and uncorrupt as Singapore became under Lee Kuan Yew?
The question of how well run pre-democratic or non-democratic China will be in the future depends in large part on how leaders will be chosen in absence of mass vote. One possibility is something akin to early American and early British democracy where only land owners or title holders were allowed to vote. There is a mechanism for how this could be accomplished without public elections. China still has an official communist party. The party now attracts the new capitalists of China as members. One potential direction of development for China's political system would be to develop a leadership selection system where the wealthiest become party members and choose regional and national leaders. Anyone know whether China's capitalists are getting involved in selecting party leaders? Or do the capitalists limit themselves to just bribing whoever is in power?
I do not view the transition of China toward Western style liberal democracy as inevitable. My guess is that the Chinese are more interested in having a "good emperor" than in having a democracy. To some extent they may even have enough animosity toward Westerners for some of them to see democracy as not authentically Chinese. Still, maybe China will become a democracy some day. Maybe China will even become a liberal democracy with widely popular protections for free political speech. But in my mind this outcome is still in doubt.
Nor do I believe that democracy would necessarily make China into a benign nation in relation to the rest of the world. Intensely nationalistic feelings in China - especially among professionals and intellectuals - have been compared by some commentators to those of Wilhelmine Germany. The Chinese strike me as feeling aggrieved with a lot of resentment toward Japan, Europe, and the United States.
Okay, I hear some of you saying "But I just know that economic development will lead to democracy in China". Well, okay, maybe you are right. That still leaves one problem: timing. Germany eventually became a liberal market democracy. But unfortunately it industrialised and carried on a couple of really big wars before making the transition into "nothing to worry about here folks" category of countries. Japan went through a similar rough transition period. Will China?
China is becoming more bold in its bid to capture Taiwan.
BEIJING Mar 8, 2005 — China unveiled a law Tuesday authorizing an attack if Taiwan moves toward formal independence, increasing pressure on the self-ruled island while warning other countries not to interfere. The United States said Beijing should reconsider.
Taiwan denounced the legislation as a "blank check to invade" and announced war games aimed at repelling an attack.
China is trying to undermine US alliances in East Asia.
China has warned Australia to be careful about the way it treats the ANZUS alliance with the US in dealing with the Sino-US conflict over Taiwan.
Beijing is reportedly demanding the Howard government review the 50-year-old military pact, saying the alliance could threaten regional stability if Australia is drawn into taking sides on the Taiwan issue.
South Korean President Roh Moo-hyun says South Korea will resist US efforts to use South Korea as a base from which to defend Taiwan.
"I clearly state that the U.S. Forces Korea should not be involved in disputes in Northeast Asia without our consent," Roh said in a speech at an Air Force Academy commencement ceremony.
It was the first formal response from the country's leader to a U.S. plan to use its troops in South Korea as a regional force, with missions to handle conflicts outside the peninsula.
Joshua Kurlantzick has written an important article in Prospect Magazine surveying changing attitudes in an increasingly powerful China and among East Asian countries toward China.
This growth has created a new confidence among ordinary Chinese; many believe that the government has been correct to focus on economic rather than political liberalisation. After Tiananmen there has been no anti-Mao campaign in China as there was an anti-Stalin campaign in Russia. This confidence convinces Chinese that their country should take a leading role in the world, even if it means challenging the US. The Asian affairs writer Daniel Snider reports that ordinary Chinese boast "about how Japan and South Korea now depend on selling their goods to China." Chinese strategists are advocating a "great power mentality" in foreign affairs.
In the past, state media, still the main source of information for most Chinese, rarely mentioned foreign policy. Today they constantly feature China's successes abroad, and harp on the problems of the US. Papers like the People's Daily run endless commentaries on America's "failing" foreign policies from unfriendly sources, such as Arab newspapers. Historians appear in the press to discuss China's imperial-era control of Vietnam, Korea and other parts of Asia. And as a 2002 report by the US congressional commission on China showed, official media often characterise the US as a "hegemon" or an "imperialist"—even comparing it to Nazi Germany.
The booming economy has lured overseas Chinese back to China, including former Tiananmen dissidents who have traded their pro-democracy stances for power and wealth. Several former dissidents have become hi-tech entrepreneurs and have backed a code of internet self-censorship.
Kurlantzick reports that while in public and in diplomatic channels China non-interference opposition to pressures from American in private they are talking about domination of Asia and creation of an empire.
