China: Power Shifts

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February 6, 2019: China made it clear this week that it was not taking sides in Venezuela and would cooperate with whoever was in charge. This comes less than two weeks after Venezuelan opposition politician (the elected head of the National Assembly in what was considered a fair vote) Juan Guaido claimed he was the legal Venezuelan leader because recently reelected president Maduro had won in what was widely considered (by locals and foreign observers) a rigged and illegal election. Most Western Hemisphere nations and many European ones backed Guaido (as did most Venezuelans). The United States and EU nations are assisting Guaido in taking control of billions of dollars in cash and other assets belonging to Venezuela that are located in the U.S. and Europe. On the basis of all this Guaido made it clear that he will respect current economic deals and is willing to work with Russia and China, currently Venezuela’s largest creditors. Maduro has the active support of Cuba, North Korea, Iran and perhaps Russia.

Corruption Update

Despite all the talk and action, China seems to be losing ground when it comes to reducing corruption. This is widely considered the most dangerous problem of all. The 2018 international corruption ratings show the world that China is not making much progress dealing with corruption. Currently, China ranks 87th out of 180 nations compared with 77 in 2017 and 79 out of 176 nations in 2016). Corruption in the Transparency International Corruption Perception Index is measured on a 1 (most corrupt) to 100 (not corrupt) scale. The most corrupt nations (usually North Korea/14, Yemen/14, Syria/13, South Sudan/13 and Somalia/10) have a rating of under 15 while of the least corrupt (New Zealand and Denmark) are over 85. The current Chinese score is 39 (versus 41 in 2017) compared to 63 (61) for Taiwan, 40 (40) for India, 29 (29) for Russia, 57 (54) for South Korea, 14 (17) for North Korea, 33 (35) for Vietnam, 85 (84) for Singapore, 72 (73) for Japan, 38 (37) for Indonesia, 38 (38) for Sri Lanka, 31 (33) for the Maldives, 36 (34) for the Philippines, 33 (32) for Pakistan, 26 (28) for Bangladesh, 28 (30) for Iran, 16 (15) for Afghanistan, 29 (30) for Burma, 70 (71) for the UAE (United Arab Emirates), 62 (64) for Israel, 72 (75) for the United States, 27 (27) for Nigeria, 43 (43) for South Africa, 18 (18) for Iraq, 41 (40) for Turkey, 49 (49) for Saudi Arabia and 28 (28) for Lebanon,. A lower corruption score is common with nations in economic trouble and problems dealing with Islamic terrorism and crime in general. China’s corruption score has not changed much since 2012, when it was 39. This indicates that despite all the breathless media hype about increased efforts to reduce corruption there is not much real progress. President (for life) Xi is accused of directing many corruption investigations at officials deemed a threat to his power.

Christians, Korea And The Denuclearization Myth

China continues to have a complicated relationship with North Korea. For example, there is a lot of tolerated North Korean government activity in northeast China. North Korea earns the ability to carry on like this by sharing intel gathered with China. This includes info from North Korea on what is going on in North Korea and adjacent areas. For example, the North Korean need for more cash now involves Christian churches in northeast China and South Korea. Many North Korean defectors join these churches and North Korea secret police have often done so as part of their job to collect information on “subversives.” In the last year, those orders have changed and the agents who are still active in these churches in northeast China have been ordered to change their focus to seeking business opportunities that will raise cash for the North Korean government. The agents have been told to seek out Church members with business connections in South Korea and develop those connections. These can be legal or illegal, as long as they are profitable. Collecting information on “enemies of the state” is now secondary to raising cash, the shortage of which has become the greatest enemy North Korean rulers currently face. What these North Korean still do is reported on and what new information they receive is shared with China.

North Korean and local ethnic Korean-Chinese in northeast China have long been vulnerable to North Korean interference. If the North Korean agents can secretly get the Chinese police to back off persecuting their church or individual believers the agent gains increased influence in the church. This was long suspected but some of the recent senior defectors have apparently confirmed this. For Chinese and North Korean Christians this is just another aspect of persecution they have been increasingly subject to.

