China: The End Of An Era



May 25, 2022: The Russian invasion of Ukraine in February came as an unpleasant shock to China, which had increasingly been doing business with Ukraine and following developments in both Russia and Ukraine. The Chinese were shocked to find that their assessment of the situation in Ukraine after Volodymyr Zelensky was elected president in 2019 was more accurate than Russia’s. Vladimir Putin seemed to dismiss Zelensky as an opportunistic actor and comedian while the Chinese saw Zelensky as a shrewd political operator who quickly disrupted Chinese plans to abscond with a lot of Ukrainian military technology and manufacturing trade secrets. China was surprised at how badly Russia misjudged Zelensky’s preparations of Ukraine for a Russian escalation or invasion. China had admired how Russia used special operations and political preparation in 2014 to quickly seize the province of Crime. A similar effort to take two provinces (Donbas) in eastern Ukraine a few months later failed. China was waiting for Russia to come up with another bright idea to deal with that. China was not expecting Russia to blunder into a major miscalculation by invading Ukraine.

That invasion triggered an unexpected imposition of heavy sanctions on Russia. The mess in Ukraine has fundamentally changed the relationship between China and Russia. The most obvious changes for China are economic. Foreign trade accounted for about 28 percent of Russian GDP and about half was disrupted by the 2022 sanctions. China is Russia’s largest trading partner and, together with Belarus and a few other nations, continues to trade with Russia. The other half is currently halted, or soon will be, by sanctions. Russia has experience in evading economic sanctions and knows that greed in notoriously corrupt countries provides customers willing to switch to heavily discounted Russian oil. There are many similar but smaller customers. The discounts can be high; sometimes 20-30 percent off the world price, which is currently a hundred dollars a barrel. Even with heavy sanctions and smuggling related discounts, Russia is still making as much as they used to before the Ukrainian escalation.

Several NATO (the North Atlantic Treaty Organization) nations are still buying Russian oil and natural gas because they cannot afford to cut those imports completely until they have sufficient alternate sources to avoid an economic collapse. This will take from six to 18 months or more, which is accepted as an essential move to avoid economic collapse in NATO nations getting most of their oil and gas from Russia.

Although China is a major customer for Russian oil and gas, a new pipeline must be built to get them the product. Importing it via tanker ships is much more expensive because that is smuggling and risky. That means a larger discount and more risk of confrontations with NATO naval forces sent after tankers used for smuggling. Russia has threatened to use its handful of modern nuclear subs to go after NATO merchant shipping and risks seeing their small nuclear sub force disappear at sea. Western navies stalk Russian nuclear subs in peacetime and Russian subs seek to do the same to Western nukes. This is an activity dating back to the Cold War and little is made public about who is ahead in the peacetime stalking competition.

All this degrades future Russian economic prospects. That has a negative impact on Russian allies. These foreign supporters now see their powerful patron as less powerful than believed and now feel desperate or simply afraid. And then there is China, which does not have allies, only trading partners and tribute states. Russia is now moving from trading partner to the lower tribute state status.

China has territorial claims on Russian territory on or near the Pacific coast. Japan has a dispute with Russia over the ownership of some Pacific Coast islands that Russia took at the end of World War II as well as fishing rights in the area. Until recently Japan was rather timid in its requests to Russia about these islands. Once it became clear how poorly Russia was doing in Ukraine, Japan has become more open and aggressive about the island dispute and Russian efforts to keep Japanese fishing boats out of areas they have long worked in.

China has, since the 1990s modernized and expanded its armed forces to the point where, on paper, China has stronger ground, air and naval forces than Russia. Chinese forces have not been in combat since the 1970s and back then found the less numerous but more experienced and motivated Vietnamese surprisingly effective. Russia encountered a similar situation in Ukraine, just as they did in Chechnya in the 1990s and Afghanistan a decade before that. A major difference between China and Russia is that the Chinese study and learn from their mistakes and the mistakes of others. Russia did not pay attention, especially to what was going on in Ukraine between 2014 and 2022. China has paid attention to how Ukraine prepared and how the West responded. This is important for China because of their plans and efforts to take possession of Taiwan and the South China Sea. Taiwan was also paying attention, especially since 2014 and increased its preparations to defeat a Chinese attack. Massive sanctions on China would be another matter because China is now the largest trading nation in the world, followed by the U.S. and Germany. These three nations are the only ones with trade exceeding a trillion dollars. Russia was 19th before the sanctions and with the sanctions will be fortunate to remain in the top 30 nations. If China did face the degree of sanctions Russia received, the results would be catastrophic because while the Chinese economy is much larger than Russia’s, it is much more sensitive to major disruptions. While China is still a communist police state, there is greater risk of major internal unrest if the economy is mismanaged. Incurring heavy sanctions is seen as mismanagement.