Many members of the Chinese elite recognise that this advocacy of "multipolarity" and "non-interference," masks an aspiration to convert "comprehensive national power" into dominance, even military dominance of Asia. Beijing has not dropped its claims over the entire South China sea, and still refers to many parts of Asia as virtual Chinese possessions. In private, Chinese leaders admit that their goal is to build an empire in the region. And when it suits it China often acts unilaterally, as it has done by damming its part of the Mekong river despite protests that it has destroyed the livelihoods of thousands of Thais, Cambodians and Laotians who depend on its water.
Kurlantzick lists Burma, Laos, Thailand, and East Timor as countries which now assign greater importance to their relations with China than their relations with the United States. He notes that a number of other countries, notably South Korea, while not primarily oriented toward China are no longer reliable allies to the United States. The decline in American influence is well under way. But for cultural and historical reasons some countries may resist being captured in China's orbit. Vietnam, for example, sees China as an ancient and enduring enemy. The animosity between Japan and China makes Japanese subservience to China less likely. Filipinos and Indonesians resent their own Chinese economic elites and this may translate into greater resistance to China's overtures. However, Indonesian Muslim resentments toward America have reached such an intensity that China has an opening with Indonesia. The Australians are also likely to resist Chinese dominance. But all of these countries are going to develop far larger trade relationships with China than with the United States and money talks.
Kurlantzick sees the Bush Administration's single-minded focus on the war against terrorists as causing the priorities of Asians to be ignored and for Asian countries to feel ill treated by Washington DC. Kurlantzick advocates wiser policies by the Bush Administration to prevent so many East Asian countries from drifting into China's orbit. Certainly the Bush Administration has exacerbated the problem and accelerated the drift away from Washington. But the underlying cause of this trend is China's own continued economic development combined with the fact that some not-exactly-liberal governments (and not-exactly-liberal populations in many cases) in the region prefer to have their primary diplomatic relationship be with another unliberal regime.
Barring a revolution or war China looks on course to become the second largest economy and eventually the largest economy in the world. Authoritarian China will promote a different set of priorities around the world and serve as a very different role model than has democratic and liberal America. The continued rise of China is not a development that I'm looking forward to.
Although Iranian leaders agree on the strategic value of a strong nuclear program, they are divided over just how strong it should be. Conservative ideologues press for a nuclear breakout in defiance of international opinion, whereas conservative realists argue that restraint best serves Iran's interests. The ideologues, who view a conflict with the United States as inevitable, believe that the only way to ensure the survival of the Islamic Republic—and its ideals—is to equip it with an independent nuclear capability. Ali Akbar Nateq-Nuri, a conservative presidential candidate in 1997 and now an influential adviser to Khamenei, dismissed Tehran's recent negotiations with the Europeans, noting, "Fortunately, the opinion polls show that 75 to 80 percent of Iranians want to resist and [to] continue our program and reject humiliation." In the cosmology of such hard-liners, nuclear arms have not only strategic value, but also currency in domestic politics. Iranian conservatives see their defiance of the Great Satan as a means of mobilizing nationalistic opinion behind a revolution that has gradually lost popular legitimacy.
In contrast, the clerical realists warn that, with Iran under intense international scrutiny, any act of provocation by Tehran would lead other states to embrace Washington's punitive approach and further isolate the theocratic regime. In an interview in 2002, the pragmatic minister of defense, Ali Shamkhani, warned that the "existence of nuclear weapons will turn us into a threat to others that could be exploited in a dangerous way to harm our relations with the countries of the region." The economic dimension of nuclear diplomacy is also pushing the pragmatists toward restraint, as Iran's feeble economy can ill afford the imposition of multilateral sanctions. "If there [are] domestic and foreign conflicts, foreign capital will not flow into the country," Rafsanjani has warned. "In fact, such conflicts will lead to the flight of capital from this country."
While Pollack places great importance on the power of economic sanctions to bring Iran to shelve its nuclear weapons development program trends in trade are well along the way toward making that threat very hollow. The United States and the EU are going to become less important in world trade as China, India and other south and east Asian countries develop.
The Iranians are moving to reduce their reliance on customer countries that are allied with the United States. Iranian Oil Minister Bijan Namdar Zanganeh says Iran is going to replace Japan with China as Iran's biggest oil customer.