Over the last decade, China has become increasingly hostile to local Christians and religions in general. In early 2017 China expelled 32 South Korean Christian missionaries who were working along the North Korean border. The missionaries have long worked among the many ethnic Koreans living in the area. Most of these ethnic Koreans are Chinese citizens but a growing number are illegal migrants from North Korea. China also prosecuted two South Korean clergymen for assisting North Koreans to escape from North Korea and into China. South Korean Christian missionaries who were working along the North Korean border. The missionaries have long worked among the many ethnic Koreans living near the North Korean border. Most of these ethnic Koreans are Chinese citizens but a growing number are illegal migrants from North Korea. Since 2014 China has also applied more pressure to Christian charities and foreign Christians in general who are operating in China near the North Korean border. Many of these Christians (especially ethnic Koreans from the West) are known or suspected of helping North Koreans escape North Korea and get to South Korea.

The fact that this Chinese-North Korean intel sharing and cooperation continues indicates that China is not willing to put extreme pressure on North Korea to abandon its nukes. That is a major reason why North Korea can say to the Americans and South Koreans that “denuclearization” is possible while continuing to tell North Koreans that the nukes will never be abandoned. China really would prefer that North Korea did not have nukes but is apparently willing to tolerate that if North Korea becomes more responsive to Chinese advance and needs. To help that process along China is trying the carrot with North Korea although the stick (messing with the North Korean economy by halting trade and Chinese investment) has been used more and more.

China is willing to unofficially reduce sanctions as long as North Korea follows Chinese advice about reforming their economy and adopting more of the techniques that have enabled China to remain a communist police state while also benefitting from a free market economy. Kim Jong Un is apparently succeeding in convincing China that North Korea will accelerate its adoption of Chinese economic practices. That includes being more open to economic cooperation with South Korea. Since the 1990s South Korea and China have become major trading partners. South Koreans are becoming more willing to help North Korea economically even though that will mean less incentive for North Korea to denuclearize. At the moment it is clear that North Korea is not planning to denuclearize. Internal propaganda repeats that and much critical work on perfecting a nuke that could be used against Japan continues.

China continues to tolerate a certain amount of North Korean smuggling and financial misbehavior. But North Korea must be discreet because China is officially backing (if not actually enforcing) most of the economic sanctions on North Korea. Since a crackdown on Chinese banks a few years ago North Korea has moved most of its illegal finance operations out of China. North Korea has established a network of companies and banks that will act (for a fee) as middlemen in turning North Korean profits from foreign operations into products that can be shipped to North Korea without any real proof North Korea paid for it. Of course, it is obvious that these imports are not free foreign aid but the source of payment is difficult to trace, often more trouble than it is worth. But when the effort is made a new North Korea financial network is detected.

China is also helping North Korea control its side of the border by making it easier to purchase the latest Chinese surveillance camera equipment. China is a leader in this market and the Chinese government is a huge customer. The North Koreans are particularly interested in surveillance cameras that are easy to conceal the better to catch defectors or smugglers who believe they will not be detected. Same applies for border control guards who take bribes. North Korea does not want to stop smuggling but it does want most of it to be government controlled. This is vital to bring in the luxury goods (now banned by UN sanctions) via China. These luxury and consumer items are needed for gifts to reward successful officials and also to stock the “hard currency shops” that carry foreign goods that can be purchased using dollars, euros or yuan. With more donju (entrepreneurs) and government officials getting bribe income these shops are busier and in need of more frequent resupply.

The Burma Blues

In northern Burma, the Chinese ambassador visited Kachin State At the end of 2018 and bluntly told local officials that if China were not allowed to resume work on the $3.6 billion Myitsone dam project there would be serious consequences for Kachin state and Burma in general. After the visit, China reported that the ambassador found most people in northern Burma did not oppose the Chinese projects. The reaction in northern Burma was to accuse the ambassador of ignoring reality.

The dam project was the result of studies done in the late 1990s to develop the border areas and control flooding. Originally scheduled to be operational by 2017 the Myitsone project has been shut down since 2011 because of corruption charges (largely true) and armed resistance from local tribal rebels. China was always willing to make concessions to save the dam project but has been unable to agree with Burma on terms. Meanwhile, conditions in China have changed. Originally China needed the 6,000 MW of electrical power generated by Myitsone and 90 percent of it was going to China. But in the last few years Chinese economic growth has slowed and with that the need for additional electric power. Actually, there are now electricity surpluses in parts of China bordering Burma and the Chinese have been offering to export some of that electric power to northern Burma (which still has an electricity shortage). Because of this many similar Chinese development projects in northern Burma (other dams, new mines and lots of road and bridge building to support it all) are no longer as important to China.

