China: A Place In The Sun


July 28, 2013: 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 distant 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.

China is losing its diplomatic and propaganda effort to prevent the Philippines, Japan, Vietnam, and other victims of Chinese territorial claims from forming coalitions and bringing their complaints to international forums. That’s a problem, because many of the Chinese claims violate international maritime laws and Chinese chances of winning in court are not nearly as good as their bullying tactics are.

All this is disturbingly similar to the situation in the late 19th century when Germany, recently united (in 1870) for the first time and turning into the premier economic power in Europe (only the U.S. was larger), began demanding territory that belonged to others and insisting it was also owed greater respect and deference because Germans had been wronged by their neighbors for thousands of years. The Chinese complaint is that Europeans (and their lackey Japan) took advantage of a temporarily weakened China and now China is back on its feet and wants payback. The German demands led to nearly a century of war and conflict that left over 100 million dead. The Germans wanted “a place in the sun” and got desolation and despair instead. China believes its situation is different, but their neighbors don’t agree.

India accused China of using UAVs to patrol the northwest (Kashmir) border and entering Indian territory nearly 200 times since early 2012. Closer investigation of this revealed that most, or all, of these sightings (by Indian troops) were actually the planets Jupiter and Venus moving close to the horizon. Meanwhile, Chinese incursions on the ground are less ambiguous and increasingly frequent.

India is accusing China of violating a March agreement that was supposed to halt the Chinese practice of sending troops to follow each other’s infantry patrols along the LAC (Line of Actual Control) and sometimes sending troops into Indian territory. The LAC is also known as the MacCartney-MacDonald Line and is the unofficial border between India and China. The LAC is 4,057 kilometers long and is found in the Indian States of Ladakh, Kashmir, Uttarakhand, Himachal, and Arunachal. On the Chinese side its mostly Tibet. China claims a lot of territory that is now considered part of India. The practice of monitoring each other’s patrols has led to hundreds of armed confrontations over the last few years as one side or the other accuses “foreign troops” of crossing the LAC. China has become less vocal about its claims on Indian territory recently but has not abandoned these assertions. This is a big relief to India, which has a defense budget one third that of China’s. But India accuses China of sending a mounted (on horseback) patrol into Indian territory in Ladakh (northwest India) on July 16th and remaining across the line until the next day, when confronted by Indian troops. China says it was a misunderstanding, but in the GPS age this is not as convincing as it used to be.

Taiwan and China are increasingly using economics to develop greater togetherness. Since both countries agreed to let tourists to freely visit each other five years ago, Chinese tourists have spent $15.68 billion in Taiwan, while Taiwanese have spent $27.7 billion in China. The restrictions on these tourists have been reduced each year, which has increased traffic.

A Chinese online game developer, with the cooperation of the Chinese armed forces, went live with a new Internet based game (Mission Of Honor) featuring China’s first aircraft carrier, plus air and land forces, all devoted to dealing with a war over disputed islands in the South China Sea. The game centers on the Diaoyu (in Chinese) Islands (Senkaku in Japanese and Tiaoyutai in Taiwan). The islands are actually islets, which are 167 kilometers northeast of Taiwan and 426 kilometers southeast of Japan's Okinawa and have a total area of 6.3 square kilometers. Taiwan also claims the islands, which were discovered by Chinese fishermen in the 16th century and taken over by Japan in 1879. They are valuable now because of the 380 kilometer economic zone nations can claim in their coastal waters. This includes fishing and possible underwater oil and gas fields. The game developer is working with a film company to make a movie based on the events that transpire in the game.

China is seeking, without much success, a way to shut down North Korea’s nuclear weapons program. These weapons could easily be a threat to China if there were a government collapse in the north. China also wants the Koreans to stop using gangster tactics against Chinese businesses. This ranges from outright theft from Chinese firms set up in North Korea to threatening to arrest Chinese fishermen legally fishing off the east coast of North Korea if the Chinese don’t buy their fuel (at inflated prices) from North Korea. A growing number of Chinese officials are quietly arguing for a coup in North Korea, to install a pro-Chinese government that would implement economic reforms and quickly improve the standard of living there. This would preclude (so the theory goes) any backlash from the traditionally touchy Koreans (who resent the many incidents over the last thousand years where the Chinese did this sort of thing). This option has always been on the table, at least unofficially, and the North Korean leaders know it. Such a coup would be messy and risky. It could go sideways and cause a lot of bloodshed and chaos. For the last decade the northern leadership has been increasingly paranoid about “Chinese agents” and showing too much friendliness to China can get North Korean officials jailed or executed (or, at best, denied promotion). But the Chinese feel cornered by the North Korean nuclear weapons program. The North Korean nukes are still pretty crude and not much of a threat to anyone (except their owners). But as the years go by, it becomes more likely that a desperate and vengeful North Korean leader, facing an actual Chinese coup attempt, might toss a nuke across the border to show the Chinese that you cannot mess with Koreans anymore. The Kim dynasty would still end (as in they would all be dead) but the Kim’s would forever be remembered by all Koreans for that last act against the hated Chinese. It’s the sort of guilty pleasure Koreans are fond of, as is their feelings towards Americans dropping two nukes on the Japanese during World War II. 