The war in Ukraine has confirmed the inferiority of Russian weapons compared to Western models. For years Pakistan received most of its weapons from China or Russia. The Chinese gear is superior to what the Russians produce but still inferior to Western systems. Pakistan is China’s largest export customer for weapons and Pakistani military leaders now want to repair relations with the Americans, who withdrew all military aid after decades of being lied to by the Pakistani military about their support for Islamic terrorism. That support backfired with the new Afghan government, installed with much help from the Pakistani government, threatening war with Pakistan over border disputes and growing anger inside Afghanistan against Pakistan because of the even greater economic collapse in Afghanistan.

The Ukrainian conflict had other impacts on China. In April Taiwan sent a 28-page booklet to all households on how to behave if China attacks. The advice was similar to pamphlets in Sweden, Finland and the Baltic States that were distributed before the invasion of Ukraine. The Taiwanese now plan to resist, even if some or all of Taiwan Island is occupied and need the cooperation of the civilian population to do that.

The booklet for all households is but the latest effort to defeat a Chinese attack. Taiwan has been rearming for over a decade and even managed to secretly procure all the components it needed to build its own submarines, something the Chinese were shocked to discover. Now Taiwan has distributed the pamphlet on how to keep fighting if the Chinese get ashore.

China was surprised at the failure of Russian forces to quickly conquer Ukraine and the fierce resistance that tore apart the invasion force. The Taiwanese have been particularly encouraged by the success of the Ukrainians in developing a defense that worked against a delusional and overconfident invader. Not quite Finland in 1940 but close, and Ukraine is an updated version of the 1940 example. Taiwan wants to be the East Asian model for derailing invasions by larger neighbors.

Taiwan has good trading and diplomatic relations with many of the smaller nations near Russia that pioneered the concept of preparing for the worst and winning, not just surviving. This has become a common and successful strategy among small European states. Small East Asian nations like Taiwan, Singapore and South Korea have the same problem and are all studying the Ukrainian war intently for lessons they can use.

The Southern Front

In the south, the border conflicts with India have remained quiet, mainly because China has more urgent problems to deal with. One of those problems does impact India. China backs the military government in Myanmar (Burma). India has a 1,4oo kilometer border with Burma in the northeast and long had problems with tribal separatist rebels there, on both sides of the border. India finally worked out peace deals with all their rebels before the pro-India elected government in Burma was ousted in February 2021. The Burmese army war with northern tribes resumed because the army is seen as the main reason for all the corruption and illegal Chinese economic activity in the north. A year later there is a lot more fighting in northern Burma and a lot of refugees fleeing to India. The Indian government has ordered border police to turn away or forcibly return such refugees to Burma. Local state governors refuse to enforce those orders, if only because so many of the refugees have kin in India. Many of the refugees belong to the same tribe that straddles the border. A lot of non-tribal Burmese entered as well and India sought to stop those refugees to avoid more trouble with China. The state governors protected these refugees as well. In some cases, separatist tribal gunmen in India used force to block Indian government efforts to curb the flow of refugees. The federal government has not escalated this dispute, in part because the local resistance is an adequate excuse for allowing the Burma refugees in despite protest from China.