Burma is willing to let Chinese development projects to go forward in the north as long as there is minimal corruption and misbehavior. That means compensating the local landowners (mainly tribes that have been in the area for centuries) fairly. China, however, wanted more than just the electrical power and profits from these investments. China also wants some diplomatic assistance, apparently regarding North Korea, South China Sea and other sensitive matters. China has been willing to negotiate with Burma and compromise on its unpopular economic activities, mainly in the north. China is also offering good deals (low prices) on modern military equipment and that has the Burmese military leadership interested. Meanwhile, the border tribes have to go along with any Chinese settlement and the tribes don’t want the Burmese troops to have more effective weapons. The Kachin tribes don’t trust the Chinese or their own government.

Another Chinese complaint has more widespread support. Shan state in northern Burma remains the largest source of illegal drugs in the region. China wants something done about all the drugs coming out of northern Burma, specifically opium, heroin and methamphetamine. The Burmese methamphetamine production (about 250 tons a year) is a major regional problem that is worth $40 billion a year and that is a tremendous incentive for tribal drug gangs and corrupt government officials to help keep it going, The meth (usually in pill form) is called yaba locally and is the most popular drug in Southeast Asia and southern China. Most (nearly half) of yaba goes to China, followed by Thailand. The Burmese meth has become hugely popular in China, which is pressuring the Burmese government to do more about the problem and that has resulted in more police activity up there, but not enough to put a dent in the drug business.

The neighbors are aware that the Burmese drug gangs have local security forces on the payroll, which is why these clashes with Burmese drug smugglers only seem to happen in Thailand. China plays down the fact that the smugglers don’t have much trouble on the Chinese side of the border because of the corruption. Moreover, the drug trade in this area goes back a long time. The area was a known source of opium for many centuries. First as a valuable and expensive medicine (pain killer) and eventually, for wealthy Chinese, a recreational drug. In the 1700s the Chinese tried, with some success, to ban opium exports to China. The northern tribes of Burma have maintained their armies of well-armed, well trained and very motivated soldiers for generations because of the drug income. Soldiers going after the drug armies are offered a choice; bribes or bullets. The bribes are the more popular choice.

January 30, 2019: A UN North Korea sanctions monitoring group accuses China of violating the sanctions by tolerating Chinese fishermen to buy fishing licenses to operate in lucrative North Korea waters. The Chinese paid about $7,000 a month per boat. South Korea was also criticized for illegally bringing in several hundred tons of petroleum to operate a new liaison office at Kaesong. North Korea is limited to 520,000 tons of imported petroleum products a year and all of that has been coming from China (which normally shipped four times as much a year). China is believed to be exceeding the quota by 20 percent or more via its oil pipeline to North Korea. Illegal imports can be estimated by monitoring retail fuel prices in North Korea.

January 29, 2019: China has established a maritime rescue center on one of the artificial islands (Fiery Cross Reef) in the Spratly Islands. Current facilities on Fiery Cross will be expanded to include more rescue capabilities. Nearby nations who have lost control of territory to the Chinses South China Sea claims see this rescue center as another Chinese effort to legitimize its illegal efforts to take control of the South China Sea. By controlling the South China Sea China controls the shortest sea route from West Asia to the Middle East, Africa and Europe.

January 28, 2019: The United States imposed oil sanctions on the Venezuelan state oil company, which is the only means China has to gets over $30 billion in Venezuelan loans paid back. This move encourages China to back Juan Guaido as the legitimate acting president of Venezuela. While Guaido has made it clear he is willing to work with China, it is only implied that the Americans will go along with this.

January 26, 2019: In Malaysia, the government announced it was canceling a $20 billion railroad project sponsored by the Chinese. The Malaysians determined that the project was too costly and the government could not afford it. The previous government that approved the deal was generally believed to be corrupt and willing to take bribes from the Chinese to approve such a deal.

January 20, 2019: China officially admitted that recent personnel changes in the military had fundamentally changed the Chinese armed forces. For the first time in history the Chinese army comprises less than half the personnel in the armed forces, the majority belong to the navy, air force, strategic missile forces, space force and Cyber War forces. Chinese have long called their armed forces the PLA (People’s Liberation Army) but in the last decade it has more common even for the media to refer to the “Chinese army”, navy, air force and so on. This process has been going on since the 1990s and the major shift took place in the last five years. In 2013 there were 2.3 million personnel and about two-thirds of that was the army. In the last five years, there were major cuts in army strength (something that has been going on since the 1990s) and rapid growth in the navy (mainly) as well as the other services. Military strength is now less than two million. This has not gone unnoticed in Russia, although there the state-controlled mass media maintains a strict silence about how the Chinese military is not only twice the size of Russian forces, but has far more modern equipment, both in terms of quality and quantity. China also had a defense budget that is more double what Russia can afford. This also means that the in the Russian-Chinese relationship China is now the senior partner, in both economic and military terms.