Unfortunately the Chinese are playing from a position of weakness when it comes to North Korea. This can be seen from the feeling among Chinese and South Korean diplomats (who meet regularly to discuss North Korea and compare notes) that both nations are being manipulated by North Korea because the North Koreans take advantage of the fact that neither of its neighbors wants the current North Korean government to collapse. That’s because China and South Korea would both be confronted with a messy and expensive situation and might even go to war over who should take control. China is the most fearful here because they are much stronger than South Korea and could even afford to try and force the U.S. to back off. In that case, South Korea would be off the hook for the trillions of dollars it would cost to bring the north up to southern economic and social standards. If China took over, it would spend a lot less but would do whatever was needed to prevent millions of starving North Koreans from trying to flee into China. While the average North Korean would benefit from the collapse of their government (no matter who came in to take over), dealing with the post-collapse mess is something no one wants to be stuck with. So, the logic goes, North Korea plays fast and loose with both China and South Korea, secure in the knowledge that the neighbors will keep sending enough aid to prevent complete collapse in the north. In effect, North Korea is like the huge American banks and insurance companies that are considered too big to fail (and cause the economy to collapse). While North Korea likes to brag that it became blood brothers with China during the Korean War (1950-53) the truth of the matter is that the North Koreans have always resented the overbearing Chinese. This has been going on for over a thousand years, and now the North Koreans have found ways to manipulate, humiliate, and frustrate their unpopular neighbor. You really have to be Korean to appreciate this and Chinese would really like to find some way out of this mess.

The Chinese government is concerned about slowing economic growth, which is partly the result of bad banking practices, which has led to a building boom that has created thousands of large buildings that no one wants to buy or rent. If those bad loans, and irresponsible lending, are not handled correctly there could be a lot of unemployment and social unrest. Dealing with this situation is very difficult. As a practical matter a lot of capital is now tied up in unused real estate. Chinese banks are carrying this debt at full value, which is misleading and misleading. China has tightened up on lending, to try and curb the corrupt bankers. That has led to more bankruptcies, especially by smaller firms that are more prone to critical shortages of capital. Economic growth is headed for zero and even the remote possibility of a period of contraction. Economic growth for this year is expected to be no more than 7 percent.

July 27, 2013: China has ordered its National Audit Office to find out what the real total debt is for all the thousands of government entities. The government knows that corruption in the banking system has resulted in a lot of bad debt. They have run sample audits on a small percentage of governments and know there is a problem. You would think the government would be monitoring something like this in real time. But China is, in many ways, generations behind the West. One such area of backwardness is financial controls and government information systems. Then there is the problem of decentralization. Running China has always depended on decentralization. For thousands of years it was feudalism that made it work. But the revolutions of the 20th century did away with the feudalism but not the decentralized political power. So the central government still appoints local officials (the senior ones at least) and hopes for the best. There are audits but not on a regular basis. This time the extent of the bad lending is something the government has to know in detail, and quickly, so they can stave off a collapse of the banking system and the economy. This would mean the end of communist rule in China.

The national audit has a lot of local officials worried because many of them have grown rich from these illegal loans. Many have been careful to try and conceal their newly obtained wealth and this audit is a major threat. The corrupt and careful thought they could get away with it because the less prudent corrupt officials spent their new wealth in obvious ways and were getting caught in growing numbers. This satisfied the public and reduced the urgency to try harder to find all the corrupt officials. Then there are the spurned mistresses of corrupt officials who have been particularly effective in feeding the media and public demand for some obvious anti-corruption action. Ironically, some of the spurned mistresses were as smart as they were beautiful and understood how their lovers were stealing money via shady bank loans. Once cut lose, these women released more than compromising videos but also details of financial misbehavior that government banking regulators and anti-corruption experts found very informative. The National Audit will, unless it is compromised by bribes and threats, cause some very powerful officials to be ruined. This is going to be interesting, if nothing else. 

July 25, 2013: Five Chinese Navy ships (two destroyers, two frigates, and one supply ship) arrived back from joint naval exercises off the Russian coast north of Japan. Those exercises ended on the 14th and, instead of returning directly to their bases, the Chinese task force completed a route that took them completely around Japan, the first time Chinese warships have done that. The Japanese were not amused.

July 24, 2013: Japanese fighters were sent aloft as, for the first time, a Chinese military aircraft (a Y-8 AWACS radar plane) flew between Okinawa and the smaller nearby island of Miyako. The Chinese AWACS came close to Japanese territory but stayed in international air space. Meanwhile, four Chinese warships were spotted near the disputed Senkaku islands.

July 23, 2013: China held night exercises with helicopters and fixed wing war planes in Tibet. Air operations are tricky in Tibet, especially for helicopters because most of the area is high enough (3-4,000 meters/2-3 miles) to reduce the lifting ability of helicopters. This problem becomes worse at night, but wartime operations across the nearby Indian border would often take place at night.

July 20, 2013: A man detonated a bomb in the airport outside the Chinese capital. He was injured but no one else was because the bomb was made from fireworks. The man was in a wheelchair, the result of injuries he had earlier received from Chinese police. The bomber was protesting police violence and corruption.

July 17, 2013: After over a year of negotiations the Indian government agreed to provide the money needed for the army to create a special 50,000 man combat force trained and equipped to deal with a Chinese invasion on India’s northeast border. India is playing catch up because China has been building up its military forces and infrastructure here for over a decade and is much better prepared to invade the disputed territories (mainly in the Indian northeast and northwest) than India is to defend them.

July 14, 2013: For the first time ever Chinese warships were seen moving through the La Perouse Straits, which separates the Russian island of Sakhalin and the Japanese northernmost home island of Hokkaido.

July 13, 2013: Responding to growing public opposition, which the censors could not deal with, the Chinese government agreed to cancel plans to build a uranium processing plant near many residential neighborhoods that feared radioactivity escaping. Chinese factories are notorious for poor pollution control, even though there are laws that prohibit such problems.  


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