"Japan is our number one energy importer for historical reasons . . . but we would like to give preference to exports to China," Zanganeh was quoted as saying in China Business Weekly magazine.
China is protecting Iran from sanctions in the UN Security Council.
Earlier this month, Chinese Foreign Minister Li Zhaoxing, who has just crowned a year of negotiations between the two countries, paid a rare visit to Tehran. In a meeting with Iranian President Mohammad Khatami, Li said Beijing would oppose US efforts to refer Iran to the UN Security Council over its nuclear program.
China would probably be joined by Russia and perhaps even France in voting in the UN Security Council against trade sanctions on Iran.
China will increasing be able to supply Iran with any goods that the EU and America refuse to sell.
In turn, China has become a major exporter of manufactured goods to Iran, including computer systems, household appliances and cars. "They have industry and we have energy resources," said Ali Akbar Salehi, Iran's former representative to the International Atomic Energy Agency.
China's trade with Iran also is weakening the impact on Iranian policy of various U.S. economic embargoes, analysts here say. "Sanctions are not effective nowadays because we have many options in secondary markets, like China," said Hossein Shariatmadari, a leading conservative theorist and editor.
China's demand for energy is rising very rapidly.
In 2003, China raced past Japan to become the world's second biggest consumer of petroleum products after the US.
In 2004, its thirst grew by 15%, while its output only rose 2%.
China is helping Iran develop a stronger weapons manufacturing capability.
The US Central Intelligence Agency has submitted a report to US Congress stating that Chinese companies have "helped Iran move toward its goal of becoming self-sufficient in the production of ballistic missiles". In the ongoing controversy over Iran's uranium enrichment program, China has also opposed bringing the issue before the UN Security Council, and has even threatened to veto any resolution that is brought against Iran.
China and Iran are signing massive oil and natural gas development deals.
TEHRAN -- Speaking of business as unusual. A mere two months ago, the news of a China-Kazakhstan pipeline agreement, worth US$3.5 billion, raised some eyebrows in the world press, some hinting that China's economic foreign policy may be on the verge of a new leap forward. A clue to the fact that such anticipation may have totally understated the case was last week's signing of a mega-gas deal between Beijing and Tehran worth $100 billion. Billed as the "deal of the century" by various commentators, this agreement is likely to increase by another $50 to $100 billion, bringing the total close to $200 billion, when a similar oil agreement, currently being negotiated, is inked not too far from now.
US influence on the world has peaked. Rumoured plans for a US air strike against Iran's nuclear weapons development facilities are probably the only practical option available for delaying Iran's nuclear program. But even air strikes will not prevent Iran from eventually developing nuclear weapons. Also those air strikes will cost the United States diplomatically. My guess is that the Bush Administration will probably carry out those air strikes. Though I'm unsure on this point.
The Bush Administration is unlikely to strike hard at Iranian oil and natural gas production facilities because to do so would cause skyrocketing energy prices. The US economy would suffer along with the rest of the world and the United States would be widely (and correctly) seen as responsible for bringing on a world economic recession. My guess is that even Bush will shrink from making such a move.
Newsweek has an article about the increasing "soft power" influence of China as the Chinese economy continues to grow and its trade increases.
Beijing's diplomats are tireless salesmen. While America's emissaries rail against tyranny and terror—and vow to spread democracy throughout the world—China's envoys aren't pushing any kind of ideology. And they're not squeamish about human rights; they've cut deals with Burma, Cuba, Sudan, just about anybody. The only thing Beijing asks for is new opportunities for Chinese entrepreneurs to trade and invest—and a promise that its foreign friends will support China's claims on the island of Taiwan. The Beijing official says: "We don't preach like the U.S. does."
Note the non-judgemental utilitarian approach that the Chinese take toward foreign policy. An increasing number of countries are going to see in China an alternative to dealing with a preachy and pushy Washington DC power structure. US influence is set to decline dramatically in the coming decades.
With the growth of Chinese power and influence in mind I am trying to come up with a list of questions about China's likely longer term ambitions. One underlying assumption to these questions is that China's economy will continue to grow more rapidly than the US economy for the next few decades and its energy and other raw materials imports will grow along with its economy.
- Will China be able to bring Taiwan under control from Beijing?
- Will China's territorial ambitions extend beyond Taiwan? If so, where?
- Will Chinese commercial domination of some Asian economies become so great that it will use that domination to force those countries to adopt trade rules with the United States and Europe that are less favorable?
