The economy remains the major problem for the people that run China. Islamic terrorism, foreign affairs and military reforms all matter much less than the health of the economy. The government says all is well but a growing number of foreign economists and Chinese business leaders have doubts. The foreigners can speak openly while Chinese critics must be discreet. The government predicts GDP growth for 2016 to be about 6.5 percent which and that estimate has not wavered. That makes a lot of experts wary, because as time goes by more evidence of past falsification of data become obvious. There are a lot of old problems that can no longer be hidden. These include massive pollution, corruption, and unprofitable state owned industries. These problems have gotten worse and are crippling economic growth and must be tended to. Territorial claims in the South China Sea and India are distractions from what concerns people most in China; the economy. Thus while Japan continues to be a useful villain for distracting propaganda the government also realizes that Japanese economic power, expertise and experience with economic crises (in an East Asian cultural context) are more useful to Chinese survival. This cannot be admitted publically, but then neither can a lot of essential truths. It’s the East Asian way.
Some things the leaders have to discuss openly and one that involves most Chinese is the government effort to deal with corruption. A recent decision seems promising and it involves changing the rules for monitoring the performance of the most senior officials and investigating corruption among people who were long believed immune to such indignities. This puts the government back on track because assurances were made in early 2016 that the anti-corruption campaign would not only continue but intensify. In the past mainly lower ranking Chinese Communist Party members were prosecuted but by 2015 it became clear that if the corrupt senior party members were not shut down the widespread corruption would survive and thrive. So prosecutors were told that no one was immune and throughout 2015 some of the most senior government and Chinese Communist Party officials were being prosecuted. This was unprecedented and if the investigators are allowed to prosecute everyone who was dirty there would be a lot of new faces in the partly leadership by the end of 2016. Then came the Panama Papers. Chinese leaders hate surprises like this but it became and by May investigations of senior officials seemed to be fading. Apparently not.
Despite Chinese willingness to quietly ask for advice and cooperation on economic matters Japan also recognizes a need for more obvious diplomatic gestures. Thus Japan is greatly increasing its defense spending, and doing so more efficiently. Japan is saving money by purchasing foreign (mainly American) weapons. In the past Japan would license American tech and build the weapons in Japan. That cost a lot more but created more jobs and a sense of self-sufficiency. That is no longer enough and Japan is buying more weapons and strengthening military ties with the Americans and neighbors also concerned with the very visible Chinese territorial aggression. Most Japanese leaders realize that this Chinese aggression is mostly for show, to distract the Chinese people from more significant economic problems back home, but that sort of distraction has, in the past, led to war. It’s how Japan got involved in a series of foreign conquests that began in the late 19th century and ended in 1945 with a devastating defeat that will take a long time to forget.
China and Indonesia are unofficially, but very visibly, at war with each other over illegal fishing. China has been stealing fish (poaching) from offshore areas where the fishing rights belong to other countries. This poaching has been going on with increasing frequency since the 1990s. But now many of the victims have done the math and noted that the most frequent offenders are Chinese ships. These are either Chinese owned fishing ships or ships from other countries that register themselves as Chinese to gain a measure of immunity from being stopped or punished by the nations being plundered. But some nations are not just complaining, they are fighting back. In the case of Indonesia the fighting back consists of shooting at poachers and, since 2014, destroying (via explosives or burning) over 170 ships used by guilty poachers. Indonesia calculates that this poaching costs Indonesia over $2 billion a year and that China’s worldwide poaching operation brings in over $20 billion a year. Since China does not officially admit it is organizing and controlling this, and the Indonesians are using large warships with orders to fire on any poacher caught and refusing to surrender, the Chinese are taking most of the losses off Indonesia. For a while China sent warships to accompany flotillas (often ten or more ocean going fishing ships) and protect the poachers if caught and keep the police or coast guard boats busy while the poachers escaped. But Indonesia responded by sending out warships (corvettes and frigates) with orders to fire on any foreign warships caught with the poachers. China stopped sending warships but the poachers kept on coming and Indonesia keeps capturing and prosecuting the crews. The poacher ships are often destroyed as media events, with local news being allowed to capture and broadcast videos of the fires and explosions.
The Invisible Wars
Chinese territorial claims off its coasts (especially the South China Sea) and along the Indian border get the most media attention but there is another kind of Chinese invasion that, while less noticed, is becoming a serious economic and political problem for the countries the Chinese have been allowed to invade. Put simply if a country allows Chinese investment on a large (multi-billion dollar) scale the deal usually involves allowing China to bring its own workforce and permitting those workers to establish their own Chinese settlements and then stay when the project is over. This sort of thing results in the Chinese establishing a permanent economic presence and control over a growing percentage of the local economy. This often begins when China floods weak local economies with inexpensive goods. Both of these tactics are hurting local businesses and causing unrest among African business owners and workers. As a result, it's become common for opposition parties in Africa to accuse China of "neo-colonial exploitation." The accusation fits, and the Chinese will pay for it down the road, as will peacekeepers brought in to help clean up the mess.
