China: The Long-Term Prospects Are Good


May 22, 2014: In the northwest (Xinjiang) Uighur terrorists are increasingly aggressive in attacking the growing Chinese presence among them. In northwestern China, especially Xinjiang province, the local Uighurs are increasing angry over growing pressure from Han Chinese soldiers and intrusive Han government officials. Because of that many Uighurs continue to support anti-Han activity and this makes it possible for Islamic terrorists to survive and operate. Most Uighurs are found in Xinjiang province. There the nine million Uighurs are now less than half the population and most of the rest are Han Chinese. Chinese officials have been publicly urging soldiers and police to be more aggressive against uncooperative Uighurs. The government accuses Uighur activists of endangering state security and tries to keep the unrest out of the news. This is part of an ongoing effort to suppress Uighur unhappiness in the face of the growing number of Han Chinese moving to traditionally Uighur areas and taking over the economy and most of the good jobs. The same thing is happening in Tibet, where the government is using the same tools to keep everyone under control.

The U.S. is trying a new tactic in its battle against Chinese hacking; indicting five senior Chinese Army officers (Wang Dong, Sun Kailiang, Wen Xinyu, Huang Zhenyu, and Gu Chunhui) known to be running a specific army organization (Unit 61398) outside Shanghai. Unit 61398 has been tracked and identified as the source of thousands of hacker attacks on American corporations. These attacks resulted in the theft of billions of dollars’ worth of trade secrets and software. China has consistently denied any knowledge or participation in these attacks. The U.S. Department of Defense has long sought permission to go on the attack against Chinese hacking but involving the military struck many as dangerous against a potential foe as large and powerful as China. Lawsuits and sanctions, on the other hand, are a civil matter. Much less risk of military escalation. The Chinese are scrambling to cope with this unexpected form of counterattack and the sanctions and bad publicity that are likely to follow.

May 21, 2014: Russia and China agreed to build a natural gas pipeline from Russia to China so Russia can export natural gas. The agreement obliged China to buy a minimum amount of Russian natural gas (worth $400 billion) over a 30 year period. This deal had been in the works for a long time and it was believed that the growing production of shale (“fracked”) natural gas worldwide was making this deal unattractive for China. Russia had long dismissed shale gas and fracking as more American fads that would soon fade. Now Russia has to cope with lost markets because of shale gas (driving gas prices down). Since oil and gas are Russia’s major exports, this is a serious matter. With less foreign currency available from energy sales, there is less money to import new technology and consumer goods as well as rebuild the military. Older Russians remember how successful American efforts to lower the price of oil in the 1980s helped bankrupt and destroy the Soviet Union. To many Russians this is happening again. Even ally China suddenly became less likely to be a customer for Russian natural gas because the proposed deal to build a $22 billion natural gas pipeline to China depended on the price of natural gas staying high enough to justify the pipeline cost. With more countries (including Europe and China) fracking a lot, the price of natural gas will stay low and the China pipeline could be a big money loser. Russia has apparently sweetened the deal sufficiently (at Russian expense) to interest the Chinese again. Meanwhile, without any fanfare or much publicity China began, for the first time, producing natural gas from shale using fracking. China has a lot of these shale natural gas deposits and this could eventually produce all the natural gas China needs. The complete details of the Russia-China gas export deal were not made public and it is likely that China has a way to get out of the deal if world prices of natural gas plunge (as they already have in the U.S.) because of fracked natural gas.

In Burma China is under growing pressure from ordinary Burmese who resent illegal Chinese logging in the heavily forested north. This is part of a decades long effort by China to take control, legally or otherwise, of natural resources in northern Burma. To further this effort China has been quietly interfering in internal disputes and backing several of the rebellious tribes up there. For example, China is helping arm and finance some of these tribes. To protect the illegal lumber trade China helps out the KIO (Kachin Independence Organization) in northern Kachin state.  Another example is the Wa rebels (UWSA or United Wa State Army) who live in Shan state near the Chinese border. In Shan state the UWSA is a major factor and the Burmese army tends to respect UWSA military capabilities. Half the tribal militiamen in the far north belong to the UWSA, which has about 30,000 armed men operating along the Chinese border. The Wa are ethnic (Han) Chinese, and many other Wa live across the border in China. The Chinese have made it clear to the Burmese government that any attack on the Wa would not be appreciated and have pressured the Burmese on behalf of the Wa. Burmese troops continue interfering with truck traffic entering Wa territory. The Wa can get what they need from China, but some Burmese Wa live closer to roads coming from the south, rather than those coming from China. Many Wa believe that the Burmese would like to push all the Wa into China, but that is not likely to happen because of UWSA resistance and Chinese support. This sort of Chinese interference in Burmese affairs is causing many Burmese to talk of joining the anti-Chinese coalition that currently consists of most of the nation’s China has territorial claims on.