- Will Chinese troops be used to prop up select regimes that have lots of oil? Sudan comes to mind.
- Will China encourage more Middle Eastern regimes to develop nuclear weapons capabilities as a way for China to decrease US influence in the Middle East?
- Will China's government eventually extend as much protection to foreign intellectual property rights as the US and European governments do? Or will Chinese theft of foreign intellectual property become a permanent feature of their legal regime?
- Will China eventually manage to intimidate Japan into a more submissive position or will Japan become defined by its determination to remain independent of China? Currently Japan appears to be moving in a direction of greater defensiveness and resentment of China even as Japanese business embraces investment in China wholeheartedly.
- Will large numbers of Chinese men work in the near abroad managing factories in Southeast Asian countries and use their presence to become political powers in those countries?
- Will elites with tight business connections to China stage coups with Chinese government support to overthrow democratically elected governments that are seen as harmful to Chinese business interests or Chinese national security interests?
I do not have answers to these questions. I also suspect I'm leaving out some important questions about China's role in the world in the future. What do you all think? What do you see China doing in the world in the future?
Philip P. Pan of the Washington Post has written a very interesting article on a court case over a lawsuit brought by Fuyang China party secretary against two authors of a book that makes corruption and abuse of power charges against the party secretary and other party officials.
More than a quarter-century after launching economic reforms while continuing to restrict political freedom, the Chinese Communist Party remains in firm control of the courts. Most judges are party members, appointed by party leaders and required to carry out party orders. But the government's claims of support for legal reform and human rights, and an influx of information about Western legal concepts, have fueled public demands for a more independent judiciary.
China's citizens are asserting their rights and going to court in record numbers. About 4.4 million civil cases were filed in the last year, more than double the total a decade ago. Behind this surge in legal activity is a belief that everyone, even party officials, can be held accountable under the law, a belief promoted by a new generation of lawyers, judges and legal scholars trained after the death of Communist Party Chairman Mao Zedong.
The party appears torn by this rising legal consciousness. It recognizes the value of an impartial judicial system to resolve disputes in a country with growing social tensions and an emerging capitalist economy, and it sees the potential of citizen lawsuits to curb corruption and improve governance. But it is also afraid that rule of law and independent courts might threaten its monopoly on power.
This report addresses what is perhaps the most important issue for determining how far China's industrialization can go: will China have independent courts that protect the rights of individual Chinese citizens from the tyranny of all levels of officialdom? Will China get rule of law or will it continue to have rule of bureaucrats? It is an enormously important question for China and for the world as a whole.
This article provides an account of a court case brought by a local party secretary Zhang Xide against the authors of a book which documented the corruption of Chinese officials. A sharp attorney defending the writers used the need to prove the accuracy of the book to turn the court case effectively into a trial of Zhang Xide. The judges that presided over this case refuse to announce a decision because they do not want to anger their superiors by ruling against the party secretary and yet they also do not want to anger the peasants.
Pu ended with a subtle plea to the judges to defy their party superiors.
"Obviously, there is room for you to be creative," he said. "If you are appropriately creative, your efforts and morals will lead society toward the further development of civilization and democracy. Your names will go down in history. . . . Your judgment will show whether the judiciary in China can shoulder its responsibility to promote the development of society."
But the lawyers said the judges have told them they cannot decide the case, which suggests that higher-level party officials are involved. The party's deliberations have been complicated because accounts of the trial have been published on the Internet and in Hong Kong. In a sign of the party's indecision, several officials have contacted the authors and their attorneys and urged them to settle the case.
So far, the authors have refused. "Settling isn't an option," Chen said recently. "We've come this far. We want a verdict."
One question is what will happen about issues relating to freedom of the press. My guess is that the Chinese government is not going to allow total unrestricted criticism of the government. However it is conceivable that the higher levels of the Chinese government might decide to instruct judges to allow local officials to be criticised while still telling them to protect higher level officials against writings by reporters and book authors.
Another question is about rule of law for doing business. Will the Chinese government instruct the courts to protect businesses against the predations of government officials? Will contract enforcement be fairly uniform regardless of whether some business has sons of important officials in management? Just how far China can develop economically depends in large part on whether contracts are enforceable and whether businesses can operate free of extortion by corrupt officials.
Writing for The National Interest David Hale examines the sheer scale of China's economic growth.
