The global recession caused a 23 percent drop in Chinese exports (versus a year earlier), but domestic industrial output is up 12 percent in the same period. China's economy is expected to grow about 8 percent for this year, down from about ten percent predicted pre-recession. The real strength of the Chinese economy is production for domestic consumption. Starting in the 1980s, China began to recover from largely having missed the Industrial Revolution (which most Western nations underwent in the 1800s). As happened in the West, this leads to explosive growth. But China is already encountering problems with pollution and raw materials shortages. This makes China's neighbors nervous, because that's where lots of the raw materials come from, and some of the pollution (industrial waste) can go to. Currently, China is on track to have the largest economy on the planet within twenty years.
One of the more popular quips in China these days is, "without corruption, the Communist Party will fail, with corruption, the country will fail." In other words, the solution to the corruption problem involves the removal of the Communist Party bureaucracy. The communist bureaucrats are not too fond that approach, but many quietly (or not so quietly) realize that it is true.
A recent U.S. Department of Defense report, describing China's growing military power as the primary threat to American interests in the Pacific, was denounced by China as "Cold War thinking." But it wasn't. The report indicated that the situation was quite different from the Cold War, in that the current rivalry was largely commercial, while the Cold War was more about ideology. While China is still a communist police state, it's economy is not communist. But Chinese military power is being built up for a purpose, and that purpose is the defense of what China considers its interests in East Asia, and beyond. Traditionally, when China had a powerful military, China was accustomed to having its way. That is what makes China's neighbors so nervous. China has not had a powerful military, or a competitive economy (to support it), for several centuries. A lot has changed since the 17th century, but no one is sure about the traditional Chinese attitudes towards war and peace and disputes on its borders. If the Chinese go old-school, things could get ugly.
China says it is not concerned with India's moving two more infantry divisions into northeast India, where the Himalayan mountains form a border with China. There are boundary disputes between India and China along the Himalayas, but these are now being negotiated (although not settled yet). China believes the Indians are putting two more divisions there (in Arunachal Pradesh) to deal with long term ethnic unrest. India also recently upgraded a primitive airfield (used mainly for helicopters), 25 kilometers from the Chinese border, to one that can handle larger transports.
September 18, 2009: In Beijing, police raided a hotel room from which three Japanese journalists (a reporters and two cameramen) were recording preparations, outside on the street, for the October 1 military parade (celebrating the 60th anniversary of the communists taking control of China.) The three Japanese were beaten and their computers and cameras destroyed. On September 6th, the government ordered foreign news organizations to not take photos or video of the parade preparations. But since then, the media, and the Internet, has been full of photos of the parade rehearsals, and speculation on what new weapons would be displayed. It's expected that over fifty relatively new weapons systems will be publically displayed, in the parade, for the first time. Apparently the attack on the Japanese was a way of sending a message to journalists, in the area, to back off. Lots of civilians are still taking, and posting on the Internet, cell phone photos and video of the preparations. Apparently the government is resigned to that activity continuing.
September 12, 2009: In Xinjiang, a court sentenced three Uighur men to prison (for up to 15 years) for a terror campaign in which as many as 600 ethnic (Han) Chinese were pricked with a syringe. This led to large demonstrations earlier this month. The Turkic Uighurs are unhappy with the growing migration of Han Chinese into what was traditionally an area where nearly all the population was Uighur. The Han migrants are angry at their cold, and often violent, reception. No one was made ill by the syringe attacks.
September 8, 2009: China rolled out a scale model of its first domestically designed and (to be) built wide body airliner. The C919 is a twin engine aircraft with a 4,000 kilometer range and carries 168 passengers. China plans to begin deliveries in seven years. China has been building military aircraft, starting with Russian designs, for over four decades. In the last two decades, it has been increasingly building Western designs under license, and its own designs as well. All of this was with the intention of developing domestic design and production capabilities. In the next decade, this will have been achieved.
September 7, 2009: A UAE (United Arab Emirates) transport headed for China, while on the ground to refuel in India, was found to be carrying undeclared (in their paperwork) weapons. This set off speculation that the UAE was sending samples of U.S. weapons to China illegally. This was not the case. There is a large Chinese arms trade with the Persian Gulf, and the Chinese are constantly sending in weapons and military equipment for potential customers to evaluate. When that is finished, the stuff is flown back to China. This is what the UAE told the Indians, and the aircraft was allowed to proceed to China.