The Chinese economy continues to slow, mainly because of fears corruption in the banking system and a housing bubble (housing prices have been falling for 11 months) will be more than the government can handle. So far the situation has been controlled, even if it’s at the expense of economic growth. That means more unemployment (including over six million recent college graduates). Manufacturing activity has shrunk four months in a row.

In addition t0 economic problems at home, anti-Chinese riots in Vietnam prompted the government to assist in getting nearly 4,000 (so far) Chinese out of Vietnam. This was mainly done via sea, in five ships China sent on the 16th. Injured Chinese were flown out. The riots have shut down many Chinese-owned factories and other businesses in Vietnam. All this because China set up an oil drilling platform in Vietnamese coastal waters China insists belongs to China. According to China, the issue is non-negotiable and now many Vietnamese feel the same way for their own claims. The rioters set fire to at least fifteen factories. Most were Chinese but some were Taiwanese or South Korean. This hurts Vietnam more than the foreign countries involved because Vietnam needs the jobs while the foreign companies have other developing countries they can operate in. The main problem here is that Vietnam has been resisting Chinese domination for two thousand years. Vietnam got free of Chinese occupation in 938 and since then has been largely free of Chinese rule. But for the last thousand years China has been a constant threat and many Chinese still consider Vietnam (at least northern Vietnam) a “lost province.” After five days of anti-Chinese violence, the unrest has abated in Vietnam, but not the fear of China.

Meanwhile China blamed the unrest in Vietnam on the United States. China also (in state controlled media at least) sees the U.S. as organizing the coalition of Chinese neighbors against China. This anti-Chinese alliance does not bother China a great deal because China has major economic links to these neighboring countries and knows that any anti-Chinese violence will harm China less than the country doing the hurting. China is betting on short-term economic self-interest and fear diluting anger against Chinese aggression in the South China Sea and elsewhere. In any event China has the largest military in the region as well as nukes. To China, the long-term prospects are good.

May 20, 2014: The Philippines and Vietnam have agreed to jointly oppose illegal Chinese claims on their coastal waters. China insists the entire South China Sea is Chinese and no one else can be there without Chinese permission. These two nations are no match for Chinese military power and are hoping that the U.S. helps them to resist and respond to any armed aggression from China.

May 19, 2014: Taiwan revealed that it was running computerized combat situations, featuring its newly acquired AH-64 helicopter gunships, examining different scenarios for a Chinese attack on Taiwan.

May 17, 2014: Unable to obtain armed Predator UAVs from the United States, Saudi Arabia has turned to China and is buying some (exact quantity not made public) of Chinese Wing Loong UAVs, each equipped to carry two BA-7 laser guided missiles (similar to the Hellfire) or two 60 kg (110 pound) GPS guided bombs (similar to the U.S. SDB).

May 16, 2014: In Cameroon some 200 Boko Haram (apparently from a nearby base in Nigeria) attacked a Chinese construction camp, killing one Cameroon soldiers and kidnapping ten Chinese. Nigerian and Cameroonian troops were assigned to find and free the Chinese. China has become a major investor in Africa, building roads and other infrastructure as well as exporting inexpensive industrial and consumer goods. China has become a major buyer of African natural resources.

May 15, 2014: The Philippines released photos proving the China is building military facilities on the disputed Johnson Reef

May 12, 2014: One reason China wants to keep American signals (electronic) reconnaissance aircraft (the U.S. Navy EP-3 and the U.S. Air Force RC-135) away from their coast is because of the apparent weaknesses in the Chinese air defense systems. The Chinese air surveillance radar system and the anti-aircraft forces its supports are, in reality, a ramshackle collection of new and elderly equipment that never quite meshed into a single reliable system. That means that carefully analyzing these network from international waters (at least 22 kilometers from the coast) reveals vulnerabilities that attacking aircraft could exploit. This is doubly troubling to the Chinese because the Americans are known to share this kind of information with their allies, especially Taiwan, South Korea and Japan.