China has developed a voracious appetite for raw materials. Its commodity imports cost $140 billion last year, and its trade deficit on them was $100 billion. China's imports of iron ore have increased from 14 million tons in 1990 to 148 million in 2003. China's imports of aluminum have shot up from 1 million tons to 5.6 million tons. Imports of refined copper have risen from 20,000 tons in 1990 to over 1.2 million tons last year. Imports of platinum have leaped from 20,000 ounces in 1993 to 1.6 million last year. Imports of nickel have risen from zero to 61,500 tons during 2003. The impact of China's raw material demand on global trade has been so dramatic that shipping rates have quadrupled during the past 18 months.
There are now some commodities in which China is a larger consumer than the United States. In late 2003 China accounted for 20.6 percent of global copper demand compared to 16 percent for the United States. In 2005 China will probably account for 21 percent of global aluminum demand compared to 20 percent for the United States. China also accounts for 35 percent of global coal production, 20 percent of zinc output, 20 percent of magnesium output and 16 percent of phosphate output. This is all the more remarkable given that China's real GDP is probably half of America's. And since the real incomes of China's people are only now rising to levels that generate large demands for material goods such as autos, appliances and houses, its consumption of raw materials is poised for explosive growth.
China now makes more steel than the United States and Japan combined. If China fllows a path of development that repeats the experience of Japan then China will eventually consume more steel per capita than the United States. With its much larger population China could eventually consume 5 times more steel than the US does per year. Whether the political system of China can maintain stablity and develop a legal framework that can support an economy of such complexity remains to be seen. But my guess is that China will surpass the United States as the world's largest economy in the first half of the 21st century.
The torrid Chinese demand for raw material last fall and winter has largely evaporated, as credit-starved companies drew down their supplies and stopped placing new orders. Prices slumped in commodities markets as a result. As the lines of ships waiting to unload cargo at Chinese ports dwindled, ocean bulk freight rates tumbled as well, falling by more than half on some routes after shooting up seven or eightfold last year and early this year.
...
"Our orders came down 75 percent," said Harry Banga, vice chairman of the Noble Group, a big Hong Kong-based commodities and shipping business. "Not only ours, but everybody else's.
An industrializing economy can through depressions and still recover and regain a high level momentum. The United States had a number of severe economic downturns while it was developing most rapidly. But after each downturn rapid growth eventually resumed. China may be in for a bumpy ride. But unless it descends into civil war I expect it to eventually become the largest economy in the world. There is nothing inevitable that is going to keep the United States as undisputed most powerful country.
Wang Zaixi, vice-minister of Beijing's Taiwan Affairs Office of the State Council, threatens war if Taiwan declares independence.
"If the Taiwan authorities collude with all splittist forces to openly engage in pro-independence activities and challenge the mainland and the one-China principle, the use of force may become unavoidable," Wang said.
The use of the term "war" is quite explicit:
The vice-president of Beijing's Taiwan Affairs Office, Wang Zaixi said "Taiwan's President Chen Shui-Bien's recent pro-separatist activities had crossed Beijing's 'red line' and run the risk of triggering a war with the mainland."
With the mainland growing economically the Chinese government in Beijing is growing in strength. There is a definite window here that is going to close on the Taiwanese. If they do not formally declare independence soon it may become increasingly more difficult to do so in the future.
Chen and his ilk would have never had the temerity to go farther and farther against the will of the Chinese people, including Taiwan compatriots, without support from foreign pro-Taiwan forces, especially those in the United States.
The Taiwan issue would have never become a question without US intervention.
On the one hand, the United States makes its commitment to adhere to the one-China policy and not to support Taiwan independence, but on the other hand, it gives Taiwan oral and material support, thus laying down a serious obstacle to mainland-island reunification.
Note that the Taiwan government has de facto independence and has had it for a long time. China is trying to prevent the Taiwanese from gaining international recognition as an independent country that can not be attacked by the mainland Chinese without a violation of international law.
The threat comes as campaigning heats up for Taiwan's March election. President Chen Shui-bian's re-election bid has gained traction in recent weeks with plans for a new constitution and a law that would allow citizens to call for referendums, which could lead to a direct vote on independence. This has angered Beijing, which still considers Taiwan part of China.
"There is almost no one in Taiwan to stop Chen Shui-bian. And who's going to stop Taiwan independence then? It has to be the United States."