Chinese claims on the South China Sea are causing unfavorable, for China, developments. For example, i n January Australia and Japan signed a Reciprocal Access Agreement which makes it easier for the two countries to cooperate in military matters, including moving military equipment and personnel in and out of each other’s territory and joint training so aircraft, ships and ground forces have an easier time operating together. That process was started before the Reciprocal Access Agreement was made official. An example is the two-year effort to ensure that the Japanese F-2 fighter, which only Japan uses, could refuel with Australian KC-30A tankers. Australia has six KC-30s, which are based on the AirBus 330 airliner. Japan has eight similar tankers based on the Boeing 767. Aerial refueling compatibility is important for military cooperation between the two countries which use similar combat aircraft. Both Japan and Australia have adopted the F-35. Australia has 44 out of 72 F-35s ordered. Japan has ordered 147. Before the Reciprocal Access Agreement with Australia, the only other one Japan had, since 1960, was with the United States. There was a similar situation with the Australian Reciprocal Access Agreement with the United States. Until the Chinese threat manifested itself over the last decade, Japan and Australia believed the alliance with the United States would be sufficient. The Chinese threat increases and both Japan and Australia have expanded their military alliances.

China has not been idle in areas where there is little military action. Along the Indian border Chinese troops and engineers continue building roads, structures and fortifications. Similar activities continue in the South China Sea. Further south, China signed a military-economic pact with the government of the Solomon Islands, that Australia opposes. The Solomons consist of six major islands and over 900 smaller islands east of Papua New Guinea and 2,000 kilometers northeast of the Australian coast. Australia fears China will attempt to establish a naval base in the Solomons by providing more economic and other aid to the Solomons than Australia does.

The Siege Of Shanghai

The shutdowns in Shanghai, China’s largest city, continue to cause major problems for manufacturing firms in China and worldwide. Damage to the economy and economic growth was so severe that the government refuses to release relevant statistics, at least not yet.

While many employees of Shanghai financial firms can work from home, factory workers cannot. Shanghai, and many other areas in China were shut down on April 1st after a major outbreak of covid19 was discovered during March. The outbreak was worst in Shanghai, a coastal city of 26 million that is the center of Chinese finance and several other manufacturing industries. The infection was traced to several people from Hong Kong who had fled to Shanghai to avoid a covid19 outbreak there. Some of these apparently healthy visitors had covid19 but were, like about 80 percent of those who get the virus, asymptomatic (showed no symptoms) and spread it to many in Shanghai. The current strain of covid19 spreads faster but it is less lethal. Several efforts to end the shutdown have failed and now China is seeking to finally end the shutdown and economic disruptions by June 1st. There are already partial suspensions of the shutdown in parts of the city but new cases keep showing up in areas believed to be free of covid19.

So far China has admitted to several thousand covid19 cases in Shanghai but, as per Chinese policy, few deaths. Over 90 percent of those who die from covid19 have preexisting conditions that could eventually prove fatal but covid19 speeds that up. In the West the custom is to blame covid19 for many deaths where the virus was not the chief factor. In China it is just the opposite, which results in very few admitted covid19 deaths. China is aware of how covid19 works and that the elderly are the most likely to die from it. That is why the elderly did not receive the Chinese covid19 vaccines and in Shanghai the elderly hospitalized for covid19 were kept separate from younger Chinese who are vaccinated. There was a larger problem with young children and babies quarantined separately, often in quarantine centers far from each other. As videos of distressed babies and young children got out the separation policy was changed.

The Chinese vaccines are less effective than Western vaccines but still provide some protection. The outbreak in Shanghai is different because the virus spread so quickly that the government felt compelled to shut down the entire city and found that it could not keep all these people, basically under house arrest, supplied with food and other necessities. At first people shouted from their windows or apartment balconies and did so in large numbers. Cell phone cameras captured this and those videos escaped China and alerted the word to what was happening there. Now there have been some “riots” in the form of people taking to the streets to protest. Among the cell phone videos getting out of China are some aerial views, apparently taken by a quad-copter, showing the largely deserted streets of the deserted metropolis. Meanwhile the virus spreads and the Chinese wall of deception and denial is crumbling.