January 18, 2019: Many nations are reporting major reductions in trade with China. This is having a major impact on key world markets. The most obvious one is petroleum, where the price remains low despite the OPEC cartel cutting production several times. The fracking boom in North America is the major reason for this and that explains why China is rapidly adopting the American fracking techniques to increase oil and natural gas production from the huge shale deposits that China has (and which may exceed those in the United States).

January 14, 2019: Russia is joining China in undertaking high-risk natural resource operations in Africa. For example Russia recently agreed to back (financially and otherwise) a Russian mining firm (Alrosa) that negotiated a deal with the African nation Zimbabwe to do a better (and more profitable) job of extracting diamonds from the large deposits Zimbabwe has but has been unable to exploit effectively because the state-run mining company was corrupt and inefficient. Alrosa will have more freedom to operate. Russia is also a major producer of diamonds and is willing to invest in Zimbabwe despite the corrupt and erratic government there. Alrosa is protected because Russia and China continue to protect their business interests in Africa. For example, earlier in 2018 both countries vetoed a UN resolution to impose sanctions on Zimbabwe, where the government has trashed the economy and chased a third of the population away. Russia and China also blocked UN attempts to halt the Sudan governments’ mass murder and depopulation of rebellious people in Darfur. Russia and China both do a lot of business with Zimbabwe and Sudan. But the opposition to UN sanctions is more personal. Russia and China both have long histories of mass atrocities against their own populations, and do not want to support any precedent for foreign intervention to halt this sort of thing. Zimbabwe would also like Russian help in modernizing its armed forces but hasn’t got any money to pay for it. Russia is willing to work out a deal that involves providing more security for Russian commercial operations in Zimbabwe.

January 12, 2019: In Uganda, the finance minister announced that in his opinion Uganda's growing debt is sustainable. Another government official had warned that major loans by some foreign lenders could lead to the lenders acquiring “sovereign Ugandan assets.” That warning spoke to a fear shared by many in Uganda – that major lender China has forced the Ugandan government to use oil reserves as collateral for its large loans. There are also worries that if default occurred Beijing could gain control of power generation facilities and dams built with Chinese money.

January 11, 2019: Japan is ordering another 99 F-35 fighters. This will cost about $15 billion. Most of these will be the F-35A model but as many as 40 will be F-35Bs, the vertical takeoff version that can operate from carriers. Japan already has 42 F-35As on order to replace 73 elderly F-4E interceptors. The new F-35As on order are to replace a hundred older F-15J fighter-bombers. Another hundred more recently built F-15Js have been upgraded with digital communications and fire control gear that can cooperate with F-35s. Japan may order more F-35s as part of its military buildup.

There may be more Japanese F-35 orders because its locally designed F-2 maritime attack aircraft has been canceled because of high cost and uncertain performance. Japan also sought to design and build a stealthy replacement for the 1990s era F-2s but concluded it would be too expensive for just a hundred aircraft and such an “X-2” aircraft could not compete against the American F-35 in export markets (assuming Japan changed its constitution to allow weapons exports.) So now Japan is planning to eventually replace the F-2 with F-35s. Japan imports a lot of foreign warplanes but usually assembles them locally under license, which it will do with the F-35s.

Ordering some F-35Bs makes it clear that Japan is going to experiment with some of these aircraft aboard the existing Japanese “helicopter carriers”. Since 2017 Japan has had operational two 27,000 ton “destroyers” (DDH type ships) that look exactly like an aircraft carrier. These Izumo class ships can carry up to 28 helicopters or up to ten vertical takeoff aircraft. The carriers are armed only with two 20mm Phalanx anti-missile cannon and launcher with sixteen ESSM missiles for anti-missile defense. The DDH have powerful engines capable of destroyer-like speeds of over fifty-four kilometers an hour. There are also more medical facilities than one would expect for a ship of this size. Izumo does have considerable cargo capacity, which is intended for moving disaster relief supplies quickly to where they are needed. Apparently, some of these cargo spaces can be converted to berthing spaces for troops, disaster relief personnel, or people rescued from disasters, as well as additional weapons and equipment needed to support F-35B fighter-bombers. Izumo could carry and operate at least ten of the vertical take-off F-35B stealth fighters once modifications were made to the flight deck handle the extremely high temperatures the F-35B generates when taking off or landing vertically (like a helicopter). Meanwhile, China admits that its aircraft carrier force will be confined to the West Pacific for a decade or more as China learns how to use a carrier task force most effectively.