Russia and Central Asian nations are seeing the same tactics being used on them and are demanding restrictions on these practices. Thailand recently turned down billions in Chinese investments because the Chinese would not limit the use of Chinese labor doing the work in Thailand. China is now more willing to negotiate because a growing number of nations are willing to do without Chinese investment if the terms include an influx of Chinese workers, many of whom want to stay for good.
The “overseas Chinese” have been a presence in Asia for centuries. But until now the Chinese government was never much concerned with them. China was never, until the late 20th century, a major international trading power. Now China is and it is spending heavily to finance the migration of more Chinese to settle in foreign lands, and never forget where they came from. For those who do, when the motherland calls, the Chinese government will remind the unwilling that they still have kin or other links back in China and how shameful would it be if this lack of cooperation became known.
China is also involved in wars most people, including most Chinese, are unaware of. For example there is Chinese media support for Iran backed Shia rebels in Yemen. There Saudi Arabia has organized a coalition of local nations to provide air and ground support for the Yemen government against the rebels. China has long backed Iran and in Yemen the rebels know that the popular support in the Gulf oil states for participation in the Yemen war would rapidly erode if there were a lot of casualties among their troops. So far the rebels have been right about this. Yet the Saudis cannot afford to leave a hostile Iranian-supported enclave on their southwestern border and it appears the Saudis feel they have to do whatever it takes to prevent the Iran backed Shia rebels from remaining active. Meanwhile Iran continues to back the rebels, especially when it comes to propaganda. Iran and its allies Russia and China are all using their state controlled media to make the Yemen rebels look more successful than they actually are. Iran continues trying to smuggle in weapons and military supplies. Some of those efforts appear to be succeeding. Most Chinese never notice that the local state controlled media is distorting what is going on in Yemen to favor the rebels there. But those outside China who have free access to all news sources can’t miss it.
The impact of China enforcing all the UN trade sanctions against North Korea has, after four months, caused serious shortages of foreign currency. This is how you measure the true impact of any sanctions on North Korea and you know the sanctions are bad when Chinese exporters of consumer goods for the North Korean ruling class (two or three percent of the population, including immediate family, who run the government, universities, research centers and security forces) are now demanding cash in advance. China is the main access point for the thousands of luxury items North Korea imports each month to keep their ruling class content and willing to do what it takes to keep the Kim dynasty in power. There are numerous reports from China about exporters losing sales of these goods to North Korea because bills are not being paid. So suppliers are demanding cash now and the North Koreans don’t have it. The Chinese suppliers are complaining to anyone who will listen because this trade with North Korea is big business in some Chinese cities on the border. North Korea is desperate and North Korean leaders are willing to do almost anything to mend relations with China. “Almost” may not be enough unless North Korea agrees to adopt a market economy to the extent that China has. China, however, is willing to be more flexible on that if North Korea will cooperate in other ways. North Korean officials were recently told, privately, that all would be well if North Korea got rid of its nuclear weapons and its nuclear weapons development program. So far the north is not interested.
July 18, 2016: A senior Chinese admiral told a visiting American admiral (the head of the U.S. Navy) that China would not halt its construction of artificial islands in the South China Sea. The recent Permanent Court of Arbitration ruling against China specifically described these islands as illegal. The U.S. has said it will continue naval patrols in South China Sea waters China claims as well as flying through air space that China has declared as restricted.
China announced that it would be holding military exercises in the South China Sea from the 19th to the 21st. The precise area where foreign ships and aircraft are excluded. This is not unusual for exercises that involve the use of weapons and all major naval powers do it. American naval experts fear that China will abuse this procedure to block access to large areas for extended periods.
July 17, 2016: The Philippines rejected a Chinese offer to hold talks over the South China Sea dispute. This was because the Philippines does not consider the situation a dispute but rather a case of unwarranted Chinese aggression. Now the Philippines has international law on its side, although China does not recognize the July 12th decision by the Permanent Court of Arbitration that backed the Filipino accusations that China is acting illegally with its claims in the South China Sea and that it was illegal for China to build artificial islands and claim them as Chinese territory. China promptly offered to discuss the matter with the Philippines. Britain and other Western nations had previously announced their belief that the Court of Arbitration ruling would be binding and they would enforce any penalties levied. China cannot ignore that. The Philippines, America, Australia, Japan and South Korea all openly oppose the Chinese claims. Other nations in the area (Taiwan, Indonesia, Vietnam, Malaysia and India) held back for a while but are now also in open opposition.