-- Shih Chihyu, professor at National Taiwan University
Keep in mind that these Beijing leaders who want the US to rein in Taiwan are the very same people who enable the continued development of nuclear weapons and the export of missiles and nuclear technology by North Korea. The Beijing leaders supply food and oil crucial for the Pyongyang regime's continued existince and they may also be secretly happy that the North Koreans are pursuing policies that are widening the split between Seoul and Washington DC. My advice to George W. Bush: Stand by and let the Taiwanese hold a referendum to declare independence. We should be for democracy and against totalitarianism.
Beijing's official China Daily accused the U.S. government of "breaking its decades-old practice of limiting a Taiwan leader's activities in the United States to an unofficial level," by allowing him unhindered access to the media and freedom to travel while in New York.
It also noted that, in Panama, Chen and Secretary of State Colin Powell had "exchanged pleasantries."
The China Daily is reporting all sorts of quotes of official upset.
"Chen's perverse acts have not only aroused the indignation of all Chinese people, but also prompted us to prepare well to crush the conspiracy of Taiwan separatists," said Li Weiyi, a spokesman for the Taiwan Affairs Office of the State Council.
The Bush Administration says they can handle the situation and maintain the peace.
A top George W. Bush administration official, reacting to an apparent rise in cross-strait tensions, has said that the US is more than capable militarily to keep the peace in the Taiwan Strait if needed.
"We have full faith that the question of Taiwan will be resolved peacefully, and it is on this premise that we base our policy regarding Taiwan and the People's Republic of China," Deputy Secretary of State Richard Armitage said in Washington on Tuesday.
But if Taiwanese President Chen Shui-bian wins reelection, amends the constitution to allow direct referenda, and then holds a referendum on independence that wins a majority of the vote what will the Bush Administration do at each of these steps along the way? Will it tell the Taiwanese not to proceed if they want continued US protection? What is the point of US protection if the Taiwanese are only being protected until the Chinese mainlanders can eventually become strong enough militarily to capture the island at some future date when the United States is relatively weaker than China? If you don't think that is going to happen my response is: demography is destiny. How can the US stay economically and militarily stronger than a country that has about 4 and a half times more people, has been industrializing rapidly for a couple of decades running, and that has a populace that is on average at least as bright as Americans?
The Taiwanese say that since they have a democracy they should be allowed to be independent.
"Taiwan is a democratic country. Only its 23 million people have the right to decide its future and what is best for them," a spokesman for Taiwan's cabinet, Lin Chia-lung, said in the statement.
"We can't tolerate interference with our internal affairs by any undemocratic countries," Reuters reports Lin saying.
Taiwanese President Chen refuses to embrace the "One China" policy.
Since taking power on May 20, 2000, the Taiwan leader has refused to embrace the one-China principle that states there is only one China consisting of both the mainland and Taiwan.
China Daily reports the British are sticking with the "One China" policy.
British Defense Secretary Geoff Hoon said Thursday that Britain would make further efforts to strengthen cooperation with China, stressing that his country would stick to the "One China" policy
Canada's position in this dispute is pure realpolitik. Canada ought, in theory, to be supportive of Taiwan. Taiwan is democratic; China is not. Taiwan respects human rights; China does not in all instances. According to Transparency International, Taiwan's corruption ranking is much better than China's. In per capita terms, Canada does more trade with Taiwan than China. But the Chrétien government swoons over that huge Chinese market. Mr. Chrétien has made six trips to China as Prime Minister. On Dec. 11, the day before he hands over power to Paul Martin, Mr. Chrétien will welcome China's Premier in Ottawa.
When (as seems likely) the Taiwanese declare indepdendence the United States, Britain, and Canada are going to have to decide whether they put morality or money first. I'm betting on the desire for Chinese mainland trade to prevent an official recognition of Taiwan by any Western government. But it is likely that the US will, for the foreseeable future, be willing to defend Taiwan against a Chinese mainland attack. So the Taiwanese can probably get away with a formal declaration of independence. But as the US becomes economically and militarily weaker relative to China in the coming decades the Taiwanese are going to have to develop a nuclear weapons arsenal if they are going to succeed in maintaining their independence.
Update: Chen has been anathema to Beijing since the 2000 Taiwanese elections.
In 2000, when Mr. Chen was elected leader of Taiwan on an independence platform, in the first real democratic elections on the island - Beijing's reaction was virulent. Not until a year ago was Chen's name allowed to be published in Chinese state media.