Chinese problems with covid19 were already proliferating before Shanghai. There are still outbreaks in China and the use of misinformation and disinformation to deny that the virus came from China are unraveling. Chinese efforts to conceal the origins of covid19 eventually backfired. Initial evidence was that covid19 first appeared in Wuhan during late 2019. Chinese doctors complained that the government would not take action, as China had earlier said it would. Instead, those outspoken doctors were ordered to remain silent or else. Several of those doctors died of covid19 while a few others got out of China and were largely ignored, at least initially, by Western governments. China insisted that they had limited covid19 deaths to a few thousand and their lockdown approach kept reinfections from spreading. China tried to blame infected American soldiers, who arrived in China for a mid-2019 planned event. This claim was denied by the United States which tended to go along with the rest of the Chinese version. That eventually changed as the covid19 infection and death models proliferated and were accepted. The actual deaths in China were nearly two million. China continues to stand by its original claims but even WHO (the World Health Organization) and epidemic specialists in other countries are no longer supporting Chinese claims. The Chinese government took a big risk by not providing accurate and early reports about covid19, which they were legally required to do because of international criticism of earlier Chinese refusal to share data on new covid-type diseases. China also developed its own covid19 vaccines, which are actually not vaccines in the classic sense of providing immunity. All covid19 “vaccines” are actually antiviral medications that will lessen the impact and spread of covid19. Such antivirals have long been used to lessen the impact of the annual influenza outbreaks, which are always different because influenza, like covid19 and the common cold, constantly mutate and change. China tried to steal the superior antiviral tech the West had created and went ahead with less effective Chinese vaccines/antivirals. While most Chinese have received the Chinese antivirals, that means they are more vulnerable to continuing outbreaks of covid19.

China is a communist police state but, like all similar governments, it monitors public opinion and some senior officials saw covid19 as a potential disaster for the government and worth the effort and risks to suppress details of its origins. China took a chance with covid19 and lost. This covid19 side-effect may be the most lasting and damaging of all.


President Xi Jinping is meeting unexpected resistance from Communist Party elders as he seeks a third term as leader of China. Xi is blamed for the problems with covid19 and the growing military alliance formed to oppose Chinese expansion efforts. In 2018 China abandoned its political rules that limited Chinese presidents to one five-year term. The 2018 changes enabled president Xi Jinping to rule indefinitely, or at least as long as he can hang onto power. There is still the matter of getting various symbolic (but still official) groups to approve this and that succeeded in 2018. But now some of those groups, like the revered party elders, are reconsidering.

All this had a lot of Chinese business leaders and entrepreneurs worried. The 1980s reforms of Deng Xiaoping, to replace the “dictator for life” model pioneered by radical socialists Joseph Stalin, Benito Mussolini, Adolph Hitler and Mao Zedong with a system that kept the one party radical socialist dictatorship in power but allowed a market economy and term limits on the national leader. This produced unprecedented economic growth and political stability for over three decades. Why change it? That’s what worries the business community and overseas customers and investors. Xi Jinping feels the abandonment of term limits is necessary so that he can deal with the corruption that has always been a major weakness of Chinese culture and governments. Yet the return to one man rule for life brings with it other potential pitfalls. One is unexpected and often arbitrary changes in laws and a growing dependence on nationalism to maintain sufficient popular support. Nationalism is the most dangerous angle and it has already put China into conflict with the United States (over free access to the South China Sea which China now claims as sovereign territory) and with India over where the Tibet border should be. All Chinese neighbors are nervous about this revival of traditional imperialism. This predatory behavior has also been present during the rapid economic growth. The government tolerated, and even encouraged, theft of foreign technology and tolerating Chinese firms using corrupt practices to cheat foreign business partners. This not only bothers the aggrieved and threatened foreigners but successful Chinese entrepreneurs and businesses as well. A nationalist dictator is more likely to risk war (trade or otherwise) to maintain popular support, especially if the domestic problems have to do with economic problems. In the end it’s all about the economy. This is especially true now that so many (nearly half) of Chinese have had a taste of middle-class life (education and some access to a consumer economy). That is something that has never happened before and Chinese leaders are unsure of what, if anything, they can do to prevent this new development from putting a permanent end to autocratic rule in China. This is a real threat because this has already happened in Japan, South Korea, Taiwan and Singapore.