July 13, 2016:
China got some support from Taiwan on its South China Sea crises. Taiwan uses the same logic for its claims to parts of the South China Sea as China does. Most Chinese support in this matter came from traditional allies. Pakistan announced its support for China. India urged China to seek peaceful resolution of those disputes, but many Indians now wonder if India would win a similar suit challenging Chinese claims on Indian territory. In August 2015 India went public with its support for Vietnam and other nations in the area opposing China claiming most of the South China Sea as Chinese waters. The Chinese claims are in violation of several international treaties. India has long criticized the Chinese position but is now being more public about it. Now that the case has been decided India is being more diplomatic. In Thailand the military government is determined to retain power one way or another. To do that the military government is trying to improve economic relations with China and being more pro-China in general. Thus Thailand is officially neutral in the dispute all its other neighbors are having with China over Chinese claims on the South China Sea and other international waters near China. The international court of arbitration recently ruled against Chinese claims in the South China Sea. Although the UN and nearly every other nation abides by the rulings of this court, China rejected the court and the decision against China.
July 12, 2016: The UN backed Permanent Court of Arbitration ruled that Chinese claims to own the South China Sea are without basis and illegal. The court specifically mentioned areas belonging to the Philippines that China insisted were Chinese. As promised China promptly repeated its intention to ignore the court and its ruling. Chinese celebrities, especially those with international fans, promptly denounced the court ruling and Chinese state controlled media ran dozens of different stories, obviously prepared in advance, explaining why the court ruling was invalid and irrelevant.
July 10, 2016: In South Sudan two Chinese peacekeepers were killed and five wounded when their armored vehicle was hit, apparently by accident, by an explosive shell. The Chinese vehicle was in an area where there was a lot of renewed fighting between government and rebel forces. A peace agreement that ended this fighting has collapsed and since July 7th some 300 locals have died. There are about 230 Chinese troops in South Sudan and about a thousand in Sudan. China is criticized for what local rebels and aid groups call preferential support for the South Sudan and Sudan governments. Both of these nations supply China with oil. The Chinese government has majority ownership in three of the five major oil consortiums operating in Sudan and South Sudan. At least one west Sudan (Darfur) rebel group has threatened to attack Chinese troops over perceived favoritism, though as yet no specific attacks have occurred.
July 8, 2016: South Korea announced that it would receive American THAAD anti-missile systems as soon as possible. Earlier in 2016 the United States attitude was there was no need to hurry the deployment of THAAD to South Korea. Because of continued North Korean nuclear and ballistic missile development South Korea had asked to get the THAAD sooner. China, Russia and North Korea have long opposed THAAD. South Korea wants THAAD for protection from North Korean missile attack and always resisted Chinese objections, even when China hinted that failure to drop THAAD might result in less trade with China. That was a signal to South Korean voters to carefully consider the cost of defying China. The Chinese will not come right out and say it but they object mainly because THAAD would also make South Korea less vulnerable to intimidation by Chinese ballistic missiles. South Korean voters understand that so the economic threats are having less impact than China expected. South Korean public opinion polls show voters are even more enthusiastic about the high tech and very expensive (over $100 million per launcher and associated equipment) THAAD system now that North Korea has continued launching ballistic missiles and preparing for more nuclear tests. While China has openly said it still objects to THAAD it does agree that South Korea has the right to do what it considers best to defend itself against North Korea. South Koreans won’t feel better about this until THAAD arrives and is operational. That will now happen by the end of 2017 rather than several years later. For China this means South Korea does not believe Chinese assurances that it has North Korea under control. This move also means that South Korea is not ready to abandon its alliance with the United States and instead accept the patronage and protection of China., the traditional local superpower.
July 7, 2016: China went public with its opposition to the American plan to unilaterally impose a wide range of sanctions on North Korea leader Kim Jong Un because of the “crimes against humanity” he has committed on his own people. Apparently China believes all the economic sanctions against North Korea must be approved by the UN (where China has a veto) and not unilaterally (where China cannot promise North Korea that in return for something China can make the sanction disappear). The proposed American sanctions ban any American firm (or foreign subsidiary) from having anything to do the Kim Jong Un or members of his immediate family. That would include the many overseas economic activities done for Kim Jong Uns personal benefit. Going after that might expose more Chinese corruption, which Chinese officials know exists but want to deal with on their own terms, not in an international media storm created by these American sanctions.
July 5, 2016: China began a week of naval exercises in the South China Sea. The exercises ended on July 11th, just before the Permanent Court of Arbitration announced its decision regarding Filipino accusations that China is acting illegally with its claims in the South China Sea.