January 9, 2019: In Algerian, the army also showed off six of its new Chinese SM4 self-propelled 120mm mortars. Algeria has long been a major customer for Russian weapons and the Algerian navy recently put two new Russian Kilo class submarines into service. These had been ordered in 2014 when Algeria began a major effort to upgrade its armed forces equipment. While Algeria has had some problems with the new Russian weapons, the Chinese stuff has performed much better and the Chinese tech and logistics support are superior as well. Algeria has the highest defense spending in Africa (about $10 billion a year), which is a bit more than twice what second place Sudan spends. Algeria accounts for about half the foreign weapons purchases throughout Africa and gets most of its new gear from Russia. Algeria keeps the Russians honest and attentive by also purchasing more weapons from China, which has a reputation for building Russian weapons better than the Russians. A 2007 plan to spend $7.5 billion program to upgrade a lot of Cold War era weapons and equipment included getting 300 new Russian T-90 tanks and 1,200 German wheeled armored personnel carriers. Russia and Germany are also providing new warships for the navy and dozens of Russian Su-30 warplanes. Russia offers low prices and a tolerant attitude towards corruption and bribes. Plus, the Russian stuff looks impressive and is not likely to be used in any serious fighting because Algeria is surrounded by nations that have been generally non-threatening for a long time. The government has been quietly canceling or delaying military procurement deals because of the sustained low oil prices. This includes nearly a billion dollars’ worth of Russian arms and a $1.1 billion deal with an American firm to provide three Gulfstream business jets equipped to perform radar, optical and electronic surveillance. This militarized Gulfstream purchase was made in 2015, just as the low oil prices became a long-term, not a short-term problem.

January 7, 2019: North Korean leader Kim Jong Un arrived in China, aboard his private train, for a fourth visit. This one lasted four days and apparently consisted of Chinese officials reminding Kim of how important it is for the Kim dynasties’ survival that Kim Jong Un pays attention to Chinese economic advice. Kim was taken to several Chinese workplaces to see the Chinese economy in action and have it explained to him how it would work in North Korea. Kim has been more cooperative with China than with South Korea or the United States and for good reason. China is the only reliable and effective ally North Korea has. In the past, North Korea has ignored and embarrassed China but no more.

North Korea has been at odds with China ever since Kim Jong Un took power in 2012. In 2014 Kim was told that China would not come to the aid of the current North Korean government if the government collapses or starts a war. Since 2014 China has been cracking down on North Korean use of China for illegal imports and exports. Nothing seemed to work for China when it came to North Korea (or South Korea for that matter). This was humiliating for the Chinese leaders and while the Chinese government does not discuss this, many Chinese do talk about this disrespect and the Chinese leaders pay attention to that. But what could China do about an increasingly troublesome and disrespectful North Korean leadership? North Korea’s traditional allies China and Russia, have found that, unlike before 2012, they now had little sway over the North Korean government. The Russians could ignore all this but China could not. To make matters worse China found itself being publicly insulted by North Korea, something that was unknown before Kim Jong Un came to power. In response, China began publicly criticizing things that were wrong in North Korea (mismanagement, nuclear weapons, criminality in general). China sent senior officials to North Korea in late 2015 to spell out in some detail the consequences of continued bad behavior. That did not fix the problem. As usual, when it comes to North Korea the situation was expected to get very interesting. Especially since China offered a carrot as well as a stick. Following the 2015 warning, Chinese censors were ordered to suppress popular criticism of North Korea and to have state-controlled media say nice things about Kim Jong Un for a while. Thus China offers North Korea a choice; cooperate and be rewarded or keep disrespecting their “elder brother” and suffer the consequences. Until 2018 North Korea had not cooperated but China was patient and eventually, reality caught up with the troublesome (and now in big trouble) Kim Jong Un. The elder brother is being listened to, respected and obeyed.

 

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