This switch from limits on Chinese leaders back to the more traditional dynastic “ruler for life” model was something of a surprise. Supreme leader Xi Jinping got another five-year term in late 2017, allowing him ten years in office. This has been the custom since 1982 when it was decided that a “collective leadership” was a good idea and supreme leaders should serve for only two five-year terms, or just one if there were problems. Since 1982 this has worked but Xi Jinping wants more and is getting it. This time he put ineligible (too old and more loyal to Xi than able to take his place) men in the Politburo Standing Committee from which the next leader is selected. Xi did not designate a preferred successor. And as “ruler for life” he no longer has any legitimate opposition to his power to do whatever he wants.

Another pattern noticed by foreigners, working from public records, was that “tigers” accused of corruption tend to be disproportionately people who had not supported current leader Xi Jinping in the past. Those who did and do support Xi Jinping for a long time and are caught up in a corruption investigation still tend to get punished, but in the form of quietly retiring and are often allowed to keep much, if not all, of the wealth they stole. One area where this “friends of Xi Jinping” angle does not work so well is the military. The senior officers accused of corruption had fewer opportunities to support (or not) Xi Jinping, who came up through the civilian and CCP (Chinese Communist Party) bureaucracy. Corruption in the military has been an ancient tradition and there’s a lot more opportunities to steal now. Xi Jinping has made it his personal goal to break that tradition, or at least greatly erode the extent of corruption in the military and that means a lot of the accused “tigers” tend to be generals and admirals.

May 24, 2022: South Korea complained to China that once more Chinese military aircraft had violated South Koreas’ ADIZ (Air Defense Identification Zone). South Korea complained to Russia for similar violations off the north coast. This is all about a 2013 China decision to establish a new ADIZ that overlapped South Korean, Philippine and Japanese air space (and ADIZs). China demanded that any foreign military or commercial aircraft request permission before flying into this zone. South Korea and Japan protested while the United States quickly flew some B-52s into the disputed zone without asking for Chinese permission. China protested and the United States ignored them. After a decade this ADIZ dispute remains unresolved.

In South Korea the American president visited and assured the new South Korean that the U.S. remained ready to intervene militarily if North Korea attacks South Korea. The same pledge was made to Taiwan if China attacked. After the American president left the next day, North Korea test fired another three ballistic missiles.

May 20, 2022: North Korea now claims it has detected over two million North Koreans with covid19, but less than a hundred deaths. Until a week ago North Korea insisted it had no covid19 and because of that refused offers of South Korean or Chinese covid19 vaccines. Senior North Korean officials have apparently received regular doses of the most effective Western vaccines and other treatments. Meanwhile North Koreans dying of flu-like symptoms were not tested for covid19 and the deaths simply attributed to flu. However, many people show symptoms of influenza and are sent to isolation centers for a few weeks before the survivors are released. North Koreans complained that being sent to isolation centers was too often a death sentence because people at those centers were more likely to die than those who recovered at home. The increase in arrests for corruption and anti-government behavior has meant more people in already overcrowded prison camps. It is difficult to isolate showing flu symptoms and there are more deaths from flu-like diseases in these camps. North Korea still refuses covid19 related aid from China, South Korea or the United States. Admitting the existence of covid19 was apparently made possible by the rapid spread of the new strain and far fewer fatalities. North Korea is not using widespread shutdowns as China does but warning the population and insisting that those capable of going to work do so. Going to isolation centers is no longer mandatory. North Korea did more harm than good since early 2020 as it closed its borders and instituted mandatory isolation at the province level. This caused major economic and food supply problems and the increase in deaths among the elderly or those with other conditions was attributed to the food and medical shortages.

May 19, 2022: The Chinese economy was already slowing down when the current covid19 shutdown in Shanghai and elsewhere made matters worse. There is also a real-estate bubble that is unresolved and more Chinese banks are suffering liquidity (cannot meet demands for withdrawals) problems. The economic damage done by all this led to a $5 trillion dollar stimulus program to alleviate suffering among workers and provide businesses with cash needed to keep operating. The actual decline in GDP growth is a state secret but is believed to be bad enough to produce GDP shrinkage and an official end for decades of high GDP growth. The Chinese economy is, at $18 trillion (or less) a year, the second largest in the world. The Americans have economic problems but not to the extent China is suffering from.