May 11, 2014: China is threatening the Philippines with retaliation (probably economic) if nine Chinese fishermen and their boat are not released. Last week the Filipino coast guard caught the boat illegally fishing off the Philippines and carrying over 500 turtles that are on the endangered list in the Philippines and illegal to take. The area off the Philippines is also claimed by China, as is all of the South China Sea. Only waters within 22 kilometers of land are considered coastal waters of countries bordering the South China Sea. For this reason China considers the Filipino action illegal.

May 9, 2014: The government declared the tap water of Jingjiang (a city of half a million on the Yangtze River) dangerous to drink. Such bans are increasingly common, especially along the Yangtze River, with its heavy shipping traffic. A growing number of ships are carrying toxic chemicals and when there’s an accident and some of the chemicals get into the river, the government shuts down, for hours, or days or more, the use of river water for drinking.

May 6, 2014: China denied recent Western news stories detailing leaked details of Chinese plans for coping with a collapse in North Korea. That said, all major nations have contingency plans (usually drawn up by the military) for likely emergency situations. So the Chinese denials have some basis in fact as contingency plans are not always recognized as official policy. But if something bad happens the Chinese leadership will call for possible solutions and the military will bring forward several contingency plans they have already prepared and let the boss decide.

In the south (Guangzhou in Guangdong province) several men attacked people at a train station, leaving six wounded. Initially Uighur Islamic terrorists were blamed, but later China instructed media to report that there was only one attacker and it had nothing to do with Uighurs. But reports (via cell phone and Internet) indicate that the attack did involve Uighurs making it the third Uighur terror attack since March. That was apparently why the government ordered the media to change the story. But in yet another defeat, cell phones and the Internet (despite vigorous government censorship) defeated the long invincible censors.

May 5, 2014: The U.S. recently announced a $5 million reward for information leading to the arrest of Chinese businessman Li Fangwei. What makes this man so valuable to American prosecutors is the fact that Li controls a network of companies that form the single largest organization Iran uses to illegally import weapons (especially missile) components and export oil and other contraband. Since 2006 Li Fangwei has conducted 165 known smuggling operations for Iran, worth $8.5 million. The items obtained were crucial for the functioning of Iran’s ballistic missile program. It took years of discovering and investigating smuggling efforts, connecting them to various Chinese companies and then realizing that many of these operations were organized by Li Fangwei. China refuses to arrest Li Fangwei because according to Chinese law Li Fangwei has committed no crime and Iran is considered a major trading partner and supplier of desperately needed oil. Li Fangwei has been careful not to travel anywhere the United States might be able to arrest him. In fact, Li Fangwei spends most of his time in eastern China, looking after the many businesses he owns. The smuggling is a very small part of his business activity, most of which appears to be legitimate.

May 2, 2014: As China continues to send its coast guard ships into Japanese coastal waters (closer than 22 kilometers from land) off the Senkaku Islands, Japan is taking more actions to defend itself. Japan is expanding its military presence on and around Okinawa by building a radar station on Yonaguni Island. This is westernmost inhabited Japanese island, although it only officially became part of Japan in 1879 (along with Okinawa). Yonaguni Island has a population of 1,500 and is a favorite tourist attraction for Japanese. The island is 2,000 kilometers southwest of  Tokyo, 505 kilometers west of  Okinawa, 300 kilometers southeast of China, 110 kilometers east of Taiwan (which China claims) and 144 kilometers southwest of the disputed (with China and Taiwan) Senkaku Islands. This new radar station produced a very loud protest from China who are not happy with Japanese hostility to Chinese threats over the Senkakus. The Japanese are becoming more alarmed at increasing Chinese military activity in waters and air space around Japan. It’s not just disputed areas, especially the Senkaku Islands, but around Okinawa and increasingly east of Japan, in the Pacific. Operating out there is what the Chinese would have to do for a blockade of Japan. As a result of all this Chinese naval and air activity there is growing support for expanding the Japanese military, especially obtaining long range UAVs for maritime patrol and ballistic missiles for hitting Chinese bases in the event of hostilities. This doesn’t bother China as much as constant Japanese chatter about developing nuclear weapons. But the Chinese believe that decades of anti-nuke militancy would prevent Japan from actually going down this road. If Japan did build nukes, it would make Japan once more dangerous to China and that could cause a really dangerous situation.

April 30, 2014:  In the northwest (Xinjiang) Uighur terrorists attacked a train station with a bomb and knives, killing three people and wounding nearly 80.





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