This is mainly about the size of their $117 trillion (before the new stimulus) government debt, which is nearly four times the size of the U.S. debt. China has the second largest economy in the world, at $18 trillion. That means their debt is six times GDP while the American debt of $29 trillion is 1.26 times GDP. It’s worse when you take population size into account. China has about four times the population of the U.S. meaning the average Chinese has about 16 percent of the income of an American while carrying far more government debt per capita. Much of that debt comes from millions of housing units built by local governments that not enough Chinese can afford or will not consider because many of these “Ghost Cities” are far from where the jobs are. The Chinese bond market is the second largest in the world, after the United States. With this kind of debt, quality (the ability of debtors to repay) is a major factor. The quality of Chinese debt is much lower than the U.S. or the West in general and the extent of this problem was deliberately hidden by debtors, especially local governments, for decades. This makes a Chinese real estate bubble far more dangerous than previous ones encountered in major economies.

May 13, 2022: Off the west coast of Australia, a Chinese Type 815 (Dongdiao class) AGI (intelligence collection) ship was spotted near a joint U.S.-Australian intelligence facility. AGI ships are designed to linger and collect electronic and other information. “Dongdiao” translates as “East Investigation” and the 6,000-ton ship carries 250 people, most of them sensor maintenance and monitoring technicians who also analyze some of the data and transmit it back to China or other aircraft or warships. These new Chinese AGI’s are equipped to collect useful information from land-based intel facilities.

May 4, 2022: South Korea has become the first Asian nation to join NATO’s CCDCOE (Cooperative Cyber Defense Center of Excellence). South Korea has a lot of experience dealing with North Korean and Chinese hackers. These hacking operations have become an increasing threat to NATO nations. East Asian nations like South Korea, Taiwan, Japan and Singapore, along with Australia and New Zealand, have been increasingly cooperative with NATO nations because they have a common enemy in China and its smaller sidekick Russia. There are other problems with China. South Korean exports to China were down 3.5 percent in April compared to last year. This is mainly because of the covid19 shutdowns in Shanghai and a growing number of other Chinese cities. Problems with Russia, a major source of energy and raw materials for China, will have an increasing impact on the Chinese economy. South Korea currently exports about half a trillion dollars’ worth of goods and services each year, with China the largest customer, accounting for 26 percent of these exports. Because of Ukraine related sanctions, exports to Russia are down 70 percent. Russia accounts for less than one percent of South Korean exports.

May 1, 2022: The government halted train traffic into North Korea because Chinese cities on the North Korea border are dealing with a new, faster spreading strain of covid19. Apparently the Chinese covid19 outbreak had already spread to North Korea.

April 26, 2022: T he U.S. Navy conducted another FONOP (freedom of navigation operation) near China as an American destroyer passed through the Taiwan Strait (the waters between Taiwan and the Chinese mainland). Since July 2018 the U.S. Navy has carried out Taiwan Strait FONOPs nearly every month. Until the 2018 FONOP such trips through the Taiwan Strait (which American warships do regularly) were not publicized, something the U.S. had been doing since 2007. The renewal of publicizing these movements annoys China which responded by having their own warships following American warships passing through the Taiwan Strait and increasing Chinese naval ship patrols around Taiwan.

April 14, 2022: Covid19 is spreading in China because new strains of the virus spread faster, although they are less lethal. Most Chinese are vaccinated, but the local vaccines are less effective than Western ones and leave more people vulnerable to new strains of covid19. Because of this some Chinese cities near the North Korean border are suffering shutdowns to contain the virus. North Korea responded by ordering border guards to wear gas masks if they are working at border crossings close to infected Chinese cities. North Korea continues to insist it has no covid19 and refuses offers of South Korean or Chinese covid19 vaccines. Senior officials have apparently received regular doses of the most effective Western vaccines and other treatments. Border guards complain that the masks are uncomfortable and make it difficult for others to understand what masked men are saying.

Meanwhile North Koreans dying of flu-like symptoms are not tested for covid19 and the deaths simply attributed to flu. However, many people show symptoms of influenza and are sent to isolation centers for a few weeks before the survivors are released. The increase in arrests for corruption and anti-government behavior has meant more people in already overcrowded prison camps. It is difficult to isolate showing flu symptoms and there are more deaths from flu-like diseases in these camps.




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